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
5. Evaluating and choosing between strategic options
6. Presenting strategic recommendation.
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 Analysis of Adidas using Porters’ five force Model in future
Operations involving shipping and distribution of products and services worldwide.
Imposition of US tariffs and restrictions on Chinese goods are concern for Adidas as it will increase prices of its products
Level of political stability, integrity of politicians, the laws that the country enforces can impact operations of Adidas.
Implications
Adidas has to extend its international supply chains and follow political procedures when selling products online.
Rising labour cost in China where Adidas manufactures more than 50 % of its products.
Economic slowdown due to Covid 19 pandemic in the whole world.
Implication
Adidas has to transfer its production capacity to low wage rate countries.
Since Adidas products are not essential goods hence its demand will be impacted due to covid 19 pandemic.
Demand of eco friendly products in market.
Trend of remaining fit and healthy is increasing.
Health standard, Class distribution among society, age and gender is of utmost important.
Implication
Adidas has to rely on niche marketing as its product belongs to premium class.
It has to increase consumption of raw materials which is socially sustainable and eco friendly.
Use of internet to buy and sell products online.
Application of technologies to design and develop innovative products.
Use of technologies to improvise cost and attain economies of scale.
Implication
Improves global supply chain and distribution network to avoid shortage, lateness and reduction in cost.
Continuous development of new and differentiated products to remain unique in market.
Weather condition impacts transportation of input and output.
Climate changes can make many products useless.
Use of inputs and methods that inhibits less pollution.
Implication
· Delivery dates of the final product in the case of bad weather can be delayed.
· Sale of winter sports wear can be impacted due to global warming.
· Adidas has to use raw materials and methods which emit less pollution and less harm to environment.
· Intellectual property law, local regulations of the countries, minimum wages acts and other business laws and regulations impact operations of the business.
Implication
· Adidas has to abide by rules and regulations of countries it operates in to smoothly run its business and remain sustainable in that country.
Internal Analysis using Value Chain Analysis and VRIO framework
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4. Generate a set of future strategic options which leverage organisational strengths to take opportunities or rectify organisational weaknesses in order to overcomethreats.
5. Evaluating and choosing between strategic options
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
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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.
References
· Porter, M. E. (2008) ‘The five competitive forces that shape strategy, Harvard Business Review, issue 1, pp. 78–93.
· Adidas corporate strategy. Retrieved from https://www.slideshare.net/divya-mishra/adidas-corporate-strategy.
· Adidas Group. (2019). Adidas Annual Report 2019. Retrieved from https://report.adidas-group.com/2019/en/group-management-report-our-company/corporate-strategy/sales-and-distribution-strategy.html
· Adidas Group. (2018). Adidas Annual Report 2018. Retrieved from https://www.adidas-group.com/en/investors/financial-reports/#/2018/.
· Adidas. (2019). Strategy. Retrieved from https://www.adidas group. com/en/group /strategyoverview/
· Germano, S. (2019). Adidas runs into supply-chain problems in crucial North American market.
· The Wall Street Journal. Retrieved from https://www.wsj.com/articles/adidas-runs-intosupply- chain-problems-in-crucial-north-american-market- 11552477305?ns=prod/accounts-wsj.
· Working at Adidas. (2019). Retrieved from https://www.glassdoor.com/Overview/Working-atadidas- EI_IE10692.11,17.htm
· Adidas. (2019). Adidas delivers record results in 2018. Retrieved from https://www. adidasgroup.com/en/media/news-archive/press-releases/2019/adidas-delivers-record-results- 2018/
· Adidas. (2019). History. Retrieved from https://www.adidas-group.com/en/group/history/
· Adidas. (2019). Supply chain approach. Retrieved from https://www.adidasgroup. com/en/ sustainability/ compliance/supply-chain-approach/
· Alsbiei, Omar. (2015). ADIDAS GROUP Strategy Analysis. 10.13140/RG.2.1.4534.0641.
· Kiesha Frue (2017) PESTLE Analysis of Adidas . retrieved from https:// pestleanalysis.com/ pestle-analysis-adidas/
· (“Adidas Value Chain Analysis Research Paper Example | Topics and Well Written Essays - 750 words”, n.d.) Retrieved de https://studentshare.org/business/1496571-adidas-yproute-to
· Adidas SWOT analysis. Retrieved from https://bstrategyhub.com/adidas-swot-analysis/
· Strategic management – University Teknologi, Malaysia . Retrieved from https://www .studocu.com/my/document/universiti-teknologi-malaysia/strategic-management-sm/summaries/strategic-management-integrationintensive-1/5291914/view
· Adidas. (2019). Adidas continues push for equality in sports, increasing visibility for female
· athletes. Retrieved from https://news.adidas.com/action-sports/adidas-continues-push-forequality- in-sports--increasing-visibility-for-female-athletes/s/2a1bbd18-8a81-4e19-811d- 81905304f564
· Birch, Rebekah, "Adidas: A Strategic Audit" (2019). Honors Theses, University of Nebraska-Lincoln. 166. https://digitalcommons.unl.edu/honorstheses/166