Adidas Strategic Management Case Analysis from Harvard Business Review, Papers of Strategic Management

Download Adidas Strategic Management Case Analysis from Harvard Business Review and more Papers Strategic Management in PDF only on Docsity! ADIDAS HBR wha CASE ——— adidas SUMMARY 02I. An Adidas overview II. Vision and mission III. Internal assesment IV. External assesment V. Strategy formulation VI. Strategy implementation VII. Strategy evaluation VIII. Evaluation III. INTERNAL ASSESSMENT 2016: 5,43% of the total revenues vs 2019: 12,7% of the total revenues E-Commerce revenues have slightly increased in 3 years FINANCIAL RATIO ANALYSIS All the efforts put by the company to digitalize have worked as the amount of e-commerce revenues have increased E-commerce is the fastest growing channel ADIDAS ORGANIZATIONAL CHART Behe DeCoie ams erincg Sings ene merce Vice President - HR SEIT President - Plater iss BSS ms Gul Teale iy Electronics Eng. Customer Saar eaeY fonntontcd Saar iecm:) ADIDAS ORGANIZATIONAL CHART GOOD AND BAD ASPECTS GOOD POINTS : Ensuring that the company can effectively manage its global operations and maintain its position as a leader in the sports apparel industry Clear Hierarchy: Adidas' organizational chart has a clear hierarchy, which ensures that responsibilities are well- defined and everyone knows who they report to Collaboration: Adidas' organizational structure promotes collaboration across different departments and teams. This helps to break down silos and encourages cross-functional cooperation, which can lead to better decision-making and improved performance Innovation: Adidas' business units are structured to encourage innovation and creativity. Each business unit has its own team of designers and marketers, allow the company to face competition POINTS TO IMPROVE : Bureaucracy: With a clear hierarchy and many layers of management, Adidas' organizational structure can become bureaucratic, which can slow down decision-making and limit flexibility Centralization: The centralized structure of Adidas can make it difficult for local teams to make decisions and respond quickly to local market conditions. This can limit the company's ability to adapt to local needs and preferences Complexity: With many different departments and teams, the organizational structure of Adidas can be complex and difficult to navigate. This can lead to confusion and inefficiencies, particularly for new employees ADIDAS MARKETING STRATEGY GOOD POINTS -Effective branding: Adidas has built a strong brand that is recognized around the world : logo, slogan, and marketing campaigns, have helped to create a distinct identity -Partnership & Sponsorship: Adidas has invested heavily in sponsoring some of the world's top athletes and teams (Kanye West or Lionel Messi) --> limited edition products -Effective use of social media: Adidas has leveraged social media platforms, such as Instagram and Twitter, to connect with consumers and build a community around its brand -Innovative marketing campaigns: unique and creative marketing campaigns: "Here to Create" which promotes a message of empowerment and creativity. -Sustainable initiatives: "Parley for the Oceans," which turns ocean plastic waste into sports apparel and shoes. BAD POINTS -Reliance on partnerships and celebrities representations: can be an issue if the partnerships does not align with the brand value anymore or is involved in a scandal -Lack of diversity: criticized of lacking of diversity in its marketing campaigns and the products offered - Overlapping product lines: Adidas has several product lines that can overlap, making it difficult for consumers to differentiate between them. ADIDAS MARKETING STRATEGY OUR RECOMMENDATIONS: MORE FOCUS ON DIVERSITY AND INCLUSIVITY : diversification of the marketing campaigns as well as range of products --> partnerships with diverse influencers and athletes (wider range of body types and cultural backgrounds) USE DATA ANALYSIS : use date to gain precise insights on customer preferences and behavior --> in order to make more customized marketing campaigns USE SOCIAL MEDIA EFFECTIVELY : already strong presence on social media, but could increase its presence by using more platforms like Instagram or TikTok to showcas its products PRIORITIZE SUSTAINABILITY AND ENVIRONMENT : emphasize commitment to sustainable development by developing sustainable product lines or partnering with environmental organizations MAP LOCATING ADIDAS OPERATIONS Adidas suppliers all around the world --> Global presence (operating in over 160 countries) --> Takes advantage of lower production costs and access to specialized skills and technologies (Asia for instance) Adidas location operations are designed to support its global growth strategy 20 Strengths of Adidas Brand Recognition Innovation Global Presence Collaboration with celebrities Strong Distribution Network Diversification of the products Eco-innovation / sustainability Strong Financial Performance Strong E-commerce Presence Strong Marketing Strong Brand Legacy Quality of products Employee Benefits Focus on Customer Experience Strong Research and Development Supply Chain Strong Corporate Social Responsibility Company Culture Values Leadership 14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Dependence on few key suppliers for raw materials Complexity of the supply chain High production costs Dependence on a few key markets Frequent errors in managing demand High marketing and advertising expenses Limited product range compared to some of its competitors Over-reliance on wholesale distribution channels Lots of customer complaints and returns Limited differentiation Dependence on external designers and collaborations for new product development Difficulties to respond rapidely to change Lack of transparency in the supply chain and production processes Difficulties in data-driven decisions. Bureaucracy and slow decision-making Dependance of footwear sales Limited product customization options compared to some of its competitors. Limited retail presence compared to some of its competitors Vulnerable to fashion trends and consumer preferences ESG competition 20 Weaknesses of Adidas Internal factor evaluation matrix With the major internal factors of Adidas, we constructed the IFE matrix. The major strenghts of Adidas are : the global presence and the brand recognition... Concerning the Weaknesses, Adidas has to work on : its problems of Supply Chain, its dependance on key suppliers and its dependance to footwear sales... As the total score is above 2,5, this means that Adidas has a strong internal position. The weaknesses are minor comparing to the stranghs whiwh support the business. 09 Major competitors Here is our Competitive Profile Matrix, in which we compared Adidas, Nike and Puma, its major competitors. We can analyse that Nike is far ahead from Adidas and Puma in most of the factors cited, such as brand image, market share, innovation, diversification etc. Sources : https://app.emaze.com/@AIRCWILZ#/13 III. EXTERNAL ASSESSMENT External factor evaluation matrix With the major external factors of Adidas, we constructed the EFE matrix. The major opportunities that Adidas has to seize are : expantion to emerging markets, Open to new partnerships, take advantage of the new trends... Concerning the threats, those that affect the most Adidas are : fierce competition, the changes liked to technology and the increase in general costs... As the total score is under 2,5, this means that Adidas is not properly set up to fully utilise the opportunities an protect against threats . STRATEGY FORMULATION 1 Strong brand recognition and loyal customer base 2 Diversified product portfolio in multiple categories such as footwear, apparel, and accessories 3 Wide distribution network across the globe 4 Focus on innovation and sustainability in product development 1 Dependence on third-party manufacturers for production 2 Higher prices compared to some competitors in the market 3 Heavy reliance on physical stores for sales, with limited e-commerce presence in some regions 4 Limited exposure in certain markets, such as South America and Africa 1 Growing trend towards athleisure and activewear, which aligns with Adidas' core product offerings 2 Increased demand for sustainable products and practices, which is a key focus for Adidas 3 Expansion into new markets such as Africa and South America 4 Investment in e-commerce to capitalize on the growing trend of online shopping Intense competition in the sportswear industry from established players such as Nike and Under Armour, as well as new entrants Uncertainty in global economies and consumer behavior post-COVID Volatility in global supply chains and raw material costs Potential negative impact on the environment and society from the manufacturing and disposal of products. 1. 2. 3. 4. SPACE MATRIX Adidas is in the Quadrant II (Aggressive), indicating that the company should pursue an aggressive strategy to leverage its strengths, overcome weaknesses, and capitalize on the available opportunities. The company should focus on expanding its e-commerce presence, investing in sustainable manufacturing practices, and entering new markets such as Africa and South America. At the same time, Adidas needs to address its weaknesses by reducing its dependence on third-party manufacturers, increasing its focus on affordability, and expanding its reach in untapped markets. To stay competitive in the face of intense rivalry in the sportswear industry, the company should focus on innovation and product differentiation. GRAND STRATEGY MATRIX Develop new and innovative products to meet evolving customer demands and trends. Product Development Forward Integration Backward Integration Horizontal Integration Market Development Diversification Expand into new markets such as Africa and South America, where Adidas has limited exposure. Acquire or partner with complementary businesses to strengthen its product offerings and distribution network. Acquire or control raw material suppliers to improve supply chain efficiency and reduce costs. Acquire or control retailers or e-commerce platforms to increase control over the distribution process. Expand into new and unrelated markets to reduce dependence on the sportswear industry. GRAND STRATEGY MATRIX Overall, Adidas should focus on continuing to innovate and differentiate its product offerings, while expanding its reach in untapped markets and investing in sustainable manufacturing practices to meet increasing demand for sustainable products and practices. The company should also focus on expanding its e-commerce presence to capitalize on the growing trend of online shopping. By pursuing an aggressive growth strategy through the above potential strategies, Adidas can maintain its strong competitive position in a high-growth market in a post- COVID world. Adidas has diversified its product line to include more athleisure wear and casual apparel to cater to changing consumer preferences. This strategy has a moderate attractiveness score and a moderate competitive advantage score in a QSPM analysis. However, it still has potential to grow and contribute to the company's overall success. QUANTITATIVE STRATEGIC PLANNING MATRIX Online Sales Strategy Diversification Strategy Sustainability Strategy Cost-Cutting Measures The pandemic has also forced Adidas to implement cost-cutting measures to maintain profitability. These measures include reducing marketing and advertising expenses and optimizing its supply chain. Using a QSPM analysis, we can see that this strategy has a high attractiveness score but a low competitive advantage score, as cost-cutting measures are common among businesses during times of economic uncertainty. Adidas has also made sustainability a core part of its business strategy. The company has set ambitious targets to reduce its carbon footprint and improve its supply chain transparency. This strategy has a high attractiveness score and a high competitive advantage score in a QSPM analysis, as sustainability is becoming increasingly important to consumers. Adidas has also made sustainability a core part of its business strategy. The company has set ambitious targets to reduce its carbon footprint and improve its supply chain transparency. This strategy has a high attractiveness score and a high competitive advantage score in a QSPM analysis, as sustainability is becoming increasingly important to consumers. Projected Income Statement 2019 Sales € 44,44,309.00 Change in inventory € 481.00 Total output € 4,444.79 Other operating income € 5,89,900.00 Cost of materials €-16,10, 747,00 Personnel expenses € -7,96,334.00 Amortization and write-downs of intan -1 19722 Other operating expenses € 23,37,405.00 Income from operations € 1,70,487.00 Income from investments in related co € 17,29,239.00 Profit received under a profitandlosst € 2,12,486.00 Impairments to financial assets € - Interest result € -3,498.00 Taxes on income € -1,61,218.00 Income after taxes 1947 491 Other taxes € -330.00 NET INCOME € 19,47,161.00 Retained earnings broughtforeyard € 41,365.00 Transfer to revenue reserves € -7,50,000.00 Transfer to capital reserves 0 € - Utilization for share buyback € -4,10,496.00 RETAINED EARNINGS € #,28,030.00 2020 € 39,91,218.00 € 1,135.00 € 39,92,353.00 € 9,86,100.00 € -14,65,521.00 € -6,55,177.00 € -1,26,781.00 € 25,64,728.00 € 1,66,246.00 € 1,11,043.00 5,10,156.00 -210.00 -36,173.00 -76,218.00 6, 74,844.00 -1,209.00 6,73,635.00 8,28,030.00 € -3,36,000.00 € - € - € 11,65,665.00 fh oh dh oth oth oth oth th fh oh dh oth fh od gh othodh oh oth oth oh oth th oth oh oth oth oth oth oth 2021 2022E 44,74,901.00 58.00 44,74,959.00 6,49,230.00 -17,44,168.00 -7,68,375.00 -1,17,401.00 -2.46 32,369.00 10,65,579.00 8,61,122.00 -10,910.00 -97,759.00 1,85,01,401.00 -632.00 18,49, 769.00 5, 80,467.00 -9, 24,880.00 -8,316.00 -1,62,871.00 13,34, 169.00 € 55,93,626.25 72.50 55,93,698.75 8,11,537.50 -21,80,210.00 -9,60,468.75 -1,46,751.25 -3.08 40,461.25 13,31,973.75 10,76,402.50 -13,637.50 -1,22,198.75 2,31,26,751.25 -790.00 23,12,211.25 7,25,583.75 -11,56,100.00 -10,395.00 -2,03,588.75 16,67,711.25 fh oth oth th oth oth th oth oth oth th oth oth oth eth oth oth oth oth oth oth 2023E 67,12,351.50 87.00 67,12,438.50 9, 73,845.00 -26,16,252.00 -11,52,562.50 -1,76,101.50 -3.69 48,553.50 15,98,368.50 12,91,683.00 -16,365.00 -1,46,638.50 2,77,52,101.50 -948.00 27,74,653.50 8,70, 700.50 -13,87,320.00 -12,474.00 -2,44,306.50 20,01,253.50 fh oh dh oth fh od gh othodh oh oth oth oh oth th oth oh oth oth oth oth oth ASSETS. FIXED ASSETS Intangible assets Tangible assets Financial assets CURRENT ASSETS Inventories Receivables and other ass € Securities Cash and cash equivalents € PREPAID EXPENSES Dec. 31, 2020 € — 1,54,005.00 € —6,82,862.00 € 48,39,124.00 € 56,75,991.00 € 39,584.00 26,98,286.00 € 21,94,043.00 12,55,556.00 € 61,87,469.00 € 95,721.00 € 1,19,59,181.00 Projected Balance Sheet Dec. 31, 2021 2022E ah oth oth oth oth oth oth 2,35,938.00 6,91,403.00 48,00,936.00 57,28,277.00 38,048.00 21,55,288.00 14,24,475.00 15,99,503.00 52,17,314.00 1,15,733.00 1,10,61,324.00 th oth oth cth hot th oth th eth thy 2,59,531.80 7,60,543.30 52,81,029.60 63,01,104.70 39,950.40 22,63,052.40 14,95,698.75 16,79,478.15 54,78,179.70 1,27,306.30 1,19,06,590.70 EQUITY AND LIABILITIES EQUITY Subscribed capital Par value treasury shares Capital reserves Revenue reserves Retained earnings UNTAXED RESERVE PROVISIONS/ACCRUALS LIABILITIES DEFERRED INCOME Dec. 31, 2020 2,00,416.00 -5,350.00 13,33,660.00 8,38,468.00 11,65,665.00 35,32,859.00 2,470.00 6,36,252.00 77,19,963.00 17,637.00 1,19,59,181.00 Dec. 31, 2021 2022E Ahh oth oth oth th oth oth th oth oth 1,92, 100.00 -505.00 13,46,694.00 9,28,916.00 13,34,169.00 38,01,374.00 2,181.00 7,96,848.00 64,45,485.00 15,436.00 1,10,61,324.00 hooth th oth th oth oth oth oth oth th 1,92,100.00 -505.00 13,46,694.00 9,28,916.00 13,34,169.00 38,01,374.00 2,181.00 7,96,848.00 64,45,485.00 8,60,702.70 1,19,06,590.70 Other metrics EPS Calculation Adidas AG EPS for the twelve months ending September 30, 2022 was $3.83, a 38.48% decline year-over- year. Adidas AG 2021 annual EPS was $6.45, a 410.94% increase from 2020. Adidas AG 2020 annual EPS was $1.26, a 77.46% decline from 2019. Adidas AG 2019 annual EPS was $5.6, a 12.63% increase from 2018. K ey R atio s