Adidas: Competitive Advantage, Market Environment, and PESTLE Analysis

This report provides a comprehensive analysis of Adidas's competitive advantages within the sports apparel industry. It begins with an introduction defining competitive advantage and its key elements. The main body of the report delves into Porter's Five Forces analysis to assess the competitive intensity and attractiveness of the market, examining factors like the threat of new entrants, supplier power, buyer power, threat of substitutes, and competitive rivalry. It also explores Adidas's responses to the market environment, utilizing a PESTLE analysis to evaluate the political, economic, social, technological, legal, and environmental factors impacting the company. The report highlights Adidas's strategies in navigating these factors. The report then concludes by summarizing Adidas's strengths, weaknesses, and areas for improvement, emphasizing the increasing competition and the need for strategic actions to maintain and enhance its market position. The analysis includes a comparison with its main competitor, PUMA, and suggests areas where Adidas can focus on for future growth.

INDIVIDUAL REPORT

Table of Contents
INTRODUCTION...........................................................................................................................1
Main body........................................................................................................................................1
Porter's Five forces analysis........................................................................................................2
Respond of Adidas to the market environment...........................................................................3
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Competitive advantage can be simply defined as the attribute that permits a venture to
outgo its competitors. It is also a situation allowing an enterprise for manufacturing a product
and service at equivalent value but at a minimum cost or in a most enviable fashion. Such
circumstances are allowing the productivity entity for generating large sales and at superior
margins in comparison to its market's rivalries (Albrecht and et. al., 2015). Thus, it can be said
that competitive benefits are being characterised to a variety of elements involving structure of
cost, branding, quality regrading deliverables, network for distribution, consumer service and
intellectual property. The present report is based on Adidas where – in different terms are going
to be discussed that is related with competitive advantages. In addition to this, one of the main
competitor has also been explained showing how this is giving challenges to the above
mentioned company. Adidas AG is an international organisation whose headquarter is situated
in Herzogenaurach, Germany. They are offering and designing products or services like clothes,
shoes (especially sports wear) and many other athletics related accessories. It is known as biggest
sports wear maker in Europe and is comes at second position after Nike. They were having
around 53,731 workers in the year of 2014 and have earned an income of approx. €0.72 billion.
Main body
This has been recognised that competition is increasing day on day. Due to it, problems are being
created for several famous ventures since other emerging companies are offering similar
products as well as services at lower prices. For example, even Adidas is a multinational
enterprise; it is also facing different challenges as its competitors are enhancing year on year. But
they are giving their best in this regard. One of the key rival of this firm is ' PUMA '. The most
interesting fact is that the founder of both of them were brothers. But the relation between these
two brothers got worsen until the two agreed for splitting in 1948 and then rise of those
organisations occurred (West, Ford and Ibrahim, 2015). This has been examined that PUMA SE
had employed around ten thousand people across whole world and distributed its goods or
services in more than one hundred twenty nations in the year of 2016. its operating income is
founded as € 127.6 million in 2016. thus, giving a great competition to Adidas. But besides this,
Adidas is effectively maintaining its position and gaining more and more competitive benefits.
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Porter's Five forces analysis
The selected venture has been successfully surviving even by facing challenges and has
managed to keep its reputation in marketing place. For knowing about maintenance of
competitive advantages by Adidas, one should analyse certain tools so that it get aware about its
challenging factors. Porter five forces could be used for the same purpose which is described
below :
 Potential of New Entrants in the Market : For gaining access of cheaper labour and
reducing shipping costs, Adidas is used to outsource in Asia and various other regions.
This has been explored that around 35 % of its products is being designed in China,
importing norms, duty and traffics is playing a vital role in the successfulness of
corporation. Thus, in turn Adidas is having a risk since it relies for outsourcing on Asia.
Additionally, complete quality of products determined by users in the developed nations
is a main concern. The probability or possibleness of new entrants is relatively less due to
absence of barriers for taking entry (Peteraf, Gamble and Thompson Jr, 2014). Still, in
the existence of retail giants such as Nike and Adidas, it will be complex for rivalries to
spend such a large sum of money for doing promotional activities, Research and
development, marketing and receiving accounts of those contestants who have not
signed up with these popular brand. As Adidas, is having a strong position in terms of
brand image, access to distribution channels now becomes too easy and as a result, they
do not face serious threat from their competitors for taking benefits of economy of scale.
 Power of suppliers : The booming business of this successful brand is seeking attention
of large number of suppliers. Hence, it can be stated that threat from suppliers of raw
materials is considered as zero to none (Barney and Hesterly, 2015). As such
commodities are found in bulk, so the power of providers or suppliers in the chain of firm
is actually very low but the mentioned corporation however relies on them because cost
of manufacturing of raw items is more than in relation to purchasing price.
 Power of consumers : The powerfulness of users is also considered as lower in this
commercial activity where in every one is looking for most standardised deliverables. But
they are not aware about such products for making a decision. Thu, in this case brand is
helping in this situation for taking appropriate decision for almost all purchasers who are
just wishing to buy a product of cited company that is Adidas. Still, some wholesalers
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who are having knowledge regrading its cost are examining forward to buy in goods in
majority and there – by comprising of higher ability to do bargaining or negotiation when
the risk for switching to other substitutes occurs.
 Threat of substitute products : The danger to move or migrate to other offerings of
sports is relatively less with the existence of only low number of brands in accessories as
well as apparel of sports – wear. However, it has been evaluated that Adidas is also
struggling with each other substitute goods whether it is associated with athletics or not
so the risk of being substituted with various another cheap commodities is competitively
high.
Respond of Adidas to the market environment
In order to know the present situation of above mentioned enterprise in market, it is
essential to carry out PESTLE analysis. By doing this, impacts of different macro factors as well
as response of Adidas can be easily determined. Those factors includes governance, technology,
economics situation, legislations, society and environment. This can be better understood by
follow mentioned points :
PESTLE analysis is an tool used by organisations to track environment in which they had
operating or launching a new product or service. Adidas is a well-known leader in sports goods
community. They are German based organisation, which allowed communities in world to
acknowledge company with three stripes in parallel shapes (Li and Liu, 2014). They develop
and manufactures several of its products which are beneficial for nature. This well recognised
company also faces so many political, economical, social, technological, environmental and legal
factors in competitive environment. This PESTLE analysis of this ADIDAS organisation will be
discussed here in details:
 Political Factors: Adidas manufacture and distribute various assorted category products
throughout worldwide. This postulate them to expand their international supply chain
system fore selling products in offline and online mode. They experience different
taxation system throughout overseas which creates more complex issues which vary with
one country to another country. By imposing new tax or duty by any government
organisation, due to which entire balance sheet of an organisation will or might change or
it will affect adversely on maintaining customers relationship (Laszlo and
Zhexembayeva, 2017). They are so many political factor just like tax and duty policies,
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trade tariffs, fiscal policies and many more which any government may draft or impose
during financial year which affect business or economic environment of an organisation.
 Economic Factor: These factors will adversely affect on potential customers which
directly impact on company's long term economic growth. Economic factors includes per
capita income, inflation rate, unemployment, unskilled labours, tax inflation, foreign
exchange rates, health crises occur in any country will directly or adversely affect on
organisation economic growth as well as it affect on the way Adidas has manage their
products and services prices (Schilke, 2014). Adding to great extent, it would affect
potential customers purchasing power and demand and supply ratio for organisation.
 Social Factors: These factors varies with country to country, culture to culture which
examine or audit social environment of the marketplace. Adidas products and services are
often available for each and every section of society just like age, colour, gender, culture,
festive season and monsoon seasons. Their core focus on heath conscious buyers group
with a lots of love in sports. Adidas also supports national and international sports
competitions and tournaments worldwide which give them an opportunities for marketing
and catch new customers or audience around the world. These social factors may affect
on innovation and buying habits of customers.
 Technological factors : Adidas used to test their goods under variable conditions since
they have to supply such commodities to sports – man (Saeidi and et. al., 2015). They
also attempt for optimising performance for professional and team leaders in the sector of
games. In order to resolve durable issues related with athletic, they are utilising natural
materials for doing replacements. In addition to this, Adidas used to offer online sales by
using various websites and from social media.
 Legal factors : The cited venture comprises of possession of IP systems and intellectual
properties. Apart from this, they also have formulated patents for protecting their rights
against infringement and copiers. Patents act as legal protective covering for ending
fictitious businesses. As it is a popular brand, they encompasses automatically a trade
mark productivity. Because of their connectedness to the world of sports, Adidas supports
sponsorships of celebrity as a form of marketing. Besides this, they are following overall
agreement with the national as well as regional legislations.
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 Environmental factor : This has been examined that this venture has effectively reduces
environmental influences. It is their obligation to observe unsafe substances and remove
them instantly in order to safeguard atmosphere as well as consumers. The main reason
of this is the use of natural resources in deliverables of Adidas. In addition to this, they
are having system based approach for managing impacts of environment on its
operations. They are concentrating on minimising VOC (Volatile Organic Compounds)
and also used to tackle climatic alternation (Wagner III and Hollenbeck, 2014). This has
been identified from a report that for decreasing environmental effects of manufacturing
and distributing groups merchandises in the year of 2009, Adidas has continued to
actively involved in developing more atmosphere sustainable goods. This comprises of
their first offerings from its programme of “Better place “.
Therefore, it can be said that there is strong positioning of Adidas in market place of sports –
wear and are doing all operational activities in proper manner.
CONCLUSION
From the above based report it can be summarised that in this modern era, large number
of companies are being set up in similar industries. Due to this reason, level of competition has
been rising drastically. For example in the sector of sports - wear, numerous of firms are
emerging which is giving birth to vast rivalries for Adidas. Therefore, it is effecting adversely on
the performance of this venture. One the major competitor of it is known as PUMA which is
offering identical merchandises or services. Hence, reducing the number of customers of Adidas.
Thus, in order to attain more success within or next 2 to 5 years; this company needs to work
hard in their business of athletics' wearing. For doing the same, they have to concentrate on more
some actions such as advertisement, marketing, human resource and so on. Firm requires to
recruit skilled and qualified employees in order to design best quality and fashionable shoes or
others accessories for drawing attention of large number of users in all over the world. To reach
at more audiences, enterprise can take use of different promotional tools such as social media,
television, newspaper, magazines and many more. Additionally, they need to enlarge its business
in those areas wherein they do not exits yet.
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REFERENCES
Books and journals
Pinto, J. K., 2015. Project management: achieving competitive advantage. Prentice Hall.
Wagner III, J. A. and Hollenbeck, J. R., 2014. Organizational behavior: Securing competitive
advantage. Routledge.
Schilke, O., 2014. On the contingent value of dynamic capabilities for competitive advantage:
The nonlinear moderating effect of environmental dynamism. Strategic management
journal. 35(2). pp.179-203.
Saeidi, S. P. and et. al., 2015. How does corporate social responsibility contribute to firm
financial performance? The mediating role of competitive advantage, reputation, and
customer satisfaction. Journal of Business Research. 68(2). pp.341-350.
Li, D. Y. and Liu, J., 2014. Dynamic capabilities, environmental dynamism, and competitive
advantage: Evidence from China. Journal of Business Research. 67(1). pp.2793-2799.
Laszlo, C. and Zhexembayeva, N., 2017. Embedded sustainability: The next big competitive
advantage. Routledge.
Peteraf, M., Gamble, J. and Thompson Jr, A., 2014. Essentials of strategic management: The
quest for competitive advantage. McGraw-Hill Education.
Barney, J. B. and Hesterly, W., 2015. Strategic management and competitive advantage
concepts and cases. Pearson.
West, D. C., Ford, J. and Ibrahim, E., 2015. Strategic marketing: creating competitive
advantage. Oxford University Press, USA.
Albrecht, S. L. and et. al., 2015. Employee engagement, human resource management practices
and competitive advantage: An integrated approach. Journal of Organizational
Effectiveness: People and Performance. 2(1). pp.7-35.
Johnson, G., 2016. Exploring strategy: text and cases. Pearson Education.
Online
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