Question

SWOT analysis of Adidas in the Chinese market

Answer 1

Adidas is one of the strongest sports brand in the world. Known most prominently for its range of Shoes, the brand is also a manufacturer for clothing and accessories. Here is the SWOT analysis of Adidas.

Strengths of Adidas:

1. Legacy & heritage: With decades of heritage & legacy, Adidas has travelled a long way to establish itself as a youthful brand. The brand was started in 1949 and has travelled a long way since then.
2. Diversified portfolio: Company has multiple product portfolio’swith varied range of footwear & accessories under brand nameAdidas (premium segment) & Reebok (mid range).
3. Strong financial position: With its 2400 store globally accounting $4.3billions, the company is in strong financial position.
4. Distribution network: By selling it from online stores to company owned stores to supermarket stores, Adidas has an effective distribution system for their products available through different channels.
5. Branding by creating touch points with the community:Celebrity endorsements & sponsoring major sports organizations such as FIFA, UEFA, NBA & Olympics has increased the awareness of Adidas in the market & hence it has increased the highly targeted customer base as well.
6. Collaborations & memberships: Strong relationship within the sustainability area with organizations such as InternationalLabour organization, International Finance Corporation has given the company an edge over competitors so that they can have a sustainable business.

Weakness of Adidas:

1. Premium price range: High price range due to innovative technology & Production methods have made the brand affordable to limited customers only, especially in developing countries.
2. Outsourced manufacturing: Adidas has 93% of production outsourced to 3rd party manufacturers (largely to Asia) to avail of low labour cost & easy availability of resources. They are running a risk of over dependency on outsourcing especially in Asian markets. Also, the overall quality of products perceivedby the consumers of developed economies is a major concern as far as brand is concerned.
3. Limited product line: Adidas along with the recently acquired Reebok brands, has got only 2 brands under their group although they have got deep assortments within these brands. Thus, there is more scope for product line expansion.

Opportunities of Adidas:

1. Changing Lifestyle: With the saturation of developed economies, changing taste & preferences, education & changing lifestyle of developing economies, there is a steep rise in the demand of premium goods & services.
2. Market development: Entering into new markets will be the only way to succeed in the future because developed economies are already having high competition.
3. Expansion in product line: Expanding its product line will open a new set of opportunities while at the same time it can differentiate itself from the competitors by following this strategy.

Threats of Adidas:

1. Competition: Although Adidas is a global brand but it is facing fierce competition from other brands like Nike which is No.1 brand and Adidas being in 2nd Position in this premium segment. Besides this, there is regular competition from local players, substitutes and market penetrators.
2. Supplier Dominancy: Due to majority of its production being outsourced; Suppliers have more bargaining power then the company.
3. Government Regulations: With its 35% products manufactured in China & 93% of production happening in Asia, Import regulations, duty & tariffs plays a critical role in the pricing and success of the company.