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 – talent flight as more people leaving formal jobs, increasing household debt because of falling income levels, digital marketing is dominated by two big players Facebook and Google, increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing, increasing commodity prices, banking and financial system is disrupted by Bitcoin and other crypto currencies,
competitive advantages are harder to sustain because of technology dispersion, increasing government debt because of Covid-19 spendings, 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 -
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.
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.
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.
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.
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.
Organizational Resilience of Adidas
– The covid-19 pandemic has put organizational resilience at the centre of everthing Adidas does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
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.
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 States 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.
Ability to recruit top talent
– Adidas is one of the leading players in the Footwear industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
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.
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.
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.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Adidas supply chain. Even after few cautionary changes, Adidas is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Adidas vulnerable to further global disruptions in South East Asia.
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.
Need for greater diversity
– Adidas 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
– 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.
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.
Low market penetration in new markets
– Outside its home market of United States, Adidas needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
Slow to strategic competitive environment developments
– As Adidas is one of the leading players in the Footwear industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Footwear industry in last five years.
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 -
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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 -
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.
Shortening product life cycle
– it is one of the major threat that Adidas is facing in Footwear sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.