Adidas group of companies is the second largest leading brand of shoes and sportswear in the world. The company is based in Germany and the name was inspired from its owner Adolf Dassler. Adidas owns the Reebok sportswear, Taylor Made- Adidas Golf Company and Rock Port. Dassler started off this brand with the name “Gebrüder Dassler Schuhfabrik” in 1924. Being a sports athlete himself he understood the needs of the quality sportswear and wanted to provide the best possible equipment to the athletes. (Adidas Group, n.d.)
Competition in the Industry
Adidas has successfully survived through the challenges and managed to keep its reputation above par. But still it is the second best to most selling brand of sportswear, Nike Inc. Adidas is striving to outdo Nike by investing heavily into its R&D, developing new marketing and advertising strategies by increasing its costs and expanding its product lines. There are competitors like New Balance and Puma but they need to make their position strong since they own a small share in the retail market. (J.Fontana, 2012)
Potential of New Entrants in the Market
Due to gain access to cheap labor and reduce shipping costs, Adidas is outsourcing in Asia and other regions. With 35% of its goods being manufactured in China, import regulations, duty and tariffs plays a critical role in the success of the company. (Bhasin, 2017)
Consequently Adidas is running a risk by depending on outsourcing in Asia. And the overall quality of the goods identified by the consumers in the developed countries is a major concern. The possibility of new entrants is relatively low due to lack of barriers for entry. However in the presence of retail giants like Nike and Adidas, it would be difficult for competitors to invest such a large capital for advertising, R&D marketing and gaining the accounts of those athletes who haven’t signed up with either of these largest brands.
With the brand’s successful standing in the market, the access to distribution channels becomes easy and the company doesn’t face a threat from its competitors to take advantage of the economies of scale. With the fiscal crisis, not only Adidas but its competitors also faced the setbacks in their profits as they all operate in the same regions. Also the depreciating value of the exchanged currency would cost the company to lose it profits because it is dependent on it outsourcing.
Power of Suppliers
The brand’s booming business attracts the suppliers in abundance. So the threat form the suppliers of the raw material is zero to none. Because of the raw material is found in bulk the supplier power in the company’s chain is really low but the company still depends on them because the manufacturing cost of raw material is more than the purchasing cost.
Power of Customers
The power of the consumer is relatively low in this business where individual consumers are looking for mostly standardized products and are not knowledgeable about the product to make a decision so the brand makes the decision for the large number of buyers who just want to own a product of Adidas.
However the wholesalers who are well aware of the cost and are looking forward to purchase in bulk, have the higher power of bargaining when the threat to switch to other substitutes arises.
Threat of Substitute Products
The threat to switch to other sport’s products is moderately low with the presence of only a few brands in sportswear apparel and accessories. Consequently, it doesn’t drive the prices down when the threat to new entrant is low. (J.Fontana, 2012) However Adidas id fighting with every other substitute product whether it is sports related or not so the threat of being substituted with other cheap item is relatively high.
Conclusion
The sportswear depends on marketing, variety, innovation and endorsement of professional athletes. All the brands incorporate the same strategies with slight variations. Adidas started off with the best of intentions to answer the needs of the professional athletes. But with the death of Dassler the company lost its position from being the leading sportswear brand to the bottom. However with the acquisition of few successful brands and smart mergers, the company has been able to stand up again as the second largest retail brand of sportswear.
Bibliography
• (n.d.). Retrieved from Adidas Group: http://www.adidas-group.com/en/group/history/
• Bhasin, H. (2017, April 16). Adidas SWOT analysis – SWOT analysis of Adidas. Retrieved from Marketing91: http://www.marketing91.com/adidas-swot-analysis/
• J.Fontana, E. (2012, April 1). Adidas in 2009: Has Corporate Restructuring Increased Shareholder Value? Retrieved from academia: https://www.academia.edu/7353901/Adidas_Case_Study