Adidas Strengths

Brand Value: Adidas is one of the most valuable brands in sports. According to Forbes, it is ranked at #3
position (Nike at # 1 and ESPN at # 2) with a brand value of $6.8 Billion.

An Iconic Brand with a Prestigious Legacy: Adidas has nurtured a strong and prestigious legacy and
heritage over its long, illustrious history by influencing and shaping numerous aspects of society across
the world.

For example, the company influenced sports in the 70s and shaped the hip-hop culture in the 80s. Its
iconic three-striped tracksuit and three-leafed motif logo transformed the brand into a cult, particularly
among urban youth.

New Products Innovation: Since its founding, Adidas has prioritized the quality of its products over
everything else. In 2018, EUR 153 million was invested in R&D (0.7% of its annual net sales). High-
quality, innovative products are one of the driving forces behind its ever-growing customer base.

Diversified Portfolio: Even though the Adidas brand is restricted within the sportswear industry, the
company’s products are diversified. It offers multiple products that are designed to cater to a wide range
of sports, including footwear, apparel, and hardware accessories.

Young Customers prefer Adidas: The consistent focus on product quality and customer experience has
enabled Adidas to nurture a global and loyal customer base, particularly teens and young adults
between 16 and 24 years in urban areas.

Image Source: www.entsight.com | Survey shows that US youth prefers Adidas over other sports brands

Effective Supply Chain Management: Supply chain management is vital in the success of global
companies, particularly for Adidas, since it outsources most of its manufacturing. According to its annual
report, Adidas works with key strategic partners to ensure control of the entire supply chain.

Footwear – In 2018, 97% of total footwear volume was produced in Asia and Europe (1%) and the
Americas (2%). Vietnam is the largest sourcing country representing 42% of total volume.

Apparel – In 2018, 91% of total apparel volume from Asia. Europe (3%), Americas (4%), Africa (1%).
Cambodia is the largest sourcing country representing 24% of produced volume.
Hardware – In 2018, about 79% of hardware products (bags and balls) were produced in Asia, Europe
(19%) and Americas (1%). China represents the largest sourcing country (38%), followed by Turkey (18%)
and Pakistan (18%).

Strong Financial Position: Financial capability is critical in protecting market share and long-term
profitability and sustainability. Adidas is among the most financially stable companies globally and
utilizes its financial superiority to fend-off competition from other global companies such as Nike and
Puma.

In 2018, Adidas’s currency-neutral revenue grew by 8% to EUR 21.9 Billion, and net income increased by
20% to EUR 1.7 Billion.

Strong & Diversified Distribution Network: Adidas has several distribution networks, including over 2300
company-owned retail stores, over 14,000 mono- branded franchise stores, and over 150,000 co-
branded, retail partners and wholesale stores.

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In addition, eCommerce platforms increase sales by providing different channels to reach target markets
and sell directly to the consumers within these markets.

Effective Marketing Strategy: The strength of the marketing strategy used by Adidas stems from its
perfectly balanced mix of promotion, advertisements, and the use of digital technology.

Branding through international sponsorships: Sponsoring global organizations provides an opportunity

Sponsorship of high-profile athletes such as David Beckham, Lionel Messi, Sachin Tendulkar, Andy
Murray, etc. strengthens brand desire.

Celebrity Endorsements: Adidas has strived to maintain and enhance its recognition as a youthful and
urban brand through endorsements from celebrities. Adidas has been endorsed by a long list of movie
stars and music hit-makers such as Beyoncé and Kanye West.

Adidas Weaknesses
Supply Chain Shortage: Adidas outsources the production of most of its products to 3rd party or
independent manufacturing suppliers, mainly in China, Cambodia, and Vietnam. It has exposed Adidas
to the risk of overdependence on foreign suppliers.

According to Reuters, these suppliers are unable to keep up with the growing demand for mid-priced
apparel in the North American market, resulting in a reduction in sales growth by 1-2% in 2019.

Expensive Products: Adidas charges a premium or high prices for its products, which has alienated low-
income consumers. Only upper- and middle-income group customers can afford over a $100 shoe.

Limited Product Line: Adidas Group has only Adidas brand and Reebok brand under its portfolio, which
has restricted the company within sports footwear, sports apparel, and accessories. Therefore, a decline
in demand for sports-related products can be disastrous to Adidas.

Adidas Opportunities

E-commerce: In recent years, the number of consumers who shop online or use e-commerce sites has
increased significantly. Adidas incorporated Instagram’s checkout feature into its distribution network,
leading to a 40% increase in online sales in the 1st Quarter of 2019, which implies that it can replicate
this success in other social media platforms such as Facebook and Snapchat.

Growing Sportswear Industry: Sports and fitness have grown in popularity with no sign of slowing down
soon, which means there will be a consistent increase in demand for sportswear products and
assortments.

Investing in Smart Materials: Technological advancements have enabled the development of new
synthetic materials that are better and more beneficial than traditional materials.

Continual and increased investment in technological development and the manufacture of new
materials can provide Adidas with an edge over its competitors.

Culture of Yoga Pants: Increased health consciousness, change in preference, and tastes among
consumers have increased demand for sports-related products. “Culture of yoga pants” is redefining our
sports apparel industry.

Increasing Demand for Premium Sports Products: Improved economic situation in developing countries
has increased purchasing power and demand for premium products. Adidas can capitalize on this by
expanding into countries such as India, where discretionary income is expected to increase by 45% by
2025.

Diversification into sporting equipments: Even though Adidas has a diversified portfolio, there is still
room for expansion of its product line.
For example, Adidas can differentiate itself from Puma and Nike by expanding its product line to include
sporting goods such as tennis rackets, golf clubs, hockey sticks, and so on.

Global Expansion: The rapid growth of emerging markets in Africa, Asia, and South America provides
Adidas with lucrative opportunities for expansion. For example, Adidas has about 12,000 stores in China,
and in 2019, they plan to open additional 1000 new stores.

Product Development in Space: In 2019, Adidas has partnered with International Space Station National
Lab to explore new product development “Boost midsole creation” process without gravity.

Shoe Subscription – In the UK, it is estimated that over 300 million pairs of running shoes are thrown
away every year. Adidas engineers are trying to make the entire running shoe (midsole foam, outer sole,
knitted upper, an insole, laces, torsion bar) from the same material (usually, Adidas’s running shoes
include over 12 different materials).

Once the shoe is worn out, it can be completely melted and recycled to new shoes. This concept is
known as FutureCraft.Loop. Who knows – this can very well turn into a shoe subscription model in the
future?

Adidas Threats

Competition: The main threat facing Adidas is increased competition due to globalization and
technological advancements, which has enabled entry and penetration of small and medium companies.
This implies that Adidas has to compete against main rivals such as Nike, Under Armour, Puma while
fending-off new entrants and penetrators.

Image Source: Statista | Adidas’s Major Competitors

Rapid Expansion and Adoption of Ecommerce: Companies are adopting the rapidly expanding e-
commerce at an alarming rate, which can pose a threat to Adidas if its main competitors such as Nike
and Puma adopt e-commerce before them.

Supplier Dominancy: The fact that Adidas outsources most of the manufacturing of its products implies
that the suppliers have more bargaining power than the company. The skewed balance of power
exposes Adidas to the possibility of being held hostage by its biggest suppliers.

Loss of Trademark: In 2019, Adidas lost the three-strip logo trademark case in the General Court of the
European Union, which exposes the brand to the threat of imitation.
Technological Advancements: The threat posed by competitors increases as they become more
technologically advanced. This implies that a competitor such as Nike will pose a greater threat if they
become technologically advanced than Adidas.

US-China Trade Tensions: Adidas operates globally, which implies that the company is susceptible to the
reckless tit-for-tat imposition of tariffs between countries. A trade war is particularly threatening to
Adidas because the US is the company’s second-largest market, yet vast majority of its products are
made in China and other Asian countries. According to CEO Rorsted, currency war and tariffs pose a
major threat to Adidas.

Exchange Rates: Fluctuations of major currencies such as the Euro and the US Dollar can negatively
affect Adidas’s profits since it operates in the global marketplace.

Global Economic Slowdown: The effects of economic slowdowns, such as lower sales, negatively affect
Adidas, just like any other company.

Fake Products: According to CEO Rorsted, 10% of Adidas products in Asia could be fake. The number and
quality of fake products for premium shoe brands have increased significantly in the recent past, which
poses a threat to shoe-manufacturing companies.