Adidas is one of the leading companies in the world that specialize in the production of wide variety and high quality sportswear and sports equipment. The head office of the company is located in Germany and has good brands through which it promotes its products. The company is carrying on its operations by using the three brands names of Adidas, TaylorMade-adidas Golf, and Reebok. The company is widely operating in Europe, North America and Asia. Adidas has a strong work force of around 39,000 employees working in different parts of the world. The company has its operations in Europe, US and Asia in more than 150 subsidiaries and are purely focused on manufacturing.
Adidas focuses on sports and the brand specializes in footwear, apparel and accessories. Adidas is very popular with the sports division where the brand image of the company is promoted in sports like running, football, basketball, tennis etc. Reebok is mainly focusing on the style and its products are related to sports, fitness and casual footwear, apparel and equipment. The brand TaylorMade-adidas Golf offers products related to golf clubs, accessories, footwear and apparel. Majority of the goods of Adidas are manufactured by other companies. In order to minimize the cost of production, Adidas has outsourced its major portion of manufacturing to a different company situated in Asia.
Ansoff Matrix Analysis of Adidas
The Ansoff matrix has four strategies based on the products and customers. Along with the strategies and their positive implications, there are also few negative factors for these strategies. With this type of matrix there will be several options for the company to decide what product to sell to which customers. According to Ansoff Matrix, the companies should consider the options are at a wide and broader perspective of the market and its operations. The strategies devised may not be suitable for all the market and in some cases it may have a huge positive impact on the sales and profits of the company. The companies can implement different strategies in various markets across multiple geographic regions. The strategies of the Ansoff model are market penetration, market development, product development and diversification. The Ansoff matrix helps businesses decide their product and market growth and strategy.
Due to the well known brand image of Adidas and other products, penetrating into new markets will bring lot of benefits for the company. The company should not alter its products to enter the new markets instead it should use the existing products and customers. By penetrating into new markets the company can improve its sales without having any impact on the strategies implemented by the company to market the products. Adidas can penetrate into the new markets by attracting the customers of the competitive company, assuring the customers about the quality of the products and providing excellent customer service. It can also attract new customers who are not at all using the products by devising attractive advertisement campaigns and offering special prices. Penetration need not be into the new markets, but within the existing customers and the market, the company should be able to retain the current customers by making them use the products more, giving loyalty schemes and memberships etc. Adidas can also be more effective in increasing its customer base by dynamic advertisement campaigns that will dominate the competitor in the present market. Pricing can be considered as one of the factor for penetration. All these can be done by positioning the brands properly in the market.
The strong presence of Adidas in markets like Asia, Europe, Latin America and North America can now expand its operations to different markets and also to specific countries where the products are not available. In this attempt Adidas has lot of opportunities to expand to new markets especially the Indian market, Middle East, African markets and few other countries. With the existence of different brands in various countries, Adidas should identify the markets where it can expand with less effort in terms of finance. As far as the market development is concerned, Adidas should try to implement newer strategies by improving the product quality, changing the packing system, new ways of distribution having collaborations with local companies in going to new markets.
Particular concentration on new markets also is beneficial for the company if it intends to improve the sales and profits. Markets where Adidas does not exist now should be analysed and the products should be launched there. By doing this, Adidas can expand their business in different geographical segments. As the brand is being promoted by various sports personalities in few countries, it should think of identifying sportsmen in different countries and see to it that the brand is being promoted by that particular sportsman. The best example for this is the Indian market where Sachin Tendulkar who is a famous cricketer can be used by the company in entering and improving the sales in the Indian market. Similar strategies can be used in different countries. Different sales and marketing techniques can be used by Adidas to improve the market segments.
It is well known that Adidas has various technological tools to develop new products and this will allow Adidas to introduce new products according to the needs of specific target groups. So the company can increase their profits by introducing new products to their existing customers. This strategy can also useful when the company enters into the new markets. To attract the customers, products can be developed according to the tastes and the likes of the customers. By using this strategy, the company is going to sell the new products to the existing customers only and in this process, the old products have to be redesigned and made more attractive so that the customers are attracted and the sales improve. Adidas can announce certain offers while the new products are being introduced which will attract both the existing and new customers. It can now identify specific target groups like children, middle aged people, middle class people in their markets and design products that are affordable by them and they start buying these quality products instead of any inferior quality product locally.
Diversification strategy is considered as a risky strategy because the companies may incur huge losses if they diversify without knowing what kind of business will help the company achieve maximum profits. Adidas can diversify its activities into various segments where the company has to either go with the existing products into new markets or with new products into new markets. For Adidas, the diversification strategy can be one of the suitable strategies if it can keep its cost in control as the diversification process involves lot of financial risk. As the company is currently strong financially it should try to understand that with new investments in new markets, the benefits also should be analyzed and then a decision about diversification should be done.
Implications of Ansoff Matrix Analysis
The strategic options that Adidas has considered may change the decisions of the management. The company cannot just take the suggestions, but it should gauge whether the strategies can be implemented in the practical business environment. We shall discuss in brief the implications of the strategies that we have discussed above relating to the Ansoff strategic model.
Implications of Market penetration and Market Development
The market penetration and market development will have positive and negative effects on the company. Initially, Adidas is a company that already exists in many markets and if the company want to move into new markets lot of efforts should be taken in terms of employment generation to recruit employees in the new markets. If they enter the new markets and the results are not up to the expected levels, then the chronology of the operations within the organisation will be disturbed which can cause confusion within the employees and they may feel insecure, as result of which there may be high attrition rate and there will be financial burden on the company in recruiting and training new employees. Lack of coordination between different branches within the same market and different markets may exist. Social responsibility also plays an important role in the new markets and the company has to divert funds for social service activities thereby resulting in reduce profits. If Adidas is wiling to enter new markets it should be willing to spend more money during the initial stages of development and if it can afford to spend, then the company will be successful. As marketing is required for entering new markets, suitable brand ambassadors should be selected to introduce the products and if the selection of this ambassador is not proper then the product would fail and finally the brand image of the company will be destroyed. Careful financial planning should be done in gaining profits where the complementary gifts offered to customers are expensive. If the offers are attractive then the company can gain more market share and will give a tough fight for the competitor. When Adidas enters new markets, it can target specific companies that are inferior to them, but which hold a good market share. This can be encountered with aggressive campaigns and advertisements which will definitely increase the market share of Adidas. Adidas can acquire small companies that have a good image in local markets and by doing so Adidas will easily and quickly move into the many markets and the quality of the product can also be upgraded by using the technology that Adidas has, giving more customer service, more designs for different categories of people and become successful in new markets. By using the new distribution channels, the company can make the products available to all the customers which would be an added advantage for the company in reaching a vast majority of people in different markets.
Implications of Product Development and Diversification
If Adidas has to consider the product development and diversification strategy, it is clear that the product development would be beneficial for the company rather than diversification. As developing a new product involves lot of expenditure, technical expertise, and Adidas can make use of the existing technological advancements that it has to develop new designs and products that will be suitable for different markets and attract more customers. Adidas business operations over the internet also can be effectively improved if the technology is used to develop the products required by the customers and are available in the retail stores immediately. Work force with high skills should be recruited and this will prove to be expensive and so the amount of business should be relatively developed to gain maximum profits.
If the diversification strategy is implemented, Adidas can have risk because of huge expenses and reduction of core business activity. If Adidas diversifies in the same activity it is beneficial or else it may may risky for the company. Entering into business segments without proper analysis is going bring lot of problems which has happened with the Reebok brand that Adidas has bought long back. Even though, it has diversified into the same activity, it is not productive.