Based on the analysis on the Annual report of Adidas, 2019, You are now to assume the role of internal/external consultant to Adidas’s senior management team and present your analysis for its consideration. Your report should focus on the set of strategic options in critically evaluating the sources of competitive advantage available to Adidas based upon identifying and evaluating their resources and capabilities. In your report you will be expected to provide information through a seven step scenario planning method-
- Develop an understanding of the type of company Adidas is and the type of industry it operates in (Company background/profile))
- Critically evaluate the trends shaping the sports industry and Adidas’s strategy. Your evaluation should begin at this stage by undertaking an environmental analysis of Adidas. The external environments involve with several factors, which can dramatically influence business strategy. (External +Internal Analysis )
- The industry analysis concentrates on economic, political and market factors, which can impact the development of industry (TOWS matrix ).
- Generate a set of future strategic options which leverage organisational strengths to take opportunities or rectify organisational weaknesses in order to overcome threats.
- Evaluating and choosing between strategic options
- Presenting strategic recommendation.
1. Develop an understanding of the type of company Adidas is and the type of industry it operates in.
|About Adidas||Founded in 1949, Adidas AG is the largest sportswear company in Europe and second largest in world.|
Revenue earned during 2019 was € 23.6 Billion and net profit being € 1.9 Billion, 12 % more than 2018.
Company has global presence in all continents of the world through its retail outlets, franchise, wholesale stores and E Commerce website and Adidas App.
|Brand Mission||To become best sports brand through design, build up and sale of best sports products with best service and experience to its customers.|
|Brand Value||Create the New through creativity, collaboration and confidence.|
Operational excellence through One Adidas.
Focus on innovation and newness.
|Key strategic Pillars||Best service, Best product, best experience, Speed, fast Creation for operational excellence.|
Brand Leadership to provide ‘consumer obsessed’ culture to enact speed, agility and empowerment.
2. Critically evaluate the trends shaping the sports industry and Adidas’s strategy. Your evaluation should begin at this stage by undertaking an environmental analysis of Adidas. The external environments involve with several factors, which can dramatically influence business strategy. (External +Internal Analysis -20 marks)
External Analysis using Porters’ five force Model in future
Internal Analysis using Value Chain Analysis and VRIO framework
3. The industry analysis concentrates on economic, political and market factors, which can impact the development of industry (TOWS matrix -10 marks).
|Strengths Strong Distribution network . Low-cost structure with strong hold on suppliers. Strong financial position with strong profit and asset base. Highly qualified, skilled and innovative employee workforce. Strong presence on internet through its E Commerce, App and social media coverage. Strong brand image. New product innovation.||Weaknesses Fixed rental cost on outlets and offices taken on rent. Liquidity issue. Dependency on local workers. Over dependence on outsourcing leading to compromise in quality and mismanagement in supply chain.|
|Opportunities Rapid growth in internet users and online buyers. Preference of environmental friendly products. Increase in size of population Demand increase in premium sportswear products.||SO Strategies Penetration and tapping of new market through application of E commerce and social media presence. Design and development of eco friendly innovative products to cater increase in demand of sportswear products.||WO Strategies Increase investment in R & D to develop eco friendly products. Integrate R & D with technology to develop products at low cost. Over dependence on suppliers can be reduced through set up of its own factories in less developed countries.|
|Threats Intense competition Exchange rate fluctuations Global economic slowdown due to Covid 19.||ST Strategies Make use of distribution network to fight against intense competition and reach to customers in new markets and reduce losses due to exchange rate fluctuation. Use of strong asset base and financial position to create inventory to meet future demand after end of pandemic caused due to Covid 19.||WT Strategies Increase in R & D investment to cope up with competitors. Acquisition of property for retail outlets and offices to reduce fixed cost and reduce impact of Covid 19 in terms of revenue losses till pandemic continues.|
4. Generate a set of future strategic options which leverage organisational strengths to take opportunities or rectify organisational weaknesses in order to overcome threats. (Generating strategic options-10 marks)
5. Evaluating and choosing between strategic options (10 marks)
List of future strategic options and Evaluation of investment opportunity has been done using following factors. 1, 2, 3, 4, 5 and 6 indicates its position in table
- Improve profitability = 1
- Increase sales, market shares, return on investments = 2
- Customer satisfaction = 3
- Brand image = 4
- Corporate mission, vision and strategy = 5
- Resources and capabilities = 6
6. Presenting strategic recommendation.
Major problems company focuses currently relates to supply chain shortage in North America, high priced products, intense competition from its rivalries and high cost structure in product development. Keeping above scenario in mind, the best strategy recommended for Adidas would be intensive strategy in which company must focus on market penetration, market development and product development using its resources and capabilities and strengths to lead future of sportswear industry and become best in the world. Intensive strategy will help company to boost its sales through exploration of new market, development of products as per the demand of new market and lower cost of products through economies of scale and achieve its goal of becoming number one company in the world.
Keeping in view the problems associated with Adidas, in future, it needs to focus on taking advantage of its strong supply chain management, distribution network and brand image and enter into new market using E Commerce and social media channel, retail outlets and franchise to increase its revenue and profitability, thus establishing itself as the market leader and attaining number one position in Sportswear and accessories industry in the world. In order to achieve its mission and vision of becoming best brand and sport wear company in the world, it has to develop innovative and price competitive products that matches the need perspectives of customers and create high value for them through continuous research and development and expanding its distribution and supply chain network in new market, the way it is doing currently in North America. Adidas needs to invest huge chunk of funds in R&D to cut cost on product development and get competitive advantage in market over its rivalries.
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