Adidas is among the top brands in the world. It is the market leader in the shoe industry mostly and well known for sportswear, watches, accessories, bags, eyewear among other products. In recent years, Adidas made huge strides with its business model that boosted its performance. Adidas’ objective is to become one the best sports company worldwide. Suitability is also a main goal since Adidas produces items from sustainable materials. In 2017, Adidas manufacture over a million pairs of shoes made of Parley Ocean Plastic ( Boone & Kurtz, 2013) . The company also made products from cotton. The sustainable products boosted the company's financial results in 2017. Adidas made 21.2 billion sales in Euros. In all regions in the world apart from Russia, Adidas doubled its sales in 2017 ( Boone & Kurtz, 2013) . Regardless of the currency fluctuations, the company’s gross margin increased to 50. 4 percent. It increased by 120 points. The brand projects to maintain this trend in the coming years.
Adidas wants to increase its revenue at a faster rate, and its mission is to be an outsranding sports product compant globally. However, Adidas faces a great threat from Nike, Puma and Under Amour. Nike is Adidas’ top threat, and it is known as the best sports company, and it is a trusted brand. Nike is a popular brand in the market and in the top sellers list it ranks higher than Adidas. In the basketball sneaker category, Nike ranked top due to its popular brands, Paul George, Lebron James, and Kyrie Irving. In this category, Adidas was rarely mentioned. The brand ranged between 1 percent and 3 percent. Adidas aggressively penetrated the United States market due to its ability to recognize trends’ at an early stage. However, to succeed and beat the competition Adidas should focus on its competitive advantage. Competitive advantage is mainly concerned with brand positioning in the market. Consumers prefer brands based on their perception of the products.
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Nike has dominated the market, and this poses a great threat. However, Adidas is also a popular brand in the world. To boost its market share and popularity, it is recommended that Adidas company focus on marketing and marketing strategies. Apart from digital promotions, Adidas should reach out its customers through new channels. This will not only attract new sales, but it will also improve customer relations and improve the brand image. Digital technology will also bring the brand closer to its customers through social media platforms such as Facebook and Twitter. The company should freely accept customer feedback to know what the customer needs. To boost its popularity, Adidas should use sponsorships and partner with different a4rt athletes and celebrities. This will increase Adidas’ market share.
Over the past years, the market has turned more competitive and turbulent. Pricing strategies are no longer effective in building a sustainable as well as a competitive market advantage. In some cases, price wars undermine the competition, but lowering prices is unstable for the long run. Adidas should mainly focus on the customers' needs and use this to beat the competition. In this light, customer’s need change with time.
Moreover, the market is filled with different types of customers with different needs. What may work for one customer, may not work for another. Customers’ needs influence the production process. Adidas should base its brand on quality and innovativeness, selling sports products that can positively influence the customers’ lifestyle. The company should highly commit in innovating new products and come up with technologies that benefit the customer’s life. To meet these goals, Adidas should collaborate with top fashion designers to manufacture functional and fashionable sportswear (Choi et al., 2015). Instead of seeing it as just a sportswear brand, customers will see Adidas as a fashion brand, and this will grow the company's market share.
Adidas should use the Research and Development department and the market department to target a specific market. In that note, the youth, aged between 19 and 29 maintain an expensive lifestyle and like to utilize the top brands. Adidas should seize this opportunity and formulate a differentiation strategy that focuses on this market. The company should do a research and capture what the market wants, to invent products that accurately satisfy their needs. Also Adidas should also invest in sustainable products and sustainable methods of production. Digitization across the entire value chain would also greatly boost the company’s competitive advantage. The products should boost the customer’s quality of life and solve health, and lifestyle issues.
Cost leadership is vital for competitive advantage. Cost leadership establishes a competitive advantage by lowering costs (Banker. et al, 2014) . Adidas should create competitive advantage by maintaining its costs lower than Nike and other competitors. To keep low costs, the company's expenses should be monitored and managed across the value chain, from the start to the end. Unlike differentiation that focuses on the external environment, cost leadership focuses on the internal environment. The strategy involves total cost control. The production budget should cover the most critical processes and should disregard any unnecessary processes. Cost leadership boots organizational performance and ensures that debts are at the lowest level. The company operates at a low cost, and this increases its flexibility in pricing.
Alliances are vital, to beat the competition. To penetrate the North American market, Adidas partnered with Reebok. However, Nike still dominates a considerable percentage of the market, and Adidas needs more alliances. A massive supply chain and distribution network is imperative for a substantial competitive advantage ( Boone & Kurtz, 2013) . Adidas should maintain its production using independent suppliers. To ensure that the cost of production stays low, Adidas should outsource a considerable percentage of its production to independent suppliers, preferably in the developing countries. The company should provide the suppliers with specifications of how the products should be made and delivered. The company should also form alliances with wholesalers and franchises to invest in markets that are quite expensive for the company to set up shops. Without the partnerships, Adidas may not efficiently beat the competition. Through alliances, the company can break even with its new products within the first year.
Even though alliances are beneficial, in some cases, they are detrimental. After Reebok established an alliance a decade ago, its sales reduced. The competitors' profits grow by 16 percent annually while Reebok records growth of five percent annually ( Boone, & Kurtz, 2013) . To balance and monitor the growth rate, Adidas should use the partnerships performance systems, including the Balanced Scorecard to check the financial and non-financial position of the company and its alliances.
Currently, the business environment is greatly influenced by political factors. The government is strict on issues such as tax evasion and other illegal and unethical matters. Since it is an international company, trade relations also influence Adidas’s ability to do business. In case the company violates any of the legal or ethical guidelines, it is prone to lawsuits which could extensively damage its brand image and eat into the company's profits. Hence Adidas should ensure it strictly follows the law and conducts ethical and accountable business operations. Adidas should also focus on its corporate social responsibility to build its brand image among customers. Being a global company, Adidas should focus on sociocultural factors. Every continent, country, and society has a different culture. Hence one business and marketing strategy may work in one market and fail in another.
Moreover, different societies have different tastes and preferences. Adidas should conduct market research to know what a specific market prefers and adopt different business and markets strategies that suit the market. The changing social trends also significantly impact Adidas’ competitive advantage. The society is mainly focused on the millennial generation and their needs. Adidas should concentrate on the same through brand innovation.
Technology is now more critical than before. Technology is crucial for business growth since it influences all business operations including sales, marketing and the day to day business activities such as customer service and involvement. Adidas should invest technology in all its departments and operations forms, Supply chain and marketing. The company should also digitize its marketing strategies and its reduction process. Through Research and development, Adidas should come up with technological innovations to boost the production process, sales and customer service. Technology will advance Adidas’ competitive advantage since it will nurture better customer service, better products, and efficient customer feedback channels.
In every market, customer satisfaction boosts competitive advantage. In this case, customer satisfaction retains customers. This reduces costs since maintaining old customers is easier and cheaper than gaining new customers. This will work for Adidas since it is in a highly competitive mature market. The customers make repeat purchases and the cost of serving them reduces.
Moreover, dissatisfied customers hike the cost of sales. They make delayed payments and make a lot of complaints which destabilize the organization. Dissatisfied customers may also involve legal departments which may cost the company lawsuits that are added expenses. It is better for Adidas to create customer satisfaction than to correct it.
Satisfied customers rarely change suppliers. Hence, they want the company to survive any disaster, and they do all they can to support the company’s survival. This makes it more difficult for competitors to capture the satisfied customers. The competitor has to offer a higher ad better value than the company by lowering prices for the same level of performance or by increasing the level of performance for the same amount. The bigger the loyal customer base, the higher the entry barrier for competitors.
Satisfied customers are resourceful since they insulate the company during a crisis. A typical crisis is product tampering either in the retail arena or at the factory. When Adidas has a strong customer base, they slow down the decline in sales during a crisis. Also, the loyal customers make sure the company does not lose its market share. After rectifying the problem, Adidas can quickly build a more significant market share.
Gaining new customers is the best way to bosts business growth. Loyal customers offer a competitive advantage since they bring in new customers without the company significantly investing in marketing, sales or other strategies. They market the company through word of mouth and promote the company's products and services. They are more ready to offer their reviews and customer feedback about the services and products to make sure that the company stays on top.
In the past, Adidas efficiently managed its marketing efforts and strategies. Through its strategy, it has acquired a significant markets share. The company should focus on customer satisfaction and customer engagement for a robust competitive advantage. To equally compete with Nike, Adidas should focus on customer retention and involvement, and it should focus on new markets. Adidas has improved its growth rate by a double-digit in most markets, but it should focus on retaining the trend. This is through customer experience and reliable customer service. Customers are the backbone of any company since they generate sales and revenue.
In conclusion, Adidas’ objective is to be the best sports company globally. Adidas targets at raising its revenue at a faster rate, with an aim of becoming an outstanding sports company in the world. However, the company faces a great threat from other close competitors such as Nike, Puma and Under Amour. It is recommended that Addidas focus on marketing and marketing strategies to increase its sales and market grounds. Apart from digital promotions, Adidas should reach out its customers through new channels that are accessible to a large population of its clients. Also, Adidas should majorly focus on the customers' needs and use this to beat its competitors. Furthermore, the company should highly commit in innovating new products and come up with technologies that benefit the customer’s life. Adidas should also use the Research and Development department and the market department to target a specific market. Adidas should create competitive advantage by maintaining its costs lower than other is market competitors. Addidas should also embrase market alliances to beat the competition of other rapidly growing companies. Addidas should focus on customer satisfaction as this retains clients therefore boosting its sales.
References
Boone, L. E., & Kurtz, D. L. (2013). Contemporary marketing . Cengage learning .
Choi, H., Ko, E., Kim, E. Y., & Mattila, P. (2015). The role of fashion brand authenticity in product management: A holistic marketing approach. Journal of Product Innovation Management , 32 (2), 233-242.
D. Banker, R., Mashruwala, R., & Tripathy, A. (2014). Does a differentiation strategy lead to more sustainable financial performance than a cost leadership strategy? Management Decision , 52 (5), 872-896.
Wagner III, J. A., & Hollenbeck, J. R. (2014). Organizational behavior: Securing competitive advantage . Routledge .
