Aligning Brand Portfolio Strategy System: A Case Study On Adidas

PESTEL analysis

Discuss about the Aligning Brand Portfolio Strategy System.

Adidas is a German multinational corporation that primary deals with designing and manufacturing of sports clothing, shoes and accessories. Adidas was established in the year of 924 with the objective of providing superior quality of sports equipments. Presently, Adidas is the largest sports garments and equipments manufacturer in Europe. It has also established its presence in the global market that helped the organization to achieve sustainable growth. In 2016, Adidas revenue was accounted around € 17 billion, which is one of the highest in the sports equipments manufacturing sector (adidas.com, 2017). Adidas has always looked to initiate different competitive strategy to position itself distinctively in the global market. For instance, Adidas always have selected top sports personnel like David Beckham, Lionel Messi, Zinedine Zidane and Gareth Bale to promote their products in the global platform. Adidas is also the official sponsor of UEFA Champions League, which has helped the organization to emerge as the most popular name in the sports equipment sector. Adidas also has 9.1% share of FC Bayern Munich that has allowed the organization to boost overall popularity in the global market. In 2016, brand value of Adidas was estimated around $7,885 million, which allowed the organization to represent itself as the biggest brand in sport goods manufacturing industry (Krüger, Stieglitz & Potthoff, 2012). 

Factors	Description
Political factor Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	Political stability is crucial for any organization in order to realize all the business objectives essentially. Over the years, Adidas have faced tremendous risks related to changes in trade policies and civil unrest. The business strategies of Adidas have focused on evaluating all the factors like expropriation, war, terrorism and nationalization. It has created challenges for Adidas in providing right amount of products at right time (Piller, Lindgens & Steiner, 2012). Therefore, it has affected the overall sales volume of the organization in a major way. However, Adidas have focused on developing manufacturing units on those areas where restrictions related to labor wage in minimum.
Economic factor	Economic factor can create huge impact on continues growth aspect of the organization. In 2005, Adidas have faced economic downturns that affected the overall profit level of the organization in a major way (Nadeem, 2012). Economic factors like inflation, per capita income, unemployment and taxation on the profit level can create challenges for the organization in performing all the activities smoothly. For that reason, Adidas have always focused on measuring all the variables in an in-depth manner for achieving business aims and objectives. Moreover, Adidas has always focused on tax consumption rate of different economies for maximizing the profit level.
Social factor	Adidas business objectives always focused on developing designs for the sports equipments in such a way so that it does not directed towards any particular age, group or religion. It primarily focuses on using the popularity of the sports for enhancing the sales volume in global economy (Uggla, 2015). For that reason, Adidas always have tried to invest huge amount on the innovation aspect so that it can able to satisfy the changing needs and wants of the global customers. The marketing strategies of Adidas have always focused on resonating with the lifestyles of people living in different economy.
Technological factor	Effective utilization of technology has become crucial for fulfilling the requirements of the customers. For that reason, Adidas has focused on developing unique technologies, which can easily be distinguished from other organization. The utilization of advance technology has helped Adidas to boost the overall production of the organization along with the minimization of energy and cost (Heesen, 2015). Adidas has focused on technology not only for enhancing the quality of the products but also have tried to provide online purchasing experience to the global customers.
Environmental factor	Over the years, Adidas has made conscious effort in eliminating the adverse impact of manufacturing unit on environment. For that reason, it has avoided manufacturing of any restricted product. As a result, Adidas does not have to face any challenges of reducing various organic compound emissions (Garrigos-Simon, Lapiedra Alcamí & Barberá Ribera, 2012). It has also focused on reducing the energy consumption for completing all the activities associated with the manufacturing unit. In addition, Adidas have tried to perform different CSR activities for representing itself as a responsible corporate citizen.
Legal factor	As a global manufacturer of sports goods, Adidas have tried to maintain all the legislative proceedings comprehensively. The business strategy of Adidas believe the necessity of maintain legal guidelines for achieving sustainable growth in the global market. For that reason, Adidas have maintained trade description Act, Press Complaint, Standards of Advertising Authority and Television Commission (Molino, 2013). Moreover, Adidas have also focused on maintaining trade restriction and import export duties initiated by different countries.

Table 1: PESTEL Analysis

(Source: Mahdi et al., 2015)

It describes the possibility of new entry in the market that can affect the overall sales volume of the organization. Now, every economy provides free entry in the sports good manufacturing sector. However, it can create very little impact on the global sports equipment manufacturing brands like Adidas. For that reason, entry barrier is comparatively high, as businesses can easily enter into the market but surviving by competing with the giants is extremely difficult (Lyons et al., 2012). Adidas possess strong supply chain network in the global environment that allows organization to achieve desired sales volume. Moreover, Adidas use its strong brand image along with high technology based products for capturing major share of the market. Therefore, it possesses very little threat from the new entrants in the sports good manufacturing market. 

It reflects the kind of alternatives customers have at the time of purchasing any sports equipment. Now, Adidas have serious competition from the products of Puma and Nike. All the products provided by these competitors are extremely good and innovative. For that reason, it primarily depends on the loyalty or brand preferences of the customers at the time of purchasing any sport products (Gassmann, Frankenberger & Csik, 2016). Moreover, these organizations try to utilize price advantage strategy for capturing major share of the market. For that reason, it can be mentioned that threat of substitute is very high for Adidas. It has kept the organization very careful at the time of initiating any strategy in the global market.

Porter’s Five Forces analysis

Buyers bargaining power reflects the extent to which buyer can influence the price level of products. Now, Adidas posses high threat of alternatives, which provides greater bargaining power to the customers. Moreover, Adidas has also kept the price level low consciously for capturing maximum share of the market. It has also induced Adidas to utilize different strategies like opening store at all the prime geographical locations achieving desired sales volume from the global market (Cleff et al., 2013). Adidas have also focused on establishing its online presence to enhance the convenience level of the customers at the time of purchasing any provided sport products. In addition, Adidas has also focused on utilizing product differentiation strategy for providing maximum alternative options to the global market.

It reflects the degree to which supplier can induce organization to change the price level of the provided products and service. Now, Adidas have plenty of alternative supplier options in the global market. Therefore, suppliers can have very little impact on the price level of the provided products. In fact, it has been assessed that supplier concentration in the global market is relatively higher than needed. It has allowed Adidas to perform all the distribution activities in extremely cheaper price (Sammer & Back, 2013). Adidas has used diverse distribution channel o provide mass volume in very limited timeframe at any parts of the world. Therefore, it has helped Adidas to achieve sustainable growth in the world market.

Industry rivalry defines the amount of competition a particular organization will have to face in order to fulfill all the business objectives. Now, Adidas have to face intense competition from other global suppliers of sports equipments like Fila, Puma and Nike. The rivalry among these major brands in sports good manufacturing industry is very high. For that reason, Adidas have to invest huge amount on the promotional and market strategies to capture the attention of the customers (Frego, 2014). The organization has been the official sponsor of many major global events, which has helped to create required amount of awareness in the global market. In addition, Adidas also have utilized acquisition strategy through the acquisition of the sports brand like Reebok Inc and Saloman AG.

In the present time, Adidas have very limited superiority in terms of the reputation of the provided products compared with the products of Puma or Nike. For that reason, the management of Adidas needs to focus on developing clear advantage in terms of quality of the products. Moreover, management of Adidas will have to invest more amounts on the innovation and development facilities so that all the new products of the organization can satisfy the customers (Frego, 2014). In addition, Adidas will also have to focus on developing effective customer service department for resolving any query or issue of the customers. It will help the organization to retain customers for long period of time.  

Threat of Substitutes

As per the article by Aubert et al. (2016) development of effective brand awareness in the global market allow organizations to create desired amount of impact for fulfilling business aims and objectives. For that reason, management of Adidas will also have to focus on the development of strong brand in the global market. It has been assessed that Adidas already has established its presence all across the globe. However, it has only targeted the prime areas of the economy. Therefore, the management of Adidas will also have to target areas other than the prime cities in order to reach more number of potential customers in the global market.

Achieving cost advantage can help organization to create maximum impact on the overall sales volume. It also helps organization to achieve higher profit level compared to all its competitors. For that reason, Adidas will also have to focus more on reducing the cost associated with the manufacturing and distribution process for achieving continues growth in the global market (Rathjen, 2014). Thus, the management of Adidas will have to focus on the effective utilization of advance technology so that it can reduce the required time and money. Adidas will also have to focus on minimizing the waste associated with the warehousing and manufacturing process so that it can also create maximum impact on the revenue level.

As mentioned earlier, Adidas will have to face huge amount of competition from other prime organizations like Nike and Puma in order to sustain its position in the global market. For that reason, it has become essential for the organization to focus on developing effective counter strategies in order to gain competitive advantage in the market (Ind, Iglesias & Schultz, 2015). For that reason, Adidas need to focus on proving value added services like developing cafeteria and free Wi-Fi at all the retail outlets in to the attract customers to visit the outlets on daily basis. Adidas will also have to focus on utilizing social media and television platform for enhancing the sales volume as much as possible.

Conclusion:

Adidas is regarded among the prime organizations in the sports goods manufacturing sector. The innovative product design and aggressive marketing approach has helped the organization to establish itself in the global market. Over the years, Adidas have made several changes in their business strategies for maintaining its position in the global market. However, increasing competition has affected the overall market share of Adidas in recent time. It has also challenged Adidas in maintain its position in the global market. Therefore, the organization needs to introduce different innovative approach for fulfilling all the business objectives in an effective manner.

Bargaining power of buyers

References:

adidas.com (2017). adidas United Kingdom. Retrieved 25 March 2017, from https://www.adidas.com

Aubert, B. A., Saunders, C., Wiener, M., Denk, R., & Wolfermann, T. (2016). How adidas Realized Benefits from a Contrary IT Multisourcing Strategy. MIS Quarterly Executive, 15(3).

Cleff, T., Dörr, S., Vicknair, A., & Walter, N. (2013). Brand experience–how it relates to brand personality, consumer satisfaction and consumer loyalty. An empirical analysis of the Adidas brand. Interdisciplinary Management Research, 9, 731-754.

Frego, E. (2014). Sustainability: strategic and marketing approaches. The case of Adidas and the Kayley LW (Bachelor’s thesis, Università Ca’Foscari Venezia).

Garrigos-Simon, F. J., Lapiedra Alcamí, R., & Barberá Ribera, T. (2012). Social networks and Web 3.0: their impact on the management and marketing of organizations. Management Decision, 50(10), 1880-1890.

Gassmann, O., Frankenberger, K., & Csik, M. (2016). Innovation Strategy: From new Products to Business Model Innovation. In Business Innovation: Das St. Galler Modell (pp. 81-104). Springer Fachmedien Wiesbaden.

Heeg, R. (2015). Data and analytics connect adidas with consumers. Research World, 2015(53), 72-77.

Heesen, B. (2015). Effective strategy execution: improving performance with business intelligence. Springer.

Ind, N., Iglesias, O., & Schultz, M. (2015). How Adidas Found Its Second Wind. Strategy+ Business, (80).

Krüger, N., Stieglitz, S., & Potthoff, T. (2012, December). Brand Communication In Twitter-A Case Study On Adidas. In PACIS (p. 161).

Lyons, A. C., Mondragon, A. E. C., Piller, F., & Poler, R. (2012). Mass customisation: A strategy for customer-centric enterprises. In Customer-Driven Supply Chains (pp. 71-94). Springer London.

Mahdi, H. A. A., Abbas, M., Mazar, T. I., & George, S. A. (2015). A Comparative Analysis of Strategies and Business Models of Nike, Inc. and Adidas Group with special reference to Competitive Advantage in the context of a Dynamic and Competitive Environment. International Journal of Business Management and Economic Research, 6(3), 167-177.

Molino, A. (2013). ” New Targets” for” More Sustainable” Companies: A Corpus-driven Study of the Adidas, Ikea and Vodafone Sustainability Reports. Textus, 26(1), 103-114.

Nadeem, M. (2012). Social customer relationship management (SCRM): how connecting social analytics to business analytics enhances customer care and loyalty?. Browser Download This Paper.

Piller, F. T., Lindgens, E., & Steiner, F. (2012). Mass Customization at Adidas: Three Strategic Capabilities to Implement Mass Customization.

Rathjen, K. (2014). Kids as consumers challenges of product marketing to kids in the sporting goods industry: analysed for the adidas neo label (Doctoral dissertation).

Sammer, T., & Back, A. (2013). The Race to the Top: Will a’Bring Your Own Device'(BYOD) Policy Contribute to the Success of the Adidas Group?.

Uggla, H. (2015). Aligning Brand Portfolio Strategy with Business Strategy. IUP Journal of Brand Management, 12(3), 7.