Industry Analysis of ADIDAS using Porter’s Five Forces Model
1. Degree of Rivalry of ADIDAS
Adidas is competing in the market with many rival firms including the world leaders Nike and PUMA. The rivalry among existing competitors is pretty high in the sports and footwear industry. As ADIDAS deals with products of low product differentiation and the switching costs are low, the degree of rivalry is so high. The diversity of rivals, that is the rival firms like NIKE, PUMA are of different cultural, historical and philosophical backgrounds and so the rival moves are very difficult to predict. However, Adidas has adopted several strategic measures for their market growth such as acquisition of an existing competitor, building partnership etc. ADIDAS has grown into a world leader through several acquisitions; namely Sports Inc., Salomon AG, Reebok etc. In 2005, the ADIDAS acquired world’s third sports brand, REEBOK and this was a remarkable event in the history of the company, as it paved the way for the expansion of its market share. The Company ADIDAS has also benefited from the strategy of on-line sales. Though stiff and strict competition exists, the company growth is based on its brand-equity and brand identity.
2. Threat of Substitutes
The substitutes of Adidas products such as NIKE, PUMA etc. is also affects the market growth of Adidas. The price of its substitute products often affects the products of ADIDAS, either in a positive or a negative way. When the price of the substitutes is low, the demand for the Adidas product will be low, and vice versa. That is when switching cost is low there is a higher tendency to lose its customers. However in certain circumstances buyer’s choice purely influences the buying decision and its demand. The degree of threat of substitutes is low in the case of Adidas.
3. Bargaining Power of Buyers
Bargaining power of buyers of Adidas products tends to be high these days. One of the reasons for this is that the...
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