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 - – increasing household debt because of falling income levels, increasing energy prices, technology disruption, banking and financial system is disrupted by Bitcoin and other crypto currencies, supply chains are disrupted by pandemic , challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion,
increasing inequality as vast percentage of new income is going to the top 1%, customer relationship management is fast transforming because of increasing concerns over data privacy, 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 -
Sustainable margins compare to other players in Strategy & Execution industry
– Adidas (A) firm has clearly differentiated products in the market place. This has enabled Adidas Dreyfus to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Adidas Dreyfus to invest into research and development (R&D) and innovation.
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.
Cross disciplinary teams
– Horizontal connected teams at the Adidas Dreyfus are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
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.
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.
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.
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.
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.
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.
Highly skilled collaborators
– Adidas Dreyfus has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Adidas (A) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Operational resilience
– The operational resilience strategy in the Adidas (A) Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Organizational Resilience of Adidas Dreyfus
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Adidas Dreyfus does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses Adidas (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Adidas (A) are -
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.
High bargaining power of channel partners
– Because of the regulatory requirements, Jacques Horovitz, Giana Boissonnas, Ursula Hilliard suggests that, Adidas Dreyfus is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
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.
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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Adidas (A) HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Adidas Dreyfus has relatively successful track record of launching new products.
Increasing silos among functional specialists
– The organizational structure of Adidas Dreyfus is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Adidas Dreyfus needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Adidas Dreyfus to focus more on services rather than just following the product oriented approach.
No frontier risks strategy
– After analyzing the HBR case study Adidas (A), it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Adidas (A), in the dynamic environment Adidas Dreyfus has struggled to respond to the nimble upstart competition. Adidas Dreyfus has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
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.
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 -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Adidas Dreyfus to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Adidas Dreyfus to hire the very best people irrespective of their geographical location.
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.
Creating value in data economy
– The success of analytics program of Adidas Dreyfus has opened avenues for new revenue streams for the organization in the industry. This can help Adidas Dreyfus to build a more holistic ecosystem as suggested in the Adidas (A) case study. Adidas Dreyfus can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Adidas Dreyfus is facing challenges because of the dominance of functional experts in the organization. Adidas (A) case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, 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.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Adidas Dreyfus to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
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.
Better consumer reach
– The expansion of the 5G network will help Adidas Dreyfus to increase its market reach. Adidas Dreyfus will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
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.
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.
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.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Adidas Dreyfus in the consumer business. Now Adidas Dreyfus can target international markets with far fewer capital restrictions requirements than the existing system.
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.
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 -
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Adidas Dreyfus will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Adidas Dreyfus can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of Adidas Dreyfus
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Adidas Dreyfus.
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.
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) .
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.
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.
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.
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.
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.
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.
Regulatory challenges
– Adidas Dreyfus needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Adidas Dreyfus in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
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.