The Adidas Company Global Operations Project Report
The Adidas Company
Adidas is a company with origin in Germany and its headquarters is at Herzogenaurach in Germany. The company deals with clothing, shoes and various accessories that it designs. It is regarded as the biggest company dealing with sportswear in Europe and globally, it is ranked the second largest in its area of operation. It works closely with Reebok, Adidas golf company, Rustanic and Ashworth. The revenue for the company has been growing steadily and by the year 2012, the revenue for the company stood at €14.88 billion. This was an indication that indeed the company was doing well in terms of its business. It is true to say that the revenue of the company has been constantly on the increase because of its several strategies that have proven fruitful. The company was established in the year 1949 the 18th August by its founder named Adolf Dassler. This is after he had disagreed with his elder brother Rudolf. Rudolf initially formed Puma that ended up rivalling Adidas in the market. The company is known to provide employment opportunities to very many people globally. The production units are clear indications that Adidas is not a simple company that relies on innovation and learns to spur its progress (Meyer, & Peng, 2016, pp. 6).
Adidas employs a variety of strategies to ensure that it succeeds in attaining its goals as well as surviving in the competitive business environment. The company uses positioning, targeting and segmentation to market itself globally (Hertrich, & Mayrhofer, 2015, pp. 7). As the biggest manufacturer of sportswear in Europe and the second globally, it considers demographics, behavioural and psychographic factors in its segmentation of the market (Mahdi, et. al., 2015, pp. 167). It has four strong brands namely Taylor, Rockport, Adidas and Reebok, which are segmented to suit the different customers in the market. Differentiation strategy has helped the company in meeting the products needs of children, adults and young adults who are so much interested in sports and fitness. Most of the customers fall in the age bracket of 15-30 years and in the upper and middle classes (Hertrich, & Mayrhofer, 2015, pp. 15). It specifies the benefits accruing to the users by buying its products and this is how it is able to protect the image of its brand in the vast and competitive market. The differentiation strategy has helped in meeting the needs of different individuals from the various social classes (Mohammadian, & Karimpour, 2014, pp. 95). In the end, the company ends up having control of the market a move that is envied by its arch rivals. The mission of the company, which is to be the leading company in the sports industry by developing brands that promote passion and lifestyle in sports, has played a crucial role in marketing the company. It is very committed when it comes to strengthening its products and brands continuously so that its competitive position can be improved (Buckley, & Ghaurim, 2015, pp. 32). It does not believe that there is nothing, which is impossible, and so the employees and stakeholders work tirelessly to achieve the set targets as well as set new ones provided the ones that had been set previously have been attained. The tagline has borne fruits in the company as the employees are rejuvenated to work hard and attain the goals of the company that they desire. If employees are committed to attain the objectives of the company then it is obvious that it will succeed. Another strategy employed by the company is having a vast distribution network, strong brand equity and product quality (Mahdi, et. al., 2015, pp. 169). Companies that produce high-quality products but cannot reach unto consumers minimize their abilities to make profits because consumers do not know about the products and if they do, they cannot easily access the products (Gong, 2013, pp. 50). However, it is not the case with Adidas, a multinational company.
The Adidas Company has also managed to take a charge of the international market because of its ability to sponsor various activities of the communities where it conducts business. It has in most cases sponsored sporting activities globally, and this has helped the company to market itself globally because many people love sport (Hertrich, & Mayrhofer, 2015, pp. 28). For example, it has sponsored Cricket, NBA, UEFA and FIFA Olympics and this has helped it market itself very well in the market. Apart from its corporate social responsibility that has won over the hearts of many consumers, the company has also been able to sell the best products that are appreciated by the different consumers in the market. It is rated as one of the best in terms of producing good sports products. The products are long lasting and comfortable for the consumers. There is no better strategy as compared to producing the best products, which are appreciated by the consumers (George, 2014, pp. 12). The survival of Adidas is largely attributed to its good products in the market that the consumers highly appreciate and can comfortably share with their colleagues to purchase. Moreover, the company has had a good relationship with international organizations that are highly valued and this has equally helped the company to market itself ((Mohammadian, & Karimpour, 2014, pp. 99). For example, the relationship with international finance corporation, international labour organization and world trade organization has boosted the standing of the company at the international level. It has enabled the company to outsmart the rivals in a market that is full of competition. By having a good reputation built by very powerful organizations, Adidas has been able to sustain its operations in its different areas of operations at the global level. Through having good relationship with the big organizations, the brands of Adidas have been able to develop strong shares in the market amidst competition that is very stiff in the market (Mahdi, et. al., 2015, pp. 174). Nike and Puma are struggling to have strong brands in the market that can dominate the market.
The market is controlled by political, economic and social factors that keep on changing. Adidas has been very keen to change based on the changes in the environment and adhere to environmental demands lest it is driven out of market or its competitive advantages reduce (Imran, Zhang, & An, 2017, pp. 4). Initially, the company relied on selling its products using its distribution channels but as time went by, it realized that this was not bearing much success and so it resorted to interacting with the consumers to inform them of the availability of products, size and convenience (Mohammadian, & Karimpour, 2014, pp. 104). Exclusive stores have been used to expand the system of distribution of the company so that many consumers can access its products thereby improve its profitability (Meyer, & Peng, 2016, pp. 11). The flexibility of the company and willingness to adapt to the environmental demands has helped the company to survive in not only the local but also regional and international markets (Mahdi, et. al., 2015, pp. 174). Proper studying of the environment and adjusting accordingly is a boost to the company in its quest to dominate the market. The company has also used brand equity to market itself. The activities that are centered on sports revolve around programs that are connected to communities and social media (Hertrich, & Mayrhofer, 2015, pp. 32). This has catapulted Adidas to being one of the companies doing very well in sportswear. Each sub-brand and brand has its own unique positioning and identity. This has provided a soft spot in terms of creating products, experiences and services that lay a ground for profitability improvements and market share (Hertrich, & Mayrhofer, 2015, pp. 9). The multi-brand tag of the company has given it a competitive advantage that is very important. The brands cover consumer segments and sports, which engages and inspires people to support sports activities because sport is very important in the lives of the people. Adidas is really doing well due to differentiated positioning even though Reebok is faltering amidst efforts by Adidas to uplift it in the market. It should equally be noted that the current or emerging strategies in marketing are very important in promoting Adidas and its products. For that matter, therefore, it is important to take note of E-commerce and the internet that have helped Adidas to continue with its quest to be a global company in sportswear.
Social, political and economic factors are vital in determining the operations both at the local and international levels. Adidas is very keen in following and adhering to government policies (Ind, Iglesias, & Schultz, 2015, pp. 65). For such reason, it is able to prosper. It does not rub shoulders with the government and a law-abiding business, it is very easy for it to prosper because it cannot be blacklisted by the government or have its reputation damaged. Furthermore, it does customer analysis so that it understands its consumers and provide them with products that they yearn for and they can afford without struggling. Adidas understands that it is not realistic for it to produce products in large quantities or conduct mass marketing because it may not have the desired impacts (Mohammadian, & Karimpour, 2014, pp. 117). This is the reason as to why it employs different marketing strategies and produces products that suit the needs of its different segments. In developing its products, Adidas understands and identifies the motivating factors for individuals as well as the goals that they have in sporting. Furthermore, the level of fitness, lifestyle, sporting places and the buying habits are vital in creating products that are meaningful and consumers want to associate with. It is how Adidas builds brand loyalty and lasting impression (Ind, Iglesias, & Schultz, 2015, pp. 52). The company believes there is need for consumers to make their choices in terms of products and this is the reason as to why it uses multi-brand strategy. The strategies have enabled the company to take advantage of opportunities that have helped grow internationally (Imran, Zhang, & An, 2017, pp. 4). The investments by the company focus on channels and potential markets and this is the reason as to why Adidas invests in markets that have the potential for growth in the long run so that it keeps on making profits. Priority is given to markets that are emerging, especially in Russia and China. Furthermore, it also builds markets that have not been penetrated properly like the USA.
In the process of investing in the markets, the fiscal, economic, legal requirements, as well as technological developments, ,are put into consideration by Adidas. It is also worth noting that Adidas also gives much attention to potential and existing competitors in the market. It puts into consideration economic factors when it comes to pricing its goods and services (George, 2014, pp. 19). This ensures that it does not charge consumers exorbitantly. The pricing strategy employed is reliant on the market of operation. In instances, whereby it looks forward to penetrate a new market, it uses market skimming strategies or lower prices. In cases, whereby it faces stiff competition from its rivals at the international level, the company keeps on reviewing its prices so that it is not disadvantaged by the prices in the market that is very competitive and unpredictable. With its strategy, the products of the company have remained competitive right from the point where they are produced to where they are going to be sold. The ambitious plan by the company has enabled the company to distribute its products very well and meet the consumers. In its distribution, it focuses on e-commerce, retail business, joint ventures, shop-in, franchise stores and working closely with other organizations that can help it in marketing its products to the varied consumers ((Ind, Iglesias, & Schultz, 2015, pp. 67). This is how the company has been able to control its brands and market. Furthermore, it uses integrated distribution so as to enhance the growth of the brands that will easily penetrate affluent cities and areas that have got low penetration.
The strategies that have been used by the company at the international level have helped the company in taking advantage of the market and outdoing its rivals (Imran, Zhang, & An, 2017, pp. 4). The company has greatly invested in marketing, distribution and brand development (Meyer, & Peng, 2016, pp. 15). Furthermore, it sells quality products affordably. It is the reason as to why many consumers prefer its products to those of other companies. It must also be understood that the company has segmented its markets and sells products that suit every market and so it does not generalize the production and marketing of its products. In addition, it is important to take note of the fact that the company puts into consideration political, economic, social and legal factors that are beyond its control whenever it is developing its strategy (Mahdi, et. al., 2015, pp. 170). It is the principle behind Adidas’ success. Without considering the external environment factors, it is not possible for a company.
Differences between global and domestic operations
The manner in which a company like Adidas operates at the global level is quite different from how it operates at the domestic level. The global level needs numerous resources to invest in the products, markets, and research as compared to domestic markets that need resources although not comparable to global levels (Ind, Iglesias, & Schultz, 2015, pp. 59). It is also important to understand that competition is very stiff at the global level as compared to the domestic level. This is because of the availability of many companies from different parts of the world that have resources and exposure as compared to domestic operations. The global market is very big and diverse unlike the domestic market (Buckley, & Ghaurim, 2015, pp. 49). This is the reason as to why it is important for companies to understand the market properly. Otherwise, they will be irrelevant in the market that is very competitive. In instances, whereby companies cannot cope with the market dynamics, they are driven out of the market because of the unprofitability of their operations ((Meyer, & Peng, 2016, pp. 2). It is very difficult for a company operating at the global to satisfy the varied needs of the consumers leave alone supplying them with the products that they need. In the domestic market, a company may try to satisfy the needs of the consumers because they are less diverse. The political, economic, social, legal and technological environments at the domestic level are not very diverse as they are at the global level. It is the reason why it may be easy for a company to do business at the domestic level but when it comes to the global level, it is not in a position to survive (Gong, 2013, pp. 44).
The global operations call for flexibility in terms of understanding the environment of business operation as each country has its way of doing business. Understanding the global business is harder as compared to the domestic environment. Generally, it is easier to do business domestically as compared to globally whereby each country has its demands as far as doing business is concerned.
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