With billions of dollars in annual profits, Adidas is no small fish. The sporting goods giant has a cutthroat rivalry with Nike, leading to some very interesting business dynamics. We previously explored these dynamics in a PESTLE analysis of Adidas, but today we’ll be learning more about the brand through the lens of SWOT analysis. By picking apart the Strengths, Weaknesses, Opportunities, and Threats affecting Adidas, you’ll be amazed to see how much potential they have for both extreme upside and extreme downside!
One of Adidas’ biggest strengths is, without a doubt, its powerful brand. Alongside Nike and several others, Adidas is one of the premium sportswear brands recognized in every corner of the globe. Not only does the brand have widespread awareness, but it’s also a positive brand image. Adidas products are associated with being fashionable and relatively high quality. All in all, Adidas’ powerful brand is a key part of how it manages to capture such a large fraction of the luxury sportswear sales.
Aside from its excellent brand image, Adidas also has a well-developed distribution network. On a logistical level, the Adidas distribution network ships millions of goods across the globe in reasonable timeframes. When products are ready for retail, customers have plenty of choice in how and where they can purchase. Adidas sells its products in brick and mortar stores across the world — some of them Adidas-branded stores and others larger-scale sportswear retailers. Aside from physical sales, Adidas also has an established eCommerce presence. Products are available to purchase on thousands of internet stores, including Amazon and Adidas’ own.
Adidas outsources the production of its products to Far Eastern manufacturers. While this strategy does allow the brand to cut costs, it’s one of their major weaknesses. By outsourcing manufacturing processes to third-party suppliers working overseas, Adidas loses some control over how its products are made. This makes it extremely difficult for Adidas to ensure all of its products meet the same rigorous quality standards. Furthermore, by outsourcing the manufacture of its products, Adidas is put at the mercy of third-party suppliers. If the suppliers are, for example, unhappy with compensation, they can simply stop working. This can quickly cause issues for a company as big as Adidas.
Narrow Product Line
Another major weakness facing Adidas is its narrow product line. Despite diversification across multiple price ranges and international markets, Adidas has not yet opted to diversify its product line. Currently, Adidas almost exclusively offers sportswear products, with a focus on footwear. It’s hard to imagine the sportswear industry getting any smaller, but it’s not hard to imagine new competitors forcing their way into the market and siphoning away Adidas’ market share. If Adidas were more diversified in the products it offers, it would be less shaken by market changes or new competitors.
Unlike Nike, Adidas has invested very little in securing celebrity endorsements for its products. This is objectively a weakness, since it has led to Adidas constantly lagging behind Nike in terms of growth. While the Adidas brand is strong enough as it is now, there’s no doubt that paid endorsements could only improve it. It’s also worth noting that endorsements not only increase brand value, but they also drive sales directly.
The primary opportunity for Adidas may well be the growing sportswear industry. Health and fitness are hotter than ever, and there’s no sign they’ll be slowing down any time soon. This means there will be a consistent increase in the number of people practicing sport and thus needing appropriate sportswear. This is not an opportunity unique to Adidas, however. Other sportswear brands will be exposed to the same, growing industry, and it’s up to Adidas to think of clever ways to outpace them.
Science is more advanced than ever. Every week, new materials are discovered that have dozens of benefits over traditional alternatives. To add to that, consumers are always looking for products that are built better. These two factors together present a new opportunity for Adidas: the use of smart materials. By continually investing in the development and manufacture of new materials that can be used in sportswear, Adidas may be able to offer a superior product to its competitors. For example, Adidas could invest in developing new, breathable fabrics to keep sportspeople extra-cool in the summer, or various gums and rubbers to improve the reaction of running shoes with each step.
As with any company, the threat of competition is always present. Adidas is known for its fierce rivalry with Nike, and they really can’t drop their guard in that battle. As it stands, consumers choose between Adidas and Nike on the basis of personal preference, since there’s no major difference in the product lines or qualities. This is why it’s incredibly important that Adidas continues to promote its brand image, hence the suggestion of celebrity endorsements discussed previously.
The sportswear industry is ripe with counterfeit products. Given the hefty price tags of premium sports apparel brands such as Nike and Adidas, it should come as no surprise that many consumers want a cheaper alternative, but with the same powerful brand. Counterfeit products already exist for Adidas, but the company has done a good job of encouraging consumers to buy the real thing. However, if Adidas were to have a fallout with one of its overseas suppliers, the risk of a huge influx of counterfeit products is an extremely scary prospect.
SWOT Analysis of Adidas: Conclusion
As you’ve seen, Adidas is an extremely strong brand in the world of sporting goods. This powerful branding alongside with its brilliant distribution infrastructure is balanced only by a few small weaknesses — namely outsourced manufacturing, a narrow product line, and limited celebrity endorsements. However, Adidas does have opportunities for the future in this growing industry — such as smart materials — if it can only survive the competition! The question is, can Adidas handle the heat?
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