INTRODUCTION
1. SW SWOT OT Anal nalysis ysis::
In order order to ident identif ify y the the main main stra strate tegi gicc issu issues es faci facing ng Adida didass in main mainta tain inin ing g thei theirr glob global al competi competitiv tivee pos posit ition ion,, it will will be quite quite useful useful to und undert ertake ake a SWOT SWOT analys analysis is of the company company According to !ogoff and "e#os $%&&'())*, the best way to begin a research on the competitive advantage and competitive position of a company is to do a SWOT analysis of the company which is an acronym standing for strengths, weaknesses, opportunities and threats of the business
SWOT SWOT anal analys ysis is of Adida didass will will invo involv lvee the the eval evaluat uatio ion n of its its inte intern rnal al as well well as e+ter e+terna nall environment In order to be the market leader and gain g ain more and more profits, Adidas always intends to develop new opportunities which make it highly prone to risks
STRENGTHS
!enowned brands +tensive -arketing Infrastructure .iversity and /ariety
WEAKNESSES
OPPORTUNITIES
2rowing .emand in Sport quipment merging -arkets .eveloping Technology
THREATS
1.1.
0nderperformance of !eebok 1hannel 1onflicts
Increased !aw -aterial 1osts 1ompetition conomic !ecession 1ounterfeit 3roducts
Strengths:
4ollowing are the key strengths of Adidas 2roup(
555 !enowned "rands( It is one of the ma6or strengths of the company Adidas group owns brands like Adidas, !eebok, Taylor-ade Taylor-ade $Adidas 2roup Website* Website* The strong brand b rand image of Adidas has increased its brand loyalty which in turn has led to increase in profits 1 | S t r a t e g i c M a n a g e m e n t
It is the brand reputation which has helped Adidas to be the market leader in almost every part of the world Adidas brands are not only popular in urope and 0S but they have also captured most parts of Asia now According to Shanley, %&&7 $8elmsman Online*, Adidas emerged as a market leader in 9apan in %&&: replacing ;ike for the first time According to a report of Adidas, it is has maintained its top position in urope till date Adidas also strengthens the images of its brands by customer satisfaction $Adidas Official*
55% +tensive -arketing Infrastructure( The company has a widespread marketing infrastructure The policy of the company to focus on a single distribution channel has changed It is now focussed on having various distribution channels and has a huge network of stores and outlets worldwide $Adidas Official* .ue to an e+tensive marketing infrastructure and advertising, Adidas has been able to undergo market penetration which helps them to draw more profits According to -an#enreiter $%&&)(<&<*, Adidas kept doing the advertisement campaigns with popular sports celebrities after the %&&% football World 1up like .avid "eckham, 8idetoshi ;akata, etc in order to gain more and more market share in the markets like 9apan Adidas also formed one of the pillars in %&&7 football World 1up in 2ermany
55< .iversity and /ariety( According to Adidas $1orporate Website*, =We will remain committed to understanding, valuing and incorporating the diversity into the corporate culture of the Adidas 2roup> This helps them in market penetration and gain competitive advantage Adidas has a large number of products in a number of styles for both men and women $!unningshoes)u* The company has gained strong reputation in almost every part of the world due to its innovative technology and continuous introduction of new brands
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Wea!nesses:
5%5 0nderperformance of !eebok( The merger between Adidas and !eebok was basically an attempt of Adidas to gain more market share in 0S? the ;ike@s own turf $Tribune A* Adidas wanted to confront ;ike on its own home land The takeover was supposed to be a friendly takeover and the stock prices of both the companies started to improve from the very day of the announcement $-S;"1 report* "ut during the last months of %&&:, sales of !eebok dropped from B5 billion to BC5% million The poor performance of !eebok continued from the very time In -arch %&&', Adidas also admitted that the merger was not as successful as it was supposed to be and the causes for the failure of the takeover were fully attributed to !eebok Adidas blamed !eebok to be the basic reason as the group had <7D drop in the overall gross margins by the end of %&&' $-arketingmaga#inecouk*
5%% 1hannel 1onflicts( In the times of growing e?business, Adidas has also begun to sell its products online on a large scale $Official Site* This has led to the conflicts with the retailers !etailers will be less reluctant to sell Adidas products in future which can lead to drop in sales
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O##$rt%nities:
5<5 2rowing .emand in Sports quipment( According to Walker and Seidler $5CC<(:*, since 5C7&, sports has changed a great deal and sports equipment industry has become a multibillion dollar industry as a virtue of this change Also with growing population there is a large demand for goods $.raak, 5CE7* So, Adidas need to improve its strategies much more in order to avail ma+imum benefits
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5<% merging -arkets( According to 1avusgil et al $g%&&%(5&*, merging markets have a high birth rate and accommodate about ':D of the world@s total population As more population means more sales, it is important for the company to strengthen its roots beyond the uropean and 0S borders The company is doing well for its brand popularity in the emerging economies Such as, the company has launched the apparel for Indian yoga to target the market share in India $Ameinfo ;ews* After the "ei6ing Olympics the company increased sales in 1hina also $Opendoorcom report* Southeast Asia and astern urope $!ussia* are also emerging markets with opportunities due to their large populations
5<< .eveloping Technology( According to annual report %&&C, the company is aiming to use new technology and come up with new brands Although the company@s innovative technology can be regarded as its strengths yet a great deal needs to be done in this field As -aier $%&&C* clearly states that as a business grows the importance of keeping up with changes in business computing and technology can be more important over time
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Threats:
5)5 1ompetition( As the merger between Adidas and !eebok was an attempt to gain more market share in 0S and to give a tough competition to ;ike $;o 5 in the industry* and 3uma $;o )* $Tribune A* At the time of the merger, it seemed that it really made sense but ;ike was never on the backseat ;ike is the most tough and giant competitor of the company
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5)% Increased !aw -aterial 1osts( The company is facing higher raw material and wage cost $""1 Online* This is one of the key threats to Adidas .ue to this reason, Adidas was thinking of closing some stores at the end of the previous year
5)< conomic !ecession( 2lobal recession is one of the biggest threats which almost every business is facing right now According to ""1 Online $%&&C*, =Adidas sees profits drop by C'D> It further says that Adidas made :m euros net profit during the first quarter of %&&C which was 57Cm in %&&E Adidas blamed economic downturn as a basic cause for this
5)) 1ounterfeit 3roducts( According to Adam $%&5&*, the market is full of counterfeit products which resemble the genuine product and are made to deceive the customers According to a "ehean, about 5%D of sportswear in %&&5 was fake This has become a key threat to Adidas over the past years
. ANSO''(s )atri*:
In order to evaluate potential strategic options that Adidas should consider in sustaining and developing their global competitive position, we need to use Ansoff@s matri+ As commented by 4ifield $5CCC(5)<*, Ansoff stated that there are actually only four ways through which a company can e+pand its operation in order to sustain its global competitive position 4rom the market point of view, Adidas group believes in market development and market penetration
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)ARKET PENETRATION
)ARKET DE+E,OP)ENT
2lobal "rand /isibility AdvertisementsFSponsorships
PRODUCT DE+E,OP)ENT
;ew 3roducts !elevant -odified 3roducts
DI+ERSI'ICATION
.1.
;ew -arkets ;ew .istribution 1hannels in merging -arkets
.iversification of 3roducts G Athletics, 1ricket and 8ockey 1asual 4ootwear
)ar!et Penetrati$n
%55 2lobal "rand /isibility( According to Haferer (<
%5% AdvertisementsFSponsorships( The other key method of market penetration followed by Adidas is aggressive advertising According to !ot#oll et al ( when there is a strong appeal to fear along with product benefits, there is a possibility to get potential consumers to move to 6 | S t r a t e g i c M a n a g e m e n t
an immediate purchase Adidas is also using the aggressive advertisement strategy to gain more market share with its e+isting products in e+isting markets eg in %&&& Adidas launched a series of new advertisements featuring reputed sportspersons in daring but eccentric conditions $.rummond and nsor, %&&<(%&<* The basic ob6ective was to target the young market segment without giving details of the features of the product Similarly, prior to the football World 1up in 2ermany, there were poster advertisements featuring the 2ermany@s football captain - "allack saying the Adidas tagline, Impossible is ;othing@$"leachers brew* The main motive of this advertisement was to catch customer attention by creating a hope for 2ermany@s World 1up win Adidas also has a tradition of making reputed sportspersons, with a lot of fan following, their Ambassadors It helps the company to target the sports lovers These include -ohammad Ali, .avid "eckham, etc Overall Adidas carries out an e+tensive advertising on T/, !adio, Web sites, through posters etc $Tennis "log* Adidas 2roup also sponsors numerous sports events such as "asketball, 4ootball, etc which helps them to penetrate the market effectively
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)ar!et De-el$#ent:
%%5 ;ew -arkets( In order to develop markets, Adidas has always been in search of new markets In the emerging markets of India, 1hina, !ussia, etc, Adidas is continuously e+panding its business by entering new markets with e+isting products In case of marketing strategy, Adidas has always been following the offensive marketing strategy in new markets
%%% ;ew .istribution 1hannels in merging -arkets( merging markets also open new channels for Adidas 4or e+ample, Adidas entered India long time ago "ut recently, in %&&E, it was able to conquer the sports market of 9ammu J Hashmir state of India by opening two stores, one each in 9ammu and Srinagar $2reater Hashmir, -ay %<(%&&E* Similarly, after the 7 | S t r a t e g i c M a n a g e m e n t
sponsorship of "ei6ing Olympics Adidas opened the biggest Adidas store in "ei6ing
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Pr$/%0t De-el$#ent:
%<5 ;ew 3roducts( Adidas is known for coming up with new products from time to time Through continuous introduction of new products in the market, the company has been able to enhance its strong recognition Adidas group mainly launches new products in ;orth America It is also considered the main platform for communication strategy by the company Therefore the company has replaced its focus on a single distribution channel with the focus on various distribution channels 4or e+ample, Adidas launched several new products in %&&E like -atchball of the 04A, uropass@? the football boot In the e+isting markets of India, Adidas has introduced the Koga apparel to gain market share $Adam, %&5&* The product design is based on the partnerships with Stella -c1artney, etc -oreover, the three brands Adidas, !eebok and Taylor-ade all offer different personalisation platforms and products which reflects the strategy of each brand
%<% !elevant -odified 3roducts( Technological innovations have led Adidas to the modification of products as well 4rom the first day football boots with screws embedded in spikes to the present day 1lima1ool Adidas has been creating Adidas has modified them several times ike the present day 3redator -ania which is modified football boot meant for accuracy, speed and control Adidas has formed brand teams to conduct a research about customer needs so that products are renewed and modified according to those needs It has also teamed up with .iesel to sell the 6eans at its Adidas Original stores
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Di-ersii0ati$n:
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According to Ansoff this strategy is highly risky of the four as it involves the introduction of new products in new markets without having a proper knowledge of different parameters
%)5 .iversification of 3roducts in Athletics, 1ricket J 8ockey( This would help Adidas in competing in the markets of huge competition The group has a strong hold on soccer and basketball product line The development of products for athletics, cricket and hockey will help Adidas to be a market leader in new markets like India and 3akistan where people are more interested in cricket and hockey instead of football and basketball
%)% 1asual Shoes( In order to minimise competition and increase profits, Adidas has implemented a multi?brand strategy "oth as a mass and a niche player this ob6ective helps them in the times of fierce competition and provides them a competitive advantage Adidas is capable of providing a wide range of products for different customers Adidas has now also started to manufacture the casual leather shoes $Annual !eport, %&&C* Adidas $%&&C* was clear in its strategy to sell leather shoes by saying that it will offer them a significant opportunity
". THE I)P,ICATION O' THESE OPTIONS 'OR THE STRATEGIC )ANAGE)ENT.
".1.
,ea/ershi#:
.rucker $5CCC* writes that it is only a leader@s ability to generate unusual or e+ceptional commitment to a vision $"oddy, %&&E():E* So implementation of strategic plans requires inspirational leaders It was until 5CE' that 8orst .assler, being egoistic, ruined his family reputation because of his usual comparisons with the competitors 8erbert 8ainer was made 1O of Adidas in %&&5 8e is an inspirational leader and has been looking forward to implement new strategies from time to time 8e e+tended the 9 | S t r a t e g i c M a n a g e m e n t
"eckham deal and was the person to launch the "eckham@s line in %&&: when he saw "eckham@s huge fan following In the same year, 8ainer and 4ireman $1O of !eebok* 6oined hands for the growth of both the companies and give a tough competition to ;ike The merger was aimed to gain more market share and become the market leader in 0S According to 8ainer $1O*, =We will e+pand our geographic reach, particularly in ;orth America, and create a footwear, apparel and hardware offering that addresses a broader spectrum of consumers and demographics With !eebok we are advancing our position on the playing field of sports good industry and are improving our financial strength to drive increased shareholder value>
$Inside 8oopscom* It is clear from his statement
that the group has innovative brands and market position which gives them a competitive platform The biggest challenge is to improve the products and strategies with time and undergo a successful integration of !eebok After the merger, 8ainer had a strategy of targeting the basketball and soccer lovers individually with !eebok and Adidas brands According to the 1hief +ecutive 8ainer( =The brands will be kept separate because each brand has a lot of value and it would be stupid to bring them together The companies will continue selling products under respective brand names and products> $I1-! India*
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Organisati$nal Str%0t%re:
According to .rummond and nsor $%&&<(%:)*, in developing a marketing strategy it is very important for an organisation to have teams Adidas has multifunctional teams which help the company in its offensive marketing strategy 8eadquartered at 8er#ogenaurach, 2ermany, Adidas is the largest producer of sportswear in urope The organisational structure of the company is in accordance with its business strategy As the business activity of Adidas includes three product lines, footwear, apparel and hardware of sports, the structure of the company is also emphasi#ing on a sporty environment and is in complete agreement with its products and services After merger, !eebok targeting basketball lovers was kept separate and its previous management was retained The identity of the brands of both Adidas and !eebok was kept distinct as before even after the merger This reflects Adidas@s strategy based structure The construction of Originals 10 | S t r a t e g i c M a n a g e m e n t
Stores@ was an attempt to target fashion forward people The designs of these stores also reflect the strategy of the company
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C%lt%re:
According to .rummond and nsor $%&&<(%:<* a strategy is most likely to fail if it goes against the dominant culture Same was the case with Adidas The merger between Adidas and !eebok in %&&: was an attempt of Adidas to capture 0S markets "ut the merger was not culturally fit as one of them was 2erman and the other was American and it forced Adidas to pay a high price The merger was not in agreement with the cultural fit and as a result it is considered as an almost failed merger !eebok sales are declining continuously and are one of the key weaknesses of the company right now
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Inn$-ati$n:
In the present times of huge competition, Adidas has always created symbols which stand for its innovation and product development According to 3almer $%&&)(%7'*, innovation not only refers to the products offered by a company but includes all marketing functions, including distribution and promotion Adidas is highly innovative not only in the field of technology and new product development but also in the other aspects of marketing such as creating a suitable image of its brands The basic factor responsible for the faster innovations is the global influence of the company Adidas follows the strategy of increasing premium partnerships and attracting its customers through consistent innovations with various marketing issues
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CSR3Ethi0s:
1orporate social responsibility and ethics at Adidas is an important part of the company@s corporate strategies The company is focused on the healthy living of people as it deals with sports equipment and sportswear It is due to Adidas that different sports activities have become popular in all social classes particularly kids 8owever, the violent and 11 | S t r a t e g i c M a n a g e m e n t
eccentric advertising is a bit unethical on the part of Adidas Adidas is also concerned with its employees very much The supervisory board which consists of a total of 5% members has si+ members from employees Adidas cares very much about the employee satisfaction Asian employees are focussed on the production whereas uropean and American employees are focussed on the marketing, distribution and retailing
&. CO)PETITI+E PRO'I, )ATRI4 5CP)6
&.1.
Deiniti$n CP)
1ompetitive 3rofile -atri+ $13-* To compare it with the ma6or firms of the industry Shows the firm its weak and strong point as compared to the ma6or players in the industry Takes into account effectiveness of advertising, product quality, management, finances, the prices and competitiveness among other factors !ating ( )Lma6or strength,
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Criti0al S%00ess 'a0t$rs
1ritical success factors $1S4* are the key areas, which must be performed at the highest possible level of e+cellence if organi#ations want succeed in the particular industry They vary between different industries or even strategic groups and include both internal and e+ternal factors In our e+ample, we have included 55 1S4, which is usually not enough The more critical success factors are included the more robust and accurate the analysis is The following list provides some of the general 1S4, but the list is not definite and you should include industry specific factors in your matri+(
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Weight :
ach critical success factor should be assigned a weight ranging from && $low importance* to 5& $high importance* The number indicates how important the factor is in succeeding in the industry If there were no weights assigned, all factors would be equally important, which is an impossible scenario in the real world The sum of all the weights must equal 5& Separate factors should not be given too much emphasis $assigning a weight of &< or more* because the success in an industry is rarely determined by one or few factors
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Rating :
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The ratings in 13- refer to how well companies are doing in each area They range from ) to 5, where ) means a ma6or strength, < G minor strength, % G minor weakness and 5 G ma6or weakness !atings, as well as weights, are assigned sub6ectively to each company, but the process can be done easier through benchmarking "enchmarking reveals how well companies are doing compared to each other or industry@s average 9ust remember that firms can be assigned equal ratings for the same factor
&.2.
S0$re an/ T$tal S0$re :
The score is the result of weight multiplied by rating ach company receives a score on each factor Total score is simply the sum of all individual score for the company The firm that receives the highest total score is relatively stronger than its competitors
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8eneits :
i* The same factors are used to compare the firms This makes the comparison more accurate ii* The analysis displays the information on a matri+, which makes it easy to compare the companies visually iii* The results of the matri+ facilitate decision?making 1ompanies can easily decide which areas they should strengthen, protect or what strategies they should pursue
2. STEPS IN DE+E,OPING CP)
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2.1.
Ste# 1: I/entiy the 0riti0al s%00ess a0t$rs
To make it easier, use our list of 1S4 and include as many factors as possible In addition, following questions should be helpful identifying industry@s 1S4( Why consumers prefer 1ompany A over 1ompany " or vice versaM What resources, capabilities and competences firms possessM What sustainable competitive advantages companies have in the industryM Why some companies succeed and others fail in the industryM
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Ste# : Assign the 9eights an/ ratings
The best way to identify what weights should be assigned to each factor is to compare the best and worst performing companies in the industry Well performing companies will usually undertake activities that are significant for success in the industry They will put most of their resources and energy into those activities as compared to low performing organi#ations Weights can also be determined in discussion with other top?level managers !atings should be assigned using benchmarking or during team discussions
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Ste# ": C$#are the s0$res an/ ta!e a0ti$n
Kou should compare the scores on each factor to identify where company@s relative strengths and weaknesses are
7. CO)PETITI+E PRO'I,E )ATRI4 ADIDAS AG
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;. CO)PETITI+E PRO'I,E )ATRI4 CO)PETITORS O' ADIDAS AG
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<. CONC,USION
Already Adidas is showing very satisfying returns on its investment when compared to its competitors but the matter of concern is the geographical e+pansion of the company It is not as good as should be at this level of competition 4or e+ample, ;ike stores are in very much abundance in India 8owever, hardly an Adidas store can be seen e+cept in the metropolitan cities like ;ew .elhi, etc +pansion policy will assure the company a good market share and profit in the emerging markets There is a great future for Adidas ahead if it mends its strategies a bit
=. RE'ERENCE
5 Strategic -anagement 1oncept and 1ases G 4ourteenth dition$3earson* G 4red ! .avid % http(FFwwwstrategicmanagementinsightcomFtoolsFcompetitive?profile?matri+?cpmhtml
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