Situational Analysis - Adidas - Case Study Example

Situational Analysis: Adidas Name Course Tutor’s Name Date Introduction A daring dream in 1920 by Adi Dassler to make his first shoe prospered over the years to become the trademark Adidas. The company, together with the three-striped trademark was founded in 1948, and from the start, it sought to adhere to three guiding principles namely: producing a shoe that meets sports requirements; producing a shoe that would protect athletes from sustaining injuries; and producing durable shoes for the consumer market (Bupesh, 2011). Over the years, Adidas has been a market leader in the sport shoes and sport apparel industry, second only to its main competitor Nike (Bupesh, 2011). As a company that embraces innovation as part of its growth strategy, Adidas embraced e-marketing in 2000, when it launched its website www.adidas.com/com/, and later integrated e-commerce into the same website in the summer of the same year (Bupesh, 2011). Notably, Adidas’ action came four years after Nike had launched its e-commerce website and platform. In the sections below, this paper will conduct a situational analysis on Adidas’ Internet marketing strategy. According to Nykiel (2007) a situational analysis monitors the “appropriateness of the firm’s marketing strategy to determine whether changes to the strategy are necessary” (p. 9). In the concluding section, this essay makes recommendations that Adidas should adopt in order to enhance its Internet marketing strategy. 1.0. 5C analysis on Adidas’ Internet marketing strategy 1.1. Company According to Adidas Group (2013), Adidas’ main goals and objectives when developing the Internet marketing strategy were to enhance more online purchases through the use of friendly electronic functionalities such as ease of navigation, speed and ease of purchase. Position-wise, the Adidas website acts as a virtual store accessible to millions of customers across the world. On the website, customers are able to choose different products, compare prices, and Adidas is also able to run promotions on the same platform. By 2012, Adidas Group (2012) indicated that it generated 68% “currency-neutral sales growth” through electronic commerce sites (p. 38). Consequently, Internet marketing generated sales worth €158 million in 2012 alone. The total net sales for the company in 2012 were € 11.344 billion. The company targets € 500 million sales through the same channel in 2015 (Adidas Group, 2012). Adidas has a diverse brand portfolio, which serves athletes and casual consumers interested in fashion trends. Notably, all the brands are available on Adidas marketing platforms (most especially the website), and through e-tailers, which are Internet-based retailers. 1.2. Competitors Having acquired Reebok in 2006, Adidas’ main competitors are Nike and Puma. Nike has a 39.2% global athletic footwear market share compared to Adidas’ 15.1%. Puma’s global market share was projected at 10.6%, while New Balance, another competitor worth mentioning, has a 9.4% global athletic footwear market. These projections are based on the 2012 period as indicated by Trefis Team (2013). 1.3. Customers Adidas’ main target is young customers (18-30 years), both male and female, who are active in sports or sporting activities. Some of the sporting activities mentioned in the adidas-group.com website include: football, running, basketball, training, and outdoor activities such as hiking. 1.4. Collaborators In addition to having what the Adidas Group (2012) considers a strong supply and distribution chain, the company has other collaborators in the name of brand centres, concept store, and factory outlets. The e-tailing concept that is used by each of the aforementioned collaborators is especially relevant to the Internet marketing concept since it enables the collaborators to collectively present an Internet-based marketing process to consumers. 1.5. Climate Since Adidas has established its presence in different countries across the world, it is exposed to diverse political factors. The Adidas Group (2012) for example indicates that safety standards, tax legislation, trade policies and product quality standards can change in different countries at different times. To mitigate the risks brought about by such changes, the Adidas Group tries to balance sales across different regions and especially between developed and developing markets (Adidas Group, 2012). The economic factors that Adidas encounters include economic downturns in different countries, which would affect sales. Again, this is mitigated by balancing sales across different economies. The social factors that Adidas mainly relies on are global sporting events such as the Olympics, among others (Adidas Group, 2012). From such events, the group is able to market its products to the target audience, and this makes the demand for their products predictable. The group however admits that social factors such low use of technologies in some markets affect its Internet marketing (e-commerce) strategy (Adidas Group, 2012). Adidas admits to being a market leader in the development of technological innovations. Notably however, the group notes that such technological innovations are made in consideration of the input prices and the prevailing market conditions. 2.0. SWOT analysis of Adidas’ Internet marketing strategy 2.1. Strengths Adidas has identified e-commerce as its third sales pillar, hence utilising it as an ideal tool in its overall strategy. The distribution policy (involving e-tailers) has made it possible for Internet-based customers to access Adidas products easily. Adidas has integrated brand, customisation sites and shop, hence providing customers with a single Internet-based destination (Adidas Group, 2012). 2.2. Weaknesses Some of the targeted markets do not use the Internet (especially in some developing countries). Based on its website alone, Adidas does not have an RSS feed or a blog, hence meaning that it does not fully utilise the Internet resource available to it. On Alexa.com, Adidas’ global traffic is ranked lower than Nike, hence indicating that the latter attracts more traffic from customers and other stakeholders. In a review done by Wondra (2013), it is indicated that Adidas has a cluttered homepage when compared to its main rival’s (Nike) homepage. 2.3. Opportunities Adidas can still improve its website and Internet marketing campaigns to attract more customers. The developing markets are slowly taking up Internet technologies and this is an ideal opportunity for Adidas 2.4. Threats The overriding threat for Adidas is the risk of increased competition from its main rival Nike, but also from other brands like New Balance and Puma. 3.0. Porter’s Five Forces 3.1. Threat of new entrants As indicated by Trefis.com (2013), the sports shoes and athletic apparel industry has had some recent entrants such as Lululemon Athletica and Under Armour. Additionally, the new entrants have established online presence, and as such, do engage in Internet marketing. Consequently, the threat of new entrants can be gauged as being high. 3.2. Bargaining power of buyers Buyers do not have much bargaining power when purchasing online because most of the products have fixed prices. However, they can make use of Internet-based offers, which Adidas places on its Internet marketing channels. 3.3. Bargaining power of suppliers Adidas Group (2013) admits that it over-relies on specific suppliers. As would happen when a firm relies on specific suppliers, it is likely that they (the suppliers) have more bargaining leverage as opposed to when the company had an option of contracting the services of other suppliers. 3.4. Threat of substitutes Owing to the many athletic shoes and apparel manufacturers who produce similar products to Adidas’, the threat of substitutes is arguably high. Notably, most such manufacturers have taken up Internet marketing, implying that Adidas cannot use Internet marketing to differentiate itself from others. 3.5. Competitor rivalry With the likes of Nike, Puma and New Balance having their own shoes and apparel lines and marketing the same on the Internet, competitor rivalry for Adidas is also high. Nike is Adidas’ main rival because as indicated by Wondra (2013), its Internet marketing strategies are superior to those of Adidas. Offline, Nike also performs better than Adidas if the sales figures shown by trefis.com (2013) are anything to go by. According to the trefis.com (2013) report, Nikes’ sales grew at a rate of 12.3% during the 2010-2012 periods, which was higher than Adidas’ 8.1% sales growth in the same period. Overall, Adidas can leverage its Internet marketing efforts on the youthful population, which according to Ken Research (2013), is generating the highest demand for athletic shoes and apparel. Incidentally, the same population group uses the Internet to perform research on products and to purchase the same. Ken Research (2013) also notes that teens are increasingly demanding sports-inspired casual clothes and shoes for outdoor usage. The report further indicates that young mothers are increasingly driving the demand for jogging shoes as they try to get back into shape after child bearing. To maximise market potential in various mass market and niche products, Adidas must be willing to confront some of its rivals (e.g. Nike) through innovative Internet marketing. The company must be willing to design its marketing mix in a manner that makes it an appealing athletic shoe and apparel maker for consumers throughout the world. One of the starting points that have been indicated by Wondra (2013) is making its website attractive, easy to navigate, and interactive. Additionally, the company needs to use other Internet marketing opportunities such as RSS feed, blogs and social networking sites among others. In the US alone, Gieras, King, McNeill and Parrish (2003) note that non-traditional consumer purchasing habits (which include Internet and television purchases) are common in 77% of homes. References Adidas Group. (2012). Pushing boundaries. Annual Report 2012. Retrieved September 13, 2013, from http://www.adidas-group.com/en/investorrelations/assets/pdf/annual_reports/2012/GB_2012_en.pdf Adidas Group. (2013). Shop Adidas. Retrieved September 14, 2013 from http://www.adidas.com/us/ Bupesh, D. (2011). Case study – Nike vs. Adidas, market and comprehensive competition analysis, retrieved September 13, 2013, from http://www.beknowledge.com/wp-content/uploads/2011/01/16790Case%20Study%20-%20Nike%20vs%20Adidas,%20market%20and%20comprehensive%20competition%20analysis.pdf Gieras, A., King, J., McNeill, T., & Parrish, T. (2003). Athletic footwear industry analysis. Retrieved September 14, 2013, from http://www.slideshare.net/FNian/athletic-footwear-industry-presentation Ken Research. (2012). The US Athletic apparel and footwear industry outlook to 2015- evolving niche segments in sportswear. Retrieved September 14, 2013, from http://www.marketresearch.com/Ken-Research-v3771/Athletic-Apparel-Footwear-Outlook-Evolving-6846675/ Nykiel, R.A. (2007). Handbook of marketing research methodologies for hospitality and tourism. London: Routledge. Trefis Team. (2013). Here’s why Nike will keep gaining market share in sports apparel. Retrieved September 13, 2013, from http://www.trefis.com/stock/nke/articles/181715/heres-why-nike-will-keep-gaining-market-share-in-sports-apparel/2013-05-09 Wondra, E. (2013). Nike vs. Adidas: Internet marketing. Retrieved September 14, 2013, from http://ericwondra.wordpress.com/2013/02/26/nike-vs-adidas-internet-marketing/ Read More