Strategic Analysis of Adidas Ag

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Strategic Analysis of Adidas AG

Table of Contents

Sections| | Pages|
Ⅰ.| Introduction | 3|
Ⅱ.| Suitability Evaluation| |
| 1. Strategic Position| 3|
| 1.1 Competitive characteristic| 3|
| 1.11 Five Forces Framework| 3|
| 1.2 Strategic capabilities| 5|
| 1.21 Dynamic Capabilities| 5|
| 1.22 VRIN| 5|
| 1.3 Vertical Integration| 6|
| 2. Strategic options| 7|
| 2.1 Market development| 7|
| 2.11 Market Driver| 7|
| 2.12 Competitive drivers| 8|
| 2.13 Cost drivers| 8|
| 2.2 Product development| 8|
| 2.21 Product innovation| 8|
| 2.22 E-Business development | 9|
| 3. Method| 10|
| 3.1 Merger| 10|
| 3.11 Motivation| 11|
| 3.12 Strategic Alliances| |
Ⅲ.| Acceptability Evaluation| |
| 4. Risk| 11|
| 4.1 Reputation risks| 11|
| 4.2 Financing and liquidity risks| 12|
| 4.3 Risks related to rising input costs| 12|
Ⅳ.| Feasibility Evaluation| |
| 5. Integrating resources| 12|
| 5.1 Vertical Integration  | 12|
| 5.2 Logistic Outsource | 13|
VI.| Conclusion| 13|
| Appendix 1| 14|
| Appendix 2| 20|
| Reference | 21|

Ⅰ. Introduction
Adidas AG is the largest sportswear manufacturer in Europe and the second biggest sportswear manufacturer in the world. Adolf Dassler registered it in 1948. The aim of this report is to critically analyze the strategic options of Adidas AG, in order to accurately and completely understand the concept of strategy and organization. The analysis will be based on three evaluation criteria, (i) suitability; (ii) acceptability; (iii) flexibility. The first section – suitability - would be an analysis of the competitive characteristics of the company, strategic capability, market development, and production development and merger theory. The tools of analysis used are the theory of five forces, vertical integration, theory of VRIN. The second section would analysis the reputation risks financing and liquidity risks, and focuses on the stakeholders and risks related to rising input costs. The last section would deal with the integration of resources of Adidas AG. Ⅱ. Suitability Evaluation

1. Strategic position
1.1 Competitive characteristic
1.11 Five Forces Framework
Figure 1 below represents five forces framework which provides an analysis of a competitive industry situation. It identifies the five main sources of competition, the bargaining power of suppliers and buyers, the threat of potential entrants, threat of substitutes. Grundy (2006) states that a viable strategy should be proposed to evaluate the strength and importance of these five different characteristics to different industries.

Sources: Johnson et al (2011)
Figure 1: Porter’s Five Forces Model
Competitive rivalry:
The biggest competitor of Adidas AG is Nike which controls more than 33% market shares of the world (Dogiamis & Vijayashanke, 2009). Other prominent competitors include Puma, New Balance and Li Ning which is the largest local sports-good brand in China. However, Adidas AG is resisting the competition through its innovative strategies it market-interaction strategy and its cooperative strategy. Substitutes:

Competitors of Adidas AG can rapidly produce substitutes for products of Adidas AG. Consumers will easily switch from one brand to another if there is even a small price difference. In order to keep their products innovative and novel, Adidas AG has established a specific innovation department to create new products with advanced technologies that cannot be easily substituted by a cheaper and inferior brand. Potential entrants:

To enter the apparel and footwear industry, one needs a higher level of initial capital investment. In addition, one also needs high degree of innovation in product and higher advertising costs. Adidas AG continually update the quality and style of their products to keep their market and the company insists on...
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