Adidas (0OLD) SWOT Analysis / TOWS Matrix / MBA Resources
Footwear
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Adidas (United Kingdom)
Based on various researches at Oak Spring University , Adidas is operating in a macro-environment that has been destablized by – there is backlash against globalization, wage bills are increasing, increasing household debt because of falling income levels, banking and financial system is disrupted by Bitcoin and other crypto currencies, talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%,
supply chains are disrupted by pandemic , challanges to central banks by blockchain based private currencies, 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 United Kingdom
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 -
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.
Innovation driven organization
– Adidas is one of the most innovative firm in Footwear sector.
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.
Low bargaining power of suppliers
– Suppliers of Adidas in the Consumer Cyclical sector have low bargaining power. Adidas has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Adidas to manage not only supply disruptions but also source products at highly competitive prices.
Effective Research and Development (R&D)
– Adidas has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Adidas staying ahead in the Footwear industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to recruit top talent
– Adidas is one of the leading players in the Footwear industry in United Kingdom. It is in a position to attract the best talent available in United Kingdom. The firm has a robust talent identification program that helps in identifying the brightest.
Diverse revenue streams
– Adidas is present in almost all the verticals within the Footwear industry. This has provided Adidas 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.
Superior customer experience
– The customer experience strategy of Adidas in Footwear industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
Ability to lead change in Footwear
– Adidas is one of the leading players in the Footwear industry in United Kingdom. Over the years it has not only transformed the business landscape in the Footwear industry in United Kingdom 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.
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.
Analytics focus
– Adidas 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 Footwear industry. The technology infrastructure of United Kingdom is also helping 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 of Adidas | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Adidas are -
Compensation and incentives
– The revenue per employee of Adidas is just above the Footwear industry average. It 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.
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.
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.
Lack of clear differentiation of Adidas products
– To increase the profitability and margins on the products, Adidas needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
Low market penetration in new markets
– Outside its home market of United Kingdom, Adidas needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
Workers concerns about automation
– As automation is fast increasing in the Footwear industry, Adidas 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.
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.
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 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.
Adidas Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Adidas are -
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.
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 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.
Building a culture of innovation
– managers at Adidas 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 Footwear industry.
Low interest rates
– Even though inflation is raising its head in most developed economies, Adidas 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Footwear industry, but it has also influenced the consumer preferences. Adidas can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
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.
Better consumer reach
– The expansion of the 5G network will help Adidas to increase its market reach. Adidas 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.
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.
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.
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.
Loyalty marketing
– Adidas 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.
Threats Adidas External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Adidas are -
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.
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.
Consumer confidence and its impact on Adidas 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 Footwear industry and other sectors.
Stagnating economy with rate increase
– Adidas 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 Footwear industry.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
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.
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.
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.
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.
Environmental challenges
– Adidas needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Adidas can take advantage of this fund but it will also bring new competitors in the Footwear industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Adidas in Footwear industry. The Footwear 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.
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.
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.
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.