Strategic Evaluation for ADIDAS

computersecurity10 in Shoes and Apparel April 28, 2016 4,446

Words

1.0 INTRODUCTION
Adidas is a Sports Clothing and a footwear company which was initially
established in 1920 by the shoe maker Adi Dassler who resided in the
village of Herzogenaurach in Germany after manufacturing the very first
Adidas shoe.

Dassler was not only a shoe maker, He was also an athlete which helped
him more to produce high performance products for athletes by making
use of his experience. Dasslers endeavor has merited him with 700
patents and more industrial property rights.

Ever since Adidas provided products for the very first athletes at the
Olympic Games in Amsterdam in 1928, Athletes who were utilized with
Adidas footwear and apparel have achieved more than 800 world
records and medals at Olympic Games.

The Formation of the company has been fast with an increasingly quality
background throughout the past 40 years. It was and is still the most
outstanding organization for fulfilling the requirements of athletes by
making use of their experiences to produce the products.

Companys research and development is based on Desslers concept

listen, test and modify. This cooperation has now been expanded as a
global company with excellent performance. After a survey of customer
perception, Adidas has categorized their products to three divisions such
as Sport Performance, Sport Heritage and Sport Style.

Adidas includes three core brands which are namely Adidas, Reebok and
Taylor Made. Focusing not only in products but also in their marketing
strategies that have taken this cooperation to the next level by presenting
award winning advertising and public campaigns.

Adidas cooperation is doing an excellent performance in their financial

overview. In 2013, it has had a sales revenue of 14.2 billion euros and in
2014 they have showed about 14.5 billion euros of revenue. However in
2015, Adidas has shown a slower increase sales. Adidas sales are
generally slower in the years which does not have a major sport event
such as World Champion or Olympics. They also spend about 12 to 13
percent each year from their sales amount for marketing of their
products and give more responsibilities to the marketing experts by
giving them more time with the product development staff.

As a global leader in sports, Adidas is one of the most popular brands

worldwide that provides a wide range of products and services. They are
mainly focused on sport clothing and shoe wear for ladies, men and kids.
Apart from those they supply accessories and sport equipment. Kids
items are categorized by age, Sport equipment are divided according to
sport type. Some items we buy can also be customized. Personalization of
a product and Sizing features are available.

Adidas is a company that contains retail branches in many countries

where we can go and buy quality products at any time. Apart from this
facility, they has also enabled us to use e-commerce to order products
and services digitally. Once the shipping is in progress, we have the
privilege in tracking our delivery status.

This report consists of the SWOT and PEST analysis of Adidas, the E-
Marketing strategies that are currently being used and the future
methods and also about the legal and ethical Issues that Adidas has to be
concerned about.

2.0 STRATEGIC EVALUATION

2.1 SWOT analysis of Adidas
STRENGTHS
1. Brand name and Heritage Adidas has a history of 40 years
Therefore, it carries all the experience that enabled them to establish
their quality brand name. As of today, Adidas still manufacturers
their products in high quality by using the raw materials with the
highest quality, this is mainly due to the traditional heritage of the
founder.
2. Wider range of products The availability of a wide range of
products of both brands Adidas and Reebok. It sells not only apparels
and sport shoes but also the accessories such as watches and other
digital equipment that can be used for other purposes apart from
sports.

3. Rigid financial state- This company currently encompasses 2400

stores worldwide accounting $ 4.3 billion that keeps the company in
a good financial position. Their main market being Asia, increases its
sales gradually.
4. Strong Distribution System The Company presents their sales by
online stores, Company owned stores and Supermarkets. India itself
holds 500 stores of Adidas. There E-Commerce websites and other E-
marketing strategies put up a lot effort in distributing their products
worldwide to the target customers. By the help of the both online and
offline marketing systems, the sales are increasing rapidly. Below is
an image representing all regions where Adidas operates.

5. Marketing Strategies Major marketing offline strategies and

branding are done by sponsoring of sports events such as FIFA,
UEFA, NBA and Olympics which result in a huge profit increasing
their sales, although this advantage is only present when there is only
a major sport event as such. Another method includes endorsing of
Celebrities that helped in achieving the target group of customers
and improved the awareness of the brand name Adidas. For instance,
advertising products with a famous football player can increase more
sales. The best online strategies of Adidas are the social media
marketing and their website.
WEAKNESSES

1. High Price Range The price of the products are too high due to the
latest technologies that are used to develop the footwear and
apparels. The products might only be available to a certain level of
people. Another reason for the increase in cost is due to the raw
material cost where some of them have to be shipped to European
warehouses from Asia for manufacturing due to the scarcity of some
materials.
2. High Outsourced Production Almost 93% of the products of Adidas
is being manufactured in Asia due to the low labor cost and high
availability of the necessary materials. This factor can give them a
high risk of sudden failure of the production because of a separate
outsourcer.
3. Insufficient customer service The customer service of Adidas is
very poor since there is no guaranteed instant two way
communication establishes for the users especially in the E-
commerce market.
4. Low investment on advertisements Advertising of Adidas is very
low as you must have not seen a lot of offline advertising of adidas
products. It is more likely to see Adidas shoes on sporting events and
not as random television ads.
OPPORTUNITIES

1. Changing Trends By considering the changing economies, lifestyles

and change in trends in both developed and developing countries
there can be a huge demand for premium products.
2. Market expansion Expansion of the target customers or the market
will be once the most successful ways to improve the business in the
future. It can also allow the company to compete with the substitute
products which can increase their sales. Expanding of the
international market can also be done by establishing more retail
outlets and improving E-Commerce.
3. Expanding the production line Introducing more goods to the
market or increasing production line will increase the opportunities
to the company while making it more competitive. Recently, Adidas
 manufactured products apart from apparels such as watches, this
type of products will attract new customers.
4. Increase in demand Currently there is an increase of 33% for the
premium products In the Indian market. This can give us an idea on
the future market size so the manufacturing of products can increase
accordingly.
5. Backward Integration This is when we use our own supply or
merge with the supply company to make the production more
effective and reliable which can help in gaining more trust by the
consumers in producing genuine end products. This can be a good
way to secure the company, improve their profit margin and
improves their competitiveness.
THREATS

1. Competitiveness Nike being the Number one brand of the market,

can be a huge competitor to the second in the market Adidas. There
are also other local companies giving a high competition. There is a
tight competition with the top two rivals for the global market.
Although other competitors are also increasing day by day.

2. Risk of outsourcing Since majority of the production of products

are being outsourced, the outsourcing companies have more
capabilities in negotiating that the company itself.

3. Government Acts The matter of outsourcing also increases the tax

which should be paid to the government when importing products
from Asian countries as 93% of goods are manufactured in China.

4. New brands The latest brands such as GAP, CAT and New balance
has a good and increased performance in their advertising where
Adidas is less effective in their advertising.
5. Global Economic Crisis There is a global economic crisis or a
recession in the word today. This is a period where people have many
financial issues that limit them to buying certain things and are less
likely to spend their money on things especially like branded shoes.

2.2 PEST Analysis

POLITICAL FACTORS

Political factors include all rules that are both formal and informal and
also the government and legal issues that must be considered when
operating the business. The current political state for Adidas is stable
since the UK has a democratic government, they are less likely to
introduce controversial policies because otherwise they will be voted out
in the next election. Another Political Factor includes monitoring of any
hazardous substances that may affect the health and the environment of
employees such as materials like PVC. Adidas is a Multinational
Company therefore it must be aware of policies around the world where
their outlets are being run. Taxations of governments of the countries
that operates Adidas must be considered since majority of products are
being supplied from the Asian countries therefore the import tax are
being applied accordingly.

Another factor is to provide training sessions to employees based on the

employment standards and HR systems. Adidas is an Organization that
ensures that all rights of employees are protected according to the law.

Some countries adhere to different laws than many countries therefore

according to those rules, some products are banned from selling in
certain regions. This can be a negative matter to Adidas and again as a
multinational company, Adidas must be aware of these global rules.

Strikes in China has affected negatively to Adidas. Around 30000

employees that work in a factory which manufactures Nike and Adidas
products had raised strike due to the low cost salaries made to them
compared to other companies. Adidas has faced a major situation in this
face therefore they are planning on moving their manufacturing
branches gradually to low cost salary areas such as Vietnam.
ECONOMIC FACTORS

Economic factors involve in strengthening the sales and economic

growth. An essential element in this factor is the monitoring of cash flow
and profits which is directly connected to the success of the company.
Adidas is currently having majority of their factories in the Asian
countries such as China. Asian countries have low salaries paid to
employees than in Germany. This is a favorable factor to the company in
terms of economy. Increasing of employees in the company can increase
jobs to people in countries with unemployment and it can also help those
countries.

The world is currently going through a recession period therefore people

are experiencing a low income, so it is less likely that people will spend
more on additional needs for products such as shoes, especially in the
developing countries.

Another main factor that affects the sales growth is that when there is a
main sports event such as the Olympics, there will be a high increase in
sales but when there is no major event as such it might be a less
progressive year for Adidas.

Adidas has increased their sales by producing quality products using low
cost materials which were available to them from Asia. But because of
the Adidas strikes mentioned above in China, sales of that region has
decreased because they had to pay the employees a higher amount.
SOCIAL FACTORS

These are factors to be considered to increase the growth of the economy

by full filling the customer needs according to the trends and cultures.
Adidas pays particular attention on people who likes sports on any age
group. They simply do not take into account about the race, religion or
lifestyle, they will always stick with the fashion and style. By making use
of the latest technologies, Adidas manufactures products to tally with the
latest trends.
Adidas is also health conscious on especially the footwear they
manufactures to eliminate the diseases that can cause on professional
athletes. Adidas uses the social media marketing technology to target the
appropriate audience easily especially in Facebook where they have
around 11 million fans.

It is said that majority of the Americans listen to rap music therefore

Adidas has paid some the famous musicians to mention the Adidas name
in there song which might have a slight effect on their brand image as
well as take their business to a next level of advertising.
TECHNOLOGICAL FACTORS

Adidas introduced the worlds first smart shoe with a microchip inside it.
Adidas uses there best technologies to manufacture footwear with
cushions to make the consumers comfortable and supports their health.

Society favors more environmental responsible companies nowadays,

having this feature can make a company a main topic among people
therefore Adidas has started to use rubber in developing shoes which are
environmental friendly.

Now, the internet is available for the customers to buy the Adidas
products digitally with more convenience. Adidas has introduced a
wireless mp3 player and a hot melt system that is safe for the
environment. For packaging purposes, Adidas uses friendly, recyclable
packaging systems. The technologies owned by Adidas are highly used
for research and development to invent new products especially footwear
which will give them a better chance on competing with their Rivalry
Nike. One of the recent innovations of Adidas are boost running shoe
that allows the runner to bounce.

3.0 E-MARKETING STRATEGY

3.1 Current and Future E-Marketing
Strategies of Adidas
In the 21st Century, E-Marketing is an essential element to a business.
From a small local business to large companies, broad customer reach is
a common need. According to my perception, attracting consumers to
use your products and services is the main task done in E-Marketing.

The latest headline of Adidas is Creating the New to grow their market
fast for their next four years as their marketing business plan. Adidas
targets the needs and desires of the target consumers. Adidas has three
main Marketing strategies and they are Speed, Cities and Open Source.
When it comes to speed, Adidas focuses getting fast customer
satisfaction and internal decision making. Next is Cities where they want
to increase their market sales in six main developed cities including
China and Americas. Final element is Open source that signifies the
partnership of athletes to be a part of their company.

Company website, Web marketing, Mobile marketing and Social Media

are the most trendy E-Marketing strategies available today. As one of the
most successive global companies, Adidas uses some of the most
effective E-Marketing Strategies.

Adidas is using a Company website to sell their products and services

through E-Commerce. Since buying and selling from the Internet is done
with people much often today, It is has being a favorable operation to
Adidas also. Adidas is a branded company therefore it cannot be
advertised everywhere according to the company rules so company
website is the initial place a new customer can come to in buying a
product or to get all details about the company.

The website of Adidas is designed to make more sales especially by their

simple and attractive website appearance with high ease if access to the
high density information where the consumers can get all details they
want about teach and every product.

Social Media is being a huge support to Adidas as they currently has 11

million fans on Facebook that allows them to advertise their products to
a wider range of customers.. The main sites include Twitter and
Facebook. This technique has allowed Adidas to promote their brand
name and loyalty. This can basically improve the two way
communication or interaction of new customers and also recent
customers as well as old customers.
Another E-Marketing Strategy used by Adidas is Video Marketing.
YouTube being the main support in this situation has currently enabled
Adidas to gain over four million subscribers. Video advertising of
YouTube are also popular among mobile fans of Adidas. This inspires a
lot of people in the field of Sports. Their YouTube videos are popular
among the youth especially because the role models or the brand
ambassadors they use for advertising are the top athletes of the world
competing in different sports events.

Customers who wants to get updated on their latest trendy styles and
new innovations can sign up to receive the E-Newsletter of Adidas. This
will send the user a newsletter through their Email notifying the users on
their products.

Adidas owns and maintains a separate blogging site. It is used to give

personal insights into their sports business and enhance company
visibility. It also allows the customers to get updates on the blog to their-
mail. This will allow Adidas to interact with a global audience by using a
relatively low cost. In fact, Adidas blogging site targets thousands of
readers at any time.

By 2020, Adidas is expecting online sales to quadruple from 500 euros.

They are planning on making huge investments on digital products to
introduce the trend digital sporting. Adidas chief executive Herbert
Hainer said we need to put our money where we can make a real
difference in the customer experience.

3.2 How Adidas balances the online and

offline marketing methods
According to my view, it is essential to combine the online and the offline
promotion methods as it helps in attracting your target audience in
various ways. According to the advancements in technology, more people
tend to use the online methods to buy or get information about products
and since Adidas has a branded image it does not use common offline
methods but since advertising offline can target a different market niche
they must use it.

Apart from the main online strategies of marketing, Adidas uses offline
methods such as sponsoring of sports events and billboard advertising in
popular and main cities of the world. This method itself has gained
Adidas more profits than what they earn every year. For instance, in
2016 one of the main sponsoring events they did were the sponsoring of
the England cricket team in the T20 world cup. Why this can be an
effective method in advertising is because the fans of the England team
will look forward in buying branded products in Adidas.

Although this can lead in an increase in the profit margin, it will be not
be able to target online customers who are not fans of cricket therefore
online methods must be used to promote the offline methods. Live
streaming of the match via Internet is an online method. Today, we can
use tags to videos therefore tagging the Adidas website will attract
Adidas fans to the site.

Another way Adidas balances the Marketing strategies are using of

online marketing methods to advertise or promote in offline events
organized by Adidas. Adidas Ride the Sky event organized in 2013 was a
massive success in Poland. This event was a part of the FMB World tour,
advertising of this event was done in International Magazines, News
Papers and also International TV channels which will mainly target the
senior citizens. To attract the online niche market, Adidas used the
online methods to promote this offline promoting event which can
attract the younger generation.

The Implementation of the current strategies has led to an enormous

profit to the organization. Especially the Return on Investment has being
good. Adidas as a global brand wants to gain more by doing less. We
dont always see Adidas marketing but they uses the best promoting
methods at the right time for their products according to the place,
culture, trend and event.
3.3 Impact of strategy on Business
performance
Adidas has many affectivities on the business performance with regard to
the implemented strategy. One of them is corporate culture and this
feature is excellent in the Adidas. This means that the innovative,
creativity and how they manage all tasks according to their mentality on
the current state of the organization is positive.

Stable Financial state is one of the main advantages Adidas is having and
according to my point of view this is because Adidas recruits the best
people for all their processes including their marketing sector leading
Adidas to a long-term success.

Because of the strategies they have implemented, customer satisfaction

directly affects the performance and the sales of Adidas as Adidas focus
mainly on the needs of the consumer providing them with the most
comfortable and health concerned products. Pricing and Product
strategies of Adidas has being a great favor for Adidas in terms of
business performance because customers who by Adidas product look for
the quality of the brand. Since Adidas is a banded product the customer
expectation for the price is high therefore before customers buy the
product they know it is expensive, the main niche market for Adidas
product are high class people who generally go for branded product so
the high price wont give a decline in performance of business.

Electronic Marketing strategies can improve the business performance

by numerous ways and one of them is E-commerce shopping that takes
the shopping to a next level. This gives customers that dont have access
to Adidas stores an opportunity to buy any new latest products
improving the business performance and the sales and profit margin.
4.0 LEGAL AND ETHICAL ISSUES

1. Legal Issues

The top most topic on your priority list when you run a business should
be regarding the dangers of litigation. One of the main legal issues faced
by a company is privacy policy. Adidas gathers information of customers,
processes and stores them in a database for later use. They must ensure
that the customer information arent sold or distributed to any other
person but only be accessed by the user after an authentication process.

Another issue is about Copyright and Patent concerns. A copyright

signifies a protected asset which is published or unpublished by a person
or organization. If a copyright is violated, action can be taken against the
company. This can be disobeyed in many ways and they are
Reproduction of others work, Making derivatives illegally and
distributing without permission. Therefore the companys research and
development team must check for copyrights and only publish their own
products to eliminate battles from competitors.

Domain name concerns are another issue when E-Marketing since

websites use domain names and this can benefit the company while
interacting with the audience. Trademark concern is also an essential
element for a business because it sets a unique signature to their product
and anyone who uses the same logo can be condemned.

The company must never knowingly conduct an act of deformation to

damage the reputation of another organization publicly especially during
E-marketing as these spread like viruses through the internet resulting in
failures of the business eventually. International trade, cash policies and
digital media issues are some of additional concerns to a business.

2.Ethical Issues

Ethical issues are problems that arise due to the wrong societal decision
making. One of the most important ethical issue to consider when E-
Marketing in a website is the content. The content of the website must
not be copied from elsewhere. It should be an honest and genuine
writing that treats fairly to all people.

Publishing without clients consent can be a severe issue to the company

itself. As we all know, cyberspace is a very open area and posting
anything belonging to the consumer without their approval can tarnish
the brand image of the organization.

A company should never misuse their product review as some companies

pay people to put good reviews of their product to build up their
company image but this can only lead in distrust of the customers
towards the company.

Intellectual Property is a term used for referring new innovations or

creations by a person of an organization. Before pushing the publish
button in the web, we must ensure that the publication is up-to-date and
factual meaning all pictures, videos and everything else must be true. If
not ethical issues regarding advertising laws can be severely impacted on
the degree of trust of the organization.

5.0 CONCLUSION

Based on the above information this report concludes that Adidas is a

global brand performing in a highly competitive environment and Adidas
uses the innovative and latest technologies to improve their business
performance. Their ultimate goal is to be the global leader of sports while
aiding the athletes to harness the confidence of sport in their lives.

By having a strong positive strategy as declared in the SWOT and PEST

analysis above, Adidas can increase their sales as they have predicted to
outperform the market by the end of year 2016. Although according to
the research, it is much favorable for Adidas if they focus more on
changing and expanding their production line.

By using their three E-marketing strategies, Adidas is trying to surpass

their main competitor Nikes performance. As a branded company,
Adidas maintains their brand loyalty by adhering to the 4Ps in marketing
or the marketing mix which includes product, price, place and
promotion. This concept helps in attracting the target people by using
the online as well as the offline marketing methods. However, being a
company which uses the latest E-marketing or online marketing
methods, they must be aware of the vulnerabilities and addictions that
the company can face through the Internet.

Last but most importantly, Adidas must ensure in complying with the
local and international standards and rules when doing the business.
Since Adidas is a global company, it tends to face many difficulties as
there are many competitors awaiting for space in the Sports market.
Therefore, they must not violate any rules especially Employees
standards that has resulted in many complaints of companies. However,
considering everything mentioned in this strategic evaluation, Adidas is
having a strong company background that can result in a growing profit
margin for a long time period.

6.0 REFERENCE

1. Jennifer barrett (2008), The History of Adidas and Puma. Available

from: http://www.newsweek.com/history-adidas-and-puma-
86373 [Accessed on February 15].
2. Marketing91 (2010), SWOT analysis, Available
from: http://www.marketing91.com/adidas-swot-
analysis/ [Accessed on February 20].

3. Ericwondra(2013), Nike vs. Adidas: Internet Marketing. Available

from: https://ericwondra.wordpress.com/2013/02/26/nike-vs-
adidas-internet-marketing/ [Accessed on March 15].

4. Leo Sun (2013), Five Common Legal Issues. Available

from: http://www.businessdictionary.com/article/538/common-
legal-issues-faced-by-businesses/ [Accessed on March 16].

5. Gaurav Agnihotri(2014), Ethics and Marketing. Is there a problem?

Available from: https://www.linkedin.com/pulse/20140617054600-
79304306-ethics-and-marketing-is-it-possible [Accessed on March
16]