Adidas Internal and External Analysis
Executive Summary
This paper analyzes internal and external environment of Adidas Company. Adidas is a renowned company which has been operating for over fifty years. It has a strong financial backing and the highest number of employees. However, this research paper presents the PEST analysis of Adidas and VRIO framework Analysis of Adidas. The PEST analysis looked at the external environmental factors which affect the operation of Adidas in the market. The VRIO framework of analysis analyses the internal issues which affect Adidas and most importantly the competitive advantage which Adidas has against its competitors in the market.
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Introduction
Adidas is one of the leading companies in the manufacturing of shoes and sport apparent worldwide. It has its headquarters in Herzogenaurach, Germany and it does business as America depositary receipt in the United States. Adidas has a market capitalization of USD 19 billion and a total of USD 16 billion annually. It is, therefore, a stable sportswear company and this gives it a market advantage over its competitors. It started producing shoes in 1949 and since then Adidas has registered steady growth. The company produces a variety of sportswear which fit the market. Adidas employees over five hundred thousand employees across the world and produces over 660 million products annually (Anthony, 2016, p. 12). It, therefore, means Adidas is one of the largest companies in terms of production of sportswear second after Nike. The company generates over USD 14.9 billion dollars every year based on 2014 financial report. Adidas is a complex company and it keeps things simple, lean and faster to make sure it outsmarts its competitors from the market.
2.0. Adidas External business environment Analysis (PESTEL Analysis)
2.1. Political factors
Adidas is an established company which supply, distributes and ships its products globally and therefore, it is required to abide by international supply chain procedures and follow political procedures as well when doing business online. However, political factors affect companies and Adidas is not unexceptional (Tipu, 2015, p. 16). The political instability, unrest, terrorism, war affects Adidas performance in the market. This has made Adidas to change its strategy of venturing into new markets and keeping the already ventured markets. The changes are likely to cause the company significant amount of loses since the shipment of products to these countries such as Syria and other countries which face unrest must be stopped.
2.2. Economic
Since Adidas was started it has faced significant financial changes so that it can establish itself. In 2005, Adidas face financial downtown. However, the economic factors such as inflation, unemployment, per capita income, unemployment and taxes impact negatively on the profit of the company since they contribute to the deduction of revenue (Jayawardhana, 2016, p. 30). The unemployment rate and inflation affect customers negatively and likely to decrease the purchasing power of customers and the company capital cost. According to Alsbiei (2015, p.15), companies only realize growth in an environment where the rate of inflation is low and per capita is also high and therefore, Adidas performance in countries like Venezuela is likely to decline due to a high rate of inflation and unemployment rate as well.
2.3. Social
The market segment of Adidas is about design and it needs serious analysis of social factors to outsmart competitors in the market. However, the company creates a unique design which can be used by all ages. The company designs and production take into account the age, lifestyle and religion and it has been one of the drive factors of success for the company (Alsbiei, 2015, p. 12). The social factors are considered by the company and it determine innovation and buying character of every person and therefore, Adidas has implements various social factors through Islamic TV others to get its products to customers.
2.4. Technology
Adidas has identified itself as a technological driven company. It has implemented various systems or technologies which gives it competitive advantage in the market. Technology will help in boosting its quality of delivery services and production of products saving time, energy and effort. Though Adidas has not fully utilized technology in the production of products, it produces products such as smart balls. It has online stores which customers can use to purchase products (Mahdi1, Mohammed, & Taher, 2015).
2.4. Environmental
The company does not produce any products which is restricted and can interfere with the environment. Adidas production method helps in reducing the amount of gases being emitted to the atmosphere. The main of the company is to make sure that it produces sustainable and quality products for the market and observe environmental issues as well.
2.5. Legal
Adidas is patent and therefore, Adidas has the ownership of IP system and intellectual property. The company has also design patent to protect the company against copiers and infringement. It is also serves as protection against counterfeit business. However, Adidas must be aware of import, export, sales, so that it does not face legal actions from other countries.
3.0. VRIO framework of Adidas
Adidas is a renowned sportswear manufacturing which has been in operation for over sixty years. It has a strong financial background and the second largest sportswear company in terms of market share. Adidas market strategy and its products which are highly innovative are some of its core competence in the market. It acquires Reebok so it can gain competitive advantage which can allow it to compete with other players like Nike. It is also important to note that Adidas manufacture its product in Asia in some of its factors and subcontracted to minimize wages, which in returns make the company more profitable. In addition, Adidas operates in almost 64 countries worldwide and are still opening other stores in the Middle East and Africa, and therefore, this provides more advantage to the company compared to its competitors which has limited stores.
The study also found that Adidas has an effective point of sale across all its stores worldwide and involve in the constant innovation of products. It has a strong market presence in European and therefore, it gives the company access the sporting culture environment. As a result of strong presence, Adidas registers high sales turnout in Europe and from the United States as well.
Bibliography
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