Adidas (ADSGn) SWOT Analysis / TOWS Matrix / MBA Resources
Footwear
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Adidas (Germany)
Based on various researches at Oak Spring University , Adidas is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, customer relationship management is fast transforming because of increasing concerns over data privacy, there is backlash against globalization, talent flight as more people leaving formal jobs, increasing government debt because of Covid-19 spendings, technology disruption, geopolitical disruptions,
central banks are concerned over increasing inflation, cloud computing is disrupting traditional business models, 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 Germany
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 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.
Innovation driven organization
– Adidas is one of the most innovative firm in Footwear sector.
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.
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.
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.
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.
Operational resilience
– The operational resilience strategy of Adidas comprises – understanding the underlying the factors in the Footwear 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.
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.
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.
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.
Ability to recruit top talent
– Adidas is one of the leading players in the Footwear industry in Germany. It is in a position to attract the best talent available in Germany. The firm has a robust talent identification program that helps in identifying the brightest.
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.
Weaknesses of Adidas | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Adidas are -
High bargaining power of channel partners in Footwear industry
– because of the regulatory requirements in Germany, 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.
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.
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.
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.
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.
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 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.
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.
Low market penetration in new markets
– Outside its home market of Germany, Adidas needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
Adidas Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Adidas are -
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Threats Adidas External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Adidas are -
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.