Adidas (ADSGn) SWOT Analysis / TOWS Matrix / MBA Resources
Footwear
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Adidas (Italy)
Based on various researches at Oak Spring University , Adidas is operating in a macro-environment that has been destablized by – technology disruption, there is increasing trade war between United States & China, cloud computing is disrupting traditional business models, wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels, banking and financial system is disrupted by Bitcoin and other crypto currencies,
supply chains are disrupted by pandemic , talent flight as more people leaving formal jobs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Adidas can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Adidas, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Adidas 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 can be done for the following purposes –
1. Strategic planning of Adidas
2. Improving business portfolio management of Adidas
3. Assessing feasibility of the new initiative in Italy
4. Making a Footwear sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Adidas
Strengths of Adidas | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Adidas are -
High brand equity
– Adidas has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Adidas to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Strong track record of project management in the Footwear industry
– Adidas is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Adidas is one of the most innovative firm in Footwear sector.
High switching costs
– The high switching costs that Adidas 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 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 is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Adidas emphasize – knowledge, initiative, and innovation.
Ability to lead change in Footwear
– Adidas is one of the leading players in the Footwear industry in Italy. Over the years it has not only transformed the business landscape in the Footwear industry in Italy but also across the existing markets. The ability to lead change has enabled Adidas in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Cross disciplinary teams
– Horizontal connected teams at the Adidas 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.
Training and development
– Adidas has one of the best training and development program in Consumer Cyclical industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Highly skilled collaborators
– Adidas has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Footwear industry. Secondly the value chain collaborators of Adidas have helped the firm to develop new products and bring them quickly to the marketplace.
Successful track record of launching new products
– Adidas has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Adidas has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Sustainable margins compare to other players in Footwear industry
– Adidas has clearly differentiated products in the market place. This has enabled Adidas to fetch slight price premium compare to the competitors in the Footwear industry. The sustainable margins have also helped Adidas to invest into research and development (R&D) and innovation.
Ability to recruit top talent
– Adidas is one of the leading players in the Footwear industry in Italy. It is in a position to attract the best talent available in Italy. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses of Adidas | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Adidas are -
Capital Spending Reduction
– Even during the low interest decade, Adidas 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 Footwear industry using digital technology.
High dependence on Adidas ‘s star products
– The top 2 products and services of Adidas still accounts for major business revenue. This dependence on star products in Footwear industry has resulted into insufficient focus on developing new products, even though Adidas has relatively successful track record of launching new products.
High operating costs
– Compare to the competitors, Adidas has high operating costs in the Footwear industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Adidas lucrative customers.
Aligning sales with marketing
– From the outside it seems that Adidas needs to have more collaboration between its sales team and marketing team. Sales professionals in the Footwear industry have deep experience in developing customer relationships. Marketing department at Adidas can leverage the sales team experience to cultivate customer relationships as Adidas is planning to shift buying processes online.
Interest costs
– Compare to the competition, Adidas 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 has a high cash cycle compare to other players in the Footwear industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Increasing silos among functional specialists
– The organizational structure of Adidas is dominated by functional specialists. It is not different from other players in the Footwear industry, but Adidas needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Adidas to focus more on services in the Footwear industry rather than just following the product oriented approach.
Employees’ less understanding of Adidas strategy
– From the outside it seems that the employees of Adidas don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Ability to respond to the competition
– As the decision making is very deliberative at Adidas, in the dynamic environment of Footwear industry it has struggled to respond to the nimble upstart competition. Adidas has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Adidas is slow explore the new channels of communication. These new channels of communication can help Adidas to provide better information regarding Footwear products and services. It can also build an online community to further reach out to potential customers.
Products dominated business model
– Even though Adidas has some of the most successful models in the Footwear industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Adidas should strive to include more intangible value offerings along with its core products and services.
Adidas Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Adidas are -
Buying journey improvements
– Adidas can improve the customer journey of consumers in the Footwear industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Adidas can use these opportunities to build new business models that can help the communities that Adidas operates in. Secondly it can use opportunities from government spending in Footwear sector.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Adidas 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 Adidas to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Footwear industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Adidas 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 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.
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 can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Learning at scale
– Online learning technologies has now opened space for Adidas 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.
Developing new processes and practices
– Adidas can develop new processes and procedures in Footwear 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.
Using analytics as competitive advantage
– Adidas has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Footwear sector. This continuous investment in analytics has enabled Adidas to build a competitive advantage using analytics. The analytics driven competitive advantage can help Adidas to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Adidas is facing challenges because of the dominance of functional experts in the organization. Adidas can utilize new technology in the field of Footwear industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Creating value in data economy
– The success of analytics program of Adidas has opened avenues for new revenue streams for the organization in Footwear industry. This can help Adidas to build a more holistic ecosystem for Adidas products in the Footwear industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Leveraging digital technologies
– Adidas 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Adidas can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Adidas 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 to hire the very best people irrespective of their geographical location.
Threats Adidas External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Adidas are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Footwear industry are lowering. It can presents Adidas with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Footwear sector.
Easy access to finance
– Easy access to finance in Footwear industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Adidas 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
– 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Adidas may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Footwear sector.
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 needs to understand the core reasons impacting the Footwear industry. This will help it in building a better workplace.
High dependence on third party suppliers
– Adidas 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.
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.
Regulatory challenges
– Adidas 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 Footwear industry regulations.
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 in the Footwear sector and impact the bottomline of the organization.
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 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.
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 business can come under increasing regulations regarding data privacy, data security, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Adidas 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 Adidas prominent markets.
Technology acceleration in Forth Industrial Revolution
– Adidas has witnessed rapid integration of technology during Covid-19 in the Footwear industry. As one of the leading players in the industry, Adidas needs to keep up with the evolution of technology in the Footwear 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 Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Adidas 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 Adidas 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 Adidas 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 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 needs to make to build a sustainable competitive advantage.