Note for GBA 490 with Professor Drnevich at UA-External Analysis of Addidas
Note for GBA 490 with Professor Drnevich at UA-External Analysis of Addidas
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Date Created: 02/06/15
Macro Environment Analysis Relevant factors in the macro environment affecting the footwear industry include higher fuel and material costs weak US dollar rising labor costs in China increased retail demand for discount shoes and a drop in consumer spending in reaction to the recession Footwear sales are threatened by the surge in consumer frugality caused by the weak economy Changes in societal values dictate product development and innovation The weak economy is leading to a societal value shift Because conspicuous consumption is no longer acceptable consumers no longer feel good about expensive brands consumers are increasingly feeling good about getting the best value making the best choice or not spending at all There is an increase in health and wellness concerns among US consumers opening up new growth opportunities for the footwear industry Manufacturers such as Reebok and Sketchers are taking advantage of this new opportunity by developing footwear with inherit health and wellness benefits in reaction to societal values weighing a higher level importance on health and wellness The US s regressive and punitive import duties on footwear further weaken the consumer economy and pose a threat to the footwear industry Implemented in the 1930 s aimed to protect domestic manufacturers from cheaper imports US footwear retailers are facing economic stress losses in profitability job cuts and bankruptcies due to the dropoff in consumer spending Industry Analysis The five forces model analyzed the attractiveness of the footwear market and defined the key players as footwear retailers buyers as individual enduser consumers and suppliers as footwear manufacturers Evaluation of the five forces model found the footwear industry to be unattractive due to its strong competitive rivalry moderate buyer and supplier power in the market and strong threat of new entrants Footwear is a basic necessity therefore the threat of substitutions is limited Although there is a degree of substitution between market segments the threat of substitutions in the footwear market is moderate to weak Competitor Analysis As a part of the global market of sporting goods and apparel Adidas faces some stiff competition including Nike Amer Sports and Callaway Golf These three competitors all have their own strengths and weaknesses that differ them from each other in the global market For instance Nike s strengths are that they are very competitive in their marketing strategy and have an excellent research and development team that is displayed in their innovative product line They also have the competitive advantage of having very low costs of production that is crucial to their huge profit margin as a result of selling their product for a higher price as to portray value of their product On the other hand Nike also has some devastating weaknesses that include a low diversity range of products their income is heavily dependent on market share and leverage but if the market took a hit Nike would result in an immense loss Another drawback of Nike is that they sell most of their products through retail stores owned by other companies that are putting a lot of pressure on Nike to reduce the price to become lowprice competitive with other brands that are selling more for a lower price In recent years Nike s portrayal of a high value product has not been a sustainable competitive advantage especially with the global economy being in trouble Nike s main business strategy is low cost high price They can accomplish this by creating a buzz about their product that makes people believe that they are worth more than they actually are This is done through extensive research and development of consumer desires and the popular culture that is portrayed to be cool Callaway Golf is also a major competitor in the global sporting goods and apparel market Their strengths that make them a viable company is their market leadership in a wide variety of products over the past seven years which contributes to their diverse range of product offerings that then results in their variety of prices for different products They have equipment for amateurs and professionals that are both substantial for the needs and desire of the consumer at an affordable rate The result of this is their virtually debtfree company that gives them a competitive advantage in most aspects of the market more options for their product line and it gives them more exibility when they are acquiring companies These strengths don t come without weaknesses Callaway Golf s weaknesses include unorganization in managing operations which are solely resulting of the lack of organization among the firm Another weakness is that they can experience seasonality in sales because in the cold months less people are going to be buying golf equipment and therefore Callaway will be selling less golf equipment Amer Sports a Finnish organization and the organization that acquired Salomon Winter Sports and Mavic Bicycle components from Adidas in 2005 strengths include well recognized brands global recognition of the brands that they own and they offer a balanced product portfolio which consists of a variety of winter summer indoor outdoor individual and team sports equipment and apparel The last strength is their most viable source of business in that it provides them with sustainable business year round Their weaknesses include insufficient supply chain management they have not set up longterm relations with global retailers and they do not have a high knowledge of consumer based product need and desire Key Factors for Successfully competing in industry Traditional advertising has become less effective as the advertising market place becomes more fragmented and the consumer audiences for individual media information sources shrink and disperse Firms will have to adapt to this shift in media preferences by integrating marketing activities WordofMouth is a key part of brand and marketing strategies have added value for marketers and consumers Growing web communications and communities offer an inexpensive and easy way for footwear marketers to interact with their customers Nike implemented wordofmouth marketing by creating a Facebook page Nike s Facebook page is one of the most popular footwear pages with 15 million followers Overall Attractiveness The weak economy is giving rise to more consumers implementing moneysaving behaviors threatening footwear sales Footwear replacement is declining resulting from an increase in consumers repairing shoes as a cheaper alternative to replacement Although there are difficulties posed by the recession the current economy also provides an opportunity for companies to reevaluate brand strategies and reconnect with core customers Adidas AG s rede ned Reebok s brand positioning by launching their new EasyTone product line The emergence of toning footwear is now a key driver of growth for the Us footwear industry as well as the best selling segment in footwear Toning footwear could present firms with an opportunity to offset the threat of sales posed by the rise in frugality in reaction to the weak economy The opportunities of the sporting goods and apparel industry that can be capitalized on start with the new products that would create a desire and a feeling of need in the consumer s mind This can be achieved through new and innovative products that produce proven results that are desirable by the consumer Another major opportunity is to increase the amount and range of sporting goods and apparel s product line An opportunity that is crucial to the success of Adidas is the growing concern for personal health and wellness This could be capitalized on by producing a product line aimed at the average consumer that doesn t necessarily participate in competitive sports but more so of personal improvement like working out and running The product line should consist of footwear aimed more towards running shoes that provide additional comfort but also provide the support a moderately intense runner would need The other part of the product line should include footwear that is more aimed toward comfort while doing somewhat moderate to low impact exercise and clothing that makes the consumer feel comfortable while being active Overall the major opportunity of the external industry is to market products towards the general consumer that wants to improve on their health and wellness In the external environment there are many threats that could devastate a company The major threat that needs to be taken into consideration is the intense rivalry among the athletic equipment corporations The fact that Nike is the number one recognized brand in the world is going to be a major fact when trying to improve on Adidas market share Another threat is the pressure that retailers have put on footwear and apparel companies to be more competitive in the lowprice market which would have a very adverse effect on the profit margin of Adidas In recent years it has been proven that consumers are giving up brand recognition for price advantage this act by consumers as a whole is a threat for Adidas with their moderately high prices but also for the competition and their high valued line of products A threat that is going to affect Adidas more than it is now is the seasonality of sales In the past couple of years the seasonal sports that have been most profitable to Adidas has been cut short due to the fact that it has been colder for longer and when it gets hot it is almost too hot for most of their target market to be active outside Works Cited Ayling J 2010 ANALYSIS Toning shapes up athletic footwear sector Just StyeCom Retrieved from One Source database Footwear Industry Profile Global 2010 Datamonitor PIC Retrieved from EBSCOhost The Global Footwear Market Athletic and non Athletic Shoes 2009 Packaged Facts Retrieved from MarketResearchcom Academic
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