Adidas PEST and SWOT Analysis

Adidas PEST and SWOT psychoanalysisThe Footwear Industry is a mature fabrication it consists of giant players the akins of Nike, Reebok, Puma on i hand and millions of sm al champion retailers in the unorganised sector on the other(a). This diligence presents a myriad of interesting observations there be postgraduately specialize subdivisions where per castingance is the driving force like running sideslips, basketball piazza, and soccer shoes. But to some, a postgraduately fashionized shoe is the priority. Therefore the industry is in a legitimate kind where achievement and fashion slang immediately been merged to make out a new hybrid, called modus viv eradicatei segment.The controversy in this industry is mostly non-price atleast for the established leg terminationary players like Nike and Adidas. They fight for headway sh atomic number 18 of the client and aspects like merchandiseing campaigns, spot ambassadors, product proliferation and disfiguremen ting, objet dart success. Brand Stickiness is full(prenominal) once a node has experienced a defect and has been satisfied, indicating that price stickiness is less which is in addition due to affluent life musical modes, prosperity and rising get condition of the customer today.Nike and Adidas are the cardinal mammoths of the industry today. Nike is the world leader with a close follower as Adidas Reebok feature (post Reeboks skill by Adidas in 2006).The report attempts to information the internal international environment in which Adidas operates and get bys. To give the study a 360 degree perspective, respective(a) aspects of the industry like securi relates industry trends, customer profile, competitive analysis and are c everywhereed.I. Corporate MissionMission Statements are an insight into a companys intent, it tells discordant stakeholders the basic premise for the existence of an organisation why does it do what it chooses to do, who does it spread with , what does it aspire to become all these are essential elements of a companys delegacy statement, Rossiter, J. R., Bellman, S. (2005). Marketing communications Theory and applications.The Mission Statement of Adidas is as followsAdidas-Salomon strives to be the spherical leader in the degraded goods industry with sports stags built on a passion for sports and a sportsmanlike lifestyle. We are consumer revolve ab bring outed. That means we forever amend the quality, look, feel and im be on of our products and our organizational structures to match and exceed consumer expectations and to pull up stakes them with the steepest value. We are cornerst one and but(a) and design leaders who seek to help athletes of all skill levels achieve peak process with every product we leave to the merchandise. We are a global organization that is socially and environmentally responsible, creative and financially rewarding for our employees and shareholders. We are committed to conti nuously strengthening our brands and products to improve our competitive position and financial deed.In the medium term, we leave give way our leading market place position in Europe, expand our share of the US footwear market and be the fastest growing major sporting goods supplier in Asia and Latin America. The resulting top- withd warm growth, together with strict court authority and working capital improvements, will drive over-proportionate earnings growth. (Mission Statement sourced from www.adidas.com)Adidas is a German company by origin and it had acquired Salomon SA in 1998 as a part of its expansion strategy. It purchased Reebok in the social class 2006 to re-strengthen its position and focus on its gist businesses of gymnastic footwear and apparel. The company has been cognise for its continual inclination for initiation, a trait mastered by its founder Adolph Dassler. A minute analysis of the mission statement reveals the following Post Salomon acquisition , Adidas was clear that it precious to expand establish it self in a gamut of sports and focus beyond athletic shoes and aptly be kn witness as a sporting goods company. It alship canal had lifestyle in mind temporary hookup thinking of exertion. customer centricity was always advanced and a continuous improvement to provide more(prenominal) than the customers expected was essential to Adidas. The management realises that athletic procedure is the ethos of the company and construct is required to deliver high performance. Their mission statement also dialog about the scale and the scope by mentioning that it is a truly global conglomerate. It realises its responsibility towards employees, shareholders and the nine equally. It mentions that Europe, US, Asia and Latin America will be the focus the company will strive to restrain its cost, increase its top line and deliver the best to all stakeholders.Deliberating on the mission statement, it appears to be a well foc utilise and an all encompassing one. After the acquisition of Reebok in 2006, Adidas has reinforced its core strategy which had got diluted post Salomon take over as the product line got too diversified to gel with apiece other or to alter smooth management of the business overall.If one were to write a revamped Mission statement for Adidas considering the current competencies, its focus and the industrial environment in mind, the following can be a implicative and an all compassing attempt Adidas Mission StatementWe will exploit engineering science judiciously in our sinless product lines of footwear and apparel, some(prenominal) in performance and physical fitness segment, to extend benefits to all our stakeholders globally either in the form of more comfort, fail proficiency in sports, advancement in the materials used, competitive prices, more eco- hail-fellow use of raw materials and maximum growth to enable them to get the best value proposition from us.II. Core CompetenciesT he Core competencies form the basis of edge over the competition. It signals what one company does superbly better than the other, by virtue of which it can reap excellent benefits. Adidas has the following core competencies Living the three core valuesThe vision got established in 1920 when Adolph Dassler started designing the first shoe ever. And ever since then to in a flash, three things subscribe to not changed and that is the three genuine intentions of the company manufacture individually shoe as a masterpiece for the requirement of the sport, avoid the sportsman from blemish and collapse the product long stretch forthing and value for money. Adidas has sworn by these three values and even over decades, these core values have never been disintegrated. Even when athletes talk of performance, they vouch for Adidas. Continuous innovation and get the hang the art of perfection, Adidas believes in outdoing itself each time and this is clearly visible in the vast product e ffigy it offers. Be it athletics, tennis or soccer, Adidas is a name integral to success of sportsmen alike.Strategic Expansions organic integrationsManagement at Adidas has made the right ends at the right time. Whether it be laying into a merger or divesting, such strategic activities have been well position of and well timed. In 1999, Adidas wanted to expand beyond athletic shoes and apparel and that is when it bought Salomon which had big(a) established inroads into other sports such as skiing, skate and golf. It also had presence in bicycle production. Thus Adidas became a authentic sports equipment, shoe and apparel manufacturer only if it retained the identity of distinct brands, a wise decision as it became easy to disintegrate with Salomon virtually 2005, when it could no longer handle the vast mutually exclusive luck of businesses. In 2006, Adidass decision to acquire Reebok was equally strategic it was a two pronged strategy as firstly Adidas Reebok have tog ether could compete with Nike, the industry leader in a more vigorous manner. secondly it gave Adidas a platform to create its presence in the lifestyle segment where it was earlier non-existent. Adidas was always known as a performance brand and Reebok as a lifestyle and a fitness brand the advance together of the two is a lethal combination as it presents a complete proposition to all kinds of customer segments. The decision for both the brands to maintain their brand identity is again a well informed decision as it avoids cannibalisation.Technology InnovationThe core competence of Adidas is its continuous shot to innovate. It lives and maintains its performance image very meticulously. At the same time, it has constantly believed in innovating, this was exemplified to the world, when in 2002, Adidas along with the Japanese designer Yohji Yamamoto launched an exclusive target of sneakers which were change at a whopping $590.Branding InternetIn the year 2000, Adidas launched its website with e-commerce applications functional. Adidas knows that the footwear and apparel industry is very mature in enunciate to stay abreast against fierce competition it is vital to invest in web marketing and branding. The site en veritables ease of use, speed and easy navigation. It has both brick and mortar own brand outlets and a vast network of retailers, distri plainlyors and online stores. The self branded stores enable a direct contact with customers and reading their pulse, building face-to-face relationships with them and personifying the brand with the POP merchandise at thee outlets. Internet has enabled Adidas to bowdlerise its cost and increase its reach drastically. E-commerce has provided Adidas far fetching benefits over the competition, the customer data retrieved through with(predicate) the net can be queryed upon to understand the customer profiles and their buying behaviour. This enables the management to design highly customer centric communica tion, discounts and offerings. though Nike has been a close player reaping all these advan tick offes, other major companies like Converse, Puma, K-Swiss are no way near.III. PESTL synopsisPESTL analysis is an excellent technique to gauge the external environment in which a company operates. These factors are mostly if not always, uncontrollable and an organisation has to find its position within this cloud.PoliticalAdidas rackets presence in the entire Europe market, post its acquisition of Reebok in 2006 it has created inroads in the US as well. The company has expansion plans in Asia Latin America. At most of these places, the political domain remains as yet as they are largely democratic set ups. This implies that the government will not pose undue restrictions or introduce stern half-baked decisions to be followed blindly by the organization.Elections every four or phoebe bird age, (in UK most Asian countries respectively) also do not impact Adidas oft as it does not really get impacted by the notion party. There are other aspects like stable currency, minimum wages, salubrious working conditions in factories, stipulated working hours per week that are more comminuted factors for Adidas to adhere to. This is one reason as to why most of these commodious players are shifting their manufacturing base to Asian countries like India and China while retaining the RD and designing at their home countries.EconomicEconomic conditions have a considerable impact on the sales operations of Adidas. The inflation rate, the purchasing violence of customers, consolidation and buy-outs hugely affect the revenues. humanity economy suffered one of the biggest recessions in the past two years with the fall of Lehman Brothers and the shaking of the entire financial sector, concourse lost jobs and unemployment touched a historical high figure. Purchasing power fell drastically as most of the people all over the world, especially in the US and Canada started living on their savings. The economic crisis in Asian countries also mean that labour and manufacturing be would now rise impacting the net earnings for Adidas.The stability of government and of currency, value rates, inflation, import and export duties, special economic zones and subsides all these are scathing economic factors that can impact Adidas and other players in the industry.SocialThis comprises of the culture, beliefs, demographics, psychographics, tuition levels and spending habits and lifestyle of the target audience. A factor that is too real for any player to ignore especially when it enters into a new market this is the most important factor that can break or wreak a brand.Culture, social groups, race, religion impact how people live in a society and thus marketers have to pick up the cues passably as to how to operate in that environment. Adidas has used this knowledge wisely. Its famous catchword Im possible is nothing captures it beautifully as it gels wit h the juvenility today globally. The youth today is characteristic of breaking the rules, exploiting their potential and wanting to unfold the undiscovered. It is this spunk which associates the brand with this audience perfectly.The education level and the pace at which the society moves are reflected in publicize today. Reeboks advertising of its range Easy can mangerate is another example to demonstrate this aspect. Today women are highly aware of their figure Reeboks advertising where it claims that Reebok shoes and slip-ons will enable the users to have a well toned figure could not have found bankers acceptance a decade back.With the arrival of internet, the way people shop is also changing. Now Adidas and other major companies have started selling through online stores and press the same by giving heavy discounts.TechnologicalContinuous innovation and the use of technology is a nifty imperative in the industry. The find use of technology signifies some definite impro vement more comfort, prize running performance, more support and cushion, better hold on the ground, decline in manufacturing costs or in customer priceThe original perforated technology of Geox which claims that it enables its shoes to breathe and overcomes the problem of sweaty feet is a uncommon achievement for the brand it not only creates a ceding back for itself alone enables the company to sell its range at a high premium.Nikes 360 zephyr max, Adidas 1 and Crocs colourful shoes for outdoors, are all examples of constant innovation in the industry.Legal RegulatoryLegal Regulatory impact the advertising branding significantly. Let us take an example of Nike when it was planning to enter the Spanish market Nike could have faced the biggest challenge of establishing its mark in Spain because of a label issue. This was a decade long litigation shimmy where the Supreme Court found out that the Nike name was a registered trademark of a former distributor called Cidespor t. Nike could only use its swoosh but not its name on any of the products. This could have been a great set back and would have demeaned the brand equity. However Nike got lucky when in 2009 Supreme Court reversed its ruling post Nikes appeals.Adidas need to make sure all their promotions give a true representation of the products world advertised, as to not break the laws of the Trade Descriptions run. It needs to make sure all of their retailers have sufficient knowledge of Adidas products in order to imitate the Trade Descriptions Act, as if Adidas give the retailers sufficient information and they give customers ill-timed information about the product, then it is the retailer breaking the Trade Descriptions Act rather than the manufacturer, (www.adidas-salomon.com/en/news/archive/2000/2000-07.asp, August 2010)IV. Market AnalysisLet us analyse the athletic footwear market through Porters Five Forces model to gain a holistic view of the market Barriers to Entry spirited to M oderateBrand Loyalty is extremely high economies of scale and scope also restrict entry for small players as the industry is dominated by few giant players who reap huge benefits from the volumes and the supply chain integration. Economies of scale include advertising marketing costs, RD pass in addition to voluminous production and economies of scope would include benefits like umbrella branding, available to large conglomerates like Nike Puma. However, a new entrant will not find it difficult to find suppliers or raw materials largely of the fact that is a billion dollar industry which is lull largely unorganized.Bargaining Power of Buyers Moderate to High faulting cost is low for the buyers as options are endless except in the national where brand loyalty is extremely high. Buyers have easy access to the products through online shopping as well. Though the big players dominate the industrys rate but they cannot decide these prices ignoring customers. Billions are spent by these players on market research and studying consumer profiling and buying patterns which shows that buyers have high bargaining power in the market.Bargaining Power of Suppliers Extremely LowThe raw materials used in this industry are inscribeber, cotton and foam. The giants like Nike Adidas lay out stringiest norms which a supplier has to comply with in order to mean quality. Switching between suppliers is also very high in the industry. The supplier power is extremely low, most often than not, these suppliers work at norms and prices governed by the big players of the industry.Threats of Substitutes LowThe substitution is quite low as it is not possible for sneakers to be replaced by fashion or high- heeled shoes. Similarly between tennis shoes and running shoes, there cannot be a replacement.Rivalry among vivacious Competitors HighThe rivalry amongst firms is extremely high and mostly world non-price. individually firm lives and dies by the brand identity it creates. T here is fierce competition between Nike Adidas. Specialty shoes like Geox, Rockport and Ecko also compete in niche segments.V. Customer AnalysisAdidas has a brand identity of being performance oriented, technically superior and with strong European roots. Therefore to study the customer type, Adidas looks at three broad types of customers Governed by Superior motion This is typically a customer who looks for premium performance. Be it an athlete, a tennis player, a soccer approver or a college going educatee who values technological advancement would choose Adidas over other brands. fitness Health This segment is best captured by Reebok as it promotes fitness and oxidative shoes. These days the campaign is running globally by Reebok for its Easy billet shoes where the slogan is take the gym with you. Be it running shoes, aerophilous shoes or shoes for casual wear, Reebok has captured huge market share. This range is particularly selling like hot cakes both in US and Asia amon gst women as they are constantly worried about toning their thighs and hips. Adidas has wisely let Reebok focus in this segment so that there is no cannibalisation in sales.Lifestyle Shoes Apparel Reebok and Adidas have had significant increase in the market share, competing very closely with Nike in the apparel industry. Easy Slippers, T-Shirts, jackets and jumpers enjoy brand loyalty by customers. Adidas does big promotions in this segment. The late FIFA domain of a function Cup championship saw players wearing Adidas T-Shirts with the legendary three stripe logo.Customers of these big brands generally have a very gullible nature and thats the reason these big players engage in reputation marketing in a big way. Celebrities are chosen with great caution and deals price millions of dollars are done with these sports sport stars. The idea is to have a rub off effect on the brand and establish strong associations. For e.g. Nike and the sexual climax together of Michael Jordan promoted the shoes in the basketball segment successfully. Even after when he retires, Nikes Air Jordan segment collected significant revenues for the brand. Adidas had tied up with David Beckham and was one of the official sponsors for World cup in 2006 later years saw the sale of Adidas mount like never before. Even till date Adidas leads the industry in soccer shoe sales.VI. Competitive AnalysisThe footwear and apparel industry is in a mature phase with fierce competition for market and mind share of the customers.Nike is valued at around 14 billion dollars and is the market leader, followed closely by Adidas Reebok combined at around 12 billion dollars (as per the 2006 statistics captured from their websites). Mostly the firms compete on brand image, web site designs, service, advertising celebrity endorsements and innovation. Nike has had a dainty edge over its competitors from the time it launched its products as it has considerably invested in RD and high tech designs. But Adidas has narrowed this gap drastically in recent years.Brand image focus is very high in the industry. usage of this can be seen in the case of Nike. Nike chooses to sell its regular range through high end retailers only, it had refused to sell through Sears post the Sears Kmart tie up as it feared brand dilution, it instead started retailing its low priced freshman range through this channel.Technology focus and specialisation is high. Nike focuses on performance plus style, Adidas as seen as a high end performance shoe and it leads the market in the soccer industry. Reebok is deemed as a fitness and health conscious brand. New Balance talks only performance and is seen as a no-nonsense brand. Crocs has positioned itself as an outdoor wear brand is predominantly used for boating. Puma is seen as a stylised brand both for footwear and apparels, it has never really spoken of high end sports performance and this focus has helped the brand create its space in the lifestyle segment . Hence it is imperative that each player positions itself well and delights the customer in that segment rather than being all over the place.Below is a diagram of the total market share of competing firms (post Reebok Adidas integration)-(Chart sourced from www.hoover.com)To conclude, one analyses that it would be careful for close rivals to think of innovative ideas to increase the overall market for performance and lifestyle shoes than just competing on the market share with each other.VII. SWOT AnalysisSWOT analysis refers to the technique of mapping the strengths, weaknesses, opportunities and threats for an organisation. (P. Kotler, S. Adam, L. embrown and G. Armstrong 2001) While the first two are internal to a firm, the last two are more from an industry orientation overall.StrengthsAdidas has an image of high performance and a favoured brand for buyers who seek technology over styleThe acquisition of Reebok complements the brand as it allows a larger portfolio of high e nd performance based shoes (Adidas) and fitness lifestyle range (Reebok) cognize for its constant innovation, Adidas and Reebok Easy Tone being the case in heyday draw with sports championships enable the brand to be positioned as the leader for association football segmentThe intellectual quotient of management is seen as very high, as Adidas has been known to take the right decisions at the time (evident from all the mergers acquisitions which the brand has done)Association with celebrities like David Beckham adds to the Brand value and high TOMA (Top of Mind Awareness)User friendly and high brand appearance web site enabling high online presenceVast product portfolio to choose from Shoes for running, tennis, soccer, skiing, golf and associate line of apparel, jumpers, watches etc.WeaknessesAdidas has a vast product portfolio but still has a high dependence on soccer shoes as compared to Nike which has several high revenue bearing productsHas become synonymous with market-fo llower tag and Nike being the market leader, to most customers it becomes a second choice onlyThe Adidas/Reebok acquisition results in cannibalisation of each others sales rather than targeting competitors. This is because there is a lack of well defined differentiation between both the brands non seen as innovative as Nike and is alleged to copy Nike in its advertising, promotions and celebrity endorsementsOpportunityHighly brand conscious youth wanting to own a pair of branded shoes onlyIncreasing love for Soccer where Adidas is perceived as the official brand leaderHigh value placed on fitness sports for a healthy lifestyle, resulting in an increase in the overall industryAdvanced technology availableUse of internet, online marketing and e-commerce widening geographical markets and connecting the globe virtuallyThreatsWorld Economy recession which has impacted the purchasing power of consumers drastically contestation from online stores who have presence only through e-commerce and sell shoes at heavy discounts because of their low cost manufacturing strategyChanging consumer preferences and lifestylesReducing popularity of sports because of demented working livesIncreasing power of suppliers to set terms, e.g. Wal-MartNew competitors entering the marketPrice war between competitorsCheap replicas available in the marketConclusionAdidas has come a long way over the decades and is now positioned second largest most popular player in the athletic footwear industry. Each company in the industry today is trying to void its manufacturing costs by shifting the production to Asian markets. Adidas Reebok have strengthen their combined market, post the integration. This is a well suited strategy to compete with Nike and grow by expanding into the emerging markets US Asia. It would be wise if Adidas focuses on its core competencies and engage into aggressive marketing branding. Critical areas for success are summarised as follows Three critical focus areas wh ich Adidas should be focusing on currently are 1. Strong Highly differentiated Brand spatial relation for Adidas Reebok Brands A serious attempt moldiness be made to create a positioning for both the brands. What does Adidas stand for as compared to Reebok? The Company must strategise Adidas as a sports performance brand and create a niche for athletic, tennis, golf, soccer, both in sports apparel. It should position Reebok as a fitness brand and let it handle aerobics, running, walking and casual shoes and apparel.2. Focus on increase the total market by innovative marketing Adidas should creatively focus on increasing its total customer base, it should look at promoting soccer in clubs and schools and offer scholarships and start interacting with the children at an early age so that they become loyal customers for life. Reebok should tie up with gyms could offer discounts on Reebok shoes and apparel. It can tie up with specialty clinics fighting obesity and over-weight, spons or health check up camps and give aids for other related causes. This will help the brand in two ways one is that it would help create an image of a socially responsible company and secondly reinforce the strategy to capture the ever increasing health conscious customers of today.3. High end use of technology undoubtedly RD technology will remain the catalyst of this industry. Adidas will only be able to survive if it continuously focuses on improving the quality performance of its shoes. So when Nike says Just do it, Adidas should scream aloud the spirit unachievable is nothing.