Strategic Evaluation Adidas
Strategic Evaluation for ADIDAS computersecurity10 in Shoes and Apparel April 28, 2016 4,446 Words
1.0 INTRODUCTION Adidas is a Sports Clothing Clothing and a footwear footwear company which which was initially initially established in 1920 by the shoe maker Adi Dassler who resided in the village of Herzogenaurach Herzogenaurach in Germany Germany after manufacturing manufacturing the very very first Adidas shoe. 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 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 footwear and apparel have have achieved more than 800 world records and medals at Olympic Games. The Formation of the company has been fast with an increasin increasingly gly quality background throughout throughout the past past 40 years. It was and is still still the most outstanding outstandin g organization for fulfilling the requirements of athletes by making use of their experien experiences ces to produce the products. Company’s 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 includes three core core brands which which are namely namely Adidas, Reebok 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 presenti presenting ng award winning advertising and public campaigns. Adidas cooperation cooperation is doing doing an excellent excellent performance performance in their financial 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 EMarketing 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 Emarketing 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.
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 Ecommerce 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 world’s 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 theirmail. 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 don’t 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 won’t 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 don’t have access to Adidas stores an opportunity to buy any new latest products improving the business performance and the sales and profit margin.
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 EMarketing 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.
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.
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