Assessing Adidas’ Strategic Direction And SWOT Analysis

Adidas Strategic Direction

Strategic management is considered as the on-going process that includes monitoring, planning, assessment and analysis of all the activities that are necessary to achieve the organizational objectives and goals. Changes that take place in business environment create the need to assess the strategies for long run success of business. The process starts with “assessing the organization’s current strategic direction” and   then analysing the external and internal strengths and weaknesses of the organization (Hitt et.al, 2016). To understand this concept an organization has been chosen that is “Adidas”.  Adidas is a leading brand in the sportswear segment and apparel segment. In below sections, strategic direction of the company is assessed and SWOT analysis is done to identify weaknesses and strengths in the organization. Furthermore, few recommendations are given in order to improve the company’s strategic position.

Adidas founded in 1924 by Adolf Dassler and headquartered in Germany.  The company manufactures and design shoes, accessories and clothing and is the largest manufacturer of sportswear in Europe. The company recently made strategic changes in order to improve the performance of the company in the market. In order to understand the strategies of the company it is necessary to know the mission and vision statement of the company as strategies are formulated in order to achieve the objectives. Mission and vision of the company give direction what to do and what not to do (Adidas, 2019).

Mission statement: “To be global leader in the sporting industry with brands built on a passion for sports and a sporting lifestyle, aims to continuously strengthen brand and products to improve our competitive position”.

The elements that are highlighted in the mission statement of the company are related to offering best products to its targeted customers on continuous basis, exceeding expectations of customers by providing quality products with following sustainable policies, and by clearly showing innovativeness in its each and every product range.

Vision statement: “To be the design leader with a focus on getting the best out of the athletes with performance guaranteed products in the sports market globally”.

The vision of the company emphasizes on innovation and creativity, further Adidas is driven by the desire and inventiveness to lead by setting an example of quality sports products in the market. Its current strategy highlights ‘creating new’ as an important element that differentiate it from other brands. The company strategies are formed on the basis of values to ensure that the strategies align with vision and mission of the company and these values are “passion, performance, diversity and integrity”.

PEST Analysis

Political Factor: Political environment is related to the political stability so in the countries so that companies get benefit from stable political environment. Political chaos leads to business disruption and losses to businesses.

Economic Factor: Economic factors are related to growth of shoes industry in the UK. Strong economic growth provide benefits to businesses as leads to increasing sales, more returns. Adidas is experiencing higher sales across the world that means the strong economy is beneficial for company.

Social Factor: Society has great impact on the business activities as culture and society are not same. Business strategies and marketing are changed as per the market and changing social trends. Adidas target its customer and meet all the changing requirements and needs in a better way.

Technological Factor: Adidas invested in digitization and digital technology in order to retain in the market. The focus of the company is on innovation and technological advancement that means technological environment has not that great impact on the business activities as the company is proactively responding to it.

Adidas made some changes in its strategies in order to improve its performance, the company targets metropolitan cities and focused on the use of sustainable material for manufacturing of shoes and apparel.  Adidas manufactured more than a million shoes in 2017 using Parley Ocean Plastic and used Better Cotton for clothing. Due to this initiative the company reflected growth of 16 per cent in sales. The mission of Adidas is to be a leader in the sporting industry in the world for that the company focused on three strategic areas that are cities, speed and one source. In order to stay ahead in the competition Adidas increased its investment on research and development from €149 million in 2016 to €187 million to 2017. In order to achieve its objective the company also increases its expenditure on marketing activities as its growth is affected by the main players n the market that are Nike and Under Armour (Adidas, 2018).

SWOT analysis is a tool that helps in analysing the company’s position in the market in order to develop strategic planning. SWOT analysis of Adidas is given below that highlights the areas of strengths and weaknesses of Adidas and threats and opportunities in the external environment in which the company is working.

Strengths

1. Brand equity and Brand image:  Adidas is a leading brand in the world of apparel and sports shoe. The company has strong brand image in the market because of its design and quality product offerings. Moreover, the company more focus on marketing activities led to increased popularity, higher brand equity and growing revenues and sales.
2. Strong marketing strategies: Adidas strong marketing strategies related to pricing, promotion and place is prove to be advantageous for the company.  As the company investing huge amount in digital promotion and to reach the customers. Adidas used both the model to reach their customers that are brick and click and brick and motor (Schmid et.al, 2018).
3. Innovation and Creativity: Products offering of Adidas are in such a way that fulfils needs of professionals, average consumer and everyday athletes. Adidas is ahead in providing innovative product by investing in ground-breaking technologies. Further, the company is continuously improving its supply chain with digitization.  For focusing on innovation the company create a special team that has focus on innovation named “FUTURE” (Baena, 2019).
4. Continuous financial growth: Adidas is growing in the continuous rate as in this changing environment sustaining for the long run with better profits and sales are important. The company showed 15 per cent increases in its revenue from last two years. The operating profit and gross profits of the company also increased by 31 per cent and 18 per cent respectively (Pradel et.al, 2019).

Weaknesses

1. Higher cost of production: Cost of is related to the expenses that the company pays to other parties for outsourced work such as delivery and production of its products. Its cost of production increased by 12 per cent from 2016. This is because of increases in cost of labour and raw material and because of some government regulations (Parmentier and Reynaud, 2018).
2. More revenue from developed countries:  The main issue for Adidas is that the company is mainly depend on the  customers  of developed countries as half of the sales of the company is from developed economies. The brand should also shift its focus to fast developing countries that might give more opportunities to Adidas to expand.

Opportunities

1. Growth of sports shoe market: Adidas has opportunity to excel in sports industry as this industry has showing tremendous growth from few years and will growing in future  because of economic improvement. Apart from North America and Europe, Adidas can target Asia as it is a developing economy.
2. E commerce platform: The shift of brands towards digital platform for sales and promotion changed the retail industries. The use of digital technology gives various opportunities to retailers to expand their business and Adidas is getting the advantage of this opportunity to greater extent. Use of artificial intelligence and digital technology helps the company to improve customer experience to greater extent (Langan et.al, 2019).
3. Increasing demand for innovative products: Adidas can make innovative products in different segments also except the sports shoes. The company can take advantage of changing demand patterns and should cater to the needs of people in sports and fashion trends.

Threats

1. Tough competition: The threat to Adidas in sports industry is from its competitors the company has many competitors in this segment that are doing well. Some of brands are Nike, Skechers, and New Balance.
2. Fast changing business environment:  The business environment is changing manly economic and legal factors have more impact on the Adidas strategies and growth status.

On the basis of above assessment of strategic direction and analysis of Adidas internal and external factors some of the suggestions that can be implemented by the company are:

• Adidas has strong market strategies so now the company should shift its focus on customer involvement or engagement in order to compete with Nike as this will help Adidas to retain its loyal customers and to increase customer base.
• The company showed improvement in revenue and sales, this should be further retained in future by providing attractive customer experience. So Adidas should focus on providing better services to their customers and made strategies that lead to more customer satisfaction.
• Adidas should target the developing economies too in order to expand its business across the world and to be a leading player in sports industry.
• Adidas can target Asian countries as in these countries professional are growing and these market can be targeted using local strategies in order to  find faster growth.

Conclusion

It is concluded from the above assessment and analysis that Adidas is a leading company in the sport industry. The company aims to provide innovative products to customers by ensuring the sustainable practices. Adidas strategies are aligned to its mission and vision and the company is improving its strategies on the continuous basis to be in a strategic direction. Further, it is concluded from the internal and external analysis that Adidas has strong brand image and financial position that help the company to grab the future opportunities by formulating better strategies for customer engagement and satisfaction.

References

Adidas, (2018). Adidas delivers double digit  bottom line growth. Accessed From: https://www.adidas-group.com/en/media/news-archive/press-releases/2019/adidas-delivers-double-digit-bottom-line-growth-q2/

Adidas, (2019). About us. Accessed From: https://www.adidas-group.com/en/

Baena, V., 2019. Global marketing strategy in professional sports. Lessons from FC Bayern Munich. Soccer & Society, 20(4), pp.660-674.

Hitt, M.A., Ireland, R.D. and Hoskisson, R.E., 2016. Strategic management: Concepts and cases: Competitiveness and globalization. Cengage Learning.

Langan, R., Cowley, S. and Nguyen, C., 2019. The state of digital marketing in academia: An examination of marketing curriculum’s response to digital disruption. Journal of Marketing Education, 41(1), pp.32-46.

Parmentier, T. and Reynaud, E., 2018. Strategic case: Change and change management in adidas.

Pradel, P., Campbell, R.I. and Bibb, R., 2019, July. When Design Never Ends-A Future Scenario for Product Developement. In Proceedings of the Design Society: International Conference on Engineering Design (Vol. 1, No. 1, pp. 829-838). Cambridge University Press.

Schmid, S., Dauth, T., Kotulla, T. and Leding, P., 2018. Adidas and Reebok: Is Acquiring Easier than Integrating?. In Internationalization of Business (pp. 27-61). Springer, Cham.