Adidas. Organization structure and culture. Situational analysis "swot and pestel analysis"

AUTHOR: DAVIDSON OTIENO OMONDI

ADIDAS

Introduction

The multinational high-quality and iconic three-stripes logo sportswear, ADIDAS, serves as a global publicly listed corporation. The company has greatly influenced the field of sports, offering a wide range of products, like shoes, clothing, and accessories for various sports activities such as athletics, soccer, basketball, golf, and training. The company, like any other organization, has a small beginning in Germany and now serves over 160 countries. The mission of the company is to be the best sports brand in the world, working by this mission the company has emerged to be today’s great company known for the production of different sportswear. This study is to analyze the organizational structure which includes its type of ownership, locations, size, vision, mission, products and services provided and revenue generated, and culture of the company as well as their effect on the company’s performance. Furthermore, the study explores the situation of the company, through situational analysis.

The organizational structure of Adidas

Adidas operates with a matrix organizational structure, where teams report to multiple supervisors, and leaders (Adidas’ Organizational Structure, n.d.). Matrix structure. The matrix structure as adopted by Adidas, allows it to manage daily operations in conjunction with ongoing projects. It thus, allows the company to maintain its departmental structure while projects on the other hand continue, as well as allowing employees from different departments to work together to achieve the goal of one project. This structure fosters open communication between teams of the company and thus can help it create more innovative products and services. Adidas’ Organizational Structure (n.d) states using the matrix structure, Adidas has advantages such as having a clear project objective, efficient use of its resources, corporation across its department, transparency, and the free flow of information (Adidas’ Organizational Structure, n.d.). However, matrix structure has potential drawbacks to the company as a measurement of employees’ performance is difficult, and employees could suffer overlook as much work can course overload. Gos (2015) emphasize the main problem of the matrix is increased headcount and multiplied processes, this might become time-consuming and lead to delays in the process of project completion.

According to Aubert et al (2016), Adidas has adopted an IT multi-sourcing strategy. This strategy has helped Adidas to develop the product as per consumer preferences globally, penetrate a wider market, develop the market, and promote diversification and investment through IT. The IT multi-sourcing strategy has made the company adaptable, flexible, and effective in that it reduces internal uncertainties (Lioliou, 2019). However, the IT multi-sourcing strategy can make it difficult for Adidas to maintain the close relationship with its various suppliers, increase its overhead cost as it has to hire more staff and it can make it lose control when the service providers manage more of its services (Multiple Sourcing — The Ultimate Guide of 2023, n.d.).The IT multi-sourcing strategy has some drawbacks to the Adidas company as it leads to a lack of systematic inquiry which can make the company suffer from poor implementation of its rules and regulation. According to Sharoff and Bandi (2018), the strategy has the potential of limiting the company as it may deter the formation of definite impacts of the company on outsourcing risks.

Organizational culture of Adidas

Any organization needs a well-structured, simple, and understandable culture to retain and even overtake its competitors in the market situation, and for its success. As for Adidas, starting from the vision statement simplicity, compressive and briefness show that the organization’s culture is simple, and thus can easily deliver a sense of opinion to its stakeholders and the public in general, this makes the company earn the trust of the general public and stakeholders. Adidas has shared core values which are; COURAGE, OWNERSHIP, INNOVATION, TEAMPLAY, INTEGRITY, and RESPECT, the simplicity of these core values make the employees of the company work towards a shared goal by having relevant behaviors and also makes it identify the possible gaps between actual and desired work culture. Furthermore, the core values act as a compass direction for the company as it shows the employees what they are working after and how to go about it. Adidas also offers formal as well as informal education to its employees, this clearly shows that the leadership is generally striving for the best of the company’s high performance and achievement. The company also ensures that its leadership acts as a role model for the employees. In addition, the company impacts every employee’s potential and good morale by empowering them all to act as leaders. Adidas' strategy of attracting, retaining, and motivating, has greatly contributed to its success by making sure the company explore the different market and retains customers globally, and thus have a positive competitive state as compared to its competitors. The company’s development approach, ‘#MYBEST’, is a tool used to encourage regular high-quality conversations between employees and line managers (Adidas group, n.d). Regular evaluation of the company structure makes it easier for any shortcomings to be identified and solutions found, this ensures the company’s image is good as well as its management. The company ensures employee morale is upheld by offering necessary compensation programs.

Situational Analysis of Adidas

Part A: SWOT Analysis

Strengths

Strong brand recognition, new Products Innovation, diversified Portfolio, and digital transformation are the core strengths of Adidas; The company’s iconic three-stripe logo and numerous different product lines provide it a strong brand recognition that helps attract and thus helps in customer retention. Adidas' reputation for producing high-quality items puts it in an advantageous position as compared to its competitors. Saatchian et al (2021) state that affection for a brand has an important impact on the consumers buying habits and choice of a product. In addition, for any brand’s success, creativity and invention through experience and research play a big role.

Adidas is globally known for its cutting-edge products; this creativity and invention puts it a step forward. Since its founding, Adidas has always put forward the improvement of its product quality. According to Jain et al (2021), Adidas invented the Environmental Footprint Tool (EFT) to evaluate its micro and macro monetization environmental footprint that accounts for the complete value chain from raw material production to product use and disposal. This has positively impacted Adidas to identify opportunities to reduce its energy consumption and waste at its contract manufacturing sites.

The company’s product though dealing with sportswear items, the company’s products are diversified. David (2017) states that the strength of Adidas is largely attributed to its diverse brand portfolio The |company offers footwear, leisure clothes, accessories, and apparel. The company also offers divisive products for seasoned athletes and newcomers. This divisive portfolio gives the company the advantage of not relying on one line of products.

Adidas has successfully adopted the field of e-commerce, this has greatly impacted the company positively, as it has made it easier to explore the more divisive markets, and increased the company’s close contact with its customers earning trust and reputation for the company. Gotz et at (2018) state that digital transformation reflects the general challenges faced in the international context by checking the weakness and strengths. This has made it easier for Adidas to overcome its challenges in the international market

Weakness

Major shortcomings of the company include; dependence on the sports market, intense Competition, Limited Presence in Emerging Markets, and Slow Response to Fast Fashion Trends: Adidas' reliance on sportswear products could be disadvantageous to its ability to adapt to changes in the market as this makes it vulnerable to the shifts in consumer preferences and economic downturns affecting the sportswear industry. This can make Adidas experience a sudden downturn in sales and revenue the consumer taste and preference changes.

Adidas also faces stiff competition from international companies like Puma and Nike. This can lead to pricing and market share, maintenance a challenge, and thus decreased profitability. Although Adidas has a global market presence, it has poor penetration to underdeveloped nations’ growing marketplaces as compared to its competitors, which may limit its potential for expansion.

In addition, Adidas has been struggling to react swiftly to shifts in consumer changes in preferences and tastes.  Though Adidas has made efforts to improve its product quality and respond to consumer needs, it still struggles to keep up with fast-fashion trends and the rapidly changing demands of the market, which can affect the sales and earnings of the company. Ranjan (2016) states Adidas's great dependency on external partners in manufacturing is one of its main weaknesses.

Opportunities

E-commerce and digital transformation, product diversification, collaborations and partnerships, and gender-neutral collection are possible opportunities for Adidas; Due to advanced technology, the number of consumers shopping online has increased greatly. By partnering with more e-commerce platforms, Adidas has a significant opportunity of increasing its sales and profit by reaching many people. The company has the potential of understanding its consumers' tastes and preferences easily, by enhancing the digital consumer experience and data analytics. Gotz et at (2018) state that digital transformation reflects the general challenges faced in the international context by checking the weakness and strengths. This has made it easier for Adidas to overcome its challenges in the international market.

Adidas can increase its product portfolio by creating room for more sports brands and by bringing in new categories of products different from sportswear. Since consumers' preferences change regularly, the company should not depend entirely on sportswear. Motion et al (2006) state that Adidas offering the NZRU the opportunity for the union has greatly offered relationships that would carry the All-Blacks brand into the multinational market.

Adidas can increase its sales and awareness by collaborating with more celebrities, influencers, and other brands will help the company create more fashionable and innovative products that are more appealing and attractive to customers. This could help making Adidas in a strategically advantageous position as compared to its competitors

The demand for gender-neutral products is unmet in many markets, this leaves a big gap. Adidas could grab this opportunity by tapping this market gap to generate the company a big amount of turnover.

Threats.

Company threats include stiff competition, counterfeit products, economic downturns, and supplier dominancy; The problems of stiff competition have mainly emerged due to globalization and advancement in technology, which allows for small and medium companies into the market. Furthermore, the sportswear industry is highly competitive, with larger companies such as Nike and Puma, Adidas faces intense competition, which can lead to pressure on pricing structure and market making the Adidas company suffer from decreased sales and profit. According to Poparda (2011), Adidas' threat is mainly its status with other companies such as Reebok.

The existence of fake products can damage the reputation and image of Adidas, diminish the customers' loyalty, reduce the sales volume, as well as making the company run losses since the fake products are of low quality. This will force the company to invest in the strategy of combatting the counterfeit product which is another nonprofitable goal for the company.

An economic slowdown can make consumers reduce spending on luxury products like sportswear, affecting Adidas' sales and profitability negatively. Adidas should not depend on one line of the market by diversifying its product portfolio, in addition, it should be flexible to adopting the economic changes in the market.

Adida's dependence on suppliers for resources puts the company at risk. This can lead to low-quality supply, and increased cost of production, and any supply disruption can cause a big disaster for the company as it leads to poor business performance and product unavailability.

Part B: Pestel Analysis

Political factors

International Trade Policies, Political Stability, Government Regulations, and Corporate Social Responsibility (CSR); are the political factors influencing Adidas; the company is greatly influenced by trade policies. Adidas must constantly retain its marketing position as well as monitor trade policies and political stability for the smooth flow of its operations with no interruption. David (2017) states that external factors such as political instability have a great effect on companies’ performance.

Adidas as a company operates under government regulations such as taxation and safety laws. They should always stay updated on the changes in the law and adopt them correctly, to strictly operate under this law to maintain the company’s reputation and avoid legal punishment. In addition, Adidas is expected to operate with the observation of ethnicity and ensure fair labor practices.

Economic factors

This includes Exchange Rates, Employment and Income Levels, Market Competition, and Global Economic Growth; As a globally operating company, Adidas has to use a significant strategy in making sure it manages risks associated with the exchange rates as it experiences global exchange rate fluctuations. The company should be aware of the employment and income levels on the trends of buying habit, in that when employment is high the income level increases, and thus the volume of sales increases, while the level of sales reduces when employment is low due to low incomes.

Operating in a highly competitive market, Adidas should constantly monitor its competitor’s strategy and market shares to ensure it correctly fixes the competitive market as swiftly as possible. Adidas should monitor global economic growth and its impact on its volume of sales. For instance, during the global economic growth consumer tend to buy luxury items such as sportswear as compared to times of global economic decline.

Social factors

Changing Consumer Preferences, Social Issues and Awareness, Lifestyle Trends, and Demographics are the social factors influencing Adidas; Consumer tastes and preference change over time, and Adidas should be vigilant in striving for consumer satisfaction. Moreover, Adidas should ensure it adheres to ethical standards, and actively engage in initiatives that promote social responsibility and positive change.

The company should research the trends of the lifestyle issues; this puts it a step forward by making sure it produces the items that fit the consumers' evolved taste to that particular time. Adidas is affected by Age distribution and population growth, so it should ensure it fits in correctly.

Technological factor

These are improved technological factors like Manufacturing Technologies, Product Innovation, E-commerce Digital Marketing, and Data Analytics and Artificial Intelligence (AI); using advanced technology example use of robots and 3D printing could greatly improve Adidas. As the company can streamline its production, reduce its cost and increase efficiency. Adidas should also invest in research and development (R&D) to create cutting-edge products that meet consumers’ constantly changing tastes and preferences, such as lightweight materials. Adidas' investment in E-commerce would greatly increase the volume of sales and profitability. Technology like Data Artificial will provide the company with informed decisions such as product development, marketing, and inventory management. This is used by the company to better understand consumer tastes, predict trends in the market, and optimize product offerings using consumer data and insights.

Environmental factors

These include environmental factors such as; Climate Change, Sustainable Sourcing, Waste Management and Recycling, and Environmental Regulations; This provides both risk and opportunity for Adidas. The company should be flexible in providing suitable sportswear to be friendly to the relevant weather conditions demands. Although the company sources its raw material from different places globally, it is its role to ensure that the raw materials are sourced ethnically.

The company can ensure proper waste management by implementing waste reduction strategies, such as using recycled materials, introducing circular economy principles, and encouraging recycling initiatives among its employees and consumer. As a company, Adidas is subject to environmental conservation. The company should ensure it complies with legal requirements for a good business image.

Legal factors.

These are influenced by the country's law and government, they include; Labor Laws and Regulations, Intellectual Property (IP) Rights, and Consumer Protection Laws; operating globally, Adidas encounter different law for different countries. The company should ensure that its requirements of different companies are upheld.

 To maintain its competitive environment, Adidas should actively monitor and enforce its IP rights to avoid infringement, counterfeiting,g and unauthorized use of its brands. Adidas should ensure customer exploitations are greatly avoided and eliminated. That the laws governing product safety, quality standards, quantity, and marketing practices should be followed clearly to prevent legal action against them.

Conclusion

In summary, Adidas as a multi-national sportswear production company, bases its economic advantage majorly by emphasizing its cultural structure, which is greatly attributed to its core values, mission, and vision. Furthermore, the company extends its strategy to macro factors surrounding it. Through the above strategies, Adidas has emerged to be a successful company serving over 160 countries. This company greatly impacts other small and medium companies positively, by encouraging them to strive on the small beginning and challenges. In addition, the company's strategy of diversifying its portfolio and collaboration has great impact on the company’s success through the introduction of different products tackling the continuously changing consumer tastes and preferences.

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