Strategic management analysis of adidas. Conditions in the sports equipment industry and available resources


Term Paper, 2011
28 Pages, Grade: 2,0
Anonymous

Excerpt

TABLE OF CONTENTS

1. INTRODUCTION TO ADIDAS

2. MARKET ENVIRONMENT ANALYSIS
2.1 Overview of the sports equipment industry
2.2 Analysis of adidas’ macro-environment
2.3 Analysis of the sports equipment industry
2.4 Conclusion

3. INTERNAL ANALYSIS
3.1 Analysis of adidas’ value chain
3.2 Identification of adidas’ strategic capabilities
3.3 Identification of adidas’ distinctive capabilities
3.4 Conclusion

4. STRATEGIC FIT

REFERENCES

APPENDIX I – PESTEL ANALYSIS

APPENDIX II – VALUE CHAIN ANALYSIS

1. INTRODUCTION TO ADIDAS

Adidas’ history dates back to 1920, when the company’s founder - Adi Dassler - made his first shoes with the intention to provide athletes with the best possible equipment (adidas Group, 2010). Today, adidas (brand name will be maintained throughout the report) has a broad product portfolio spanning from equipment and footwear to premium fashion and aims to be the leading sports brand in the world (adidas Group, 2011b).

Alongside Reebok and Taylor Made, adidas belongs to the adidas Group, representing 72% of total group sales in 2010 (adidas Group, 2011b). The adidas brand offers its products through two divisions, namely Sport Performance and Sport Style. The Sport Performance division represents 75% of sales and develops sports products focused on running, football, basketball, tennis and training. The remaining 25% of sales are accounted for by the Sport Style division, which targets lifestyle consumers with authentic and fashionable sportswear (adidas Group, 2011b). With adidas’ biggest market being Europe, followed by North America and Asia, it is a truly global brand with a passion for sports and a sporting lifestyle (Ghauri and Cateora, 2010, p. 561).

2. MARKET ENVIRONMENT ANALYSIS

This part of the report aims to identify trends and developments in the market environment in which adidas operates in order to effectively analyse potential impacts on adidas’ business strategy. Relevant forces outside adidas’ company environment will be identified with the help of suitable theories, in order to determine those external factors critical for the company’s success. Since adidas is a globally operating and expanding company, all existing and possible future markets worldwide are considered as its external environment.

2.1 Overview of the sports equipment industry

In the context of this report, the global sports equipment industry combines all companies who supply any object used for sport or exercise. In recent years, the industry has seen a fast-paced development due to constantly changing customer expectations, unlike any other industry sector (Löffler, 2011).

In 2009, the global sports equipment market grew by 1.9% to reach a value of $74.8 billion and is forecasted to increase to $82.7 billion by 2014 (Datamonitor, 2010a). The largest market segment is the ball sports sector, accounting for 17.8% of overall value as illustrated in figure 1.

Abbildung in dieser Leseprobe nicht enthalten

Figure 1: Global sports equipment market segmentation by sector, 2009

Source: Datamonitor, 2010a

Even though the United States (US) are the largest market in the industry with a share of 33% of market value, it is evident that the three major regions - Europe, Asia-Pacific and US - have a similar market share overall (figure 2).

Abbildung in dieser Leseprobe nicht enthalten

Figure 2: Global sports equipment market segmentation by region, 2009

Source: Datamonitor, 2010d

When comparing market growth rates from 2005-2009, the Asia-Pacific region stands out as the fastest growing market. Overall, growth rates are predicted to slow down throughout the industry (Datamonitor, 2010c). The importance of individual market sectors differs greatly in every region. While golf equipment sales proved the most lucrative for Europe in 2009, ball sport equipment is the largest segment in Asia-Pacific and fitness equipment accounts for most sales in the US (Datamonitor, 2010b; Datamonitor, 2010c; Datamonitor, 2010d).

The global sports equipment market is characterised by a large number of competitors. In addition to many niche players, a few large companies such as Nike, adidas, Reebok and Puma, dominate the market (Schreiber, 2010).

2.2 Analysis of adidas’ macro-environment

The PESTEL framework provides an analysis tool which helps to categorise external key drivers, which potentially impact on adidas’ business operations. While the following paragraphs will focus on trends and developments which are most relevant to adidas, an overview of all identified external forces is summarised in appendix I.

In recent years, the importance of emerging countries like India, Brazil and Russia has increased with China being forecasted to overtake the US as the world’s largest economy (Jorgenson and Vu, 2011). These countries do not only offer immense expansion and cost-saving opportunities, they also bare risks. Since companies outsourced a high amount of manufacturing plants especially to Asia (Jorgenson and Vu, 2011), they could have to face increasing labour costs in the future resulting from a growing economy and improved living standards. Emerging countries also provide promising new target markets. As people’s lifestyles will gradually change with a growing economy, companies need to closely monitor these changes in order to be able to respond to trends quickly.

Costs for raw materials have gone up significantly and the probability that they will continue to increase is very high. The price of cotton, for example, has more than doubled over the past twelve months (Hainer, 2011b). But other materials, such as rubber, polyester and those materials which closely relate to the already volatile oil price are also subject to the risk of price changes (adidas Group, 2011a). This is a risk all sports equipment companies have to consider when calculating their sourcing costs, as it is very likely to reflect on overall performance since raw materials account for a huge percentage of overall production costs.

The increasing popularity of major sports events (FESI, 2011) offers incredible sales and brand building opportunities for all companies in the industry. It allows them to reach out to customers all over the world at the same time. Furthermore, such events provide a good platform to introduce new equipment and make people familiar with new technologies. A major event coming up next year is the London Olympics (FESI, 2011), which offers great opportunities to present brand names, for example through sponsorship deals with individual athletes or teams. Brazil will become very important in this matter, as the country is hosting the FIFA World Cup in 2014 as well as the Olympic Games in 2016, which will both receive major public interest (Princhard Bouchard, 2009). As mentioned above, Brazil, as an emerging country, also offers great market expansion opportunities.

Over the past few years a wider practice of sports has been evident worldwide with the running and fitness segments particularly increasing in popularity (Mintel, 2005). But sports generally finds its way into people’s lives with sporting goods being used for leisure activities and boundaries between sports and casual wear becoming indistinct (Ghauri and Cateora, 2010, p.561). These trends provide interesting growth prospects for sports equipment companies and allow them to target a whole new customer segment. Additionally, the general decline in physical health (WFSGI, 2011) combined with governments’ urges for prevention activities, provides marketing opportunities addressed to health consciousness consumers.

Consumers are increasingly concerned with environmental issues and expect companies to act in an environmental friendly way. The use of natural, sustainable, Free Trade and Fair Trade fibres seems to have gained a foothold with general consumer awareness. Consumer’s interest in natural and recycled fabrics has already made a difference in what materials manufacturers offer and will continue to have an impact on all companies’ business operations (Princhard Bouchard, 2009).

2.3 Analysis of the sports equipment industry

According to Wheelen and Hunger (2011), an industry is a group of companies producing a similar product or service and therefore forms a company’s competitive environment. As understanding the competitive environment is crucial for strategic choices, Michael Porter’s five forces framework will be applied to identify the overall structure of competition in the sports equipment industry (figure 3).

Abbildung in dieser Leseprobe nicht enthalten

Figure 3: Forces driving competition in the sports equipment industry

Rivalry among existing companies

Rivalry among existing firms in the sporting equipment industry is very high with slow market revenue growth in recent years further strengthening the rivalry as firms compete for market share (Datamonitor, 2010a). Companies in the industry can only compete by differentiating their products and building strong brand personalities. Sport equipment companies compete with a large number of international as well as regional companies and also have to face competition from Asian countries importing cheaper products. Such an intense competition could put pressure on product prices and therefore affect margins (Datamonitor, 2011).

[...]

Excerpt out of 28 pages

Details

Title
Strategic management analysis of adidas. Conditions in the sports equipment industry and available resources
College
Ashcroft International Business School Cambridge  (Anglia Ruskin University)
Course
Strategic Management
Grade
2,0
Year
2011
Pages
28
Catalog Number
V285766
ISBN (eBook)
9783656860334
ISBN (Book)
9783656860341
File size
656 KB
Language
English
Tags
Adidas, SWOT, SWOT analysis, Management
Quote paper
Anonymous, 2011, Strategic management analysis of adidas. Conditions in the sports equipment industry and available resources, Munich, GRIN Verlag, https://www.grin.com/document/285766

Comments

  • No comments yet.
Read the ebook
Title: Strategic management analysis of adidas. Conditions in the sports equipment industry and available resources


Upload papers

Your term paper / thesis:

- Publication as eBook and book
- High royalties for the sales
- Completely free - with ISBN
- It only takes five minutes
- Every paper finds readers

Publish now - it's free