Major Brand Research Assignment: Adidas Marketing Plan (Research Paper Sample)

Strategy Analysis: Adidas
Word count: (3,051)
Executive Summary
The sports clothing industry is highly competitive with major brands such as Nike and Puma, setting up the competitive pace for other design majors such as Adidas. Adidas is one of the major sports clothing manufacturer that has been able to own a large market share despite the unwavering challenges that faces the sporting clothes and footwear industry. In the Europe, Adidas remains the largest sportswear company.. The influx of other competitive companies into the sportswear industry has made it hard for Adidas to maintain its market share. Adidas Company owns the Reebok Company, Rockport, TaylorMade-Adidas Golf Company as well as 9.1% of the Bayern Munich football club. The rapidly growing sports industry has created a larger market for Adidas. The company has adopted a product differentiation strategy with the view of gaining the competitive advantage ahead of the other companies such as Nike. This report analyses the external environmental factors affecting Adidas using PESTLE model, Porter’s five force model. On the other hand, the report discusses the internal environmental factors that affect the company using value chain analysis model and SWOT analysis. In addition, the report bears the discussion on Adidas, position in the footwear industry using the BCG matrix. The report findings state that Adidas has a sales target of 17 billion Euros by the year 2015. In order for them to achieve this, the company must ensure more than 15% annual growth rate with operating margin of 11%. However, this company experiences several challenges, including the introduction of other competitive companies who find it easier to venture into the sportswear industry. Nevertheless, Adidas should consider incorporating the cost leadership strategy, where the company will be able to achieve the highly competitive costs for their products.
Contents TOC \o "1-3" \h \z \u 1.0 Introduction PAGEREF _Toc403033846 \h 12.0 External Environmental Analysis of Adidas Footwear Production PAGEREF _Toc403033847 \h 12.1 PESTLE Analysis Model PAGEREF _Toc403033848 \h 12.2 Political Issues PAGEREF _Toc403033849 \h 22.3 Economic Issues PAGEREF _Toc403033850 \h 22.4 Social Issues PAGEREF _Toc403033851 \h 22.5 Technological Issues PAGEREF _Toc403033852 \h 32.6 Environmental Factors PAGEREF _Toc403033853 \h 32.7 Legal Issues PAGEREF _Toc403033854 \h 33.0 Porter’s Five Forces Framework PAGEREF _Toc403033855 \h 33.1Threats of New Entrants PAGEREF _Toc403033856 \h 43.2 Threats of Substitutes PAGEREF _Toc403033857 \h 43.3 Competitive Rivalry PAGEREF _Toc403033858 \h 53.4 Bargaining Power of Customers PAGEREF _Toc403033859 \h 53.5 Bargaining Power of Suppliers PAGEREF _Toc403033860 \h 54.0 Internal Environment Analysis PAGEREF _Toc403033861 \h 64.1 Value Chain Analysis PAGEREF _Toc403033862 \h 65.0 SWOT Analysis PAGEREF _Toc403033863 \h 85.1 Strength PAGEREF _Toc403033864 \h 85.2 Weaknesses PAGEREF _Toc403033865 \h 85.3 Opportunities PAGEREF _Toc403033866 \h 95.4 Threats PAGEREF _Toc403033867 \h 96.0 Problems Faced by Adidas PAGEREF _Toc403033868 \h 97.0 Analysis of Adidas PAGEREF _Toc403033869 \h 107.1 BCG Matrix PAGEREF _Toc403033870 \h 107.2 Porter’s Generic Strategies PAGEREF _Toc403033871 \h 108.0 Conclusion PAGEREF _Toc403033872 \h 119.0 Recommendation PAGEREF _Toc403033873 \h 1110. References PAGEREF _Toc403033874 \h 12
1.0 Introduction
Adidas UK is a multinational corporation whose primary activity involves manufacturing and designing of the sportswear such as shoes, clothing and other accessories. This company is rated as the second largest sportswear company in the world and the largest sportswear company in Europe. Adidas Group (2013) reports that, Adidas owns up to 9.1% of the famous Bayern Munich club in Germany. The Adidas Company also ventures in the manufacture of other products such as bags, watches, shirts, eyewear as well as other smaller accessories. As at 2008, the company’s revenue was estimated to be € 14.88 billion. With its product differentiation strategy, Adidas has been able to maintain its large market share in the sportswear industry (Chaudhuri, 2013).
In this report, the strategy used by Adidas in the United Kingdom will be analysed. The report will focus on the footwear as a strategic business unit (SBU), and analyse it using relevant business strategy models. The report will also provide a concise PESTLE analysis, use of Porter’s five-force model, SWOT analysis as well as the value chain analysis of the company in relation to the manufacturing of the sports footwear.
2.0 External Environmental Analysis of Adidas Footwear Production
2.1 PESTLE Analysis Model
Gregorić (2014) notes that PESTLE analytic tool is a tool that is normally used in the analysis of the external environmental factors that affect a particular company’s operation. This analytic framework analyses the political factors, economic factors, technological issues, and legal factors, environmental and ecological issues that affect a particular company or organisation. Below is figure 1 showing PESTLE framework tool.
Figure 1: PESTLE Model
Source: Gregorić, 2014
2.2 Political Issues
The UK has a stable political atmosphere that has favoured Adidas’ operation in the country. However, Adidas has experienced challenges especially when it comes to taxation. The taxation rates in the UK are relatively high thus, elevating the costs of operation. The UK government has indirect influence in the company’s operation through legislation, taxation and licensing. UK is an Adidas’ core market where most of its footwear is traded (Gregorić, 2014). However, the changes in the taxation by the UK government have seriously threatened the footwear trade in the country. Heavy taxes affect the rates of returns from the sales of the footwear. The UK government has introduced regulations that affect the labour markets for this company. With the new regulations that have led to the increase of wage rates to £ 7.85 (Adidas Group, 2024).This makes it expensive for Adidas to higher labourers (Dawes, 2009).
2.3 Economic Issues
Some of the potential economic factors that affect most of the large companies in the UK include the heightened exchange rates, the robust inflation rates, fluctuating interest rates as well as the policies in economic growth. According to reports given by Bank of England, there has been a GDP growth of 0.9% with a 1.5% reduction in the inflation rates. These factors have improved the economic environment for Adidas. On the other hand, unemployment rates have also reduced by a 6.2% margin between May to July 2014 (Rosenzweig, 2013). This has improved the markets for Adidas products as well. Due to such growth, the interest rates for various financial institutions have gone down allowing companies like Adidas to be able to leverage their operations. In the United Kingdom, where the impact of the economic downturn had been realised, Adidas suffered a severe setback. Ideally, the economic crisis in Europe, which was characterised by a dropdown of up to 1.8% of the economy, affected most of the markets within the European region (Gustafson, 2014).
2.4 Social Issues
Social factors affect most of the companies’ operations, both directly and indirectly Many people in the UK love football and other sports. This has made it possible for Adidas Company to be able to get large market for their products in the UK. Ideally, most people in the UK have good income, that creates a strong market for their footwear products. The knowledge of the social values of the customer helps the companies in designing products that are tailored to meet the tastes of the customers (Laturkar & Alvi, 2010).
The UK population is comprised of majority old individuals whose taste in sportswear does not require complex designs. This makes Adidas to inject less in terms of production costs. However, the age distribution affects the market for the footwear produced by this company. Since there are lesser young people as compared to older people, Adidas must make footwear that is friendly to the lifestyles of the older population. Nonetheless, this company is able to provide their customers with tailored footwear that match their needs (Gregorić, 2014).
2.5 Technological Issues
The trends in technology facilitate innovative ideas, development of newer products change and automation of the production process. Rates of technology transfer in the UK are faster, making companies such as Adidas to adopt various efficient technologies to replace their obsolete techniques of production. With its target on improvement of the quality of the footwear, the company has incorporated the latest technology in designing and producing the footwear (Laturkar & Alvi, 2010). The newer technologies help Adidas to cut costs by reducing the manual operations. For instance, this company uses an automated process of dying the footwear such as shoes. Technology has also improved the marketing efforts of the company’s products. In as much as the company uses the digital communication methods to conduct its marketing through displays and advertisements, the company has realised changes in its sales.
2.6 Environmental Factors
The UK has stringent legislation that control the effects of the pollutants that may affect the health of individuals within and outside the company. This rules ensure that Adidas reduce the production of pollutants that may affect the health of individuals.. In the United Kingdom, all manufacturers are restricted to ensure that they conduct production of their products using enviro...