Adidas in Vietnam: Assessing Business Environment and Strategy

This report provides a comprehensive analysis of Adidas's business environment in Vietnam, focusing on the competitive landscape and market factors influencing its performance. The report begins with an introduction to Adidas's presence in Vietnam, highlighting its success and strategic approach. It then delves into the competitive environment using Porter's Five Forces, analyzing threats of substitution from sandals, industry rivalry with Nike and Puma, the power of buyers and suppliers, and the impact of potential competitors. The report also examines macroeconomic factors such as GDP growth, fiscal policies, and environmental factors affecting Adidas's operations. Furthermore, it explores Adidas's strengths and weaknesses, including its mission, vision, values, brand equity, and responses to market challenges, such as scandals and the evolving consumer preferences. The analysis underscores Adidas's strategies to adapt to the market, including product innovation, pricing strategies, and supply chain management.

485 - Business and Business Environment
ASSIGNMENT 2
INTRODUCTION
It can be said that shoes have entered Vietnam market for a long time and are occupying a huge market
share so far. Adidas is a leading fashion brand in the world, which specializes in shoes. Adidas first
opened a store in Vietnam in 2007 in Ho Chi Minh City. And so far Adidas has many shops stretching
from North to South in Vietnam. It can be affirmed that Adidas has been as successful as it is today
because the company successfully built its strategy and experienced environmental impacts when
participating in Vietnam market.
The agents that have a great impact on Adidas' business when participating in Vietnam market can be
referred to as a competitive environment, including five forces.
CONTENT 1

1.2.1 Threats of substitutions
In Asian countries and especially in Vietnam today, sandals are one of the necessary items to protect the
feet when going out. This is one of the cheap, easy-to-use items that suits everyone, so it will become a
substitution to Adidas. Most people in Asia have low income, so they will choose sandals instead of
shoes, which is the weakness of Adidas because their main product is shoes.
In terms of price, most people can own an average pair of sandals from VND 100,000 to VND 200,000
while if you want to own Adidas shoes, you have to spend up to a million. That is a huge difference in
prices that makes Adidas disadvantageous. In terms of design, Adidas shoes wear international brands so
it is meticulously designed and invested. Besides, the sandals are often designed to be simple, not eye-
catching or color like Adidas shoes. This is in contrast to the advantage of slippers by Asians who prefer
casual and casual styles.
On the market, it can be said that sandals are the majority in Vietnam today. This is understandable
when it is cheap and easily distributed to small dealers. And Adidas brand shoes need a large amount of
money to invest in buying and reselling, they also require to be displayed and sold in stores that are
considered luxurious and upmarket.
In the case of the current Adidas, they have come up with some solutions such as designing simpler
shoes with cheaper prices. But the best way they are doing is to produce genuine Adidas sandals. This is
extremely true when the quality of their products is completely superior to the types of sandals on the
market while the price is not much different. You can completely own 1 pair of Adidas sandals at the
price of 1/10 Adidas shoes.
1.2.2 Industry Rivalry
Among all competitors with Adidas, Nike is the first and biggest name because no one has ever been able
to overthrow Nike. But that is uncertain because Adidas is also a worthy competitor of Nike when in
recent years, close to the battle of the two sides are in balance. In terms of price, it is not necessary to
discuss, these are the top two brand names so both prices are quite expensive. Basically, you will buy the
basic shoes of both companies for a price of more than $ 100. But it is no longer the same as shoes with
sandals, here we will compare it a bit backward. By competition not only at lower or more prices but also
in their designs. Customers are now no longer targeting ordinary people, but upper classes who are
willing to spend tens or hundreds of millions on a pair of shoes. Design is the most necessary thing for
the brand race between the two big men. Typically, recently, Adidas has a certain popularity in the Yeezy

model when it is being a hot trend in many parts of the world. The price of the cheapest pair of Yeezy on
the Adidas official website is $ 100. Besides the launch of Yeezy, Adidas also offers ultra boost 5.0 (Anon,
2019). So what is Nike's response, they are not inferior to their competitors when they recently launched
themselves the Nike air max product line also fully received the attention from customers, the price of
the pair. The cheapest on the official website is priced at VND 2,818,000 (Anon, 2019). It can be said that
the prices of these two products are quite similar and quite suitable for many classes.
Both Adidas and Nike have very appropriate and right competitive strategies, so Nike is the leading
competitor of Adidas.
1.2.3 Power of buyer:
Most of the customers of Adidas belong to the young elite of society, they are the birth students, young
people. So the criteria and goals they aim for are very strict. One of the first criteria they aim for is
definitely price, which determines whether they can buy the product or not. Currently, the prices of
Adidas products are varied, ranging from $ 50 to $ 300 in the shoe category and for children, men, and
women. This will certainly meet the demand for prices for customers because it is not too expensive. The
second criterion for customers is product quality. Speaking of quality, it's not a table. Because it is a
sport-style brand, they are meticulously designed with high quality, suitable for movement so it can be
kept for a long time. The next criteria of that customer are the design of the shoe. Most of the Adidas
shoes are sporty, so it is suitable for both men and women. They are designed from simple to
sophisticated and its price increases in proportion to that demand (Anon, 2019).
It can be said that Adidas is very pleased with its customers, they know how to listen to feedback about
their products. They also regularly update trends, produce trendy products and are not obsolete at all.
They do so because they know that buyers are the most important factor in their business. All of their
products must have all the customers' needs.
1.2.4 Power of supplier:
Raw materials play an important role in the production of Adidas shoes. Taiwan's Far Eastern New
Century (FENC) textile group - a supplier of materials to a number of leading brands such as H&M, Under
Armor, Columbia ... Because of the cost materials and labor costs in Taiwan are very cheap, so Adidas's
choice of a supplier like Far Eastern New Century - FENC is obvious (Baomoi, 2019). Assuming Adidas
does not select this supplier and chooses a supplier in Germany, the cost will cost. Therefore, it can be
affirmed that Adidas' dependence on Far Eastern New Century - FENC is very high.

1.2.5 Potential Competitor:
Next to the opponent is Nike, Adidas and another potential opponent is Puma. In recent years, Puma is
gradually regaining its position among customers when providing some new products. Typical of them
are collections: CALI, SHATTER STEREOTYPES, STORM. They are chosen by most consumers. The prices of
the products in the collection are mostly $ 90, so they are very popular (Us.puma, 2019). It can be said
that puma is one of the companies with good business strategy. So why is it just a potential competitor
and not an existing competitor with Adidas? Firstly, Adidas currently holds a big position while puma has
just started in the process of conquering customers. A large number of users have been using Adidas
shoes and it's hard to recommend them to try other brands. It is a disadvantage of puma's competition.
The second thing I want to talk about is design. Although both companies are mostly focused on sports
instead of fashion, Adidas has overcome that. While other shoe companies are still focusing on sports
form, Adidas has begun to focus on fashion. What about puma, they focus on many other products like
clothing instead of focusing on finishing the shoes (ELLE Man, 2019). That makes their products only
quite good, not high-quality products for consumers.
1.7 According to the General Statistics Office, GDP (Gross Domestic Product - the real page expression of the
national economy) in 2018 reached 7.08%, an increase of 0.27% compared to 2017 (6.81%) and the highest
from 2008 to present (VnEconomy, 2019). It can be said that this is a good sign for Vietnam's economy, the
government has "scored" with domestic and international investors investing in Vietnam. As GDP increases
mean demand, service, quality, consumer tastes also increase ... leading to increased market size. As GDP
increases, it means consumer demand and consumer purchasing power increase. Help increase production
demand. And that development can help Adidas expand their brand, the opportunity to develop marketing
and capture more and more value. Thereby will stimulate the development line of sports shoes such as
Adidas increased, helping revenue can increase further.

1.12 Fiscal policies
Source: Annual finance of Adidas
ADIDAS tax from 2014 to 2018, it can be seen that Adidas tax increases significantly (Marketwatch,
2019). The consequences of this result in a reduction in the company's profitability, so branch expansion
is delayed thus reducing the competitiveness of businesses. However, despite high taxes, Adidas still
grew strongly. According to Adidas 'annual report in 2018 Adidas' total revenue reached 21,915 billion
euros with a profit of 11,363 billion euros (Report.adidas-group, 2019). From that, it is concluded that for
large enterprises with large scale, especially Adidas, tax is not a big problem to prevent business.

1.23 Environment factors
Natural factors have a significant impact on the production and business of industries through the
following factors: weather, climate, rain, storm, flood, drought, etc. Vietnam is one of the countries in
Southeast Asia with a more unstable climate than other countries, with annual storms and floods.
Moreover, Vietnam is now Adidas' largest footwear production center in the world when 44% of its 403
million shoes are produced here (Forbes Việt Nam, 2019). So it can be said that environmental factors
are barriers to Adidas.
CONTENT 2
Strengths and weaknesses
2.1 Value, mission and vision
First of all, it's about Adidas' Mission. Adidas Group strives to be the world's leading company in the
sports industry with brands built on the passion for sports and sports lifestyle. Adidas is committed to
continually strengthening its brand and product to improve its competitive position. Next is Vision.
Adidas said that he is an innovative and design leader who seeks to help athletes at every skill level
achieve the highest performance with every product that Adidas brings to the market. Moreover, Adidas
focuses on consumers and therefore Adidas continuously improves the quality, interface, feel and image
of its products and organizational structure to match and exceed the expectations of people. Consume
and give them the highest value. And Adidas is also a global social and environmental responsible
organization. In addition, Adidas' value is expressed in four different values: Performance, Passion,
Integrity, Diversity. Adidas' duties, visions and values are in line with the characteristics of Adidas. With
branches expanding all over the world, Adidas is gradually becoming the world's largest brand in the
sports industry (Comparably, 2019). Adidas still keeps track of its vision. The evidence is that recently
Adidas has just announced a new Futurecraft shoe made entirely of 100% TPU (polyurethane) plastic and
when it is not used anymore, these shoes will be collected and recycled into pairs. New Futurecraft shoes
without using extra fuel outside the environment to produce (one et al., 2019). As for Adidas 'success,
when the retail industry is struggling and difficult, Adidas' customer-centric strategy has resulted in a
record increase in sales with Digital technology. Sales of Adidas shoes have increased dramatically. That
can help Adidas achieve their vision and mission.

2.2 Brandname and Brand equity
It can be said that customers are not difficult to recognize the Adidas brand. Adidas is considered one of
the most famous shoe brands in the world. According to Kantar Millward Brown in 2018 Adidas reached
the Top 100 most valuable brands in the world. Adidas brand value doubled from 8.3 billion USD to 12.5
billion USD (ELLE Man, 2019). However, there are also some scandals that greatly affect the reputation of
Adidas. It was in 2016 to celebrate Valentine's Day, Adidas posted a photo of a lesbian couple on
Instagram accompanied by a note: "The love you reap is the fostering result of two people". And just
hours after Adidas posted the photo, the photo received 51,000 comments and a fierce battle broke out
across all forums. There are even innate people who disagree with the image of Adidas. Some customers
also write that they will switch to Nike. However, Adidas immediately responded with no mercy on the
symbol of waving and kissing goodbye. This definitive and tough message is intended for those who are
unwilling to open their hearts to homosexuals and easily give up a brand just for a photo (Sohuutritue,
2019). In spite of this, Adidas' reputation is also affected more or less.
In addition, it can be seen that Adidas is a big, world-class brand. So the copying, adidas brand imitation
is likely to happen like daiads.....(News.zing, 2019)

CONTENT 3
Business decision
3.1 Since 2012 Adidas began to expand production, placing Vietnam as a manufacturer of its footwear
products. So far, Vietnam is the largest footwear manufacturing center of Adidas in the world when 44%
of the 403 million of its fashion shoes are produced here (Forbes Việt Nam, 2019). With the strength of
being a big brand in the world in the sports industry, it is understandable for Adidas to manufacture
Vietnam because it is very cheap in Vietnam. When products are exported to other countries, the profit
that Adidas brings will be huge.
However, it is also because Adidas is a big fashion company in the world in sports especially shoes. So
the expansion of production must also exchange many things. Currently, there are many fake Adidas
branded shoes on the market with the price of only 1/10 compared to real Adidas shoes. So this factor
can affect Adidas. For a large fashion goods in the world like Adidas, the expansion of production and
business also causes many risks.

3.2 The fact that Adidas places Vietnam as its main producer. That also caused many difficulties for
Adidas. Vietnam is a country often affected by natural disasters such as storms, floods, droughts and sea
level rise. The fact that Adidas places Vietnam as its main producer. That also caused many difficulties for
Adidas. However, labor and processing costs in Vietnam are quite low compared to other countries. That
makes Adidas' profit increase so Adidas's choice of Vietnam as its producer is understandable. It can be
said that this decision of Adidas is both unfavorable for Adidas but also very beneficial for the world's
leading fashion brand in this sport industry.
3.3 First, the growth of Adidas in 2018 is also very impressive. According to the 2018 financial report, the
total revenue was 21,915 billion euros with the profit of 11.363 billion euros compared to 2017 greatly
increased (Report.adidas-group, 2019). However, Adidas' biggest rival is Nike. According to Nike's
financial report, Nike's total revenue in 2014 was quite high up to 36397 billion USD and Nike's profit
was 17474 billion USD (S1.q4cdn, 2019). It can be seen that Nike's growth rate is huge. Currently, Adidas
still has poor revenue compared to Nike. Besides, Adidas' recent growth rate has also increased
impressively, showing that Adidas has a strong foothold in the eyes of consumers. Adidas needs to
develop and expand its business even further so that it can make further progress compared to its
competitors.
CONCLUSION
It can be said that Adidas is currently very successful in Vietnam. Moreover, Vietnam is also the main
producer for me. Adidas still has revenue and continues to grow. It is because of Adidas' solution with
elements from internal to external factors and excellent business decisions. Adidas has built a strong
position in the eyes of customers and become the world's leading fashion company in the sports
industry.

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