Evaluating Adidas Internal And External Analysis

Question

Task: 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 (2500 words, 90 marks).
1. Develop an understanding of the type of company Adidas is and the type of industry it operates in (Company background/profile) -10 marks)
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.
3. The industry analysis concentrates on economic, political and market factors, which can impact the development of industry (TOWS matrix -10 marks).
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)
6. Presenting strategic recommendation. (20 marks)
7. Conclusion. (10 marks)

Answer

1. Introduction
This study presents detailed information regarding the competitive advantage of the chosen company i.e. Adidas internal and external analysis. The study also discusses the external and internal factors which are responsible to make Adidas a brand or trend in the past a dozen years across the globe. This report deals with the intricate industry analysis of this company and the impact of political, socio-economic and market factor that shaped this organization into a leading company. Additionally, this Adidas internal and external analysis evaluates strategic options that are experienced by this company using PESTLE and TOWS matrix. Additionally, this report provides some recommendations to cover up its weakness and turn into opportunities.

2. Company Background for conducting Adidas internal and external analysis
Adidas AG, largest sportswear manufacturer in Europe and second-largest in the world a multinational corporation founded in 1949 in Germany. Adidas deals with a range of clothing products, varying from men's and women's jackets, t-shirts, hoodies, football and many other accessories. Adidas started manufacturing cricket footwear in the 1970s and until now it has entered into so many cricket sponsorships that have showcased its brand value across the world (KAL, 2019). Not only cricket or football but also Adidas has rolled out its products for different sports such as basketball, baseball, golf, gymnastics, tennis and kabaddi. At the same time, it has started designing watches, sunglass, bags, socks and also deodorants and perfume. Adidas is constantly uplifting their sponsorship tag by sponsoring different leagues, football clubs and national teams along with its players worldwide. In 2019 Adidas has mainly focused on designing distinct types of running shoes and lifestyle shoes. For this purpose, Adidas has developed a strong runners' network within the different cities of Europe. Excluding the sponsorship, Adidas has launched so many campaigns time to time to redefine its brand image like in 2004 'Impossible is nothing' is one of the company's most celebrated campaigns. In 2011 another campaign namely 'Adidas is all in' focused in fashion, street music and pop culture.

3. Evaluation of Trends
Adidas has designed its products as per market trends and customer demand and its focused product are running shoes of the different model with great features. Under this segment, Adidas has unveiled a new strategic business plan i.e. 'Creating the new until 2020'. Along with that, it has developed a culture of 3Cs i.e. Creativity, Collaboration and Confidence and this plan have three choices i.e. speed, cities and open source. In the speed objective, Adidas has evolved the entire business model end-to-end, from planning to product design, sourcing, supply chain and sales (Yang, 2019). They have also expanded 'fast creation' and 'fast replenishment' strategy and it has increased its sales by around 45% in 2019. In cities segment, Adidas has figured out important cities across the world and created an end-to-end in these cities which links the customer to relevant products with its holistic retail experiences. Activation was the first step to launch one by one impressive shoe on any special event. Products and experiences are the rest steps to launch a global campaign and providing customer premium retail experiences across the globe. Open source is the last objective where Adidas has welcomed innovative design from the consumer by encouraging them to co-create the future of sports with them. Under this campaign, this company has manufactured extensive running shoes with exceptional features. Adidas Alphaboost and Adizero Boston 8 are the most amazing models along with that Supernova Glide Boost 8, Rockadia Trail, Terrex Skychaser GTX, Ultraboost 19, Cloudfoam Ultimate, Terrex Swift R GTX has transformed the running shoe segment across the world (Burnap, 2019). It has incorporated world-class features such as dual-density which boosts the cushioning with stability pods, lightweight, well-shaped, foam platform which is liable to take smooth and well-judged steps, unique outsole unit that helps to grip the surface. In this planned way, Adidas has evaluated its products trends according to the consumer and market acceptability.

4. Environment Analysis- Adidas internal and external analysis
4.1 External Analysis
To assess Adidas internal and external analysis, a PESTLE analysis can be highly efficient and applicable.

4.1.1 PESTLE Analysis
The PESTLE analysis deals with the evaluation of external conditions of an organization and their effects on the brand. The PESTLE analysis focuses on Political, Economic, Social, Technological, Legal and Environmental factors that can affect organizational operations (Perera, 2017). The PESTLE analysis for Adidas internal and external analysis has been presented as follows:

Political
As per the research conducted on Adidas internal and external analysis, UK faces major political unrest due to the issues with Brexit which has led to the loss of Free Trade relations with the countries involved in the European Union (Lawless and Morgenroth, 2019). Additionally, the recent outbreak of COVID 19 has led to major political unrest worldwide and has led to unstable political conditions. These issues have led to negative effects on the brand and can lead to further problems over the next few years.

Economic
The UK has experienced a significant decrease in economic growth over the years which has led to negative effects on a large number of organizations. It was found that the GDP growth rate in 2016 was 1.91% which decreased to 1.89% by 2017 and 1.38% in 2018 (data.worldbank.org, 2020). Additionally, as per Fernandes (2020), the recent COVID 19 outbreak has led to an economic lockdown and thus economic values are expected to decrease further. This can lead to major negative effects on Adidas and can lead to problems with proper operations.

Social
Social factors deal with the population and demographic conditions of a country. Based on a dataset report presented by the ONS, it was found that most of the male population in 2018 belonged to the age groups 25-29 and 50-54 years (ons.gov.uk, 2020). Similarly, most of the female population in 2018 belonged to the age groups 45-49 and 50-54 years. The population values for both males and females were significantly lower from the age group of 60 years and higher which indicates high opportunities for Adidas to attract the younger population and employed individuals. The COVID 19 outbreak has also mostly contributed to the death of the older population and thus Adidas may not face major problems with sales.

Technological
The UK is highly efficient in the use of modern technologies which contributes to significant positive effects on organizations. Additionally, as per Wignaraja (2016) in regards to the Adidas internal and external analysis, the recent trade relations with China have contributed to increased opportunities for the UK has led to positive effects on availability. This has been highly efficient for the operations of Adidas as well as many other countries within the UK. However, the COVID 19 outbreak from Wuhan, China has led to a lack of clarity regarding future trade relations with China (thediplomat.com, 2020). This uncertainty can greatly affect Adidas and swift action for the development of relations with other technology providing countries is necessary.

Legal
The UK has several laws relating to business operations which include compliance with the Fraud Act of 2006 to prevent fraudulent behaviours by the organization in terms of finances and the Equality Act of 2010 which ensures equal treatment of employees (Monaghan and Monaghan, 2018). Other laws and legal guidelines include Company Act of 2006 dealing with organizational values and the Health and Safety at Work Act 1974. Adidas is highly compliant with these legal values and guidelines and thus has been highly efficient in managing their continued business operations.

Environmental
The environmental conditions of the UK are highly suitable for business operations. The weather conditions of the UK cannot be stated as either too cold or hot and its thus contributes to efficient performances. Extremely hot or cold weathers can lead to lethargy or lack of motivations for employees. Additionally, the UK experiences a mediocre level of pollution which does not affect people's performances in a major way as of yet (Howarth et al. 2018). Adidas ensures the provision of environment-friendly products and their development processes do not contribute to any negative effects on the environment. Therefore, it can be stated that Adidas can gain continued profits and operations due to the environmental conditions in the UK.

4.2 Internal Analysis
In the present study of Adidas internal and external analysis, the analysis of internal processes leading to significant competitive advantages of the brand can be evaluated with the use of the SWOT matrix and the Porter’s Five Forces model.

4.2.1 SWOT Matrix
SWOT is used to assess the strengths, weaknesses, opportunities and threats of an organization. However, as stated by Gürel and Tat (2017), this process is used for assessment and does not involve the development of strategic actions. The SWOT analysis for Adidas internal and external analysis has been presented as follows:

4.2.2 Porter’s Five Forces
Porter's Five Forces model deals with evaluating the competitive advantages of an organization. The evaluation of Adidas internal and external analysis operations based on Porter's Five Forces model has been presented as follows:

The threat of New Entry: This factor deals with the opportunity for new organizations to enter the market (Safari et al. 2016). The sportswear development business is a growing industry and thus contributes to major opportunities for various brands to gain profits. This has led to the rise of new organizations such as Under Armour and more which affects Adidas negatively.

The Threat of Substitution: This factor focuses on opportunities for people to buy products from substitute brands. The high prices of Adidas brand contribute to low opportunities for buyers to continue buying products from the brand. Therefore, substitution is inevitable and people will be more inclined to buy high-quality products at low prices from brands such as Reebok and Puma. This can affect the sales and profits of Adidas adversely.

Bargaining power of Buyers: This factor presented in the present study of Adidas internal and external analysis deals with the power of buyers to bargain for the products and buy them at low prices (Safari et al. 2016). Adidas follows a no bargain rule but the high prices contribute to increased bargaining powers of buyers. The buyers can buy products from other organization selling similar products at lower prices, thus affecting the profits of Adidas.

Bargaining Power of Suppliers: Due to the high brand image of Adidas, the organization has several suppliers. Therefore, it can be stated that the bargaining power of suppliers is low and Adidas has different options available in case of negative relations with a few suppliers. This contributes to positive effects on the operations for Adidas.

Industry Rivalry: Adidas faces competition from a large number of rival brands such as Nike, Reebok, Puma, Under Armour and more. Reebok and Puma are involved in the provision of standard quality products at low prices whereas Nike and Under Armour provide high-quality products at prices similar to that of Adidas. Therefore, Adidas faces competition both in terms of quality as well as the price which affects the competitive advantages of the brand negatively.

5. Industry Analysis using Tows Matrix
The Tows Analysis for evaluating Adidas internal and external analysis is used to developed strategic actions based on the strengths, weaknesses, opportunities and threats evaluated using the SWOT analysis (?erný et al. 2018). This method can be stated as an improvement over the SWOT matrix. This section presents a detailed evaluation of the conditions of Adidas based on the use of the Tows Matrix.

6. Evaluating Strategic Actions
As a market leader in the sportswear segment, Adidas needs to revaluate the strategic policies which are affecting their profitability. These strategic actions outlined in the study of Adidas internal and external analysis are acting as an opportunity to the other major brand like Nike, Puma and Reebok to showcase their products. Adidas products are mainly focused on higher class people due to its high-quality material which is not economical to all segments of people. For this case, a range of standard quality product with affordable price can be launched. Again Adidas faces major setback with different countries due to this affordability purpose and also for political disturbance (Bjerkem, 2019). Even in some countries, it faces tough competition with the local brands also. For this purpose, strategic actions can be changed in line with country wise and they can launch products as per the country-specific. Such as in Asian country they can launch sports shoes and traditional shoes also along with their favourite merchandise. In European countries plan of action can be different to implement this strategy thus it will boost the profitability in overall sales.

7. Recommendations based on the Adidas internal and external analysis
Based on the reflection of the above mentioned key resources, the following recommended actions can be applied to enhance its performance:

• Adidas has a high brand image so it has also renovated that image into an innovative way such as customized products for the consumer can be a game-changer.
• As Adidas is facing high competition from its contemporary brands so using its brand reputation they can launch a range of products varying low-cost quality to high-cost quality as per the market demand.

8. Conclusions
From this study on Adidas internal and external analysis, it is evident that Adidas has been the company which has great dominance in the sportswear manufacturing market now and it will be there in the future. Adidas has been focusing much more on innovation through the application of various campaign and design which are required for driving innovation and creativity in the industry so that the quality products and premium retail experiences are to be delivered to the consumer. It is concluded from the Adidas internal and external analysis that the company has the string and powerful branding are they are much more focusing on the innovative design and quality which is high demand in the global market.

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