Swot analysis of Adidas. Adidas is German multinational sportswear, clothing, and shoes manufacturing company. Adolf Dassler laid the foundation of the company in July 1924 under the name of Gebruder Dassler. It adopted the name Adidas on August 18, 1949. The headquarter of the company is in Herzogenaurach, Germany.
Dassler company was the partnership between two Dassler brothers. They both split up in 1947 and opened up their separate companies, Adidas and Puma. Later on, they both became rival brands in the footwear, apparel, and sportswear industry.
Jackets, sports apparels, sports T-shirts, football boots, yoga pants, basketball shoes, hoodies, running shoes, wristbands and headbands, hats, and glasses are some of the main products of Adidas. There are approximately more than 59,533 employees are working for the company.
According to an estimate conducted by macrotrends.net, the annual revenue of Adidas by the end of 2020 was 22.63 billion US dollars. Out of which the net income of the company after excluding all the expenses was 0.529 billion US dollars. The annual revenue and net income of Adidas have declined approximately 12.83% and 75.31% by the end of 2020.
Victoria’s secrets, Nike, VFC, Lululemon Athletica, Puma, ASICS, Under Armour, New Balance, Callaway Golf, Converse, and Fila are some of the main competitors of Adidas.
Today, we’ll discuss the swot analysis of Adidas. How internal factors are impacting the sportswear brand Adidas. If you want to learn about the macro-environmental factors of the company, check out the pestle analysis of Adidas. Here’s the swot analysis of Adidas;
Strengths of Adidas
Ever since the foundation of Adidas, the brand has straightforward priorities and that’s quality above all. According to an estimate, the company spent approximately 0.7 of its net sales worth 153 million Euros on research and development in 2018. Innovative and quality products are the main driving force behind the growth of the company.
Iconic Brand Legacy
Adidas has a long history of shaping and influencing different trends across the world throughout different periods. For instance, the brand had a deep influence on the shaping of the hip-hop culture in the 70s and 80s. The 3 leafed motif and 3 stripped tracksuits transformed the brand into a sports cult, and it became very popular among youth.
High Brand Value
According to the ranking of Forbes, Adidas has the 3rd position in the sportswear market. According to the ranking of ESPN, Adidas is in the 2nd position and Nike is 1st. Adidas is the one world’s leading brand with a value of 6.8 billion US dollars.
Even though Adidas offers products only for the sportswear and footwear market. But within the category of sportswear, the company offers a diverse range of products for sports. It includes sports apparel, hardware accessories, footwear, and sportswear.
The quality products and satisfying the needs of customers have helped the company to establish a strong database of customers worldwide. Especially the products of Adidas are very popular among the young demographic of the age ranging from 16 to 24 years old.
Efficient Supply Chain System
As we know that the supply chain management plays a significant role in the success of any company. Adidas outsources most of its manufacturing work through third-party sellers. The company has made strategic partnerships with different suppliers to maintain the smooth flow of the supply chain system.
According to an estimate, Adidas outsourced approximately 91% of its apparel from Asia by the end of 2018, out of the 24% of its products is from Cambodia. The other countries were Europe, America, and Africa with a volume of 3%, 4%, and 1% respectively.
According to an estimate, Adidas outsourced 97% of its footwear products from the Asian countries, out of the 42% of its products were from Vietnam. The other outsourcing countries were Europe and America with the outsourcing volume of 1% and 2% respectively.
According to an estimate, Adidas outsources 79% of its hardware products like bags and balls from Asian countries like China, Turkey, and Pakistan with a volume of 38%, 18%, and 18%.
Advanced Marketing Strategies
When we talk about the marketing and promotional strategies of Adidas, the company uses the right mix of digital technology, advertisements, and promotional campaigns. The company also uses the following marketing methods;
Adidas receives endorsements from celebrities. That’s how the company maintains its popularity among the young audience. Some of the top movie stars and hit music makers like Kanye West and Beyonce have endorsed Adidas.
Adidas has sponsored some of the international events organizations like NBA, Fifa World Cup in Russia, and the Olympic Games. Such events help the company to market its products directly to the customers.
Adidas has also sponsored some of the top profile athletes over the years. Like David Beckham, Andy Murray, Sachin Tendulkar, Lionel Messi, etc.
Strong Distribution Network
The distribution network of Adidas is very strong. According to an estimate, the company has approximately more than 150,000 co-branded wholesale stores and retail partners. The brand has also got 14000 mono branded franchise stores and 2300 retail owned stores.
Along with these stores, the company has also got an e-commerce platform to directly sell its products by using different delivery channels.
Strong Financial Position
Adidas has had a strong financial position before the worldwide pandemic of covid-19. Even the company falls under the category of the world’s most financially stable companies.
Weaknesses of Adidas
Restricted Product Line
Adidas and Reebok are the main sub-brands working under the parent brand Adidas Group. Both of these sub-brands offer products in the category of footwear, sports apparel, equipment, and sportswear items. When the pandemic of covid-19 hit the world, it reduced the sales and profitability of the company. It’s because the brand was only offering sportswear products.
Expensive & Costly Products
According to a study, Adidas charges premium prices for its products. The company leaves out the majority of the middle class demographic. For instance, the brand charges 100 US dollars for a shoe, it’s the price that only the upper-middle-class and the elite could afford its products.
Depending on Suppliers
As we know that Adidas manufactures most of its products from Asian countries like Vietnam, Cambodia, China, and Pakistan. It means that the company relies heavily on outsourcing.
According to a study conducted by Reuters, the demand for the company’s products was growing in the North American market in 2019. The 3rd party sellers were unable to meet the growing demand.
Opportunities available to Adidas
The trend of Yoga Pants
A trend of yoga pants is growing among the health and peace conscious customer market. Yoga pants fall under the category of sports apparel. It’s a great opportunity for Adidas to increase its focus on this niche.
Smart Product Material
Industrial research and development have enabled us to produce a new synthetic raw material. It’s more efficient than conventional material. If the company manages to develop such material, it would provide the company with a huge competitive edge in the market.
Growing Sportswear Market
People are becoming conscious about their health and fitness across the world. It means that the growth potential for the sportswear industry is great.
The trend of online shopping and e-commerce platform has been increasing. The company has already got an online e-commerce platform. Now, the brand should put more focus on the growth of its online and bring it to the world’s leading platforms like Amazon.
Shoe Subscription Model
Adidas uses approximately 12 different types of material for the manufacturing of its products. According to an estimate, approximately more than 300 million shoes become useless every year. Now the engineers of Adidas are working on the development of such material that would be reusable.
FutureCraft.Loop presented a shoe subscription model, which means you melt the worn-out shoe, recycle it, and make a new one with it. It would help you to reduce waste.
Products for Space
Adidas became a partner with International Space Station National Lab in 2019. The purpose of this alliance is to develop shoes without gravity through the process of Boost Midsole Creation.
According to an estimate, Adidas opened approximately more than 12000 new retail stores in China. The company plans to open 1000 more in the coming future. The market in Asia, Africa, and South America is growing, the brand should focus on those markets to establish its market there.
Diverse Sports Equipment
Even though the product portfolio of the company is well-diversified, but there’s always room for growth and expansion. For instance, Adidas should also launch other sports items in its product portfolio like hockey sticks, tennis rackets, golf equipment, and other products.
Threats Adidas has to face
The pandemic of covid-19 has caused the shutdown of all the sporting events and other sports activities. Since Adidas offers sportswear products and equipment, it has impacted the company very badly. That’s why the annual revenue and net profit of the company have dropped to a great extent.
Nike, Puma, and Under Armour are the main competitors of the company. Along with these competitors, many small and medium-sized businesses have jumped into the sportswear industry. They have made the sportswear market more competitive.
The conflict between the US & China
As we know that Adidas is a German multinational company. The company doesn’t have any direct conflict between the US and China. But the US is the 2nd biggest customer market of Adidas. The company manufactures most of its products from China. The Trump administration had increased the import and export taxes during its presidency.
As I have mentioned earlier that many sportswear companies are working to develop new synthetic material. If they get a tech advantage over the company, they would be able to increase the market share.
Adidas lost the legal battle in the General Court of EU of its 3 strips logo trademark in 2019. It had made the brand vulnerable to imitation.
Adidas outsourced most of its products from the 3rd party suppliers. Overly depending on the suppliers is shifting the balance of power. Now, they have got great bargaining power over the company. The brand completely relies on them to meet the growing global demand.
Expansion of E-commerce
Out of all the threats, the expansion of e-commerce platforms poses a great threat to Adidas. It is because e-commerce platforms provide an easy entry and anyone with tech expertise can enter the market. The main competitors like Nike and Puma are in the online retail business longer than Adidas.
Rorsted, CEO of Adidas, said that roundabout 10% of the company’s products in Asia are fake. Many sellers use the logo and brand name of Adidas and sell it at premium prices. The quality of these products is very low. The fake product jeopardizes the credibility of the main brand.
After a careful study of the swot analysis of Adidas, we have concluded that the company is indeed the world’s leading sportswear brand. The pandemic of covid-19 has badly impacted the growth and profitability of the company. But the company has strong financial stability, it can manage the blow. The threats of fake products, trademarks, and dominating suppliers are real. The company should find ways to minimize the risk.
Ahsan Ali Shaw is an accomplished Business Writer, Analyst, and Public Speaker. Other than that, he’s a fun loving person.