SCOPE OF THE FIRM
VERTICAL INTEGRATION STRATEGIES (EXISTING MARKET/ DIFFERENT STAGE OF PRODUCTION)
A vertical integration strategy describes “The degree to which a firm owns its upstream suppliers and its downstream buyers” (Blackwell Reference Online, Vertical Integration Strategy). The purpose of vertical integration is to increase the control of the stages of development.
In the early beginnings Adidas produced all the shoes and apparel on its own. Through the huge expansion in the last decades Adidas does not produce all their apparel on its own. Today Adidas owns 9 own factories where it produces some of its products. Further, it has around 615 main suppliers from all over the world. Production is in Europe (27%), Asia (51%) and America (22%). Adidas has now switched from its past vertical integration strategy to the outsourcing in production and manufacturing. Most of the products of the company like sports shoes, apparels, accessories and equipment are manufactured in the Asian countries. The reason for outsourcing the manufacturing is the lower cost of raw material and labor in Asian countries. In 1993, Adidas moved its production overseas to Asia in order stay competitive in the industry.
Even though Adidas has outsourced its production and manufacturing but the design and development process of all the products is still based in Germany.
The Challenge due to Outsourcing
The Adidas product line includes more than 20,000 items, from soccer and inline skates to outdoor jackets and snowboards, with thousands of product variations. To keep up with market demand and competition, the company changes its product range twice a year. The change in the product range depends more often on the availability of the new technologies and the also on the product range and technology of the competitors. Adidas also designs products for local, vertical and niche markets. Developing this complex mixture of products means the... [continues]
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