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Analytical Essay on Adidas: Organization Background and Industry Analysis
1.0. Introduction
2.0. Organisation background
2.1 History
Figure 1 source: Adidas.group
Adidas is German-based company started by two brothers Adi Dassler and Rudolf. Adi was innovative, he observed athletes, talked with them about their needs and problems and try to solve it while Rudolf concentrate on selling. Brothers are successful from the beginning. Adidas operating in Apparel and accessories industry and serves consumers at the global level with footwear, sportswear, sports material and other accessories. Today Adidas employ over 57,000 people from all around the world. Employees from more than 100 nations are working at global HQ in Herzogenaurach, Germany the World of Sports.
Adidas entered India in 1989. India is globally the second largest footwear producer after China. The company is focusing on both online and offline formats to fuel its growth in the Indian Market. According to Dave Thomas, Managing Director of Adidas India and Rebook, they have target to open more than 10,000 stores in combination of across the group of different formats, a combination of companys retail or franchise by 2020. (Verma, 2020)
2.2 Products and services
The company is engaged in the designing and manufacturing process of number of shoes, clothing and other accessories. The latest invention of Adidas is µa (micro-A), the Adidas Smart Shoe: By using new technology they are developing smart shoes to improve atelic performance and beat their competitors. The company is active in digital market as well. Adidas also currently focused on North America, adoption and use of new technology and amalgamation of its all segments to increase their efficiency by calling ONEADIDAS (Digitalcommons, 2020)
2.3 Competitors
Year 2018
Adidas + rebook
Nike
Puma
Net sale
- 21.915 BN
- 36.39 BN
- 4.64 BN
Operating profit
- 2.368 BN
- 4.44 BN
- 337 M
Net income from continuing opration
- 1.709 BN
- 1.93 BN
- 187 M
Number of employees
- 57,016
- 73,100
- 13000
Adidas acquired Rebook in 2005.Nike, Puma, Fila are the main competitors of Adidas-Rebook. From the analysis of past 8 years revenue Nike is much ahead then Adidas and Puma globally. But in the Indian market Adidas and Puma is having neck to neck competition. In India Puma and Adidas are having almost equal popularity while Nike is little behind them.
Figure 2 Adidas.com Figure 3Sources : (Dutta, 2020)
2.4 Revenue and growth
Year
- 2018
- 2017
- 2016
- 2015
Sales/Revenue
- 21.915 BN
- 21.22BN
- 18.48BN
- 16.92BN
Net income
- 1.71 BN
- 1.35BN
- 1.08BN
- 680M
Adidas begins 2019 with a good performance. They closed the three first months of the fiscal year with a net profit of 663 million euros, 17% more than in the same period of the previous year. Kasper Rorsted CEO of Adidas stated that this fiscal year will be key for the strategy that the group is drawing up for 2020. (Themds.com, 2020)
Adidas is one of the largest sports company in the world, its three stripes logo recognized in global market.
3.0 Industry analysis.
3.1 Porters five forces
Any industrys structure is depending on porters five-force model. Bargaining power of supplier and threat of substitute has high effect in Indian market.
- Bargaining power of supplier
The suppliers bargaining power is very high. Adidas makes contracts with famous athletes or teams like IPL in India to promote and advertise its products. Sachin Tendulkar was his first brand ambassador. Since these sports teams and players joint with Adidas on contract base, so they can choose among several competitors they can easily threaten to pick the one with the best offer, which increase bargaining power of supplier.
Other domestic supplier of Indian market is highly fragmented and characterised by high density in textile and apparel manufacturing sectors. They mostly work independently at small scale, which might diminish their power. However, few large domestic suppliers in market such as Tata, Raymond, Metro shoes have accrued the power and the capital to stop forward integration of foreign retailer company. (Mann and Byun, 2020)
- Threats of substitute
The threat of substitute mostly depends on cost switching, availability and performance of ubstitute and inclination of consumer. Crocs, US based company can be considered as a substitute. The popularity of the brand is increasing globally due to unique pattern and colours of the product. (The Economic Times, 2020)
Indian consumer tends to shop from small local small retailer to large supplier. Substitutes for Adidas products especially in the apparel market come from smaller and more localized companies in India. There are many local brands in India, which gives same product in low cost. The presence of large number of tailors in Indian cities make customize attractive clothes, which highly threats the foreign retailer like Adidas. Majority elder Indian women wear traditional clothes and local brand shoes due to the low cost. It can be a high threat for foreign retailer because different culture and demands of Indian market. (Mann and Byun, 2020).Figure 3Source: business-standard.com
3.2 Effect of COVID-19
China is the second largest world economy and hub for many fashion and sports industries. Many sneakers are manufacture in china and Asian country. Coronavirus has huge negative impact on sells of Adidas. Last year, Adidas did ¬4.5 billion ($4.9 billion) sales in china, which is 21% of its total business. Due to the coronavirus, effect sale of company reduced to one third and Adidas has closed many sores in china. (Bain, 2020).
4.0. Situation analysis
4.1. External factor drivers impacts opportunities or threats social
Signing film stars and cricket star as brand ambassador.
As Indian youth is influenced by the glamorous world, sale of the products will increase.
Adidas offer customized product by colour and size .
Customization will help to make strong relation with customers.
Long psychic distance.
People easily switch to another brand or buy first copy of orignals
Environmental
To reduce the pollution in environment, company has
Developed low waste initiative programme Manufacturing of eco-friendly material will reduce the carbon footprint.
Build up good ethical reputation in global market, which helpful to increase companys market share and brand name.
Political
Changing in polices and tax system
Lake of uniform tax system and corruption can also become obstacle for Adidas.
Indian government has relaxed the rules for FDI (foreign direct investment) in retail, permitting manufacturers to sell their products through wholesale, retail and ecommerce as well since 2015. .(Bailay and Anand, 2020).
Adidas has announced its intent to open its first fully-owned outlet in India in the second half of the fiscal, after it got clearance to invest in local retail operations. This can be great opportunity as Indian economy is growing fast and very popular among the global retailers.
Legal
The company has allegation of paying low wedges, child labour from their worker. (U.S., 2020)
Adidas has declined on these allegation and pass official statement. However, it has bad impact on companys reputation in market.
Adidas lost his case in European court names shoe branding Europe. The court state , the three strips logo of Adidas is not enough distinctive. (Mondaq.com, 2020)
This can be high threat for the companys trendmark.
- Opportunities and threats
From the above analysis, Indian policies and social-culture can be the great opportunity for growth in Indian market. While, different mind-set of Indian people and product substitution can be threat for company also. Legal cases or scandals are running Brand name in market.
4.2 Internal analysis
The internal analysis of Adidas is including companys strength and weaknesses. The close analysis will help to discover which tool is needed to pass the barriers and lead to success.
Strength
- Brand image and legacy
Adidas has been around as a brand since 1949. From Adi dessler to now, company has managed to maintain its legacy successfully. Its well-recognised brand in all over the world and well popular in India. The large population of Indian youth, urban nuclear families, working women, Athletes, emerging service sectors are the driving strength of well-organized companies like Adidas in India. (Citeseerx.ist.psu.edu, 2020).
- Innovative Designs and Marketing
Adidas is excellent in innovation. The company used different technology to fulfil need of the athlete and present new designs such as Adidas boost line and Alpha bounce shoes, which becomes very popular.
Adidas has been trying to experiment with 3D printing technology. Which can be useful to design high tech, customized shoes from their Future craft 4D manufacturing process.(Erkilic 2020).
Weakness
Despite of having strong position in market, Adidas do have some weakness to overcome.
- Slow Design
In order to match with current trend, the company must launch its new design on time. However, the company is designing slowly. For example, Adidas has launched its new product after 18-month gap. This might be threatened to lose the latest trend. (Digitalcommons.unl.edu, 2020)
- Prise comparison
Constant innovation and diversity in products is high strength of Adidas but Price of product is high in compare to other sports company and local retailer in India. The middle-class family in India cannot afford it and look for another substitute.
- Dependency for manufacturing
Despite of strong financial condition in the worldwide sport Goods Company, Adidas is highly dependent for manufacturing and logistics on their external partner. (Repository.kln.ac.lk, 2020) Because of this, the company cannot control the quality of manufacturing closely and accept the changes made by manufacturers, as they are so dependent on them.
5.0 Models and theories
5.1 Internationalization theory
The company has followed the Uppsala model by Johanson and Wiedersheim-Paul (1975) for its global business. In 1990, Adidas enters in India and emerged as countrys most popular sportswear and apparel brand.
Adidas has adopted this theory in India. Adidas enters in India through observing the nearby market then explore its sales and activities and then move to another specified region. Online sells help Adidas in expansion of business, which leads increase in market share and economic growth. (Jones, Coviello & Tang, 2011). (Hollensen, 2007)
5.2 Marketing mixed approach across the strategic 7Ps
The marketing mix 7Ps structure helps to analysis business practices and online business practices in market (Pour, Nazari & Emami, 2020).
- Factors
- Analysis
- Product
Adidas supplies innovative products through various online site. The quality of the products maintain the loyalty of its customers(Pour, Nazari & Emami, 2020).
- Prices
Every session Adidas offers various discount on products to promote their digital business and increase the sell.
- Promotion
Adidas uses you tube and other social media for digital marketing t of its product. Adidas also do promotion by using film stars or famous athlete in the advertisement. (Pour, Nazari & Emami, 2020).
- Place
Adidas places its stores at every area where it serves more consumers like malls, Main market of city, and theatres.
- Packaging
Attractive packages create good impression on customer. Adidas can improve its packaging style.(Pour, Nazari & Emami, 2020).
- Positioning
The Impossible is nothing slogan is used by company to establish itself in global market. Try to win customers Adidas offer innovative attractive products in market.
- People
Adidas take care of their people by offering attractive commission and payments to its distributors. Which is very helpful for online selling. (Pour, Nazari & Emami, 2020).
5.3 Home nation’s competitive advantage
Figure 4 SOURCE:Wordpress.com
Factor condition
Factor conditions refer to the different types of resources such as infrastructure, capital resources, human resources, natural resources present within a nation. (Expert Program Management, 2020)
The German education system is a world-class system which set the standard of the employees for company. Brand recognition of Adidas in its home country can be associated with loyal nature and attitude of German.
Related and supporting industries
Adidas is a sports shoes and apparel industry. The major part of the market is related to the glamorous world. Many German brands are in the top list of fashion industries such as Puma, Hugo Boss, MCM worldwide, Escada. Adidas success can be related to the available resources from related other industries.
Demand condition
The main factor of demand condition is home market demand which can be great motivation for the company for improvement and innovation. Adidas sponsors much German soccer team such as Liverpool, FC, FC Chelsea, AC Milan, etc. The love and passion for soccer among the German helps Adidas to increase the popularity of its product and market share in sports industries.
Strategies, structure and rivalry
The competitiveness of the company is depending on strategies and business structure in nation. Strong rivalry in home country play very important role in the innovation and improvement of the company. Adidass excellent performance in the world of sports industries is related to its main competitor Puma from its home country. They cant be so successive internationally without present of each other.
6.0 Marketing activities
The total Indian market of sportswear, footwear, apparel and other accessories is around ¬400 m-¬500 m in net sales, among it adidas is holding 45% share.
Adidas is focusing on its marketing strategy for enhancing its brand image. They are targeting 1000 stores as they have 750 as of now. 1000 would be a combination of companies retail and franchise by 2020 according to the Rebook and Adidas India managing director Dave Thomas. They are planning to increase their sale through the departmental store and online channels.
Segmenting, targeting, positioning
Adidas uses segmenting, targeting, and positioning strategy. It targets customers include children and adults of the 13-40 years age group. The strategy behind it that children and adults are more passionate and sports lover so they love to buy innovative and luxurious sports product at various range without going on physical shopping ( Lynn, 2020). Available number of online users is beneficial for positioning brand in market. Adidas uses digital market for promote its product and ties ups with online distributors for providing products to a final buyer (Lynn, 2020).
The company is specially focused on Bengaluru. They are having huge opportunities there due to active interest in sports such as football, cricket, tennis, and basketball. (Deccan Herald, 2020).
Marketing strategies
Adidas focuses on big sporting events like Olympic Games, FIFA cup, Euro cup and bought the official rights of the sponsor. Indian people have increased their interest to organise in various other sports like kabaddi, tennis, hockey, football rather than only cricket. The company has sponsors kabaddi team Maratha Warriors and Indian Super League football team FC Pune City. Moreover, in the Indian premium league (IPL) Adidas sponsored the team Royal Challengers Bangalore and signed up Virat Kohli (face of Indian cricket) which is a remarkable move for marketing. Next year, India is hosting the football world cup under-17, which create huge market for worlds sport company. (Fortuneindia.com, 2020) Adidas acquired Rebook in 2005. The combination of two major brand helps to increase the strength, global market shares and access to bigger markets.
Another marketing strategy of Adidas is its partnership with Samsung. Their shoe + phone scheme can use to plan, track and motivate users in training. Adidas is more trying to insert technology in their apparel and footwear and try to differentiate products from their competitors. (Anon, 2020).
7.0 Online activities
Adidas makes strategic plan for online marketing. The company use the different online business channel to promote and sell their products. Facebook, Twitter, and other online channels are used to attract more and more consumers.
Comparative analysis
Channels
- Adidas
- Nike
- Puma
- Reebok
Like
- 37M
- 33M
- 20M
- 9.8M
Follows
- 37M
- 34M
- 20M
- 9.9M
Post
- 762
- 767
- 2802
- 2698
Followers
- 25.5M
- 102M
- 11.1M
- 326K
Following
- 162
- 53
- 10
- 76
Followers
- 3.7M
- 8.1M
- 1.6M
- 725.1K
Following
- 151
- 116
- 39
- 5334
Web presence and E-commerce: Adidas is having its own websites. The company sell the wide range of its product to the consumer directly without incurring cost related to any distribution channel. For example omnichannel , here customers order stuff which is not available in local stores. Their order will deliver to the customer’s given address in 24 hours or to the local stores. E-commerce is getting popular in India. Adidas is assigned with four e-retailersFlipkart, Myntra, Jabong, and Amazon. (Fortuneindia.com, 2020) These distribution channels have agreement with the company to sell their product and offer various attractive discounts to increase the sell. Adidas also having pay per clicks attributes to reach more customers. Many people found mobile applications are easier for online shopping as mobiles are most common instrument available to every individual. Social media is very effective for the promotion of products. Adidas spends a major part of its profits in digital marketing. However, the company feels that, they are over investing in digital advertising by more focusing on efficiency rather than effectiveness. (Vizard, 2020)
8.0 Recommendation
Adidas is doing great job in digital business, however, to get more success, the company has to make some changes in its online marketing strategy as well as distribution services. The company should also improve its offline business practice as many people likes to traditional shopping in Morden world.
Adidas should launch its own mobile app, which help to reduce the cost of distribution. Moreover, a company can also add good online payment system, where customers can get points based on their shopping. These points will be helpful to get them attractive discounts by using from companys official mobile app. Adidas should also use a different website for marketing and pay them per click.
9.0 Conclusion
This assignment has explained the market analysis and internal analysis of Adidas. This analytical study has helped in identifying the opportunities and threats that are available to Adidas in the global market. This Study analyzed that with the use of online means the company can not only explore its market share but also can meet its long-term objectives and sustainable development. Adidas Starts online selling of product and makes effective use of digitalization. For long-term concerns, Adidas needs to identify external factors and internal strengths and weakness which affect its performance at the global level. This will also help in increasing the sustainability of Adidas. The company should adopt growth strategies, product differentiation strategies for its global development.
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