Introduction

A SWOT analysis is a framework that is used to analyze a company’s competitive positioning in

its business environment. This can be used by Adidas, and will involve the identification of its
internal Strengths (S) and Weaknesses (W) followed by the identification of the Opportunities
(O) and Threats (T) it faces in its extensively business environment.

Adidas is among the leading firms within its industry, and it needs to retain this position. Adidas
is carefully reviewing its SWOT analysis and using it to make strategic decisions. For a SWOT
analysis to be conducted of the firm, an interactive process needs to be undertaken by
coordinating among all the departments of the firm such as finance, marketing, operations,
human resource, logistics, strategic planning, management information systems etc.

A SWOT matrix is a 2x2 matrix that has the internal strategic factors listed in the first row;
Strengths and Weaknesses. It has the external strategic factors listed in the second row;
Opportunities and Threats. This SWOT strategic framework allows company managers to easily
view all of the company’s strengths, weaknesses, opportunities and threats in one matrix.

Internal Strength Weakness

External Opportunities Threats

The SWOT analysis matrix helps in the development of 4 types of strategies by managers.
These are:

Strengths-Opportunities Strategies (SO): This involves using internal strengths to take

advantage of opportunities.
Weaknesses-Opportunities Strategies (WO): This involves improving on the company’s
weaknesses by making use of the opportunities.

Strengths-Threats Strategies (ST): This involves the using of strengths to minimize the
weaknesses.

Weaknesses-Threats Strategies (WT): This involves the elimination of weaknesses to combat

the threats.
 Adidas Strengths
 Brand Value: Adidas is one of the most valuable brands in sports. According to Forbes, it is
ranked at #3 position (Nike at # 1 and ESPN at # 2) with a brand value of $12.9 Billion. In 2020,
Adidas was ranked the 51st most valuable brand in the world. [1]

 An Iconic Brand with a Prestigious Legacy: Adidas has nurtured a strong and prestigious
legacy and heritage over its long, illustrious history by influencing and shaping numerous aspects
of society across the world.

For example, the company

influenced sports in the 70s
and shaped the hip-hop
culture in the 80s. Its iconic
three-striped
tracksuit and three-leafed
motif logo transformed the
brand into a cult,
particularly among urban
youth.

 New Products Innovation: Since its founding, Adidas has prioritized the quality of its products
over everything else. In 2021, EUR 130 million was invested in R&D (0.6% of its annual net
sales) and EUR 115 million in 2020. High-quality, innovative products are one of the driving
forces behind its ever-growing customer base. [2]

 Diversified Portfolio: Even though the Adidas brand is restricted within the sportswear industry,
the company’s products are diversified. It offers multiple products that are designed to cater to a
wide range of sports, including footwear, apparel, and hardware
accessories. Footwear represents 53%, Apparel represents 41% and Accessories and
Gear represents 6% of Adidas annual sales of € 21.2 Billion. 
 Young Customers prefer Adidas: The consistent focus on product quality and customer
experience has enabled Adidas to nurture a global and loyal customer base, particularly teens and
young adults between 16 and 24 years in urban areas.

 Effective Supply Chain Management: Supply chain management is vital in the success of
global companies, particularly for Adidas, since it outsources 100% of its manufacturing
to independent manufacturing partners. According to its annual report, Adidas works
with 114 key strategic manufacturing partners to ensure control of the entire supply
chain.

 Footwear – Adidas produced 340 million pairs of footwear in 2021. About 96% of total
footwear volume was produced in Asia and rest from Europe and the Americas.
Indonesia is the largest sourcing country representing 36% of total volume, followed by
Vietnam (30%) and China (15%).

 Apparel – Adidas produced 482 million units of apparel in 2021. 91% of total apparel
volume from Asia and rest from Europe, Americas, and Africa. Cambodia is the largest
sourcing country representing 21% of produced volume.

 Accessories & Gear – Adidas produced 116 million units of accessories in 2021. About
69% of gears (bags and balls) were produced in Asia. China represents the largest
sourcing country (34%), followed by Turkey (29%) and Pakistan (15%).
 Adidas Weaknesses

 Supply Chain Shortage: Adidas outsources the production of most of its products to 3 rd party or
independent manufacturing suppliers, mainly in China, Cambodia, and Vietnam. It has exposed
Adidas to the risk of overdependence on foreign suppliers.

According to Reuters, these suppliers are unable to keep up with the growing demand for mid-
priced apparel in the North American market, resulting in a reduction in sales growth by 1-2% in
2019.

 Expensive Products: Adidas charges a premium or high prices for its products, which has
alienated low-income consumers. Only upper- and middle-income group customers can afford
over a $100 shoe.
 Limited Product Line: Adidas Group has only Adidas brand and Reebok brand under its
portfolio, which has restricted the company within sports footwear, sports apparel, and
accessories. Therefore, a decline in demand for sports-related products can be disastrous to
Adidas.

 Links to Forced Labor: Adidas was among 83 multinationals that were linked to forced labor in
factories across China by ASPI. Any association with forced labor not only exposes the company
to legal risks but also erodes trust among consumers. [3]

 Patent Legal Battle: Losing in court to a competitor undermines confidence and also takes away
a source of revenue. In June 2020, Adidas lost a long-running legal battle to Nike over their
respective knitted footwear. Adidas has lost the right to produce or sell it and the confidence of
customers who loved that specific footwear. [4]

 Allegation of Racism: Adidas has focused on building a brand that transcends racial lines. This
reputation was tainted by allegations that Karen Parkin, the head of human resources,
mishandled cases of racism at the company. She was forced to step down to pave way for
investigation. [5]

 Laxity in Home Market: Companies should defend their home market at all costs. For years,
Adidas has neglected its home market and allowed Nike to increase its market share. In January
2020, Nike sales in Germany surpassed Adidas for the first time in history. Adidas is also losing
key markets across Europe with Nike’s revenue from the region expected to increase to $10
billion by the end of 2020. [6]
 Adidas Opportunities
 E-commerce: In recent years, the number of consumers who shop online or use e-commerce
sites has increased significantly. Adidas incorporated various e-commerce such as Instagram’s
checkout feature into its distribution network, leading to overall 19% in online sales (€ 3.9
Billion) in the fiscal year 2021.

Adidas can replicate this success in other social media platforms such as Facebook and Snapchat.
Its e-commerce is expected double to €8 billion by 2025.

 Growing Sportswear Industry: Sports and fitness have grown in popularity with no sign of slowing down soon

there will be a consistent increase

in demand for sportswear
products and assortments.
 Adidas Threats
 Competition: The main threat facing Adidas is increased competition due to globalization and
technological advancements, which has enabled entry and penetration of small and medium
companies. This implies that Adidas has to compete against main rivals such as Nike, Under
Armour, Puma, Lululemon, Patagonia while fending-off new entrants and penetrators.

 Rapid Expansion and Adoption of Ecommerce: Companies are adopting the rapidly

expanding e-commerce at an alarming rate, which can pose a threat to Adidas if its main
competitors such as Nike and Puma adopt e-commerce before them.

 Supplier Dominancy: The fact that Adidas outsources most of the manufacturing of its products
implies that the suppliers have more bargaining power than the company. The skewed balance of
power exposes Adidas to the possibility of being held hostage by its biggest suppliers.
 Loss of Trademark: In 2019, Adidas lost the three-strip logo trademark case in the General
Court of the European Union, which exposes the brand to the threat of imitation.

 Technological Advancements: The threat posed by competitors increases as they become more

technologically advanced. This implies that a competitor such as Nike will pose a greater threat
if they become technologically advanced than Adidas.

 US-China Trade Tensions: Adidas operates globally, which implies that the company is
susceptible to the reckless tit-for-tat imposition of tariffs between countries. A trade war is
particularly threatening to Adidas because the US is the company’s second-largest market, yet
vast majority of its products are made in China and other Asian countries. According to CEO
Roasted, currency war and tariffs pose a major threat to Adidas.

 Exchange Rates: Fluctuations of major currencies such as the Euro and the US Dollar can
negatively affect Adidas’s profits since it operates in the global marketplace.

 Global Economic Uncertainty: The effects of economic slowdowns, such as lower sales,

negatively affect Adidas, just like any other company. In 2020, its net income dropped by more
than 90% due to recent events. Adidas could continue to lose if economic uncertainties persist.
[10]

 Fake Products: According to CEO Rorsted, 10% of Adidas products in Asia could be fake. The
number and quality of fake products for premium shoe brands have increased significantly in the
recent past, which poses a threat to shoe-manufacturing companies.

 Loses Popularity in China: Anta Sports Products Ltd, a Chinese athletic brand is gearing to
become a popular sports brand in China, as giants such as Adidas continuously lose sales in the
country. The plummet in sales for the big athletic brands were a direct cause of a ban proposed
by the Chinese public, demanding to shut down Adidas and Nike on allegations of forced labor.
According to reports posted by the Chinese media, western athletic brands exploit minority
workers in Xinjian, a cotton-rich city. According to Adidas, it suffered a sales drop in 2021.

 Lawsuit Against Adidas: In 2021, Nike filed a lawsuit against the second largest athletic brand
in the world. Nike claims that Adidas has been violating its copyright over the groundbreaking
Flyknit technology that Nike introduced. Nike claims Adidas has been using this technology.
 Conclusion
 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?

Reference

1. Forbes Ranking. (2020, May 12). Companies: Adidas. Forbes

2. O’Connell, L. (2020, April 2). R&D expenditure of the Adidas Group worldwide from 2010 to
2019. Statista
3. Mistreanu, S. (2020, March 2). Study Links Nike, Adidas And Apple To Forced Uighur Labor.
Forbes
4. TFL. (2020, June 26). Nike Prevails in Latest Fight with Adidas Over Their Rival Knitted
Footwear Technology. The Fashion Law
5. Thomasson, E. (2020, June 30). Adidas human resources head steps down after race row.
Reuters
6. Carretero, A. (2020, Jan. 22). Nike outranks Adidas in its own home: sells more footwear than its
arch-rival. MDS
7. Thomasson, E. (2020, January 28). Adidas to launch new fabrics from recycled ocean plastic,
polyester. Reuters
8. Thomasson, E. (2019, December 19). Adidas and Beyonce to Launch Gender-Neutral Collection.
Reuters
9. Leen, R. (2019, December 20). Adidas And Beyonce To Launch Gender-Neutral Collection.
British Herald
10. Smith, E. (2020, April 27). Adidas says first-quarter profits fell more than 90% due to
coronavirus store closures. CNBC