Adidas (ADDDF) SWOT Analysis / TOWS Matrix / MBA Resources
Footwear
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Adidas (United States)
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 energy prices, increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs,
there is increasing trade war between United States & China, increasing commodity prices, 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 States
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 -
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.
Innovation driven organization
– Adidas is one of the most innovative firm in Footwear sector.
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.
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.
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.
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 lead change in Footwear
– Adidas is one of the leading players in the Footwear industry in United States. Over the years it has not only transformed the business landscape in the Footwear industry in United States 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.
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.
Digital Transformation in Footwear industry
- digital transformation varies from industry to industry. For Adidas digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Adidas has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
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.
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.
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.
Weaknesses of Adidas | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Adidas are -
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.
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.
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 bargaining power of channel partners in Footwear industry
– because of the regulatory requirements in United States, Adidas 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 Footwear industry.
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.
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.
No frontier risks strategy
– From the 10K / annual statement of Adidas, it seems that company is thinking out the frontier risks that can impact Footwear industry. 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.
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 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.
Skills based hiring in Footwear industry
– The stress on hiring functional specialists at Adidas 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.
Adidas Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Adidas are -
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.
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.
Manufacturing automation
– Adidas can use the latest technology developments to improve its manufacturing and designing process in Footwear sector. 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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Use of Bitcoin and other crypto currencies for transactions in Footwear industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Adidas in the Footwear industry. Now Adidas can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Adidas External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Adidas are -
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.
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.
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.
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.
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.
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 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.
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.
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.
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.
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.
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.