Adidas: Creating a Niche Market and Lowering Product Costs

This report discusses how Adidas created a niche market by differentiating itself from competitors and how it has been able to lower the costs of its products. It provides an overview of Adidas as an organization and explores the strategies and tactics used by the company to achieve success in the market. The report also examines the role of supply chain management in Adidas' success and discusses the importance of understanding customer needs and preferences in creating a niche market. Additionally, it highlights the various cost reduction strategies employed by Adidas, such as eliminating unnecessary product features, reducing packaging, and maintaining strong relationships with suppliers. Overall, the report offers valuable insights into the operational management practices of Adidas.

Operational
Management

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Organisational Overview........................................................................................................1
Has Adidas created a niche market by differentiating it from its competitors? Explanation of
the perspective........................................................................................................................1
How Adidas has been able to lower the costs of its products? Discussion of views.............5
Discussion in detail of the understanding of success or failure behind Adidas supply chain
management strategies............................................................................................................7
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Operations management can be described to administration of entire business practice for
creating huge efficiency level in the enterprise. The concept is related to converting materials
together with efforts of labours into tangible commodities or intangible services as successfully
as possible for the purpose of maximising organisational profits (Annarelli and Nonino, 2016).
All business concerns have separate department of operations management that attempts for
balancing costs with income so that highest net operating profits are achieved as soon as
possible. It majorly includes utilisation of resources such as materials, technology, human
capital, equipments and many more. The report is based on Adidas that is Multinational
Corporation that was established by Adolf Dassler in 1924. The report includes answers of three
questions as per the Case Study of Adidas Management. It highlights about has the company
created niche market through differentiating it from its rivals. Further, it includes the ways the
entity has been able to lower costs if its commodities and understanding about success and
failure behind supply chain management strategies of the business.
MAIN BODY
Organisational Overview
Adidas is well popular multinational company that was established in the year 1924 by
Adolf Dassler. Its headquarters are situated in popular city Herzogenaurach, Germany. It is one
of largest sportswear entity across nation and majorly deals in clothing, shoes and other products.
It has more than 57000 employees that makes huge efforts from the point of designing to selling
phases. It has mission of becoming best sport brand across the globe and has strong management
team along with effective corporate strategies.
Has Adidas created a niche market by differentiating it from its competitors? Explanation of the
perspective
Niche market is termed to that market that is known as subset of main market wherein
main focus is on particular product. It defined about features of product that aimed to meet
specific needs of that market section (Ávila and Amorim, 2016). Moreover, it is small market
segment that is created v\by an entity for understanding the needs of that particular segment and
then offering suitable commodity that differentiates it from its rivals. Addition to this, niche is a
focused and targetable part of wider market in which an entity must leverage its expertise
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together with knowledge. Creation of such market is considered as important path to success as
well as establishing dominant position in the targeted segment for various businesses. No large
companies can be all for all people, so it is important for all to target a niche segment so to fulfil
their unmet needs and requirements for particular commodities and services.
In case with Adidas, yes the entity has created a niche market through differentiating itself
from its major competitors. As the entity has main objective of becoming worldwide leader of
offering sporting products. To attain this, the entity has formed niche market through focusing in
various parts that are maintaining variants of brand portfolio, emphasising on monetary
investments on most promising avenues, ongoing development of innovative commodities,
creating adaptable addition to efficient supply chain, cultivating passionate corporate culture as
well as functioning as environmentally together with sustainable thoughtful company. Besides
this, the company followed basic concepts that are key for niche market success and that includes
offering unique products, offering marketable products, selecting available niche market and
them marketing. Marketing is more important as increases awareness among targeted segment
about the products and services in which the entity is best (Benedetti, Cesarotti and Introna,
2017). This is considered as its major marketing tactic that is deployed for targeting particular
market segments that is unique in nature and is not yet targeted by the rival firms yet. It is
created through identifying customer wants and then trying to offer them with better solutions for
any problem that is least emphasis by other companies. Moreover, a niche market not only refers
to small market but also includes particular target population having specialized offerings. With
this, the organisation become leader of the market and enhances possibilities for other businesses
to enter in the specific segment.
It is analysed that Adidas has majorly targeted audiences from apparel, footwear and
clothing industry, including high preferences for sportswear products. The entity first understood
all the demands of the industry and later offered them similar products such as accessories,
shoes, watches and many more as per their choices along with values that was different from its
main competitors like Nike, Puma, Under Armour and so on. Following are the steps thatw ere
followed by Adidas managers to create a nice market:
Examining existing business: The managers of Adidas at this stage examine its existing
practices, policies, strategies, plans and available products. Along with this, they also think about
particular client segment with whom they like to work with as well as though about the common
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aspects among them. They have various questions in mind such as are they a specific
demographic or do they execute operations in similar sector or posses common interests and
preferences? Does the segment have deep personal experience with unique cohort that the
company can draw upon? Moreover, in this phase, Adidas became as specific as it can. Addition
to it, working towards developing niche approach does not refer that the company need to
“slack” the audiences or customers which do not fir in the niche. The organisation also served to
those clients as well but look towards the new clients who generally fits in the desired profile
(Birch, 2019). Being the avid seller, Adidas managers found a way to focus towards minded
individual.
Focusing towards why: In this stage, Adidas managers majorly focused on the concept of
“Why”. In this, they shares awareness in the market about why they are in this business, the ways
they do business and what they actually do in the order. With this, they emphasises on their main
activities and implementation of all activities for attracting as well as retaining potential clients.
Moreover, the entity must emphasis on why they execute plans in the business and why
audiences should engages with the firm. When they were successful in defining the why concept
they were able to pertinent towards high engagement product based business, including
sportswear after focusing on niche market.
Having conversation: Herein, working of marketers Of Adidas started in which they
communicate with chosen niche so to learn from them about the references of audiences form the
company, the ways that will help in communicating with them in best manner and the viewpoints
about service offerings along with approaches of the company and that of those competitors.
With this knowledge, Adidas marketers assisted managers to retain clients and feed them with
new strategies for grabbing attention of new clients. The most important in this is to ask clients
about their choices, their likes and dislikes for existing products and taking feedbacks so to offer
them with same courtesy. This increased awareness of the entity and they implemented suitable
strategies that were different from those of competitors (Chapelle, 2019).
Putting ideas into action: herein, the company was aware about the niche they wish to
target, they were aware about the main reasons to target them and they also know the reasons for
which particular clients want organisational services and products over rivals down the road.
After this, the managers of Adidas prepared them for tailoring value propositions for the niche
that are targeted. Younger Demographics generally have preferences and choices for the
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sportswear of the company and they feel more comfortable in buying them. Moreover, the
managers of Adidas have also planned to provide digital experiences to customers so that they
can invest time as well as money in offered organisational products like sportswear and clothing
through digital platforms so that all the modern expectations of the selected audiences are
fulfilled on time. Along with this, when the company recognised that the niche market belongs
time poor category they enhances the experiences through fulfilling their expectations as per
their terms and conditions that resulted in mobilising sales along with offering flexible incredible
valuables (Cheng, Fu and Lai, 2018).
Evaluation: In this stage, all the activities are evaluated as per the determined
perspectives. When Adidas managers evaluated that they were not attracting right clients then
they worked towards founding the issues and adjust the activities accordingly. It is also analyse
that chosen niche requires various refinement so that they can fulfil all their wishes and grab
opportunities for becoming leader in the competitive market. In association to Adidas, the
marketers evaluated all the plans, strategies and tactics and also analysed the main causes of low
attraction of suitable clients. Further, they adjusted the entire procedure accordingly and attain
successful outcomes.
With the above mentioned procedure, Adidas achieved success in creating a niche market
through differenting itself from the competing companies. This helps the organisation in
attracting Younger Demographics towards its sportswear and offering services that were not
provided by any of the competitors. With this, the managers utilised all the resources in effective
manner as possible and build product offerings which provide highest possible values through
properly understanding needs and requirements of many people in the specific market. nice
market of Adidas that is Younger Demographics helped the corporation in standing out from
other companies that offers almost similar products in the market (De Lautour, 2018). It also
keep focused the company towards specific group of individuals along with wither particular
needs despite of continuous requirements of investment and many more. Through creating niche
market, the business concern was also successful in reaching new clients through learning about
the needs of them and satisfies all that resulted in enhancement of customer base. Furthermore,
niche market also enabled in focusing fuller attention as well as becoming expert in the particular
segment that builds credibility of the organisation addition to expansion. When the company
works with particular group of clients, it start working to meet needs of particular segment and
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also iniate towards nurturing relationship with them and delivering effective services. When
clients are satisfied with the offerings them they becomes loyal customers and this keeps the
business towards success and most probably aching the mission also.
How Adidas has been able to lower the costs of its products? Discussion of views
Adidas specialises in designing along with manufacturing its products such as footwear,
sports equipments, footwear and various accessories at least product costs. One of the reason
through which Adidas has been able to lower the costs of its product is its eliminating
unnecessary features of products. It has been analysed that custom products generally costs
more to produce than mass produced commodities. Addition to this, any non-standard
characteristics needs additional stages in process of production which increases the expense (De
Wilde, Mahdjoubi and Garrigós, 2019). Adidas has good management team which examines the
motives of customers to make purchase decision of its offerings. They analyses main reasons
because of which customers purchases the products and they are its unique look, huge quality,
low costs or any other. With this, they analyses what is more important for the customers and
selects that particular element which assist in eliminating any characteristic that adds more
expense in production and by removing the unproductive element, the company was able to
lower various costs of its main commodities.
Another way in which Adidas has been successful in lowering its product is removing
excessive packaging. Earlier, the company was only providing its products through official
outlets or stores. But with changes in time, it has made its presence in online platforms also so
that they can enhance sales demand. In this, the company removed excess packaging in order to
bring down entire costs. Moreover, it only focused on nice packaging that provides safety to the
products till they reaches to end consumers (Dolan, 2018). This eliminates various aspects
including labour costs to affixing package solutions in individual SKU’s along with materials
like papers, cartoons and so on. The entity adopted distinct packaging techniques for its
commerce inventory as well as products which were physically displayed on shelves of outlets. It
helped the entity to reduce costs associated to products in long run.
Adidas managers have adopted a strategy to transform potential buyers into suppliers
that resulted in lowering costs of various products. It has been perceived that its various final
accessories are component of end commodities, this helped the company to ask buyers of
component to contract with raw material vendor for the purpose of furnishing raw materials fr
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processing the components (Drupsteen, van der Vaart and Van Donk, 2016). In this, profit
margins related to raw material are less than margin on processing labour as well as overhead.
Moreover, by transferring material supply responsibilities to prospective buyers helped the
organisation to reduce significant costs of offerings without any substantial reduction in margins
of profits.
The next way in which Adidas attained success in lower costs of its offerings was
maintaining relations with various suppliers so that it can purchase raw material or required
essentials at least cost prices. This helped the entity to buy at low prices and further making
products through lower prices of all its products. When some of the suppliers increase their
prices of materials then the company has top manufacture product at huge costs. It is seen that in
initial stages when the materials are purchase at least costs, this further helps in manufacturing
products through making reducing in many of the costs at different stages. This resulted in
decreasing direct costs related to purchase of materials and then making reduction in final
product costs.
Adidas also made various attempts that resulted in reducing necessary costs of products.
Another was adopting artificial intelligence in factory that reduces workings of humans and
also streamlined entire manufacturing procedure. Artificial Intelligence in form of robots
performed various critical tasks such as shifting heavy cartoons of products from one warehouse
to another in effective manner (Granåsen, 2019). Earlier, when employees used to perform this
work then it created huge difficulties or increases accidents as employees are unable to handle or
move heavy cartoons that were full of heavy accessories or other products. Through the use of
artificial intelligence, various humans were delegated another tasks and this also reduced
duplication of workings that leads to reducing additional costs that were involved in workings.
Hence, with this, the business concern was able to effectively lower down labour costs in its
commodities.
The management team of Adidas also implemented inventory management system to
lower down costs of its offerings. Inventory management system is procedure related to ordering,
storing along with using organisational inventory. It generally involved managing raw materials,
elements, components as well as finished commodities in warehouses. The company adopted
effective inventory management software that recorded all inventories whether finished or
unfinished which enters into the warehouses. Moreover, the software tracks production capacity,
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direct material costs, inventory carrying costs, actual used inventory, efficiency of labours,
overtime expenses, cash ins and outs, direct labour costs and manufacturing overhead. When all
are tracked effectively then it provided aspects about what is going in the factory and this
assisted in making remedial action along with implementing them on time that resulted in
lowering costs of diverse commodities.
Adidas managers also adopted a strategy for manufacturing its sportswear or other
products by lower their costs is recycling its defected products. The company has made
attempts to design new products through recycling defected products that requires less new
inventory and this reduces costs of new products. Moreover, the company also substituted higher
cost materials wherever possible (Ito and Matsumura, 2017). The entity makes significant
changes in the defected products as per marketplace requirements addition to manufacturers
practice. They also involved constant technology in the procedure so to improve older products
for creating new ones that lowered the prices. In addition, distinct materials required changes in
method to manufacture through enhancing cycle times that leads to reduction in costs and
process of distinct products that are offered by the company to targeted audiences.
Discussion in detail of the understanding of success or failure behind Adidas supply chain
management strategies
Adidas is considered as leading player in fashion and sports industry with wide market base
along with powerful sales with supply network spread globally. It owns around 2500 retail stores
internationally. It also sells through 13000 mono franchise stores that are popular brands and
150000 wholesale stores. With this, the company manages large supply chain to deliver ist
products fastly and provide huge experiences to wide consumers (Kasaei, 2018). A large, well
organised along with strong supply chain helps Adidas to maintain powerful international
presence. To create seamless consumer experience, the business concern has emphasis towards
checking inventory to allow shoppers to have its products available in their stores, shiping from
stores that converts stores into distribution centres which allows in faster shipping for
commodities that are ordered online, clicking and collecting the orders through e-commerce or
local stores. Along with this, it has effective supply chain management strategies which helped
the company to gain success. Supply chain management strategies are said to tactics that are
adopted by an enterprise for conveying efficient costs, fast delivery, ongoing innovation along
with high quality throughout entire supply chain of the business. Supply chain management is
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concerned with managing supply chain that is network of enterprises and business processes to
acquire raw material and then converting them into finished items along with distributing them to
end consumers. It has linkage with many entities of business including manufacturers,
distributors, retailers, suppliers, transporters and customers. The main objective of supply change
management approaches of the organisation is to effectively manage flow of materials, funds,
information and so on across overall supply chain in such manner that reduces various
unproductive and unnecessary costs related to the chain while launching products of enterprise
from concept to targeted audiences. Addition to it, the strategic contribution of entire supply
management is calculated not through the savings made but the ways it enhances shareholders
values. When it enhances the values if shareholders they success aspects are analysed. However,
decreasing values shows failures of the strategies (Annarelli and Nonino, 2016).
In case with Adidas, it has implemented various supply chain management strategies such as
demand driven planning, omnichannel integration, supply chain execution system, material
logistics management and hence forth. In context to supply chain execution strategy of Adidas,
information is provided through this system that assisted in executing supply chain steps in
effective manner. As per the understanding, it can be said that the major reasons behind the
success of this strategy are its accurate product delivery through managing flows of commodities
from manufacturers to retailers in proper manner (KC, Scholtes and Terwiesch, 2020).
Moreover, the main functions of the strategy includes providing information related to status of
orders that are being processes in order to provide exact and accurate delivery dates to end
clients. Along with this, it also assist in tracking shipment together with accounting for the items
which have been returned back or are to be again serviced. Considering all, it can be said the
supply chain execution strategy was a successful one.
Another supply chain management strategy that Adidas managers adopted is Omnichannel
strategy that was also successful. The Omnichannel strategy is about practicing appealing to
consumers through multiple channels. Through this strategy, the entity builds relations with
multiple suppliers so that they can supply the products as per the demands and requirements
promptly (Mazzarol. and Reboud, 2020). The strategy also helped in recognising facts related to
consumers perceptions, behaviour and desires so that they are offered suitable accessories that
the entity designs and manufactures. Furthermore, the strategy involves sound technology system
which integrates diverse activities across devices. When the entity is unable to place proper
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technology then it can fail in delivering right messages in time that will leads to huge losses in
business. But this was not in case of Adidas, as the entity has effective technological system that
makes relations with customers and gathers data about multiple consumer databases by
eliminating duplications. For enabling information about clients and targeted audiences, it is
necessary to manage supply change and in this, Adidas has gained beneficiary outcomes.
In context to demand driven strategy, Adidas has not gained must success as it was its
failure strategy. It was because behind this was that the entity did not had much accurate
prediction along with consistent planning tool or techniques. This added huge risks in the
business and failures in adjusting strategies for shaping demand. Adidas is provider of diverse
number of commodities to variants of professional athletes as well as teams along with regular
consumers. With implementation of the strategy, the entity faced issues in managing multiple
suppliers as there were various time when many suppliers provided similar information about
consumers (Pfisterer, 2017). Also, they were unable to share information among shareholders in
quick and easy manner that resulted in its failure. Furthermore, it is perceived that the strategy
lacked product uniqueness due to which consumers needs were not fulfilled and this resulted in
failures. It is important for business concern to have effective game plan which should be carried
out at all stages in supplying product. But it was not in context to Adidas because of poor
planning.
Adidas has also have material logistics management strategy that deals with effective
forecasting, planning, sourcing, storing, production along with distributing physical materials
and finished products. According to the understanding, it can be said that the strategy was one of
the successful among all supply chain management strategies of the company. The reason behind
its success is that it ensures that the company receives required materials on time in order to
carry out production actions for final product and also supply products to its stores and
customers on determined time frame. Moreover, the strategy assists in functioning with multiple
businesses so that higher combined demands are used for the purpose of driving down aggregate
costs. The strategy is considered as ideal model for managers and manpower of all level that are
part of the logistics activity and ensuring that its commodities are available to customers or
intended recipients at all places and time. Along with this, it also involves unique addition to
special sections on various aspects including Reverse Logistics, Aid & Disaster relief logistics
(Rao, 2018).
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For succeeding in highly competitive environment, Adidas have both fast supply chains
along with superb distribution network. It also created collaboration platform across nations as
well as regions that streamlined its practices to supply products at far distant places. The
company has strong management team together with effective corporate strategy that regulates
overall supply chain management strategies in synchronisation manner ( De Lautour, 2018). As
time changes, the business concern have made various modifications in its supply chain networks
which resulted in reducing production lead time as well as bringing fresh commodities in shelves
as fast as possible. Addition to this, the main target of Adidas is to become first and leading
sports entity that it has achieved with effective and great distribution channel. Time to time, the
organisation optimised its supply chain network in order to gain speed along with gearing up for
upcoming challenges. This optimisation allowed Adidas to make close relations with prospective
and potential customers for catering the demand in more effective manner.
CONCLUSION
The above discussion concludes that it is important for an organisation to have operations
management that improves productivity and motivation of manpower, assist in attaining
organisational objectives and improves overall goodwill. A company creates niche market
through observing current business and practices, focusing on why, having talking with targeted
audiences, putting ideas into practices and evaluating the plan. A business concerns lower the
costs of its products through removing excessive packaging, implemented inventory
management system, adopting artificial intelligence and many more. Success or failure of supply
chain management strategy depends on the practices and efforts that are made by organisational
members to achieve desired outcomes.
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