Discusses the successful turnaround of Adidas. Describes the financial and competitive situation of Adidas and the sporting goods industry in 1993 when Robert Louis-Dreyfus, CEO, takes over the management of the company. Adidas is in economic and organizational disarray and Louis-Dreyfus' challenge is to turn the company around from its current deficit of close to $100 million. Can he do it? What changes should he make?
Authors :: Jacques Horovitz, Giana Boissonnas, Ursula Hilliard
Swot Analysis of "Adidas (A)" written by Jacques Horovitz, Giana Boissonnas, Ursula Hilliard includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Adidas Dreyfus facing as an external strategic factors. Some of the topics covered in Adidas (A) case study are - Strategic Management Strategies, Leadership, Strategy and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Adidas (A) casestudy better are - – cloud computing is disrupting traditional business models, wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy, supply chains are disrupted by pandemic , increasing commodity prices, increasing inequality as vast percentage of new income is going to the top 1%, increasing household debt because of falling income levels,
there is backlash against globalization, technology disruption, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Adidas (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Adidas Dreyfus, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Adidas Dreyfus operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Adidas (A) can be done for the following purposes –
1. Strategic planning using facts provided in Adidas (A) case study
2. Improving business portfolio management of Adidas Dreyfus
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Adidas Dreyfus
Strengths Adidas (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Adidas Dreyfus in Adidas (A) Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of Adidas Dreyfus in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– Adidas Dreyfus has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Adidas Dreyfus to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Strong track record of project management
– Adidas Dreyfus is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Training and development
– Adidas Dreyfus has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Adidas (A) Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Low bargaining power of suppliers
– Suppliers of Adidas Dreyfus in the sector have low bargaining power. Adidas (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Adidas Dreyfus to manage not only supply disruptions but also source products at highly competitive prices.
Ability to lead change in Strategy & Execution field
– Adidas Dreyfus is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Adidas Dreyfus in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Diverse revenue streams
– Adidas Dreyfus is present in almost all the verticals within the industry. This has provided firm in Adidas (A) case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Effective Research and Development (R&D)
– Adidas Dreyfus has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Adidas (A) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High switching costs
– The high switching costs that Adidas Dreyfus has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Learning organization
- Adidas Dreyfus is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Adidas Dreyfus is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Adidas (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Innovation driven organization
– Adidas Dreyfus is one of the most innovative firm in sector. Manager in Adidas (A) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Analytics focus
– Adidas Dreyfus is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Jacques Horovitz, Giana Boissonnas, Ursula Hilliard can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Weaknesses Adidas (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Adidas (A) are -
High cash cycle compare to competitors
Adidas Dreyfus has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Interest costs
– Compare to the competition, Adidas Dreyfus has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Capital Spending Reduction
– Even during the low interest decade, Adidas Dreyfus has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Adidas (A), is just above the industry average. Adidas Dreyfus needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Workers concerns about automation
– As automation is fast increasing in the segment, Adidas Dreyfus needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Slow decision making process
– As mentioned earlier in the report, Adidas Dreyfus has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Adidas Dreyfus even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Need for greater diversity
– Adidas Dreyfus has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Aligning sales with marketing
– It come across in the case study Adidas (A) that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Adidas (A) can leverage the sales team experience to cultivate customer relationships as Adidas Dreyfus is planning to shift buying processes online.
Slow to strategic competitive environment developments
– As Adidas (A) HBR case study mentions - Adidas Dreyfus takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Lack of clear differentiation of Adidas Dreyfus products
– To increase the profitability and margins on the products, Adidas Dreyfus needs to provide more differentiated products than what it is currently offering in the marketplace.
Skills based hiring
– The stress on hiring functional specialists at Adidas Dreyfus has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Opportunities Adidas (A) | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Adidas (A) are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Adidas Dreyfus in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Adidas Dreyfus can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Manufacturing automation
– Adidas Dreyfus can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Building a culture of innovation
– managers at Adidas Dreyfus can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
Leveraging digital technologies
– Adidas Dreyfus can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Developing new processes and practices
– Adidas Dreyfus can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Learning at scale
– Online learning technologies has now opened space for Adidas Dreyfus to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Adidas Dreyfus can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Adidas Dreyfus can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Loyalty marketing
– Adidas Dreyfus has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Adidas Dreyfus can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Using analytics as competitive advantage
– Adidas Dreyfus has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Adidas (A) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Adidas Dreyfus to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Adidas Dreyfus can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Adidas (A), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Low interest rates
– Even though inflation is raising its head in most developed economies, Adidas Dreyfus can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Threats Adidas (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Adidas (A) are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Adidas Dreyfus can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Adidas (A) .
High dependence on third party suppliers
– Adidas Dreyfus high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Adidas (A), Adidas Dreyfus may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Adidas Dreyfus business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– Adidas Dreyfus can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Consumer confidence and its impact on Adidas Dreyfus demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Adidas Dreyfus.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Adidas Dreyfus needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Adidas Dreyfus in the Strategy & Execution sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that Adidas Dreyfus is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Adidas Dreyfus with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Technology acceleration in Forth Industrial Revolution
– Adidas Dreyfus has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Adidas Dreyfus needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Weighted SWOT Analysis of Adidas (A) Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Adidas (A) needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Adidas (A) is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Adidas (A) is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Adidas (A) is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Adidas Dreyfus needs to make to build a sustainable competitive advantage.
