Reference no: EM132243750

Porter’s Five Forces Analysis Of Adidas

In order to analyze competition of a business we use the Porter’s Five Forces, this helps with explaining industries’ waycof being able to maintain profitable levels. This model will help any business with identifyingcthreats to their company by breaking it down into distinct categories and productively give an overall structure for strategic decision-makingcwithin the company.

FIVE FORCES

Barriers to entry

While a brand cancenter with a small capitalcon a local scale, to grow a brand the size of big companiesclike Adidas requires a very large investmentcwhich can be understood from the size of its productioncand supply chain. There are several factorscrequiring large investment like technology, skilled humancresources, marketing, advertisingcetc. So, unless someone has enough capital to spendcentering the industry would be difficult. Moreover, one cannotcbuild as much brandcequity overnight. It also takes time as well as efforts to buildcas much brand equity. All these factorscmoderate the threat arising from any newcplayer trying to enter the industry.

Barriers to entry- Low to moderate

Intensity of rivalry

Apart from the mainccompetitors like Nike, Puma and Under Armour there are several othercsmaller competitors which add to the level ofccompetition in the industry. While the level of saturationcin the industry has grown, the existingcplayers are also engaged in an intense battle for marketcshare. All the brands are investingcheavily in marketing and spending billions on advertisingcand sponsorships. While the number of top brands isclimited, still the level of competitioncin the industry is intense.

In order for adidas to keep succeeding in the battlecthey should spend more on marketing and brandcbuilding, sponsorships, tie ups and long termccontracts and no compromise oncproduct quality.

Intensity of rivalry – High

Supplier power

Despite the important rolecof suppliers in the industry, Adidas’ bargainingcpower is very low which is becausecof a large number of suppliers andcsmaller size. Moreover, it is easier for the brands tocswitch to new suppliers. The supplierscare distributed globally and singly none of them can apply pressurecon the brands. Most of the production is outsourced. They have acglobal and multilayered supply chaincwith several types of suppliers in the chain, some of which are directccontractors. As a result, companies get to set the rules of thecgame including labor cost and productcquality standards and the suppliers arecrequired to comply with. Any well-establishedcbrand like Adidas, finding the suppliers for standardcproducts is not very difficult.

Supplier power – Low

Buyer Power

The bargainingcpower of buyers in in this industry is low tocmoderate and while the individual buyerscdo not hold any significant clout, as a group theycexercise somewhat significantcinfluence. Adidas has a significantccompetitor in Nike and apart from it there are other big and small competitorsclike Under Armor and Puma. There are severalclocal and international brands competing forcmarket share in this industry. The switchingccosts are low for the customers. However, this factor to a largecextent gets moderated by the product quality and marketing. Companiescwhich are focused on product quality, design and performancechas been able to build an impressiveclevel of customer loyalty. Hence thecbargaining power of the customers getscreduced and becomes low to moderate.

Buyer Power – Low to moderate

Threats of Substitutes

There are smallcand large; local and international competitorscwhich offer products under a wide rangecof prices. Some of them cater to the needscof the high-end customer whereas the local competitors offercsubstitutes at lower prices. The threat from the substitutecproducts is moderated by the quality of productscand marketing efforts of Adidas. In order to further moderatecthe threat, Adidas has focused oncmarketing in the metropolitan marketscsince a large part of itsccustomer base lives there.

Threat of Substitutes - low to moderate

In conclusion, the sportswearcdepends on the marketing variety, innovation and endorsements of professionalcathletes. All brands incorporate the same strategiescwith slight variations. Adidas started off with the intentioncto help athletes, but with death of founder of the company, companyclost the vision for some time. Now with the rightcacquisitionscand merger with other brands they regainedcthe leading position. They are leading brand in European markets and giving tuff competition to Nike in North America markets as well. The industrycis favorable for Adidas as muchcof the forces are low in power and give immensecadvantage to the company.