Question

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Porter’s Five Forces Analysis Of Adidas

For the constant maintenance of profit of the organization and to analyze the competition of the business we use Porter’s five forces. This business model will help us to identify the exact causes of threat by keen analyzation of various categories. And it also helps us to make strategic decisions for the productive and efficient running of the organization. Porters five forces are listed as follows,

Five Forces

·       Barriers to entry

As Adidas is one of the biggest leading company, the threats of new entrants is considered to be very less as it requires a very large investment set up to bring in new technologies. Marketing and advertisement of products is also a money consuming task when we try to compete with big companies like Adidas. Building up of own brand literally requires a lot of efforts and cannot be acquired overnight.

Barriers to entry- Low to moderate

·       Intensity of rivalry

The level of competition in the industry is so intense because of the main competitors like Nike, Puma, Under Armour and there are several other small competitors also sharing their position in the market share. All competitors are spending billions of dollars in the marketing, advertising, etc., Even though the top brands are limited in number, still, the competition they are giving to Adidas is very tough.

Intensity of rivalry – High

Supplier power

Adidas has multi-layered supply chains from all over the world and as it is working with more than 1000 factories in 63 countries, most of its production is outsourced. It would be a major loss to the suppliers if the suppliers try to take the risk by making supply contract with other companies because it will lead to losing up of the business tie-up with Adidas and put their business in risk.

Supplier power – High

·       Buyer Power

There are some of the local competitors are also influencing the buyers to purchase their products. But Adidas has a strong built up customer loyalty base with its efficient marketing technique. Its mainly focusses on its design, brand, and quality. So, for these reasons the switching of buyers to other concerns products is very minimal in number.

Buyer Power – Low to moderate

·       Threats of Substitutes

The threats of substitutes for Adidas is normally at a moderate rate only because the local competitors are offering a wide range of substitute products at very low prices. But Adidas is mainly concentrating on providing quality products to its customers and nowadays started focusing more on metropolitan areas where it has more customer base.

Threat of Substitutes - low to moderate

Answer 1

In addition the points mentioned by you in the answers. Add the points given below. This will make your answer complete and comprehensive. There are various determinant of the five forces, you should include those in your answer.

Addidas Porter Five Force:

Barriers to Entry:

1. Economies of scale: Addidas as a company, over a period of time have made their processes so efficient and has reached the economies of scale. This is difficult for a new entrant to achieve
2. Proprietary Products: Addidas has many patented designs which takes years of research. This would be very difficult for a new entrant
3. Brand Identity: Over the years due to efforts put in marketing, Addidas enjoys a unique brand identity which takes years to build
4. Distribution: The distribution network of the company is very strong and is present across the world
5. Capital requirement for setting up a manufacturing plant is huge

Intensity of Rivalry:

1. Industry Growth: Industry growth in past few years is stagnant and there are many other players eyeing for same pie.
2. Product differentiation between the products is minimal
3. Switching cost for the customer is quite high as people tend to stick to the same brand through the life

Supplier Power:

1. Supply volume: Since the volume of the product is high, supplier has higher power while delivering the material
2. Presence of substitute: It is difficult to find the substitute for the material
3. Switching cost of supplier: Switching cost of supplier is extremely high since all the processes are streamlined. It is extremely difficult to switch the suppliers

Buyer power:

1. Price sensitivity: Buyers are price sensitive
2. Product differentiation is minimalistic
3. Buyer information is important in today’s world for customized marketing

Threat of substitute:

1. Buyer propensity to substitute is relatively low
2. Price sensitivity is important