Pestle analysis of Adidas. Adidas is a global German multinational sportswear equipment, hardware, and footwear company. Adolf Dassler was the founder of Gebruder Dassler, and he established the brand in July 1924. Adidas came into existence on August 18, 1949. The headquarter of Adidas is situated in Herzogenaurach, Germany.
The two sons of Adolf Dassler were working jointly under the father’s company. They went on their separate ways in 1947 and launched their own companies; Adidas and Puma. They became fierce competitors later in the sportswear industry.
Some of the major products of Adidas are glasses, hats, headbands and wristbands, running shoes, hoodies, basketball boots, yoga pants, football shoes, sports T-shirts, sports apparel, and jackets. According to an estimate, the company has employed approximately 59,533 people at its stores across the world.
Some of the major competitors of Adidas are Fila, Converse, Callaway Golf, New Balance, Under Armour, ASICS, Puma, Lululemon Athletica, VFC, Nike, and Victoria’s Secretes.
Today, we’ll discuss the pestle analysis of Adidas, how macro-environmental factors impact the world’s leading sportswear brand. If you want to learn about the internal factors of the company, check out the swot analysis of Adidas. Here’s the pestle analysis of Adidas;
Political factors Impacting Adidas
Import/Export Tariff by Trump Administration
If you’re wondering that Adidas is a German multinational company, it doesn’t have anything to do with the US and China conflict. As many of you know that the US is the biggest marketing of Adidas’s sportswear products.
The Trump administration was the nationalist government and it was following the protectionist policies. The Trump administration imposed tariff taxes on all the Chinese made products. Adidas gets its products manufactured from China. When the company exports its products to China, the American sees it as a Chinese made product. It means the brand has to pay high taxes.
Supply Chain Regulations
Adidas is a global multinational brand and the company has to distribute its products across the borders of different countries. The supply chain policies and the international trade laws of different countries are different. If the company doesn’t resolve the complexity of the supply chain system, it would badly impact the profitability of the company.
The government regulations of different governments are different. Factors like terrorism, nationalism, patriotism, low acceptance, rigid social setup, and extremism play an important role. Such factors tell the stability and business environment of the country. If it’s rigid and nationalistic, there’s the place for outsiders.
Economical factors affecting Adidas
The worldwide pandemic of covid-19 and the shutdown of businesses have pushed the global economy into recession. It’s the end of 2020 and the beginning of 2021, and the businesses aren’t fully working up to their capacities. Even though Adidas is a financially stable brand, but it has faced a huge decline in annual revenue and net income.
According to a report by macrotrends.net, the annual revenue of Adidas was 22.63 billion dollars in 2020. Out of which the net profit of the brand after minimizing all the expenses was 0.529 billion dollars. In 2020, the annual revenue and net profit of the brand decreased roundabout 12.83% and 75.31%.
Adidas is a German brand and it deals in Euros with neighboring European countries. When it comes to international trade and the company’s manufacturers in Asia, those deals are in US dollars. It happens often. Even the company has to deal with different currency exchange rates every day.
Economic recession and other circumstances like the pandemic make the exchange rate volatility. Even a small change in the US dollar and Euro rates can make a huge difference when you multiply it by millions.
Local Economic Issues
The sportswear brand, Adidas, is operating its business globally. The interest rate, inflation rate, unemployment rate, and many other factors in different countries are different. Such economic issues play a huge role in affecting the purchasing power of consumers.
When the buying power of people is low, they would reduce their spending. The decrease in sales means low profit to the company. This is exactly what happened for the past few months of the pandemic.
There are two types of products; necessity and leisure. Sports and exercise are not a necessity for everyone. Only the wealthy and well off people could afford the luxury of exercise and sportswear. It’s not the need for the lower middle class and working-class people. When it’s a leisure product, the attitude of people towards it is also leisure. That’s why the sale of sportswear products has dropped during the pandemic because the people didn’t consider its necessity.
CEO of Adidas, Rorsted, said in his interview that roundabout 10% of Adidas’s products in Asia are fake and counterfeit. There’re many third-party sellers in Asia, they manufacture low-quality products and use the logo of Adidas and sell them in the market at a high price. When customers see the logo of Adidas, they’re willing to pay a high price for it.
Social factors Impacting Adidas
Health Conscious Customer
People have started realizing the significance of health and fitness activities for the past few years. Nowadays, people are joining different kinds of health and fitness clubs like golfing, gym, running, and other exercises. When they do that, it requires sports shoes and apparel for the exercise.
Here comes the role of Adidas products and profitability to the company. Pandemic and lockdown have shut people into their houses. They’ll go out and start outdoor activities as soon as things go back to normal.
Yoga Pants Trend
The culture of yoga and finding inner peace has increased in recent years. The materialist lifestyle has made people realize that something is missing in their lives. That’s why many people are joining yoga clubs. It requires them to buy yoga pants. It’s a good thing that Adidas is already offering yoga pants.
No Outdoor Activities
The lockdown and shutdown have restricted people into their houses. Many people have lost their jobs as a result of pandemic. They have decreased their spending only on the necessities of life. It means cutting out their exercise and sportswear budget.
Community Support Programs
Adidas cares about society and people where the brand is doing its business. Even the company has launched many community support programs to promote the health and well being of people.
Investment in the Olympic Games
Adidas sponsors international sports events to attract the attention of fans. According to an estimate, the brand has spent approximately 100 million pounds in the Olympic Games of 2012. It turned out to be a very lucrative investment for the company. The brand was able to boost its sales resultantly.
Technological factors affecting Adidas
In the fast era of research and development, where you have to launch a new product quarterly or annually. If you don’t, the competitors would get a competitive edge over you. Gradually they’ll pull the entire market share right under your nose.
You have to adopt new technological trends to stay alive in the market. It’s a good thing that Adidas has always adapted to the latest technology and it’s one of the main reasons behind the growth of the company.
Smart Tech Raw Material
Many researchers are working on the development of the tech raw material. It would reduce waste and the sportswear companies would be able to use the same material over and over again by melting it. If Adidas somehow manages to develop the new synthetic material, it would be a huge plus point for the company.
Ecommerce Retail Platform
The pandemic and lockdown of businesses have made people realize the significance of e-commerce platforms and online retail shops. Adidas has already got an e-commerce platform. It’s not up to the level of brands like Nike, Amazon, or Walmart. The company should exploit this opportunity and use it to its advantage.
Adidas has a reputation for being a quality conscious brand. Before launching a sportswear product into the market, the company thoroughly examines its product through sports professionals and coaches. The purpose of a company’s product is to increase the performance of athletes.
Legal factors Impacting Adidas
With the 3 parallel stripes logo and the classical trademark of Adidas, the company lost the legal battle at the General Court of the European Union. The company failed to satisfy the court that the customers recognize the 3 stripes logo of the company. It had a great significance to the company. After losing the trademark, the brand has become more susceptible to counterfeit in the international market.
Adidas has the IP system and intellectual property rights. It helps the company to reduce the threat of counterfeit, imitating design, and infringement. Fake products are a very common practice in the sportswear industry. The patent rights and legal protection help the company to minimize the risk.
Sponsoring Events & Celebrities
Adidas has a history of hiring celebrities and athletes as a brand ambassador for the promotion of its products. When certain celebrities and fans join any organization, they bring millions of their fans along with it.
Environmental factors Impacting Adidas
Low Waste Program
Adidas claims that all the manufacturing units of the company don’t produce restricted and non-eco-friendly products. The company has launched many low waste programs like FutureCraft Loop, Parley for the Oceans, Adidas Formation Technology, Dyeing Processes, Biosteel Fiber, and Sports Infinity. The purpose of all of these programs is to use oil-based plastic, they reduce carbon waste and produce a thinner and efficient product.
After an in-depth study of the pestle analysis of Adidas, we have realized that the company has a great market position. The macro-environmental factors like counterfeit, patent, and intellectual property rights pose a great threat. The sportswear brand should work on those issues to lower the risk.
Ahsan Ali Shaw is an accomplished Business Writer, Analyst, and Public Speaker. Other than that, he’s a fun loving person.