SWOT Analysis and Strategic Approach of Adidas

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SWOT Analysis and Strategic Approach of Adidas

Adidas is a German manufacturer that started in 1949 and now has 2400 stores worldwide, a revenue of 16 billion dollars with more than 46,000 employees. Adidas is the NO.2 brand after Nike’s NO.1 brand and one of the trio leading in the sports footwear in the World- Nike, Adidas and Reebok (in 2005 Adidas acquired British rival Reebok, for US$3.8 Billion), Adidas core brands are Adidas, Reebok, TaylorMade, Rockport, and Reebok-CCM Hockey. Adidas has several products such as apparel like shorts, sweatshirts, T-shirts, etc, that the young generation used now as a style statement although the main aim is sports, also they produced perfumes, deodorants and other goods like bags, balls, and accessories. Adidas is built on the three basic principles; creating the perfect sports shoe for athletes and regular individuals, creating durable shoes, and shoes that protect and minimize injuries endured by athletes (Jobber, D. Fahy, J 2009).

SWOT analysis for Adidas

Strength; strong financial position as Adidas achieve substantial revenue through its sponsorship>

Distribution network; it has 24oo store worldwide, creates a strong online distribution, and a flexible product line to meet the change in the environment

High Quality due to the high technology they use and the design, their products are known for being long-lasting and comfortable, high brand equity, and customer loyalty. sponsored many sports events like the FIFA world cup since 1970 providing balls, official gear for tournaments and referee uniforms, UEFA, NBA, and Adidas have strong market share, constantly improving quality and upgrading products’ look, feel and image to reach and exceed customer expectations and with innovative features, Adidas use celebrity endorsements such as David Beckham, Lionel Messi, and Run-DMC, Knows its target customer very well and working on what they want and needs to get ultimately a satisfied customer, the leader in fashion apparel, its logo and name widely known. Lower the price of the products although the pricing decisions are the most difficult decisions in business strategy, gave discounts, offers or increase the promotions for the products to attract customers

Enter some modifications in the products,

There is an expansion in Adidas brands to reach wider customers with casual streetwear, improving operations, increase R&D, advance further in technologies, keep supporting diversity, target more into womens wear

Adidas make products more stylish, they trended to produce more fashion clothes than sports clothes. Partnership with FIFA till 2030 Adidas’s current partnership with Samsung in producing shoes with an integrated microchip, which transfers wireless biometrics to a phone scheme on an Adidas branded mobile device and displays facts and statistics. Nike is undertaking a similar venture in collaboration with Apple (Adidas Group 2010; Nike 2010)

Adidas’s strengths are the brand value and long heritage, Adidas produces shoes made from recycled plastic waste, and produced 11m pairs in 2019 also produces apparel from recycled material (Abdulla, H 2019).

Adidas, Gap Inc, and Nike have been named in the top five of Better Cotton Initiative’s (BCI) top brands list for sourcing sustainable raw material.

Adidas used sustainable materials such as cotton and ranked as In particular, Adidas, which has been steadily working to meet a 100% Better Cotton sourcing target by 2018, sourced more than 90% of its cotton as Better Cotton in 2017

In 1954 create the first football boots that you can remove their studs. In 2005 create the first shoe that can adjust itself through an in-built microprocessor.

Weakness: relatively high price special to customers in developing countries, Adidas work in red ocean as there are a lot of strong competitors with similar products and even similar promotion in some times which mean that customer can easily switch to another brand, too wide range of football boots selection. Before 1993 Adidas culture was very self-centered, very formal, and very bureaucratic (Khan, O 2014) mainly targeting European markets/countries while there is slow growth due to the rising cost of resources and recession. Adjust the cost of celebrities and the additional sales they bring to the company, also they reflect the brands value so if those values dont match with customer value they might go for another competitor brand, for example when Kanye west described slavery as a choice (Meyersohn, N . Isidore, C, 2018)

Opportunities; Changing in lifestyle and people more aware of their health and fitness, as well as the impact of sports to enhance people’s lives, so, Adidas exploits opportunities both in casual and active wear. with saturation in the current market enter new markets in developing countries such as India while there is a growth rate of 33%, enter fashion marketing through more fashion endorsements, increasing their global market, increasing their visibility through sponsorship agreements. As most of their customer are from generation y who hang on technology, Adidas must increase their online retailer channels, and produce more stylish designs (Adidas 2019)With a new lifestyle Adidas can enter a new users and convey them from non-users to users although it is a difficult task. Adidas can attract suppliers, dealers or customers from other competition brand so they quantity of products will decrease. Increase usage by creating a different shoes for different occasions, looking for channel partners to increase their reach. Adidas focuses on North America to increase its market share for the future, as North America represents 20% of Adidas revenue. ( Storbeck, 0 2018) Focus on emerging markets such as India market, also there is a big boom in china market due to increasing popularity in sports, China is the biggest opportunity for Adidas market to expand, due to the rising income level, strengthen in yuan, Adidas moving to more digitally operation and planning to gain 4 billion euro in online sales by 2020. ( Gibbs, A. Roth, C . 2017)

Threats; saturation in the market, facing aggressive competition from a lot of strong competitors such as Nike which is the NO.1 brand and the topmost Adidas competitor, as well as puma although, the founder of puma and Adidas were brothers in 1948 they had falling out, Fila, Converse, new balance, Many substitutes enter the market with their low price and through the e-commerce, as Adidas compete in a red ocean, most of Adidas customers are a young generation whose behavior and preferences can easily change and switch to other brands especially with changing fashion trends and change in customer lifestyle, as athletic apparel and footwear are highly dependent on fashion trends and customers preferences. Adidas’ mass marketing or product strategies are no longer sufficient as Adidas is keen on it brand equity. Increase in counterfeits products impacts on the brand image as well as their profits, and the use of outsources impacts the company’s control over their quality.

Adidas has issues with animal rights and labor law as Some productions are made from animal skin. (Marks, K2012)

Although the sports industry has grown very fast and become a well-established market as well it become a very competitive market and capital-intensive industry so it is hard for a newcomer to penetrate and enter barriers as it needs large economies of scale. So there is expected of a new brand to emerge in the footwear industry (Kloster, M, and Schimmelpfennig, J 2010).

Brexit: 29 March 2019 is a deadline for the British to leave the EU, is it going to be a hard Brexit or soft Brexit, deal or no-deal, or are British lawmakers going to call for a second referendum, as Brexit going to affect the European economy, European customers and ultimately Adidas business as 30% of Adidas business is Europe, so there is a huge impact of Brexit on Adidas business. Taylor, G (2018)

Nike: Established in 1964 by Phil Knight and Bill Bowerman. It initially was called Blue Ribbon Sports Company and was created due to the lack of available quality sports shoes in the current market. They changed their name to Nike about 7 years after founding the company with the swoosh logo sign being created by a college student for a mere $35. Now Nike is the number 1 in footwear brand, Besides their shoes, they have their own apparel, accessories, perfumes, and deodorants, with a revenue of 33 billion dollars, (Jobber, D. Fahy, J 2009). Nike took advantage of Adidas’s weaknesses while Adidas does not willing to produce jogging shoes as jogging is not a sport, Nike makes jogging shoes for everyday athletes. In1977 Nike realized the importance of promotion so Nike invest more money in promotion especially in advertising the result was increasing in demand and enable Nike to grow even further. while Adidas realized later the importance of promotion and provide a lot of effort.

In 1978 introduced tailwind running shoe is a sole fill with gas and acts as cushioning it provides stamina and comfort. Although Adidas create the idea before Nike but decided to turn it down

Strategic approach

Adidas strategy

Michael porter generic strategy (1980). The recommended strategy is lower cost or cost leadership, focus, and differentiation(Griffin 2011).

Both Adidas and Nike working now under a strategic plan that is due to complete in 2020. Now Adidas has a strategic plan called creating the New to surge sales by 10-12% and increase their revenue growth, double their digital revenue growth. (Friedman, A (2018)

Adidas uses a skimming pricing strategy, as Adidas’s target customers are the upper middle class and high-end customers, with high price products Adidas attracts customer segment psychologically as a higher price means higher quality from the perspective of the customer, while the low price will affect the brand equity of Adidas. So Adidas use competitive price with a normal product to compete with other competitors like Nike and puma meanwhile its use a skimming price strategy for new products with advanced technique and high quality. Although Adidas outsources a substantial part of its business to external suppliers to reduce the cost and price of the products(Adidas 2019).

Adidas has superior quality products, which generate premium positioning from a customer perspective, it offers a different, higher-end lifestyle that other competitors cannot offer. (Adidas 2019).

Speed strategy, is Adidas’s global strategic business plan, target to become the first fast sports company, in the standard industry the period for production is 18 months(between idea, design, production, and market) but Adidas planning to reduce this period to weeks instead of months as strategic speed plan. (Wright, B. 2018).

stretch their operation in six city centers Los Angeles, New York, London, Paris, Tokyo, and Shanghai, Adidas aims to double its revenue in these cities as they play a significant part in shaping trends, Adidas is hoping to open more stores in India by 2020 with bigger space to give the customers a better experience that is missing from their previous 1000 sq ft. as customer needs more time to see all products which lead to more satisfied customer and ultimately more sales and more profits (Jain, V, 2018).

NIKE Strategy: Nike is known for its high quality, and value for money and they normally target upper middle class and high-end customers, so, they use skimming and competitive pricing strategy. Nike focuses in plunged their price so cut its workforce by 2% in 2017(almost 1400 employees), reduce operation segments from 6 to 4, and concentrate on expanding its operations in only twelve global cities ( such as New York, London, Beijing, and shanghai) (Garcia, A. 2017). Nike invests in research, development, creativity, and innovation as Nike expects that over the next five years 50% of growth will come from Nike innovation. (vault 2019)

A region that represents the greatest growth opportunity for Adidas in the next five years and explains why

Material segment:(plastic, synthetic rubber, plant-based, leather. Adidas recently announced that in 2024 they going to use recycled plastic for apparel and shoes to save the environment ( Indian Textile Journal, 2018).

Adidas
Nike

Headquarters

Herzogenaurach, Germany 1949

U S 1964

Core sports

Football, Rugby, Tennis
Basketball, Running
subsidiary brands
Reebok, TaylorMade
Converse, Jordan, and Hurley

Employees

57000 ( Statistics . 2019)
73,100 (Statistics . 2019)

Name,

Logo

slogan

Adi (a nickname for Adolf) + Das (from Dassler), three stripes logo come from the trefoil and then the shape of a mountain

Impossible is nothing

Greek goddess of victory

Wing, swoosh

From Lets Do It to Just Do It

Revenue in 2017

$ 19 billion
$ 34.4 billion

celebrity

Lionel Messi, Run DMC, Zidane, Beckham
Michael Jordan, Cristiano Ronaldo, Oscar Pistorius, Wayne Rooney

product

Product segment: athletic footwear (football, tennis, running, soccer, hockey, golf, and others). Nonathletic footwear (sandals, flip flops, boots, dress shoes)

Produce apparel and equipment for different types of sports

In the Middle East, they provide hijab for Muslim women athletes and casual outfit

Apparel, accessories, equipment and

footwear, and golf sunglass with ultra-lightweight (Nike 2018).

In shanghai, Nike opened a skateboarding and snowboarding store with events to target china.

In Arab countries, Nike provides hijab athletes with light and soft materials beside it met cultural requirements.(Kearney, L 2017).

price

Price is high due to the high technology they used also to the high quality of the material used, as a low price cannot create high quality for example Adidas charged for white T mac 4 shoes higher price than the one in the same version but with a different color. The price of Adidas is relatively high, particularly for developing countries

Skimming and competitive pricing strategy. Today they focus on reducing production costs by using the resources more effectively and efficiently. Nike cut 2% of its workforce(Nike 2018)

promotion

Tv, online, billboard, sponsors many players in the different sports areas, have a tagline (impossible is nothing) using celebrity and well-known club, Adidas platform (get Adidas news, tell us what you are interested in and Adidas exclusive offers), OOH promotion such as are you fast enough? Advertise about reebok. (odds by Adidas) when the senior marketing director of Adidas in India announce that At Adidas, we live a simple principle: No athlete left behind that ended with the sale of two left shoes and two right shoes as a pair (platmore 2018). point of sale

A smartphone app that provides personalization to customers

Sponsors various sports events. ooh, advertising, Nike has famous personalities, endorsement contracts, and athletes and non-athlete celebrities use them as ambassadors and influencers, big events like the world cup when almost 60% of the players wore Nike boots (Nike 2018). Besides offline Nike uses online such as Instagram, YouTube, Social media, and online advertising

place

Offline (Adidas outlets and multi-brand outlets hypermarkets, specialty stores, others) Online retail (Amazon.com, Myntra. com, Flipkart.com), franchises, smartphone app.

In 2015 growth in Adidas E-Commerce by 500 million.

In 2011, the us, Asia, and Europe started the online Adidas business.

In 2012, Latin America started Adidas’s first online outlet. (Hollensen, S 2014).

Introduced Nike+Running App, 20,000 retail in the U.S, and sell their products in nearly 200 countries worldwide and nearly 1000 own retail (Nike 2018), Nike sells their products in international markets through a number of subsidiaries, licensees, and more than 40 distributors. Most of Nike apparel and other products are produced in outside the U.S. mostly in Indonesia, Vietnam, and china but the equipment in the U.S. and abroad, (vault 2019) .online like Nike.com, Nike+apps Nike expects to double its digital sales by 30% . (Vault 2019)

segmentation

Adidas target different segment customer groups through demographic, psychographic, geographic, and behavioral factor. Adidas operates in eight geographic segments: Western Europe (27.4% of Adidas total revenues), then North America (17.7%), and great china (15.6%) there is a collaboration between Adidas and Wanda group which includes developing football and basketball, increases their saleable, marketable and profitable relationship as well as Adidas sponsoring 2 of Wandas Ironman event in china, MEAA (13.9%), Latin America(9%), other(7.6%), Japan (5.2%), and Russia (3.6%).(Adidas 2017).

Demographic segmentation such as sex and age

Adidas has a range of products that suits male and female such as clothing, shoes, perfume, and eyewear also Adidas provide products for kids, today Adidas provide athletic and non-athletic clothes not only for generation y but also for generation x, z. The Edge bounce Adidas shoe is for women who want shoes for mid-distance runs or CrossFit.(Amanda 2019) Psychographic segmentation is about customers’ social class, personality, and lifestyle, so Adidas provides clothes for outdoor activities also clothes for people who like sporty style, all Adidas products are fashionable, good-looking, and also functional. Used the psychological factor that a high prices come with high quality. (Adidas)

Psychographic segmentation: Nike creates events like run with me, and sports improvement clinics, to build customer belonging

Behaviouristic means how the product makes customers feel (you are an athlete, Nike products make you feel athletic), build customer loyalty.(Nike 2017)

Geographic segmentation to target market nation, region, cities, Nike carry out their activities in six geographic segments: Western Europe (18%), North America(46% of Nike’s total revenue), Eastern Europe, and central Europe(4%), Greater China(12%), Emerging Markets (11%) and Japan(3%)(Vault 2019). IN 2030 nearly two billion digital citizens in India, Latin America, and China will introduce to the middle class. And over the next 5-year, Nike’s growth will come from international geographies which will be approximately 75% of Nike’s growth (Nike 2018), partnership with the china super league. For example in India Nike focus its advertisements on cricket, rugby in Australia and England, and football and baseball in the united states. (Nike 2018)

Demographic segmentation Nike targets customers who are between the ages of 15-40 and targets both men and women, currently the revenue sales of products that target women are 20% and there is forecasting for growth in the coming years. Nike produced huarache ultra-shoes for women(Nike 2018), and Nike Hijab for Muslim athletes(Hong,d 2018)

target

In big events like FIFA World Cup, NBA All-Star Game.

Through the social network Adidas targets youth customers their age between 12-16 NEO so they can buy fit skinny jeans. Using its own platform which is the Adidas app, Adidas India provides a stable cloud infrastructure that will fast the purchase cycle three times, they launched Oracle cloud which leads to improved customer experience, staff experience, boost billing process, increase cost savings, increase sales, it is not only used by Adidas Indian retail but also used in online operation.(ENPN. 2018) Targets audience that care about stylish and fashion, Adidas produce broader products to suit different customer need, it targets customers who are working and love sports.(Adidas)

In Japan, Nike launched the Nike SNKRS app.

((Nike News 2018). Nike launched the NTC app for Arab people using the Arabic language. (NIKE 2018)

Position

As position means what a company does to the mind of the customer, so, Adidas invested heavily in major sports events, using high technology and high materials to produce high-quality products, Adidas positioned their products to be faster for example (Dwight Howard Super best) is today the lightest basketball boots, as it makes the basketball players run faster than wearing other shoes (Newsarama. (2010). Adidas is also positioned as a popular brand, the slogan of Adidas is very enthusiastic and sporty. Adidas positions itself as youthful, fashionable, and stylish and it targets the youth. (Adidas)

Using storytelling like (we won it in France), and inspiration, Nike uses endorsements to the impact on physical and emotional needs of customers, for example, endorsers LeBron James as a role model and as a hero. Also used by celebrities, brands, and corporations, like Yeezy 1 and 2, collaboration Nike SB x Diamond Supply Co( Dan, A. Helen, C., And Mark, D 2018)

Conclusion

From the critical evaluation between Adidas and Nike, it appears that there are some similarities and differences between the two brands such as they started nearly at the same time, their strategic behavior, they expanded their marketing globally, and they both reached the global leader in the sporting products industry.

Although Adidas products expanded and reach all continents, they should produce more products and improve the existing products, communicate with customers to know more about the level of satisfaction, and know more about rural area customers what they need and wants, that can happen through more surveys, and encourage new technologies to add innovation to their products.

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