Adidas Market Position Analysis - Case Study Example

? Adidas case study analysis ID: This paper will deal with analysis of the market position of Adidas in the global sporting industry. The paper will start by exploring historical events that have shaped strategy in the company, major acquisitions, new product developments and changes in market strategy. The paper will then focus on the SWOT analysis and highlight the strengths, weaknesses, opportunities and threats that face the company. In addition, the paper will go further to evaluate the implications of the SWOT analysis on the current marketing position, current business strategy and changes that should be implemented in order for Adidas to attain competitive edge in the global market. The paper will highlight how the company can use its strengths to exploit the market opportunities and turn the threats and weaknesses in to strengths. Finally, the paper will make recommendations on necessary changes to the current business strategy in order to ensure higher profitability. Table of Contents Page number Abstract ……………………………………………………………………..2 Introduction …………………………………………………………………4 Adidas SWOT analysis……………………………………………………...5 Strengths …………………………………………………………………….5 Weaknesses…………………………………………………………………..7 Opportunities ………………………………………………………………..7 Threats ……………………………………………………………………….8 Evaluation of SWOT analysis………………………………………………..9 Conclusion …………………………………………………………………...10 References ……………………………………………………………………12 Adidas case study analysis Introduction Adidas Group (Adidas) is a leading player in the global sporting industry and engages in the design, development, and marketing of sporting apparel, accessories and footwear (Blakey, 2011). Adidas mainly targets five sporting fields that are basketball, football, training, running and outdoor. The history of Adidas can be traced back to 1925 when founder, Adolf ‘Adi’ Dassler created Adidas after identifying the need of high performance athletic shoes. The gold medals of 1928 in Amsterdam and subsequent medals in Berlin in 1936 by Jesse Owens were the initial milestones that created the impetus to engage in more production of sporting shoes. Adidas 3-stripes shoe of 1949 attained the company a global recognition while German national football victory against Hungarian in 1954 World Cup finals made Adidas a household name across the world (Blakey, 2011). In 1970, Adidas conquered the football market through its Telstar official ball in FIFA World Cup since the ball enabled a higher visibility on the Black and White televisions. In 1971, Rockport Company was established in order to sell advanced technologies and materials in the casual footwear in the US market. However, the death of Adi Dassler in 1978 did not affect the company since his son, Horst and mother Kathe continued with the vision of the founder in making Adidas a modern sporting apparel and shoes provider. Continued innovation saw the development of the micropacer that provided athletics with performance statistics (Blakey, 2011). Adidas sold it stock to the public in 1995 and continued with its efforts of producing stylish and quality sporting apparel and shoes for the sporting industry. In 1996, Adidas equipped over 6,000 athletics from over 30 countries and experienced more than 50 percent increase in apparel sales. In 1997, the company acquired Salomon Group including TaylorMade, Bonfire and Mavic brands and renamed the company Adidas-Salomon AG. In 2004, the company partnered with Stella McCartney and later initiated plans of selling certain business segments like Cliche, Mavic and Bonfire to Amer Sports Corporation in 2005 (Blakey, 2011). Adidas was awarded Olympics Official Sportswear in 2008 and 2012 thus increasing its global recognition and brand loyalty among the consumers. The leading brands are TaylorMade-Adidas Golf, Adidas, Rockport, and Reebok. However, the company is experiencing high competition from Nike, Puma, Rossignol and Amer Sports Corporation (Blakey, 2011). Adidas SWOT analysis Strengths One of the strengths of Adidas is its high brand heritage and recognition since 1924. Adidas enjoys high brand loyalty and awareness across the world due to its ability to delivery sporting shoes and apparel that offer high performance and comfort to the players (Berger, 2008). Adidas has sponsored leading sporting teams, sports personalities and major sporting events such as the FIFA World Cup and athletic championships across the world (Ferrell & Hartline, 2008). Adidas has a visionary management team and nearly 40,000 employees who are committed to the strategic objectives of the company. In 2001, Herbert Hainer implemented several innovative ideas like the ClimaCool of 2002 and F50 football boot that was launched during the 2006 FIFA World Cup in order to increase the market share of the company. Adidas has attained high customer loyalty in sports fashion after gaining the largest sportswear rights during the recent 2012 London Olympics games. Adidas utilized its position as the Official sponsor of the event to excite the teen audience in the UK and get partnership with Great Britain Paralympics team. Adidas has continued with its corporate culture of reinventing and new product development in order to attain a competitive edge in the market (Pride, 2009). Accordingly, Adidas’ employees are highly motivated and empowered in order to ensure creativity in their work and remain committed to their performance expectations. Adidas has also extended its sponsorship agreements with major sporting events such as Australian Olympics, UEFA Champions League and Japan Football Association (Borowski, 2011). Adidas has formed several meaningful alliances, partnerships and acquisitions that aim at strengthening its market presence in several markets. Adidas formed a partnership with exciting labels such as Y-3 in 2003 and Porsche Design Sport in 2007 in order to minimize competition and gain additional distribution channels. Adidas acquired Five Ten, an outdoor specialist and TaylorMade, the market leader in golf industry worldwide (Berger, 2008). Adidas has a diversified product portfolio that includes sporting equipments, apparel, sporting shoes, and accessories. Adidas group comprises the Rockport and TaylorMade-Adidas golf company, field hockey equipments, and accessories such as socks, sandals, bags and watches. Adidas has established own retail outlets and co-branded outlets that are supposed to boost market position of brands such as Ashworth, Reebok, Rockport and TaylorMade-Adidas (Ferrell & Hartline, 2008). Adidas has a multi-brand strategy that caters for both the niche and mass market thus enabling the company to exploit opportunities in the market (Pride, 2009). In this case, Adidas has obtained high economies of scale Adidas is popular among celebrities and sporting personalities and has received global endorsements from renowned players such as Lionnel Messi, Run-DMC for its strong characteristic and David Beckham. Adidas has a youthful appeal in its marketing campaigns especially in emerging markets that have embraced sporting events like Japan and China. The ability to successfully partner with National Basketball Association (NBA) as the official apparel provider for several years has allowed Adidas to compete with Nike in the North American market (Ferrell & Hartline, 2008). Weaknesses Adidas suffers from several weaknesses since its products are sometimes costly due to the development methods and innovative technologies like performance monitoring statistics features (Pride, 2009). In addition, Adidas has not controlled the suppliers of raw materials and is currently experiencing an increase in the raw materials in its production activities. At the same time, Adidas outsources most of its production activities to third parties who are mainly based in Asian countries like China thus raising serious concerns on the quality of the apparel and sports shoes quality (Ferrell & Hartline, 2008). Adidas has less control of the merchandise from the foreign manufacturers especially at times when Consumer Product Safety Commission (CPSC) has issued alerts on the safety of the products. In this case, vendor failures could lead to unwanted interruptions in the production, product withdrawals and recalls by US companies that prefer quality and safety of the product (Borowski, 2011). Opportunities Numerous opportunities will offer Adidas high market presence and profitability in the global sporting industry. The recent Beijing Olympics offered Adidas high growth opportunity in the Asian countries such as China, Japan and India. Accordingly, Adidas has launched new sporting apparel that is consistent with South Asia traditions such as Indian Yoga in order to gain acceptance in sports fashion market in those countries (Pride, 2009). Adidas is currently engaged in a restructuring effort in its global operations in order to ensure efficiency in production by moving from the vertical structure to functional structure (Kaser & Oelkers, 2007). In this case, the global sales will allow the company to reduce the costs associated with maintaining the regional headquarters that have duplicated functions in the company (Ferrell & Hartline, 2008). The revival of Reebok will strengthen the competitive capacity of Adidas in the US market due to some innovative products and high brand recognition in the market. The company has the opportunity of marketing Reebok in European countries and South Asia countries in order to remain profitable (Pride, 2009). Threats Adidas faces the threat of counterfeit products that are disguised as genuine Adidas products across several markets in the world. It is believed that more than 10 percent of the sportswear that is sold as genuine branded products is counterfeit. Accordingly, Adidas faces the threat of decline in sales due to the negative impacts of economic recession in both the US and European markets (Kaser & Oelkers, 2007). Adidas experienced a significant drop in overall profitability in 2009 due to the harsh operating environment that was occasioned by the global financial crisis and economic recession. The athletic footwear marked dipped by 3 percent during the crisis while the sports apparel marked declined by about 5.5 per cent in 2009 (Kaser & Oelkers, 2007). Adidas is faced with high competition from other companies in the global market and especially in the lucrative US and EU market. Companies like Nike, Puma, K-Swiss and Timberland have presented high competition due to their national culture driven marketing efforts. In this case, Adidas trails Nike in the US market due to inability to align its products with the cultural aspects of US consumers (Pride, 2009). Adidas is suffering negative reputation in several markets due to the negative image and criticism of the public on the activities of some sponsored sportsmen such as Kobe Bryant who has been accused of sexual abuse by the media. Reebok brand is currently experiencing poor product image and reputation in the market after it lost a major contract of supplying the US National Football League and National Hockey league. At the same time, Adidas has scaled down the projected sales volumes after it wrote down $ 358 million in the fourth quarter of 2012 results. Evaluation of SWOT Analysis The findings of Adidas SWOT analysis indicate that the company has the potential of attaining leadership position in global sporting industry. The findings indicate that Adidas has visionary leaders and highly qualified employees who are committed to continuous innovation and use of new technologies in the design and development of several sporting shoes, equipments, accessories and apparel. The analysis indicate that Adidas corporate culture is geared at ensuring loyal customers, penetrating in to new markets, establishing new partnerships and implementing innovative sports technologies (Pride, 2009). The findings also indicate that Adidas has attained high market share in the European domestic market and is currently engaged in aggressive marketing campaigns in emerging markets such as China, India and Japan. According to the analysis, the company has several sponsorship partnerships with sports celebrities, national teams and major world sporting events like Olympics and FIFA World Cup. From the analysis, it is evident that Adidas is faced with severe weaknesses and challenges that have the potential of undermining its operations and profitability. Adidas is faced with the threat of product recalls and low quality products due to its strategy of outsourcing the manufacture of certain brands to Chinese firms that suffer from negative safety and quality perceptions among the US consumers (Pride, 2009). Adidas is not in a strong competitive position due to its inability to compete effectively against Nike in the attractive US market. At the same time, Reebok brand is currently experiencing decline in sales and profitability due to its declining customer loyalty and low quality production. The company must integrate it global operations and sales in order to minimize the overall operating costs. Accordingly, Adidas must attain control of the raw materials and manufacturing process in order to ensure high quality products and maintain customer loyalty. The company must implement innovative technologies in the design and development of the sporting apparel and sporting shoes in order to excite the sporting market share that contributes to a large portion of the company revenues. At the same time, the company must extend the accessories product line to include more household goods especially for the mass market. Adidas must develop both the niche sporting wear market and mass sports fashion market in order to attain high profitability. The company must strengthen its official sponsorship partnerships with the major sporting events in order to foster brand recognition and awareness across the globe. Conclusion Adidas is a global leader in sporting industry and ensures continuous innovation in its product development. The company has visionary leaders who are committed to attaining higher performance levels and meeting the changing needs of the consumers. At the same time, Adidas has remained a leading sponsor of major sporting championships and celebrities who have endorsed Adidas brand. Adidas acquired Reebok and established partnerships with other companies in Asia in order to facilitate market penetration and acquire considerable market share. Adidas must control the manufacturing process and localize its products to the national markets in order to remain competitive. In this case, the company must use multiple suppliers of raw materials and ensure own manufacturing in order to maintain the quality, stylish designs and safety of the sportswear. Adidas must extend the accessories segment to other household goods and increase its focus on the mass-market sports fashion market segment. In addition, Adidas must strengthen the sponsorship agreements and increase marketing efforts of the Reebook brand in order to compete effectively with Nike in the US market. References Berger, C. (2008). Strategic sports marketing- the impact of sport advertising upon customers: Adidas a case study. Muchen: GRIN Verlag. Blakey, P. (2011). Sport marketing. London: Sage Publications. Borowski, A. (2011). Adidas marketing strategy: an overview. New Jersey: Routledge. Ferrell, O.C & Hartline, M.D. (2008). Marketing strategy. London: Cengage Learning. Kaser, K & Oelkers, D.B. (2007). Sports and entertainment marketing. London: Cengage Learning. Pride, W.M. (2009). Foundations of marketing. London: Cengage Learning. Read More