Adidas Porter’s 5 Five Forces (2021)


Adidas Company Overview:

The Adidas Group is a German multinational athletic apparel company, which was founded by Adolf Dassler in 1949. The subsidiary brand, Adidas, has created and popularized many silhouettes such as the Superstar and Stan Smith that have become staples of popular culture: The Superstar, in particular, remains one of the most recognized sneakers today. In addition to footwear, Adidas offers a broad collection of athletic apparel and accessories for a wide variety of sports. It is the largest sportswear manufacturer in Europe and the second biggest in the world. As of 2017, it employed more than 44,000 people worldwide and generated €28.6 billion in revenue. In 2017, global revenue rose by 9 percent to €28.6 billion from the previous year, while net profit climbed 26 percent to €2.3 billion. In 2016, Adidas had 74 production facilities and employed more than 44,000 people worldwide. The company operates a number of major retail outlets in key cities around the world and is particularly known for its sportswear. Let’s go over the Porter’s Five Forces Analysis.

 

Adidas Competitive Rivalry:

 

The main competitors of Adidas are Nike, Puma, New Balance, and Asics. The company’s main competitors in the footwear industry are Nike and Under Armour who control 62% of the US Sports Footwear market.

 

Adidas Bargaining Power of Suppliers:

 

The suppliers of Adidas manufacture their products in Asia. The company is therefore forced to pay higher prices for its materials, which makes it difficult to keep costs down while also maintaining reasonable profit margins. For instance, Adidas is 70 percent vertically-integrated which means that they manufacture their own shoes.

 

Adidas Bargaining Power of Buyers:

 

The main customers for Adidas are department stores, specialty retailers, and direct. In spite of the rise in online sales, physical retail sales still account for a bulk of sales at Adidas with 58 percent of its total revenue coming from bricks and mortar stores. Additionally, many sports events such as the Olympics also feature Adidas products prominently. Since these events only take place every few years, this is not an important factor on a day-to-day basis. However, it does increase brand visibility and can potentially lead to increased loyalty among consumers who prefer supporting brands that have been more actively involved in the development of sports.

 

Adidas Threat of New Entrants:

 

The main entry barriers for Adidas are the need for a strong distribution network and a high level of brand awareness. In addition, there is a risk that Adidas could lose market share to its competitors if it fails to keep up with new trends. For instance, Nike has been more successful in establishing itself as a lifestyle brand rather than just focusing on sports equipment.

 

Adidas Threat of Substitutes:

 

Sports clothing is not always interchangeable with apparel from other brands or even with that from other sports manufacturers. For example, the shoes manufactured by Adidas are not necessarily compatible with those made by Puma or Asics. The same goes for different styles within sportswear such as soccer cleats and running sneakers.

 

Adidas Porter’s Five Forces Conclusion:

 

Based on the data provided we can conclude that Adidas has had a positive correlation with the market as it is currently increasing in demand, making it easy to sell products and increase net income. Adidas possesses a competitive advantage through having strong brand awareness, unique styles, and designs as well as relatively lower production costs which allows them to retain high-profit margins. 

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