Business Report on SWOT Analysis of the Company Adidas
Introduction
Adidas is a company that designs, markets, and sells clothing for people that enjoy an athletic lifestyle or just like to feel comfortable. They make clothing products for all people of any age. Adidas has strengths that stretch from the fact that they are well-known to doing research to show that their products have shown to have an advantage over others. These are done to show that they can make competition against other companies and have the power to satisfy their consumers. Any company can’t just have strengths though, and I say this because popularity lead to increased pressure and vulnerability. Adidas has almost 100% of their manufacturing done outside of the country, meaning they have no control over the quality of their products. They also have to pay for the labor done, and since they have workers outside the country, they have to flip the currency costing them an exchange rate.
Strengths
Adidas has grown to be one of the best known companies in the world. The company has grown to be one of the biggest manufactures all around the world, mainly with the athletic footwear, sports apparel, and equipment. The largest part of this company is the footwear, Adidas has grown to have some of the best shoe collections in the world. What makes the brand so popular around the world is the fact that the company has made apparel for both lifestyle and performance. Two other big companies that Adidas owns is “reebok”, and “taylormade”. Taylormade who partners with the golfing industry has become the sales leader when selling any type of golfing apparel. Reebok-CCM are the sales leaders when it comes to any type of hockey gear, or jerseys. People have fallen in love with the brand as it’s the most recognized brand when it comes to all this apparel. Over the years, adidas has made it a number one thing to make all their apparel as affordable as it can be, and yes it has worked adidas is increasing retail sales, as a percentage of all total sales.
Adidas' strong brand portfolio and enhanced retail presence enable easier customer recall as well as help it to drive top line growth and to attain competitive advantage over its peers. This has been working over the years as adidas has grown to be one of the top sales leaders over the years. When doing all this work Adidas really puts in a lot of their time and effort just to make the best apparel for all customers. Adidas has devoted significant resources and attention to their product development, process technology and consumer insight research to develop products with innovative and distinctive features for its two brands: Adidas and Reebok.
The Adidas innovation team has come up with so many different technologies, and doing that it really gives the brand an advantage over others, because only a few top brands can say they hold top technology. In 2013, Adidas conducted research studies with the University of Freiburg, developing and validating features of the Adidas miCoach X_Cell, a digital biometric device that measures heart rate, acceleration, jump height, speed-to-brake reaction times and shifts left or right of the wearer. So when people wonder why adidas material is so soothing and comfortable, this is why. Adidas does may test with any new product that they’re designing, because they want the customer to excel as best as they could at whatever sport they decide to play. They once went out to the field before the world cup to test if the certain type of cleat would be good enough for the texture of the field and also to see if the cleat could withstand the weight and pressure of the ball. Adidas has built a reputation to go out and test almost each of their products to see if they’re good enough to withstand anything they’re designed too. Such strong focus on R&D has enabled the company to launch various products in 2013. With such a strong R&D this allowed adidas to come up with “Boost” this has become one of the most popular shoe textures in the world. Adidas has earned a lot of money designing shoes with “boost”. That’s when Adidas really popped out as a brand, and ever since then they have just been growing at such a high rate.
Weaknesses
Even though every company has its major strengths they also have their weaknesses. Adidas doesn’t have many weaknesses, but they do have a major one and also plenty of more. Adidas is one of the world’s biggest brands but they have a lot of weaknesses that make the brand look weak. Adidas has 93% of creation re-appropriated to outsider producers generally to Asia to benefit of low work cost and simple accessibility of assets. They are risking over-reliance on redistributing particularly in Asian markets. This weakness can sometimes cause the product of Adidas to be more expensive than their other competitors Adidas redistributes the generation of its items to Far Eastern producers. While this system allows the brand to reduce expenses, it's one of their significant shortcomings. By redistributing fabricating procedures to outsider providers working abroad, Adidas loses some authority over how its items are made. This makes it amazingly hard for Adidas to guarantee the entirety of its items meets the equivalent thorough quality norms. Moreover, by re-appropriating the assembling of its items, Adidas is put helpless before outsider providers. This basically means that Adidas can’t really control how their items are made because they are being manufactured in third party countries. Adidas has really bad customer service, no one wants to buy something and if the product is horrible and want to return it you have to someone with a bad attitude. This is bad for Adidas because if a customer get disrespected by an employee and the customer lets everyone in the media know they can be criticized, if the customer wants they can even sue. When a major company like Adidas gets sued they get harsh publicity. They may even lose customers.
In the event that the providers are, for instance, discontent with pay, they can essentially quit working. This can rapidly cause issues for an organization as large as Adidas. As of 2015, Adidas has attracted major criticism. They have been accused of working with suppliers that have very poor and unacceptable working conditions. They work with with suppliers with horrible conditions because it can be cheaper for them to make the product. Since the company procures its merchandise from foreign manufacturers, it has little control over the product quality. There have been concerns over unsafe Chinese consumer products in the past. If a company is really dependent on third party vendors and manufacturing the flexibility to quickly shift to more productive lines, this may harm the company. Another major weakness is limited product line Adidas along with the recently acquired Reebok brands, has got only 2 brands under their group although they have got deep assortments within these brands. Thus, there is more scope for product line expansion.
Adidas is one of the worlds biggest sportswear companies, but they spend too much money on third party vendors that there product can only be afforded by only certain people. Growing operating expenses, with growing prices of raw material and labor, the operating expenses of Adidas have also kept growing. The revenue of Adidas has increased but so have its operating expenses. The company has grown its investment in marketing and it reflected in the form of higher other operating expenses. Other operating expenses of the brand grew past €9 billion in 2018 and were more than €350 million higher than the previous year. Growing operating expenses can shrink profit margins and affect net income adversely.
When Adidas did a collaboration with a famous celebrity also known as Kanye West there was so much excitement. The shoes were named Yeezys these shoes really helped Adidas and Kanye, but the shoe itself was not the best looking shoes out there but one of the most expensive shoes outher. Prices range from 100-450 dollars. Only certain people can purchase this type of shoe. This is an example of high price range.
Opportunities
Adidas has had many different opportunities when it comes to branding. Such as branding in various top sport events all around the world, which enhance the brand visibility. Adidas has sponsored various sport company’s all around the world which have turned out to be very successful over the years. The biggest one being the NBA. Adidas sponsored the NBA from the 2006-2007 season up until the 2016-2017 season. These were very successful years for the brand in all, because the NBA is one of the biggest sports brand’s out there. The company signed an 11-year global merchandising partnership agreement (beginning with the 2006–07 season) with the NBA. Adidas basically designed all the uniforms for the NBA, including the WNBA, and the G-League. One of the biggest moments in Adidas history was when they got the sponsorship for the 2014 Fifa World Cup. It also secured sponsorship rights to the 2014 FIFA World Cup to be held in Brazil.
The growing preference of customers to shop online has boosted the online retail trade in the US, Europe and Asia. This was really big for the company, because if you have a really high online retail trade, it can really grow your company in a quick second. Every year Adidas is getting higher sales revenue due to the quality they’re putting out there. They are getting attention from people and companies all over the world. According to MarketLine estimates, the global footwear market had total revenues of $258. 5 billion in 2013, representing a CAGR of 4. 4% between 2009 and 2013. In comparison, the European and Asia-Pacific markets grew with CAGRs of 2. 6% and 6. 6%, respectively, over the same period, to reach respective values of $98. 5 billion and $50. 9 billion in 2013.
Adidas has also decided to expand the groups that they want to partner with. They have been reached out to a person that is not into sports, but into something the complete opposite. It is official that Adidas has a partnership with Ninja. Ninja is a streamer that has been streaming on twitch for many years, but has recently switched streaming platforms. He now streams on Mixer, which is owned by Microsoft. They announced the sponsorship through one of Ninjas streams on Mixer, then later revealed on his Youtube channel. China is the land that most companies try to target when it comes to being appealing. Adidas is one of the companies that tries to appeal to this. Adidas counts approximately 10, 000 stores in Greater China, a tally that's expected to double by 2020. This is most likely not going to happen because technology is advancing and soon most purchases will be made online. Most of the payments made at these stores are done digitally. 'More than 40 percent of all purchases in our stores in China are done by mobile pay. China is, as we speak, experimenting with facial recognition pay. No other country in the world is doing that. Apple just launched a phone, the iPhone X, where facial recognition is one of the biggest features, China is now putting that into action in real life', he added. China has always been the leading place of innovation and countries are always trying to keep up with that innovation. A big thing about a company is to think ahead of the world. This is why companies are always trying to estimate statistics of the future. China is changing to be completely digital, so companies have to move into being digital and get rid of their old techniques. Companies could use China as an example for what is fit for the future. Adidas takes advantage of this by closely paying attention to the technological advances.
Threats
Adidas has grown to be known by almost everybody. Having gained this reputation has lead to them being constantly targeted by the consumers and rival companies. They have had many threats such as currency fluctuations risks, competitive pressure, and increase of labor wages. All these have posed a serious threat to Adidas, but they are on a way to solve these problems. Currency has never been a steady material in the world. Most countries have different currencies for their territory. Most companies, including Adidas, operate in many different countries. Obviously, Adidas has to pay for the labor that is put into the manufacturing of their products, but since the manufacturing is in many different countries, Adidas has to pay its employees in many different currencies. In order to satisfy the employees, Adidas has to flip the currencies according to the country of work, further costing them an exchange rate.
Competition has to be a thought when being in a business, and Adidas is stuck in between their competition. The company faces competition from Nike, Puma, Callaway Golf and New Balance Athletics. The company faces stiff competition from these companies based on style, price, quality, comfort, and brand recognition, among others. Inflation has been affecting all of the world because the cost of living is increasing gradually over time. Adidas has had to deal with this by paying their workers an increased amount and it keeps increasing. China has had a labor strike in mid 2014. They had left their job and had no plan to return unless they received a better pay and benefits. The workers are demanding past unpaid social insurance, a 30 percent pay increase from their base monthly pay of about $240, and a one-time payment based on seniority. It seems that the workers had noticed that they had been treated unfairly and could fight back for their rights. They knew that if enough people would strike, then they would be able to affect the company enough to receive attention. The greater part of the huge number of laborers who were striking at an enormous Chinese shoe industrial facility complex have come back to the activity, work activists said Saturday, empowering Adidas to continue creation there.
Conclusion
To conclude the brand, adidas has had an enormous success all around the world, since it was created the brand has expanded its product everywhere. Nowadays the Adidas brand has become one of the most successful brands in sport all the way. Early on adidas was known to be a brand for only soccer, but the brand has proven that statement wrong. When Kanye West joined the company back in 2013, it was a big boost for the whole brand, because they just signed one of the biggest rap artists in the world. Kanye and the brand started quickly, making the Yeezy shoes. This shoe was a big hit when it first came out, pricing all the way up one thousand dollars. You can say it was a very high price just for a shoe, but that’s how big Kanye was all around the world. That just led to more success, because they started signing a lot of big NBA and NFL players, the biggest NBA player signed for adidas was James Harden, this was a big win for the brand, because a few years later he would win the MVP. That lead to kids all around the world wanting to wear his shoe. When adidas first started making cleats for the NFL, business was really slow, but when they came up with the Adizero cleat this was a big boost for them, because most NFL players started using them. This cleat is rated super high by football players. A high percentage of football players prefer the adidas cleat, because it’s a very light shoe, and it allows you to move your feet quickly.
Even though they have all this success with multiple sports, the biggest one is soccer. The brand became big with this sport and it has grown tremendously with this sport also. It’s proven that the soccer sport is the most popular in the entire world, so yes it’s a big win to have your main sport being the biggest in the entire world. For example Leo Messi, he is arguably the best soccer player to ever play the game, and he is signed with Adidas. Just with that signing adidas is getting a lot of money just selling any type of gear with his name on it. This just shows how big the brand has been over the years, starting from just a soccer brand, to one of the top sports brands in the whole world. You can argue that adidas is the most popular brand right now, and it won’t be a bad argument.
