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Adidas Analysis Paper
Adidas Analysis Paper
Adidas
Company Analysis Project
Introduction
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“Gebrüder Dassler Schuhfabrik” which focused on providing athletes with the best
equipment (2020). Adidas has continued to grow as a company and brand. Adidas has
reached historic heights in both the athletic and casual footwear market segments. In this analysis
we look how Adidas has been able to adapt and look to stay with the top competitors in the
While Adidas has been able to grow and sustain its market share in this industry over the
years, factors like political environments, supply chain disruptions, and the socioeconomic
state must be considered. As consultants, we must evaluate the implications from the pandemic
have hurt Adidas and the global economy in numerous ways like unemployment rising,
relations that have been known to affect the costs companies incur who export a vast majority of
Adidas also carries implications of its corporate social responsibility in places that it conducts
business like the environmental effects of its operations and the treatment and conditions of its
labor force. Adidas operates in all corners of the world; we must thoroughly understand how this
company operates and identify the discrepancies it faces to better help this company grow in an
ever-changing world.
Recommendations that we will discuss in this paper include changing the company logo to
reflect their sustainability campaign, partnering with another sustainability shoe company brand,
and increasing the company’s online presence. These strategies are high-level strategies that
have objectives focusing on increasing revenue, customer loyalty, and product innovation.
While it is easy for new footwear companies to enter the market due to low
manufacturing costs, it is hard for these new entrants to grow and expand. With most of the
market being dominated by just a handful of companies, such as Nike, Adidas, and New Balance,
it is harder for these new entrants to keep up with the economies of scale of these other
companies. Companies such as Adidas and Nike have been producing large quantities of shoes
for decades, so they have a much larger head start in decreasing their costs across the board.
Although there have been more channels of distribution for new entrants with 29.5% of U.S.
consumers purchasing their shoes through e-commerce, the more established companies in this
industry have already taken advantage of this, thus lessening the opportunity for these new
companies (Shahbandeh, 2021). These incumbent firms have also developed the brand loyalty of
their customers over the years. In a survey of 400 people conducted by the International Journal
of Management, only 57 of the respondents were brand switchers not loyal to a single brand
(Anjum, Khanna, Malhan, 2018). This shows that it would be difficult for new firms to gain a
customer base as many consumers are already brand loyal for their shoes.
Power of suppliers
The power of suppliers in this industry is low. Large companies such as Nike and Adidas
have many different manufacturers that they use, with Adidas sourcing from 631 independent
factories and Nike sourcing from 794 factories in 2019 (Judd and Kuruvilla, 2021). This means
that companies within this industry are not tied to the mercy of just one supplier. If one supplier
tries to raise prices to an undesirable level, the switching cost of changing suppliers is negligible
Power of Buyers
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The power of buyers within the industry is low. Shoes/footwear are a necessity for
everyday life, so people will always need to buy shoes. This means that there will be a larger
quantity of smaller purchases instead of a few buyers purchasing massive quantities of the
product, resulting in lower buyer power. There is also a high degree of differentiation within the
footwear industry. Each shoe or shoe type has different benefits that they bring to the table, such
as either comfort or style, which means switching costs can be significant depending on which
Threat of Substitutes
Since shoes/footwear are necessity goods, there is no direct substitute that could take the
place of shoes/footwear. Although there is no substitute for the item itself, there is a threat of
substitutes when talking about going from one shoe to another. For example, instead of buying a
brand-new pair of high-priced athletic shoes, one could simply go to Goodwill and purchase a
pair of aftermarket shoes. Consumers could also make their own shoes to act as a substitute,
although there would be some quality tradeoffs. Consumers could also substitute different
brands within the industry. For example, a consumer looking for new shoes may substitute their
normal purchase of Adidas for a pair of Sketchers if they feel they could get similar or better
performance at a lower price point. So, while there is not really a threat of substitutes for
footwear itself, there is a high threat of substitution amongst the different brands of footwear.
while demonstrating an oligopolistic competitive industry structure. Nike and Adidas are easily
the two biggest rivals, with Nike having a revenue of $39.1 billion in 2019 and Adidas having a
revenue of $26.8 billion (BizVibe, 2020). After these two companies, rivalry still exists with the
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smaller companies. Companies such as Sketchers, New Balance, Asics, and Fila all had sales
between $3.4 billion and $5.2 billion in 2019, which means these companies are also in
competition for a larger share of the market (BizVibe, 2020). This shows that most of the top
players are of equal size, leading to higher levels of competition. Products between competitors
can often be used as substitutes for one another since they all produce athletic shoes, which also
increases rivalry. Sales are forecasted to increase annually by 6.65%, which will lead to lower
rivalry within the industry since stagnated growth tends to foster higher rivalry amongst
competitors (Statista, 2021). As it stands, the conditions of the footwear industry help promote
PESTEL Analysis
One way in which political factors have impacted this industry is demonstrated by the
U.S.- China trade war. The U.S. tariffs on goods imported from China increased from 3.8% in
2018 to 19.3% in 2021 (Bown, 2021). This impacts the shoe industry as 70% of shoes sold in the
U.S. come from China (Thomas, 2019). With so much of the U.S. shoe supply coming from
China, consumers will feel the effects of these tariffs as these shoe companies will have to make
up for lost profits somehow, which will lead to higher shoe prices across the board. Depending
on how much exactly this affects the price of shoes, it could lead to overall lower sales for these
companies.
There are a few different economic factors that can impact this industry. Some of these
factors include changes in employment rates, inflation rates, and the economic growth rates of
countries around the world. With the current labor shortages impacting countries across the
world, these shoe companies may have to start paying higher wages for employees to get the
quality of employees they need to succeed. The increase of inflation rates from 1.4% to 6.4%
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may also negatively impact these companies (U.S. Inflation Calculator, 2021). If inflation
continues to climb, then the prices of certain shoes or brands may be too much for consumers,
One way that socio-cultural factors can impact the shoe industry is that consumers are
becoming more health conscious (Gravy Analytics, 2021). With more consumers being worried
about their personal health, especially during a pandemic, it could lead to higher sales of athletic
shoes. If people care more about their health, they will exercise more, and in turn may invest
more into athletic gear. This could also be true if society places more value on a
formal appearance, there would be more of a demand for dress shoes. Another way these factors
can impact the industry is that there has been heightened awareness around social issues in recent
years. If one of these companies takes a stance that lacks empathy to social cause, it may turn
There are a few separate ways that technological factors impact this industry. For starters,
the prevalence of social media can help these companies improve their marketing by connecting
directly with the consumers. Technological advances can also improve the quality of the shoes
factors improving shoes themselves would be Nike producing “ZoomX” foam that makes the
shoes feel more responsive and their engineered mesh that increases durability (Newcomb,
2021). 3D printing also changes the manufacturing side of the shoe industry as companies can
now easily and rapidly develop new prototypes of shoes and can test the use of varied
materials to make them, all while getting the product to the market faster than before (3D
Sourced, 2021).
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With their being a greater importance on the health of our environment, many companies
within this industry have been taking steps to become more sustainable. An example of this
would be Reebok committing to increased use of recycled materials, drop greenhouse gas
emissions by 30% by 2030, and switching to 100% renewal energy by 2025 after Nike and
Adidas had committed to take similar actions (Moore, 2020). These companies must also keep
There are a few legal factors that can impact the industry as well. For starters, companies
may face lawsuits over copyright infringements or design patents. If one company’s design is
too alike to another’s company logo, then the company who originally created the design could
sue. There could also be new laws put into place that can restrict shoe sales or shoe production.
On top of this, there could also be laws passed regarding the type of materials that are allowed to
Adidas has continued to excel in the footwear and lifestyle clothing industry when
conducting an internal analysis of the company to see where they stand with their financial
reports and other documents. We also wanted to conduct a VRIO analysis so that we can see how
we can evaluate the company's resources. Adidas has continued to grow as we see in the
financial statements and tend to agree that Adidas is on the up and up.
Financial Analysis
The first thing we look at is the current financial statement. We are looking at the Q1
from last year so we can assess the current most up-to-date financial records we can find. When
looking at the statements we see that Currency-neutral revenues increase 27% with footwear up
31%. This is a positive sign as we look to assess the statements, we see a key industry grow for
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Adidas. While the footwear revenue increases to grow, we can also see that Adidas has dealt
extremely well with the current situation with COVID-19 being a detrimental factor in the
decline to many businesses, we see this relevant in the statements where it says Adidas has seen
“Growth in all market segments”. As we look in the section where it discusses how the company
sees growth in all markets, we see some utterly amazing numbers “Growth in all market
segments The top-line expansion in the first quarter segment for them. Although they did not
open many stores, they were able to increase the sales by 5%. When looking at Adidas we see
that they also have worked on lowering the amount of borrowing as stated in the following
section “Adjusted net borrowings on March 31, 2021, amounted to € 3.290 billion (March 31,
€ 1.527 billion.” Adidas has really been on the upside but has also seen some downside as they
did see the inventories and working capital decrease. Ultimately as you can see from Adidas Q1
Statements that Adidas has positioned themselves increases in all market segments. Across the
company’s three strategic markets, currency-neutral sales expanded at a triple digit rate in China
(+156%) and increased in the high-single-digits in both North America (+8%) and EMEA
(+8%)” The list did not end there but at the end we do see that Adidas did not go unscathed by
the pandemic either “Out of the market segments, EMEA was most negatively impacted by
prolonged lockdowns which decreased the store opening rate in Europe to below 50% in March.''
This is a huge deal as Europe has continued to be quite a large market industry as they have seen
growth from last year's Q1. Seen a massive growth of 25% when comparing 2020s Q1 to 2021’s
Q1 Gross Profit. As we had suspected Adidas, according to their financial statements, are
positioned well in the market when looking at other companies in the industry.
When looking internally at Adidas we conducted a VRIO analysis so that we could better
understand where Adidas stands compared to another company in the industry in a competitive
nature. A VRIO was chosen so that we can see if Adidas has the resources, capability, and
competency to have a sustainable competitive advantage. With Adidas we chose Five things to
have a VRIO analysis on. These three things were Brand and Logo Awareness, Financial
and partnerships. To really break down theses five portions we had to look at Adidas Financial
reports as well as some of their competitors like Nike and Under Armor. While these two
companies where well off themselves adidas has seen major growth in key markets like foot
ware to make them have a more sustainable advantage over them. We looked at how Adidas
positioned themselves in different market segments so that we could compare with them same
competitors listed in the previous analysis. To collect data on this we chose to look at Adidas
positioning statement from 2019 Annual Report which read as “adidas is focused on creating
inspirational and innovative marketing concepts that drive consumer advocacy and build brand
equity. While the brand historically spent almost half of its marketing investments on partnership
assets, with the remainder on brand marketing activities such as digital, advertising, point-of-
sale, and grassroots activations, we will decrease the ratio of marketing investments spent on
promotion partnerships” Ultimately after seeing this we see that Adidas unlike Nike and Under
Armor are looking to decrease the amount of money on promotion partnerships while the others
look to increases which see as easy to imamate so they only have a temporary competitive
advantage. When looking at how Adidas partnerships has changed the footwear industry with the
likes of their Yeezy line where they partnered with Kanye West, we see the impact they had with
Puma and Nike looking to copy the same format with Pharrell Williams and Virgil Abloh
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respectively. The fifth and final portion we looked at was their Global Supply chain which
Adidas has exceled at innovating and growing as they have had tremendous success across the
world at not only making sales and seeing growth but keeping up with the market trends across
the world as well. Finally looking at Adidas as a brand and logo, this is where we see Adidas
have a long-term advantage as no one can copy them exactly and Adidas is a recognized brand
worldwide.
Summary
After looking at Adidas internationally we have seen some incredibly positive things as
Adidas looks to carry on their success as stated in their Q1 statements “Despite adverse impacts
from the prolonged lockdowns in Europe, industry-wide supply chain challenges and the geo-
political situation adidas has upgraded its outlook for the company’s top-line development in
2021. Given the healthy brand momentum and stronger-than expected demand for the brand’s
products, the company now expects currency-neutral sales to increase at a high-teens rate in
2021” Adidas has only been growing and continually progressing in the fashion industry. Our
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concluding thoughts on Adidas internal analysis we see that Adidas has and will be continuing in
an upward trend although they lack in some areas of the VRIO analysis, but they can continue to
Recommendations
capitalizing long term structural trends like environmental consciousness and cultural trends that
have helped make it become one of the largest sportswear companies in the world. As of 2020,
Adidas had a turnover of €19.844 billion and has approximately 62,000 employees worldwide
(Moolchandani 2021). On its website, Adidas has laid out its strategic business plan for 2025
known as “Own the Game”. “Our strategic focus is on increasing brand credibility, elevating the
experience for our consumer, and pushing the boundaries in sustainability.” We noticed a big
emphasis on the consumer and understanding their needs. A combination of core competencies
and a deep understanding of consumer trends have helped Adidas grow and sustain a competitive
advantage in this highly competitive industry. Yet for there to be growth, there needs to be a
How does a huge company like Adidas implement a strategy that enables growth and
sustainability? Big companies will use a business model framework that outlines the firm’s
tactics and initiatives so that these strategies can be put into action. For Adidas, it lays out a plan
of how it will conduct business with its buyers, suppliers, and partners which also is a key factor
to Adidas’s competitive advantage. It is a global supply chain that provides the raw materials and
technology it uses to create its products consisting of 132 manufacturing partners worldwide.
These partners are in far east countries including Cambodia, Vietnam, and China
which entails lower labor costs. While this option may save the company money, the ethical
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implications with the environment and work conditions these laborers are under are not as
regulated as they would be in countries like Germany or the United States. In more recent news,
there also has been the question of supply chain disruptions and store closures due to the
pandemic.
Despite Adidas conducting its manufacturing overseas, it has been innovating its business
strategy to incorporate sustainability into the company’s philosophy pursuing what is known as a
blue ocean strategy. “As per the company’s press release, six out of ten Adidas articles are made
from sustainable materials.” Adidas intends for this to be nine out of the ten products they
produce by 2025 to complete their global neutrality goals. Funding has been directed towards
recycling research initiatives to ensure they meet these sustainability goals which will in turn
also drive down costs by being able to reuse materials while maintaining the value of the
product. This also falls in line with consumers who wish to purchase more eco-friendly products
but the perceived value of the product may falter in doing so. These factors lead to what is
known as strategic trade-offs, which is where managers must address the tension between value
creation and the pressure to keep costs in check so as not to erode the firm’s economic value
creation and profit margin. Adidas has made some efforts to achieve a blue ocean strategy with
its sustainable products but has yet to do so successfully to bring them to the top. This is
a critique for this strategy because the perceived value of the product by the consumer may fall
since the products are made of recycled material. In turn, Adidas could lower their prices
A strong source of competitive advantage Adidas has done well in its business strategy is its
collaboration and exclusive business deals in the sporting world. Adidas has done well at keeping
up with cultural trends like the rise of Hip-Hop music and has been one of its main core
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competencies that have helped it throughout the years. Its exclusive partnerships with influential
artists like Kanye West and Beyonce have enabled Adidas to enhance its branding and marketing
reaching out to consumers outside of the sporting world. One example of this is the collaboration
with Kanye and his Yeezy footwear line where it is now valued at around $3 billion. A
critique of this strategy is that Adidas relies heavily on trends which can fade throughout time.
Another critique is that celebrities could get involved in harmful allegations that might hurt the
company’s reputation.
Although Adidas already has strong strategies for the company, there
are three recommendations we believe would increase revenue. These three recommendations
are suggested as high level strategies for Adidas. A high-level strategy focuses on increasing
revenue, customer loyalty and satisfaction, cost savings, and product innovation (2011). For the
first recommendation, Adidas should produce a focused campaign ad showing their commitment
to sustainability. While during research some videos were found showing their end to plastic
waste, the videos were not eye-catching with “sustainability” colors. When one thinks of
sustainability, one thinks of green. This idea of green comes from the phase of “going green.”
“Going green” is when a company practices more environmentally friendly activities. While
Adidas is trying to do this, we do not believe they are attracting customers who want “greener”
products. Adidas needs to produce commercials that show sustainable logos that this market
knows well as well as adding this green color to catch the eye of people who support
sustainability. For example, the brand, Knorr, changed their company’s logo to fit their own
The first logo shows their previous brand logo, and the second logo is their new logo after
launching the sustainability campaign. The company completely took out the red tones from their
old logo and put a larger focus on the amount of green in their logo. While this may seem like a
slight change, marketing with eye catching colors can improve customer interest. Adidas, on the
other hand, has a current logo that features only black and white.
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This logo is not eye-catching and is dull. A downside to this recommendation, however, is that it
can be very costly to change the logo on all new products or on products that have already been
produced. Therefore, logo consistency across all products in every store Adidas is sold in can
take time. Also, spending more money on ads can be costly. This recommendation does have the
potential to gain new customers who are interested in buying sustainable shoes and bringing that
knowledge more clearly. The overall recommendation is to change the company’s logo and
launch commercials that show the company’s commitment to sustainability with more colors of
green in the shorter ads they produce. Viewers who get an ad on Instagram or Facebook are only
going to see the ad for a few seconds, so Adidas must make themselves the most memorable.
sells sustainable shoes to raise awareness of Adidas’ commitment to sustainability. For example,
Chaco, partnered with Vibram to make rubber soles for their sandals. This allows for both
brands’ logos to be on the shoe. If Adidas used a similar partnership, they would gain
knowledge from an existing sustainable shoe brand and allow the brand to sell their shows with
the Adidas brand name and vice versa. However, when dealing with a partnership between two
brands, there is less room for creativity for both brands because a shared decision on style will
have to be agreed upon. This can lead to negative relationships with the partnering brand and
making the partnership fall through. Partnering with an existing brand can be beneficial for
Adidas as if customers who know of current sustainable shoe brands see a collaboration between
the brand, this will raise more interest in Adidas, leading to an increase in revenue.
The final recommendation is the company needs to review their online presence.
Personally, we have never seen an Adidas ad on my phone or computer. Adidas needs to review
their online presence regularly to post ads to the correct online platforms. The company needs to
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invest in an adequate analytics company to view where their target audience and ads are most
viewed. As active college students, we believe that we are one of Adidas’ main target audiences
and we have not seen an ad on my social media page. A main pro of hiring an analytics company
is that there can be an increase in traffic to ads targeted at audiences that Adidas wants to reach.
However, paying another company to provide a service can be costly, especially with how large
Adidas’ company has become. Adidas should be posting more ads showing their products that
can be instantly viewed on the sides of websites or scrolled through on social media, not long
videos that can be skipped through. Longer videos are mostly what we found when researching
Out of all the recommendations we believe that changing the logo of Adidas would be the
best strategy for the company. First the company needs to define a framework for the strategy.
The framework will include the vision, values, focus areas, key performance indicators. The
vision for changing the company’s logo to more greener tones is to put an emphasis on
the sustainability campaign that Adidas commits to. The values are innovation, integrity, and
building a better community (2021). Focus areas include design and marketing. Designing the
logo is most important to include more eye-catching colors, then marketing the new logo is the
next step so potential customers can see the improved logo. Key performance indicators are if
there are more clicks on the new ads that include the improved logo. Then next the plan must be
created. Adidas must hire a design company or use in-house design teams to create the new logo.
Next, the new logo will go to the marketing team to create ads that introduce the new logo.
Finally, the IT (Information Technology) department will implement the ads onto different
websites and social media platforms. Next, Adidas must produce a strategy rhythm. This will
include how often the teams meet to discuss the recent changes, who needs to be there, and how
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long each meeting will last. We suggest that Adidas meets every month for a strategy checkpoint
to follow up on the progress of the new implementation of a logo. Finally, there needs to be a
focus on the performance of the new strategy. The company needs to meet and review if the new
strategy is working by looking at performance factors. This can be done by having the marketing
team let leadership know how many ads are being clicked on with the new logo. After all these
steps, the creation of a new logo for Adidas can be completed, and the recommended strategy
plan is in place.
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