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Market: Strategic Management and Adidas Essay

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Adidas – a name that stands for competence in all sectors of sport around the globe. The vision of company founder Adolf (“Adi”) Dassler has long become reality and his corporate philosophy the guiding principle for successor generations. The idea was as simple as it was brilliant. Adi Dassler’s aim was to provide every athlete with the best possible equipment. It all began in 1920, when Adi Dassler made his first shoes using the few materials available after the First World War.

Adidas Group (adidas) is one of the leading companies in global sporting goods industry with brands built on a passion for sports and a sporting lifestyle now. The company along with its subsidiaries involves in designing, developing, marketing and retailing of sports footwear, apparel and accessories. It also involves in manufacturing and retailing of various sporting gears, accessories, golf balls, and iron rods. The company offers products through adidas, Reebok, and About TaylorMade-adidas Golf brands. Adidas brand through adidas Sport Performance offers products in five categories namely, football, basketball, running, training and outdoor.

adidas continuously improved the quality, look, feel and image of our products and our organisational structures to match and exceed consumer expectations. adidas brand through adidas Sport Style offers authentic sportswear to the full spectrum of lifestyle consumers.

Activities of the company and its around 170 subsidiaries are directed from the Group’s headquarters in Herzogenaurach, Germany. It is also home to the adidas brand. Reebok Headquarters are located in Canton, Massachusetts. TaylorMade-adidas Golf is based in California. The company also operates creation centres and development departments at other locations around the world, corresponding to the related business activity. Effective December 31, 2011, the adidas Group employed 46,824 people.

SWOT Analysis

SWOT is a tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, straightforward model that assesses what an organization can and cannot do as well as its potential opportunities and threats.

The method of SWOT analysis is to take the information from an environmental analysis and separate it into internal (strengths and weaknesses) and external issues (opportunities and threats). Once this is completed, SWOT analysis determines what may assist the firm in accomplishing its objectives, and what obstacles must be overcome or minimized to achieve desired results.

Strengths

Top of brand recognition. Brand recognition of the Adidas especially its traditional three strips style is well reputed.

The biggest sponsor of the sport events. Adidas is the biggest sponsor of the sport events specially football, such as 2010 FIFA World Cup South Africa™. adidas is the Official Sponsor, Supplier and Licensee of the FIFA World Cup™ and provides the Official Match Ball JABULANI as well as the equipment for all officials, referees, volunteers and ball kids. In the 2010 FIFA World Cup™, adidas equips more than 200 players as well as 12 teams: host nation South Africa, the tobecome world champion Spain, Germany, Argentina, Mexico, Paraguay, France, Japan, Nigeria, Slovakia, Denmark and Greece.

Acquired major competitor. Adidas acquisition includes Salomon group in 1997 and Reebok in 2006 which they are the competitor previously. That increases the market share in the global sporting goods industry.

Good partnership with National Basketball Association (NBA). adidas and NBA announced an 11-year strategic global merchandising partnership in 2006 that will make the adidas brand the official uniform and apparel provider for the NBA, the Women’s National Basketball Association (WNBA) and the NBA Development League (D-League) beginning with the 2006-07 NBA season. The Reebok brand will continue to be a global marketing partner of the NBA and will maintain the ability to create NBA branded footwear.

Good reputation. The company has been obeying environmental laws and has never been accused for pollution. Such as no child labour accusations.

Geographically-diversified operations. More than 170 subsidiaries guarantee marketplace presence for products of the adidas Group around the world. Sales and distribution of adidas products is grouped in four regions worldwide: Europe/Emerging Markets, North America, Asia/Pacific and Latin America. Today, the adidas Group is Europe’s biggest supplier of athletic footwear and sports apparel. Its mean adidas demographically wide spread every county have adidas outlets in every city or the branded products are scattered in different branded super marts.

Product diversification. adidas Sport Style division presents new highlights of the Y-3 collection at the New York Fashion Week. Separately, adidas also have collaboration with Diesel – adidas Originals Denim by Diesel becomes available in stores in February 2008.

Weaknesses

The poor e-marketing. adidas e-shopping is offered only to the USA locations, some locations of Europe and Asia.

Imperfect customer service. Customer service centers are not totally functional, and problems are faced specially in the case of e-marketing.

Too expensive. The price is quite higher. The old version or over-quarter product still in higher price.

Opportunities

Improve the e-marketing. Adidas is planning to outscore its web development and ecommerce to the third party, which would then pay the company through ease at customer edge. Also can merge with them for expansion of online retail.

Apps for smartphone. The smartphone very popular in the world now. The smartphone can allow users to browse the web, watch movie clips and sporting events, download music and play games; this opens new doors for Adidas

Developing Technology. Although the company’s innovative technology can be regarded as its strengths yet a great deal needs to be done in this field. Business grows the importance of keeping up with changes in business computing and technology can be more important over time.

Growing global footwear market. According to Prweb, Global Industry Analysts, Inc. (GIA) announces the release of a comprehensive global report on Footwear markets. Global market for Footwear is projected to reach 15.7 billion pairs by the year 2017. Growth will be primarily driven by growing world population, expanding base of middle class consumers, rising standards of living, increasing household income and per capita spends.

Threats

Nike has large loyal customer base. Nike that is its strongest partner is paying much attention to the diversity of models in one item that is foot wear, this leads to enhanced marketing. So if failure to expand in North America could hamper Adidas’s prospects in Asia and threaten its leadership in Europe, where Nike is growing

Legal Risks. The sponsored Kobe Bryant are reflecting negative image of the brand through their illegal activities like sexual abuse.

Rising costs of raw materials. The company is facing higher raw material and wage cost. This is one of the key threats to Adidas.

Counterfeits. Industry world-wide loses large amounts to counterfeiters. These losses not only affect the producers of genuine items, but they also involve social costs. According to estimates by the Counterfeiting Intelligence Bureau (CIB) of the International Chamber of Commerce (ICC), counterfeit goods make up 5 to 7% of world trade. This has become a key threat.

Conclusion of SWOT Analysis

According to the SWOT Analysis, adidas is strong in the market. They can gain more market share in the future. But they must improve the e-marketing and control the costs. They should be select the sponsor carefully, that is affect the company image.

Porter five forces model

Michael Porter (1980) examines the structure of industries by determining the forces that shape them. It is important to emphasise that the extent to which each force determines the structure of the industries differs. The model can also be used to illustrate which forces the firm can influence, in order to best position itself within its chosen industry. The new competitors are high barriers of entry to global sporting goods industry. Such as, high set up costs, economies of scale, marketing barrier. The five forces that examine are 1) the threat of new entrants, 2) the power of buyers, 3) the power of suppliers, 4) the threat of substitute products & 5) the competitive rivalry between existing firms. There are several reasons for this using the five forces analysis can clearly demonstrate how each force contributes the profitability of the industry.

The threat of new entrants

New entrants to an industry bring new capacity, the desire to gain market share, and often substantial resources. There are major sources of barriers to entry:

By the economies of scale, the barrier is determined by size of operation required to operate efficiently with in the market. This is important when existing firms within the market can achieve cost advantages from their scale of operation. In industries that have minimum efficient scales of operation (MES), firms wanting to enter the market must compete at the level or incur a disadvantage. The global sporting goods industry where to be competitive there is a need to operate on a substantial scales. Just is Footwear market is projected to reach 15.7 billion pairs by the year 2017.

By capital requirements to entry, the new competitors need the very expensive to start up and run a company. This relates to the pure finance required to enter an industry, but is often liked to the other barriers to entry. The need to invest large financial resources in order to compete can deter new entrants. Capital may be necessary not only for fixed facilities but also to extend customer credit, building inventories, and fund starting up losses.

By Cost disadvantages independent of size, entrenched companies may have cost advantages not available to potential rivals, no matter what their size and attainable economies of scale. For example good relationships and knowledge of customers and suppliers can be utilized to defend a firm’s position. The new competitors may not produce easily. So the new competitors should be deriving some other competitive advantage, but that is hard.

By access to distribution channels, the newcomer must secure distribution of its product or service. The new competitive is hard to obtain exclusive deals with retailers so that they sell only their products. They should give higher slotting fees to the retailers if want a good place in the shop.

By Product differentiation, brand identification creates a barrier by forcing entrants to spend heavily on marketing. adidas have a good brand loyalty. The new competitor is very hard to build up their brand name in shortly.

By expected retaliation, responses by existing competitors may depend on a firm’s present situation in the industry. Such as Price retaliation, increase the advertising cost to the potential entrant and creditable threat such as predatory pricing. The top lending such as adidas and nike should not be easy give the new competitor entry to the market.

The power of buyers

All firms at some time buy resource and are therefore faced with the power of buyers. It will effects on restricting the freedom of the organization to determine its price and strategic position. The products are mainly sold in bulk to major sports outlets and online stores, since they offer premium shelf space they command lower price. However, adidas have their own shop. So there are a small amount of customers who buy products directly in these shops. When Adidas sell their products to one off customers they can dictate the price as Adidas don’t rely on making these sales.

The power of suppliers

Same as the power of buyers, the power of suppliers also effects on restricting the freedom of the organization to determine its price and strategic position. Supplier provides a differentiated input that enhances the quality of performance of sellers’ products or is a valuable part of sellers’ production process. adidas raw materials to make football boots are not supplied by a monopoly. This gives adidas more power to dictate the price at which they buy their raw materials, as there are a large number of competitive suppliers.

The threat of substitute products

Substitutes often come rapidly into play if some development increases competition in their industries and causes price reduction or performance improvement. Many companies produce football boots are available to the consumers. However, adidas produce football boots that have unique features, such as nylon sole, rubber pads and Traxion. So adidas’s have an edge over their competitors. Also, the substitutes for football boots also include footwear and sports clothes for other sports. That can help develop other business such as Y-3.

The competitive rivalry between existing firms

The final force to consider is the rivalry that exists between firms already in the market. In this industry where growth is slow, competitors wish to expand at a faster rate need to obtain additional market share. There are some companies competing adidas for more market share, including Nike, Puma and Umbro. Adidas should keep their market share in the industry. They must control the price, improve product introduction and innovations, increase the cost of advertising and improved customer service.

Conclusion of Porter five forces model

According to the Porter five forces model, it is hard to entering global sporting goods industry. Most of the forces are strong. There have higher barriers for new entrants. adidas have good power of buyer and suppliers. The new competitor can find the substitute products of adidas may not easily. Final, the industry growth is too slow, so new competitors are hard to competing the market share from adidas.

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Market: Strategic Management and Adidas. (2016, Dec 06). Retrieved from https://studymoose.com/market-strategic-management-and-adidas-essay

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