SWOT Analysis of Adidas (Updated 2024)

Let’s study Adidas’s SWOT analysis, a giant in the athletic wear and footwear industry, to reveal its strengths, weaknesses, opportunities, and threats.

Adidas AG is a global sportswear and footwear giant. Adolf Dassler founded the company in 1949 in Germany, and it has made sports history through invention, quality, and performance.

The three stripes are more than a logo—they represent the quality of products chosen by athletes and fashion-forward people worldwide. The company has carefully added sports equipment, accessories, and lifestyle items to serve professional athletes and fashionable individuals.

Overview of Adidas

• Product Type: Athletic Footwear, Apparel, equipment, and services
• Industry: Sportswear
• Founded date: August 18, 1949
• Founders: Adolf Dassler
• Headquarters: Herzogenaurach, Germany
• Area served: Worldwide
• Current CEO: Bjørn Gulden
• Number of employees: 59,258 (2022)
• Revenue: €5.999 billion (Q3, 2023)
• Net Income: € 270 million (Q3, 2023)
• Market capitalization: $34.80 Billion (January 2024)

SWOT Analysis of Adidas

Adidas Strengths

1. Global Presence and Distribution Network

Adidas has a distribution network of 66 centers worldwide. Adidas manages 23, while logistic partners manage 43. Adidas can address global sporting needs and tastes for a large consumer base.

Adidas’s strong distribution network, including partnerships with independent retailers, e-commerce sites, and physical stores, allows it to enter multiple markets and contact customers worldwide.

2. Digital Presence

To survive in the digital age, businesses must adapt quickly to the changing technical landscape. Adidas excels at adopting new technologies. Adidas has a robust digital footprint, including a user-friendly online retail to boost customer engagement and happiness. Adidas has recently expanded its digital presence and launched a new app. The New Adidas app gives consumers a hassle-free shopping experience, personalized services, and inspiration on sport and style.

The organization also fosters brand community on social media and uses A.R. and V.R. to enhance the consumer experience.

3. Diversified Portfolio

Although known for sportswear, Adidas has a diverse product line. The company sells footwear, apparel, and hardware items to sports fans. Adidas’s 2022 annual report shows that footwear’s 3% currency-neutral revenue increase was driven by Performance.

Despite strong Performance growth, currency-adjusted apparel sales fell 5%. Currency-neutral sales for accessories and apparel rose 19% due to increased football demand, particularly from the FIFA World Cup 2022 in Qatar.

4. Social Responsibility and Sustainability

Adidas incorporates CSR and sustainability into its business strategy. The corporation has made extraordinary environmental efforts. By 2024, Adidas will utilize recycled polyester.

Adidas may reduce its carbon footprint and save natural resources by switching from petroleum-based polyester to recyclable alternatives. The corporation aims to be carbon neutral by 2050 and cut greenhouse gas emissions by 30% by 2030 (from 2017).

5. Strong Financial Position

Adidas has maintained a strong worldwide financial position to sustain market share and long-term profitability. Because of its economic power, Adidas can compete with Nike and Puma. In Q3 2023, the company earned € 5.9 billion in revenue. Adidas AG’s net worth as of January 30, 2024, is $37.05 billion.

6. Popularity Among Young Customers

Adidas has a loyal global consumer base due to its dedication to quality and service. This is especially true for urban youth and young adults (16–24). It showcases Adidas’ youth appeal.

7. Effective Supply Chain Management

Since Adidas is the leading sportswear maker, its supply chain must be well-managed. It outsources all production to independent manufacturers. Adidas worked with 424 independent supplier facilities in 44 countries to manufacture their items by 2022.

Adidas produced 419 million shoes, 482 million clothes, 117 million accessories, and others in 2022. To offer more products at the point of sale, 32 distribution facilities serve all channels. The remaining 34 have channel- or service-specific setups to meet market needs and advancements.

8. Collaborations and Partnerships

Adidas is known for collaborating with famous designers, celebrities, and companies. These collaborations allow Adidas to make unique, limited-edition products, keeping Adidas’s products current and appealing. For example, Saudi Arabian events company Sela has announced a new strategic partnership with global sportswear brand Adidas.

9. Strong Retail Network

Adidas Retail has almost 2,000 stores, each serving a specific purpose and sector. Adidas has a global retail network. An immersive experience lets it promote and market its items directly to consumers. This improves shopping and sales.

Adidas had all these strengths. Let us examine brand weaknesses.

Adidas Weaknesses

1. Dependence on the Sports Market

Adidas relies heavily on sportswear and footwear, which is its weakness. This dependency will hurt Adidas if customer tastes change or the economy slows. Adidas may be unresponsive to business climate changes.

2. Intense Competition

Adidas faces severe competition in apparel and footwear from Nike, Puma, and Under Armour. Competitive pressure can make pricing and market share difficult, compromising the brand’s profitability.

3. Supply Chain Complexities

Adidas has a global supply chain with many suppliers, manufacturers, and distributors. This complex network is difficult to manage. Supply chain issues can hurt the company’s operations and reputation.

4. Limited Presence in Emerging Markets

Despite its global presence, Adidas has failed to penetrate several potentially profitable new markets like those of its competitors.

5. Outsourced Manufacturing

Adidas frequently uses Asian third-party manufacturers for production. Outsourcing shoe manufacturing can lead to labor issues, political instability, and supply chain interruptions, affecting pan-product availability and quality.

6. Counterfeit Products

Like other major brands, Adidas faces counterfeit items, which can damage brand image, customer trust, and revenue.

7. Slow Response to Fast-Fashion Trends

Adidas has improved its agility and responsiveness to consumer wants, but it still struggles to stay up with fast-fashion, ever-changing market trends. Due to this delay, market share may be lost to competitors who can quickly adjust to market trends.

8. Expensive Products

Adidas is typically expensive and famed for its fashionable, high-quality sporting apparel. Adidas may struggle to maintain market share and sales in a market full of bargain hunters, especially when cheaper brands with equivalent quality are available. To reach more customers, the company may need to provide cheaper options.

9. Growing Operating Expenses

As the company grows, COGS, marketing, advertising, labor, and administrative costs may rise. Adidas’ profitability may suffer if this expansion exceeds revenue growth.

10. Limited Product Line

Adidas Group focuses on sports footwear, apparel, and accessories through Adidas and Reebok. A drop in sports product sales could be bad for the corporation.

11. Links to Forced Labor

According to the Australian Strategic Policy Institute, Adidas is one of 83 corporations linked to forced labor in Chinese factories. Any such association puts the company at legal danger and may damage consumer trust.

12. Patent Legal Battles

Legal issues have hurt Adidas’s financial performance, lowering operating profit, revenue, and outlook. Additionally, shareholder lawsuits create financial risk for the corporation.

The end of the Kanye West collaboration is expected to result in a $1 billion loss in annual sales and a $250 million quarterly net income drop.

13. Allegations of Racism

Adidas promotes racial equality. However, claims against Karen Parkin, Adidas’ former head of human resources analysis, of mishandling racism incidents damaged the brand’s reputation. Parkin’s resignation to allow an investigation caused more criticism.

14. Laxity in the Home Market

Adidas has been criticized for leaving its home market, allowing Nike to grow. Nike beat Adidas in Germany sales for the first time in January 2020, alerting Adidas. The estimate that Nike’s European sales would reach $10 billion by 2020 added to Adidas’ loss of key European markets.

Adidas Opportunities

1. Expansion in Emerging Markets

With rising sports and fitness enthusiasm, India, Brazil, and Africa are prospective markets. The growing middle class and youth population in these regions and an interest in a healthier lifestyle drive sports product demand. Adidas might capitalize on this potential by localizing and expanding its retail footprint. With localized marketing efforts, Adidas might connect with consumers and grow in these regions.

2. E-commerce and Digital Transformation

Adidas can invest in its digital business as digital technology and e-commerce grow. Due to its convenience, online buying is becoming more popular. Adidas can boost online sales by upgrading its platforms, providing an effortless user experience, and using data analytics to understand consumer preferences. The pandemic has increased e-commerce, giving this an even bigger opportunity.

3. Sporting Equipment Production

Despite its apparel reputation, Adidas can make basketball hoops, tennis rackets, golf clubs, and soccer balls. Adidas might diversify its revenue streams and reduce the fashion sector’s cyclical risks with this move. Sports equipment has larger profit margins than sportswear, which might boost Adidas’s profits.

4. Collaborations and Partnerships

Strategic partnerships may encourage innovation and growth. Adidas can combine fashion and sportswear with celebrities, influencers, and other businesses to create popular items for diverse audiences. Adidas partnered with premium brand Prada in early 2020. Partnerships increase brand awareness and sales by reaching more consumers.

5. Enhanced Engagement through Augmented Reality (A.R.) Tech

Adidas can transform retail by joining with augmented reality tech businesses. A $45 million agreement with Mojo Vision promises to simplify fitness tracking in athletic wearables using A.R. Adidas wants to lead sports retail technology with this effort.

6. Embracing Sustainability and Circular Economy Practices

Eco-friendly brands are gaining popularity as people become more environmentally conscious. Adidas can capitalize on this trend by using recycled materials and designing items for recycling. Our strategy would set us apart from competitors and appeal to the growing number of environmentally conscious shoppers.

7. Personalization and Customization

Adidas might capitalize on consumer demand for individuality by delivering personalized and customized products. Adidas can increase brand loyalty and sales by customizing at scale with 3D printing and AI.

8. Exploring New Business Models: Renting or Subscription Services

Rental or subscription services can attract new customers. It could serve consumers needing sportswear for one-time activities or constantly updating their gear. By encouraging product reuse, this shift helps Adidas attract new customers and promote sustainable fashion.

9. Direct-to-Consumer (DTC) Model

Using DTC, Adidas can better manage brand experience, customer relationships, and profit margins. Adidas may gain unfiltered customer feedback and improve relationships by directly connecting with customers, enhancing customer loyalty.

10. Using Smart Material

Adidas may employ new materials and technology to improve sports gear comfort and performance. Adidas might stand out by focusing on consumer comfort and brand value.

11. Capitalizing on the Women’s Segment

Adidas has a huge opportunity to grow its market share in women’s sports apparel and footwear as more women get into sports and fitness and want stylish, functional gear. Creating products and marketing strategies for this niche could do this.

12. Gender Neutral Collections

Adidas can innovate to meet the growing demand for gender-neutral clothing and shoes. The company has collaborated with Beyoncé on gender-neutral collections to capitalize on this trend. Adidas may raise sales and promote inclusivity by offering more gender-neutral items.

13. Catering to the Demand for Premium Products

As living conditions rise in developing nations, consumers choose premium brands. Quality, innovation, and branding can help Adidas capitalize on the growing demand for premium sportswear. Adidas might increase income by targeting high-end sportswear and running shoe buyers in these markets.

Adidas Threats

1. Fierce Competition

Due to globalization and technology, sports gear is increasingly competitive. Other competitors include Nike, Under Armour, Puma, Lululemon, and Patagonia. Small to medium-sized firms can enter this market due to fewer trade barriers and e-commerce expansion. Thus, Adidas must innovate and differentiate to maintain or grow its market share.

2. Supplier Dominance

Adidas risks supplier dominance since it outsources much of its manufacturing. Adidas is susceptible to cost inflation, delivery delays, and quality difficulties due to its extensive reliance on suppliers for production. If not appropriately managed, this reliance could disrupt Adidas’s supply chain.

3. Loss of Three-Strip Logo Trademark

Adidas lost a lawsuit against Thom Browne in 2023 for copying their three-stripe symbol with his four-stripe designs. A New York jury rejected Adidas’s claims. Adidas first demanded $867,225 in licensing fees and more than $7 million in profit on Browne’s stripe design.

4. US-China Trade Tensions

Adidas worries about worldwide trade issues, especially between China and the U.S. Political conflicts might raise tariffs and product prices in the U.S., its second-largest market. Most Adidas products are made in China and other Asian countries, worsening this problem.

5. Declining Popularity in China

Adidas and other international companies are losing Chinese market share. Due to suspicions of forced labor in cotton-rich Xinjiang, anti-Western sentiment has increased calls to boycott these corporations. Adidas sales have dropped as local brands like Anta Sports Products Ltd. have taken advantage. Adidas held 9.7% of China’s market last year.

6. Lawsuits

In 2021, Nike sued Adidas for utilizing the Flyknit shoe technology without a license. This claim can result in lengthy legal battles, financial settlements, negative public attitudes, and reputational damage. Risk management must be thorough to avoid contract violations, copyright infringements, and product failures.

7. The Threat of Counterfeits

For the brand, counterfeit products are another issue. Adidas CEO Kasper Rorsted says that 10% of Asian Adidas products may be counterfeit. Adidas’s income and quality may suffer.

8. Shifting Consumer Health Trends

Health trends and athletic attire can affect Adidas sales. They must adjust quickly to market preferences and trends to keep consumers interested in their vast product assortment.

9. Economic Downturns

Luxury expenditures, like Adidas’s, might drop during recessions. Diversifying product lines and regional markets reduces the impact of these downturns on the company’s profitability.

10. Fluctuating Exchange Rates

Adidas’ foreign operations are vulnerable to exchange rate fluctuations, especially concerning major currencies like the U.S. Dollar and Euro. Exchange rate swings can hurt the company’s profits and require strict financial planning and risk avoidance.

11. Global Economic Uncertainty

Adidas can be hurt by economic slowdowns such as the COVID-19 pandemic. Adidas’s 2020 net income decreased by almost 90% owing to pandemic-related events. For ongoing profitability, Adidas must find solutions to handle economic uncertainty and secure financial stability.

Conclusion

In conclusion, Adidas has established a strong sportswear industry base and has shown determination in the face of market rivalry. Its distinctive emblem, innovation, and global presence give a solid foundation for future growth and success. Adidas must address its vulnerabilities, such as pricing tactics and supply chain concerns, to stay ahead of the curve and maximize its potential.

Adidas can increase its competitive position and maintain its excellent image by firmly addressing threats and accepting market opportunities. The brand can expand globally, retain customers, and connect more profoundly with its varied audience by developing creative goods, forging strategic partnerships, and focusing on sustainability. Adidas’s commitment to progress and improvement drives its success in this ever-changing sector.

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