Adidas SWOT 2024 | SWOT Analysis of Adidas

Company: Adidas Group
Founder: Adolf (Adi) Dassler
Year founded: 1924 (as Gebruder Dassler Schuhfabrik), 1949 (as Adidas)
CEO: Kasper Bo Rorsted
Headquarter: Herzogenaurach, Bavaria, Germany
Type: Public
Ticker Symbol: ADDYY
Market Cap (April 2022): € 43.3 Billion
Annual Revenue (FY 2021): € 21.2 Billion
Profit | Net income (FY 2021): € 2.1 Billion

Products & Services: Sports Apparel | Football Boots | Basketball Shoes | Running Shoes | Sports Bags | Glasses | Hats | Headbands, and Wristbands | Hoodies | Yoga Pants | Shorts, T-Shirts | Jackets
Competitors: Nike | Puma | Under Armour | Callaway Golf | Fila | Converse | New Balance | ASICS | Lululemon Athletica | VFC | Victoria Secrets

Did you know both Puma and Adidas belong to Dassler brothers?

In 1947, the brothers split up and opened their separate companies, which later became the biggest business rivals in the sports apparel industry.   

Adidas Strengths

• Brand Value: Adidas is one of the most valuable brands in sports. According to Forbes, it is ranked at #3 position (Nike at # 1 and ESPN at # 2) with a brand value of $12.9 Billion. In 2020, Adidas was ranked the 51st most valuable brand in the world. [1]

• An Iconic Brand with a Prestigious Legacy: Adidas has nurtured a strong and prestigious legacy and heritage over its long, illustrious history by influencing and shaping numerous aspects of society across the world.

For example, the company influenced sports in the 70s and shaped the hip-hop culture in the 80s. Its iconic three-striped tracksuit and three-leafed motif logo transformed the brand into a cult, particularly among urban youth.

• New Products Innovation: Since its founding, Adidas has prioritized the quality of its products over everything else. In 2021, EUR 130 million was invested in R&D (0.6% of its annual net sales) and EUR 115 million in 2020. High-quality, innovative products are one of the driving forces behind its ever-growing customer base. [2]

• Diversified Portfolio: Even though the Adidas brand is restricted within the sportswear industry, the company’s products are diversified. It offers multiple products that are designed to cater to a wide range of sports, including footwear, apparel, and hardware accessories. Footwear represents 53%, Apparel represents 41% and Accessories and Gear represents 6% of Adidas annual sales of € 21.2 Billion. 

• Young Customers prefer Adidas: The consistent focus on product quality and customer experience has enabled Adidas to nurture a global and loyal customer base, particularly teens and young adults between 16 and 24 years in urban areas.

• Effective Supply Chain Management: Supply chain management is vital in the success of global companies, particularly for Adidas, since it outsources 100% of its manufacturing to independent manufacturing partners. According to its annual report, Adidas works with 114 key strategic manufacturing partners to ensure control of the entire supply chain.

• • Footwear – Adidas produced 340 million pairs of footwear in 2021. About 96% of total footwear volume was produced in Asia and rest from Europe and the Americas. Indonesia is the largest sourcing country representing 36% of total volume, followed by Vietnam (30%) and China (15%). 
  • Apparel – Adidas produced 482 million units of apparel in 2021. 91% of total apparel volume from Asia and rest from Europe, Americas, and Africa. Cambodia is the largest sourcing country representing 21% of produced volume.
  • Accessories & Gear – Adidas produced 116 million units of accessories in 2021. About 69% of gears (bags and balls) were produced in Asia. China represents the largest sourcing country (34%), followed by Turkey (29%) and Pakistan (15%).

• Strong Financial Position: Financial capability is critical in protecting market share and long-term profitability and sustainability. Adidas is among the most financially stable companies globally and utilizes its financial superiority to fend-off competition from other global companies such as Nike and Puma. In 2021, Adidas’s currency-neutral revenue grew by 16% from EUR 18.4 Billion to  EUR 21.3 Billion. 

• Strong & Diversified Distribution Network: Adidas has several distribution networks, including over 2300 company-owned retail stores, over 14,000 mono-branded franchise stores, and over 150,000 co-branded, retail partners and wholesale stores. In addition, eCommerce platforms increase sales by providing different channels to reach target markets and sell directly to the consumers within these markets.

• Effective Marketing Strategy: The strength of the marketing strategy used by Adidas stems from its perfectly balanced mix of promotion, advertisements, and the use of digital technology.

• Branding through international sponsorships: Sponsoring global organizations provides an opportunity to advertise directly to sports lovers and fanatics globally. For example, the marketing campaign for the FIFA World Cup in Russia, NBA, Olympics, Boston & Berlin Marathons, UEFA Champions League etc. 

• Sponsorship of high-profile athletes such as David Beckham, Lionel Messi, Sachin Tendulkar, Andy Murray, Candace Parker, Patrick Mahomes, Aaron Rodgers, Alexander Zverev etc. strengthens brand desire.

• Celebrity Endorsements: Adidas has strived to maintain and enhance its recognition as a youthful and urban brand through endorsements from celebrities. Adidas has been endorsed by a long list of movie stars and music hit-makers such as Beyoncé and Kanye West.

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Adidas Weaknesses

• Supply Chain Shortage: Adidas outsources the production of most of its products to 3^rd party or independent manufacturing suppliers, mainly in China, Cambodia, and Vietnam. It has exposed Adidas to the risk of overdependence on foreign suppliers.

According to Reuters, these suppliers are unable to keep up with the growing demand for mid-priced apparel in the North American market, resulting in a reduction in sales growth by 1-2% in 2019.

• Expensive Products: Adidas charges a premium or high prices for its products, which has alienated low-income consumers. Only upper- and middle-income group customers can afford over a $100 shoe.

• Limited Product Line: Adidas Group has only Adidas brand and Reebok brand under its portfolio, which has restricted the company within sports footwear, sports apparel, and accessories. Therefore, a decline in demand for sports-related products can be disastrous to Adidas.

• Links to Forced Labor: Adidas was among 83 multinationals that were linked to forced labor in factories across China by ASPI. Any association with forced labor not only exposes the company to legal risks but also erodes trust among consumers. [3]

• Patent Legal Battle: Losing in court to a competitor undermines confidence and also takes away a source of revenue. In June 2020, Adidas lost a long-running legal battle to Nike over their respective knitted footwear. Adidas has lost the right to produce or sell it and the confidence of customers who loved that specific footwear. [4]

• Allegation of Racism: Adidas has focused on building a brand that transcends racial lines. This reputation was tainted by allegations that Karen Parkin, the head of human resources, mishandled cases of racism at the company. She was forced to step down to pave way for investigation. [5]

• Laxity in Home Market: Companies should defend their home market at all costs. For years, Adidas has neglected its home market and allowed Nike to increase its market share. In January 2020, Nike sales in Germany surpassed Adidas for the first time in history. Adidas is also losing key markets across Europe with Nike’s revenue from the region expected to increase to $10 billion by the end of 2020. [6]

Adidas Opportunities

• E-commerce: In recent years, the number of consumers who shop online or use e-commerce sites has increased significantly. Adidas incorporated various e-commerce such as Instagram’s checkout feature into its distribution network, leading to over all 19% in online sales (€ 3.9 Billion) in the fiscal year 2021.

Adidas can replicate this success in other social media platforms such as Facebook and Snapchat. Its e-commerce is expected double to €8 billion by 2025.

• Growing Sportswear Industry: Sports and fitness have grown in popularity with no sign of slowing down soon, which means there will be a consistent increase in demand for sportswear products and assortments.

• Investing in Smart Materials: Technological advancements have enabled the development of new synthetic materials that are better and more beneficial than traditional materials.

Continual and increased investment in technological development and the manufacture of new materials can provide Adidas with an edge over its competitors. Adidas announced that it will expand the product lines using newly launched fabrics made from recycled marine plastic and polyester. [7]

• Culture of Yoga Pants: Increased health consciousness, change in preference, and tastes among consumers have increased demand for sports-related products. “Culture of yoga pants” is redefining our sports apparel industry.

• Increasing Demand for Premium Sports Products: Improved economic situation in developing countries has increased purchasing power and demand for premium products. Adidas can capitalize on this by expanding into countries such as India, where discretionary income is expected to increase by 45% by 2025.

• Diversification into sporting equipments: Even though Adidas has a diversified portfolio, there is still room for expansion of its product line.

For example, Adidas can differentiate itself from Puma and Nike by expanding its product line to include sporting goods such as tennis rackets, golf clubs, hockey sticks, and so on.

• Global Expansion: The rapid growth of emerging markets in Africa, Asia, and South America provides Adidas with lucrative opportunities for expansion.
• First Store in Singapore: The world’s second largest athletic brand opened its first-ever store in Singapore – and it’s the largest one yet. The store is named ‘Homeground’ and is located at Knightsbridge, Orchard Rd. It’s a massive three-story store featuring Adidas’ largest and most popular athletic apparel, shoes, and accessories. Plus, the store also features exclusive products only available in the brand’s Southeast Asia corridor. As soon as you enter the store, you’re greeted by a huge 3D LED TV screen displaying the brand’s promotions and latest marketing campaigns.

• Product Development in Space: In 2019, Adidas has partnered with International Space Station National Lab to explore new product development “Boost midsole creation” process without gravity.

• Shoe Subscription – In the UK, it is estimated that over 300 million pairs of running shoes are thrown away every year. Adidas engineers are trying to make the entire running shoe (midsole foam, outer sole, knitted upper, an insole, laces, torsion bar) from the same material (usually, Adidas’s running shoes include over 12 different materials).

Once the shoe is worn out, it can be completely melted and recycled to new shoes. This concept is known as FutureCraft.Loop. Who knows – this can very well turn into a shoe subscription model in the future?

• Gender-Neutral Collection: The demand for gender-neutral shoes, clothes, and accessories is unmet in many markets across the world. Adidas struck a deal with Beyonce to design, produce, and sell gender neutral hoodies, jumpsuits, cargo pants, cycling shorts, and so on. [8]

• Expand through Strategic Partnerships: Adidas recently partnered with the Ivy Park brand. This strategic partnership provides a perfect opportunity for Adidas to attract more female customers and try to catch up with Nike and Puma who have more female customers. [9]

• Augmented Reality (AR) Tech Company Teams Up with Adidas: After raising $45 million, the AR technology startup company, Mojo Vision, announced that it would be collaborating with Adidas to boost their new AR contact lens. The company stated that partnering with athletic and fitness giants such as Adidas will help them streamline the technology, blending athletic wearables with fitness tracking.

Adidas Threats

• Competition: The main threat facing Adidas is increased competition due to globalization and technological advancements, which has enabled entry and penetration of small and medium companies. This implies that Adidas has to compete against main rivals such as Nike, Under Armour, Puma, Lululemon, Patagonia while fending-off new entrants and penetrators.

• Rapid Expansion and Adoption of Ecommerce: Companies are adopting the rapidly expanding e-commerce at an alarming rate, which can pose a threat to Adidas if its main competitors such as Nike and Puma adopt e-commerce before them.

• Supplier Dominancy: The fact that Adidas outsources most of the manufacturing of its products implies that the suppliers have more bargaining power than the company. The skewed balance of power exposes Adidas to the possibility of being held hostage by its biggest suppliers.

• Loss of Trademark: In 2019, Adidas lost the three-strip logo trademark case in the General Court of the European Union, which exposes the brand to the threat of imitation.

• Technological Advancements: The threat posed by competitors increases as they become more technologically advanced. This implies that a competitor such as Nike will pose a greater threat if they become technologically advanced than Adidas.

• US-China Trade Tensions: Adidas operates globally, which implies that the company is susceptible to the reckless tit-for-tat imposition of tariffs between countries. A trade war is particularly threatening to Adidas because the US is the company’s second-largest market, yet vast majority of its products are made in China and other Asian countries. According to CEO Rorsted, currency war and tariffs pose a major threat to Adidas.

• Exchange Rates: Fluctuations of major currencies such as the Euro and the US Dollar can negatively affect Adidas’s profits since it operates in the global marketplace.

• Global Economic Uncertainty: The effects of economic slowdowns, such as lower sales, negatively affect Adidas, just like any other company. In 2020, its net income dropped by more than 90% due to recent events. Adidas could continue to lose if economic uncertainties persist. [10]

• Fake Products: According to CEO Rorsted, 10% of Adidas products in Asia could be fake. The number and quality of fake products for premium shoe brands have increased significantly in the recent past, which poses a threat to shoe-manufacturing companies.

• Loses Popularity in China: Anta Sports Products Ltd, a Chinese athletic brand is gearing to become a popular sports brand in China, as giants such as Adidas continuously lose sales in the country. The plummet in sales for the big athletic brands were a direct cause of a ban proposed by the Chinese public, demanding to shut down Adidas and Nike on allegations of forced labor. According to reports posted by the Chinese media, western athletic brands exploit minority workers in Xinjian, a cotton-rich city. According to Adidas, it suffered a sales drop in 2021.

• Lawsuit Against Adidas: In 2021, Nike filed a lawsuit against the second largest athletic brand in the world. Nike claims that Adidas has been violating its copyright over the groundbreaking Flyknit technology that Nike introduced. Nike claims Adidas has been using this technology unlawfully and has manufactured a series of shoes and sneakers with the same tech. Adidas may have to face a full blown investigation commenced by the U.S. International Trade Commission.

 References & more information

1. Forbes Ranking. (2020, May 12). Companies: Adidas. Forbes
2. O’Connell, L. (2020, April 2). R&D expenditure of the Adidas Group worldwide from 2010 to 2019. Statista
3. Mistreanu, S. (2020, March 2). Study Links Nike, Adidas And Apple To Forced Uighur Labor. Forbes
4. TFL. (2020, June 26). Nike Prevails in Latest Fight with Adidas Over Their Rival Knitted Footwear Technology. The Fashion Law
5. Thomasson, E. (2020, June 30). Adidas human resources head steps down after race row. Reuters
6. Carretero, A. (2020, Jan. 22). Nike outranks Adidas in its own home: sells more footwear than its arch-rival. MDS
7. Thomasson, E. (2020, January 28). Adidas to launch new fabrics from recycled ocean plastic, polyester. Reuters
8. Thomasson, E. (2019, December 19). Adidas and Beyonce to Launch Gender-Neutral Collection. Reuters
9. Leen, R. (2019, December 20). Adidas And Beyonce To Launch Gender-Neutral Collection. British Herald
10. Smith, E. (2020, April 27). Adidas says first-quarter profits fell more than 90% due to coronavirus store closures. CNBC

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