Harvard Case - Adidas: How To Keep Running Fast in a Post-COVID-19 World?
"Adidas: How To Keep Running Fast in a Post-COVID-19 World?" Harvard business case study is written by Niccolò Pisani, Ornella Lupoi. It deals with the challenges in the field of Strategy. The case study is 22 page(s) long and it was first published on : Sep 2, 2020
At Fern Fort University, we recommend Adidas implement a multifaceted strategy focused on digital transformation, sustainable innovation, and strategic partnerships to maintain its competitive edge in the post-COVID-19 world. This strategy will leverage Adidas's core competencies in brand management, product development, and global reach while adapting to the evolving consumer landscape and industry trends.
2. Background
The case study examines Adidas's challenges and opportunities in the post-COVID-19 era. The pandemic significantly impacted the athletic apparel and footwear industry, forcing Adidas to adapt to new consumer behaviors, supply chain disruptions, and evolving competitive dynamics. Adidas, once a dominant player, faces growing competition from emerging brands and the rise of direct-to-consumer (DTC) models.
The case study highlights the need for Adidas to address several key issues, including:
- Digital Transformation: Accelerating the shift to online channels and enhancing the customer experience through digital platforms.
- Sustainability: Meeting growing consumer demand for eco-friendly products and sustainable practices.
- Innovation: Developing innovative products and technologies to differentiate itself from competitors.
- Strategic Partnerships: Collaborating with other companies to leverage complementary strengths and expand its reach.
3. Analysis of the Case Study
SWOT Analysis:
Strengths:
- Strong brand recognition and global reach
- Expertise in product development and manufacturing
- Strong marketing and distribution capabilities
- Commitment to sustainability and social responsibility
Weaknesses:
- Dependence on third-party manufacturers
- Limited digital presence and customer engagement
- Potential for supply chain disruptions
- High operating costs
Opportunities:
- Growing demand for athletic apparel and footwear
- Increasing adoption of digital channels
- Focus on sustainability and ethical sourcing
- Emerging markets with high growth potential
Threats:
- Intense competition from established and emerging brands
- Economic instability and geopolitical uncertainty
- Fluctuating raw material costs
- Changing consumer preferences
Porter's Five Forces Analysis:
- Threat of New Entrants: High, due to low barriers to entry and the rise of online retailers.
- Bargaining Power of Buyers: Moderate, as consumers have many choices and can easily compare prices online.
- Bargaining Power of Suppliers: Moderate, as Adidas relies on a network of suppliers, but some are essential for specific materials.
- Threat of Substitute Products: High, as consumers can choose from a wide range of athletic apparel and footwear.
- Rivalry Among Existing Competitors: Very high, with numerous established and emerging brands competing for market share.
Value Chain Analysis:
Adidas's value chain consists of:
- Inbound Logistics: Sourcing raw materials and components.
- Operations: Manufacturing and assembling products.
- Outbound Logistics: Distributing products to retailers and consumers.
- Marketing and Sales: Promoting and selling products.
- Customer Service: Providing support and resolving customer issues.
Business Model Innovation:
Adidas needs to explore innovative business models to address evolving consumer needs and market trends. This includes:
- Direct-to-Consumer (DTC) Model: Expanding its own online channels and reducing reliance on traditional retailers.
- Subscription Services: Offering subscription-based access to exclusive products and services.
- Personalized Experiences: Utilizing data analytics to personalize product recommendations and marketing messages.
Corporate Governance:
Adidas needs to ensure strong corporate governance practices to maintain ethical business operations and build trust with stakeholders. This includes:
- Transparency and Accountability: Communicating clearly about its business practices and environmental impact.
- Sustainability Reporting: Providing regular updates on its progress towards sustainability goals.
- Board Diversity: Ensuring diverse representation on its board of directors.
4. Recommendations
Digital Transformation:
- Enhance Digital Platforms: Invest in its website, mobile app, and social media presence to create a seamless and engaging customer experience.
- Data Analytics: Leverage data analytics to understand customer behavior, personalize product recommendations, and optimize marketing campaigns.
- E-commerce Expansion: Expand its direct-to-consumer (DTC) channels and explore partnerships with online retailers.
- Virtual Reality (VR) and Augmented Reality (AR): Utilize VR and AR technologies to enhance the customer experience and provide virtual try-on options.
Sustainable Innovation:
- Sustainable Materials: Develop and utilize sustainable materials, such as recycled plastics and organic cotton.
- Circular Economy: Implement a circular economy model to reduce waste and promote product longevity.
- Carbon Reduction: Set ambitious targets for reducing its carbon footprint across its supply chain.
- Transparency and Traceability: Provide transparent information about the origin and manufacturing processes of its products.
Strategic Partnerships:
- Technology Companies: Partner with technology companies to leverage their expertise in AI, machine learning, and data analytics.
- Retailers: Collaborate with online and offline retailers to expand its reach and access new customer segments.
- Sustainability Organizations: Partner with sustainability organizations to promote ethical sourcing and environmental responsibility.
- Athletes and Influencers: Develop strategic partnerships with athletes and influencers to promote its products and build brand awareness.
Mergers and Acquisitions:
- Strategic Acquisitions: Consider acquiring smaller, innovative companies to expand its product portfolio and technology capabilities.
- Joint Ventures: Explore joint ventures with other companies to enter new markets or develop new products.
Strategic Planning:
- Scenario Planning: Develop scenario planning models to anticipate future trends and prepare for potential disruptions.
- Strategic Alignment: Ensure that all business decisions are aligned with its overall strategic goals.
- Performance Monitoring: Regularly monitor its performance against key metrics and make adjustments as needed.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies: Leveraging Adidas's core competencies in brand management, product development, and global reach.
- External Customers: Meeting the evolving needs and preferences of consumers, particularly younger generations.
- Internal Clients: Empowering employees to embrace digital transformation and sustainability initiatives.
- Competitors: Staying ahead of the competition by embracing innovation, sustainability, and strategic partnerships.
- Attractiveness: These recommendations are expected to improve Adidas's financial performance, brand reputation, and market share.
6. Conclusion
Adidas has a strong foundation for success in the post-COVID-19 world. By embracing digital transformation, sustainable innovation, and strategic partnerships, Adidas can maintain its competitive edge, attract new customers, and achieve long-term growth.
7. Discussion
Alternatives:
- Cost Leadership: Focusing on cost reduction and price competitiveness. However, this could erode its brand image and limit its ability to innovate.
- Market Penetration: Focusing on increasing market share in existing markets. This could be challenging in a highly competitive environment.
- Product Development: Focusing solely on new product development. This could be costly and time-consuming, and may not address the broader industry trends.
Risks:
- Digital Transformation Challenges: Implementing digital transformation initiatives can be complex and require significant investment.
- Sustainability Costs: Adopting sustainable practices can increase costs in the short term.
- Competition: New entrants and established competitors could disrupt the market.
Key Assumptions:
- Consumers will continue to value sustainability and ethical sourcing.
- Digital technologies will continue to evolve and create new opportunities.
- Adidas will be able to manage its supply chain effectively and mitigate disruptions.
8. Next Steps
- Develop a Digital Transformation Roadmap: Define specific goals, timelines, and resources for implementing digital transformation initiatives.
- Establish Sustainability Goals: Set ambitious targets for reducing its environmental impact and promoting ethical sourcing.
- Identify Strategic Partners: Seek out potential partners to collaborate on innovation, sustainability, and market expansion.
- Monitor Performance: Regularly track key metrics and make adjustments to its strategy as needed.
By taking these steps, Adidas can position itself for success in the post-COVID-19 world and continue to be a leader in the athletic apparel and footwear industry.
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Case Description
By the end of 2019 the adidas Group was solidly the world's second largest multinational in the sportswear manufacturing industry. Following the successful implementation of a digital transformation initiated in 2015, the company enjoyed years of sustained growth and high profitability in the 2016-2019 period, strengthening its brand desirability and increasing sales volumes, especially in the online space. It ended fiscal year 2019 stronger than ever and its chief executive officer (CEO), Kasper Rørsted, was very optimistic about what the future would hold. The outbreak of the COVID-19 pandemic at the beginning of 2020 radically changed the business landscape. adidas was severely hit by the lockdowns imposed by governments. The new measures of social distancing were expected to have a lasting impact on consumer habits and consequently on the operations of companies such as adidas. Thus, unimaginable only few months before, the company's first earnings call of 2020 led by Rørsted focused on the negative results obtained in the preceding few months and the high degree of uncertainty looking forward. Aware of the many challenges facing the company, Rørsted had to decide which strategic initiatives he should prioritize to future-proof the company and keep it on a steady growth trajectory in a post-COVID-19 world.
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