Adidas PESTLE Analysis
Detailed PESTLE analysis of Adidas examining political, economic, social, technological, legal & environmental factors.
Political Factors:
The most pressing political issue for Adidas is the volatile trade policies and political unrest in many countries. In order to retain its financial as well as global performance Adidas has to deal with such issues. Since the company’s products travel all over the world, Adidas has to deal with various forms of government and taxation systems. The company outsources development of its products to third world countries as it reduces manufacturing costs. The import and export tariff restrictions imposed by trump administration can act as a major barrier for Adidas as Germany is a major exporter. The restrictions can cost Germany up to 20 billion euros. The worldwide presence of the brand requires it to solve complex supply chain management issues overcoming various laws and procedures in order to achieve various goals and objectives. Other factors such as war, terrorism, expropriation and nationalization as these factors can lead to loss of significant time, effort and money if not stable.
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This concludes the political factors in the Adidas PESTLE Analysis.
Economic Factors:
Below are the economic factors in the PESTLE Analysis of Adidas:
The entire sports industry’s revenue share is very concentrated with 50 largest companies contributing to around 70% of the total industry’s revenue. Adidas is one of those largest companies.
Unemployment, wage rates, taxation, inflation and interest rates are economic factors that affect the profitability quotient of the company. The company’s consumers, who usually follow a certain lifestyle are driven by preferences for the brand’s products. The products are classified as leisure items and not as necessity items. The products in the sports industry compete against that of music and gaming industry. The brand must analyze a particular market for growth and opportunities before entering in it. Adidas produces its products in China as they produce labor intensive products at a low cost. Adidas has to carefully price its products especially compared to the products of North American countries. The rise of counterfeit products can also dampen current market share of the company and reduces profitability.
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Social Factors:
Following are the social factors impacting Adidas PESTLE Analysis:
Culture, religion, lifestyle are the social factors that affect the performance of a brand. They affect brand image of the company in the market which further affects customer loyalty. The Adidas company’s core target audience are health conscious consumers who have an inbuilt love for sports. As more people channelize their energies towards maintaining a healthy lifestyle, the better the sales of the company as people would demand such sports apparels. In order to maintain the established customer base, they have to keep up with the preferences and the latest trends in order to retain and acquire new customers. Besides, this they offer a corporate volunteer programs which supports communities and promotes the health of the individuals. The Adidas company has been successfully able to foster distinctive designs of its products in the market. In the past, the company had invested 100 million pounds in the Olympics of 2012. The investment was a profitable one as it provided a major boost towards the sales of the company.
Technological Factors:
The technological factors in the PESTLE Analysis of Adidas are mentioned below:
In order to survive in a competitive market and maintain a dominant position, it is important that every sports brand adapts to the new innovative technologies in the market. For efficient functioning of a company it is important that technology be incorporated not only in product itself but in the way the company operates like process, management and accounting systems. The products of Adidas have to be tested under a variety of conditions, so that end users i.e. the coaches and professionals are able optimize their performance. For durable solutions to problems faced by the athletes, material replacements are used by the company. The company has expanded its research into the study of smart sportwear industry where it has developed a profound understanding of the technology like Fitbit, which is quite popular among health-conscious communities.
Apart from the retail outlets, the company sells its products on online portals and has developed a popular brand presence on social media.
Legal Factors:
Following are the legal factors in the Adidas PESTLE Analysis:
Adidas has ownership of intellectual properties and IP systems. They have design patents, defending the company against any infringements. The patents also serve as a legal protection for the company to end counterfeit businesses which are particularly common in the sportswear industry. Since, Adidas is a huge brand name they naturally have trademark production. In 2014, Adidas was granted a trademark on “three parallel equidistant stripes of identical width, applied on the product in any direction” on clothing, hats and shoes. However, in 2016, Shoe Branding Europe applied to the EU intellectual property office for the trademark to be annulled. The company lost the legal battle on the ground that the they failed to provide sufficient evidence that consumers would recognize with the brand Adidas after looking at the three stripes. The company although was disappointed with the justice, said that they would further evaluate the implications of the proceedings.
Environmental Factors:
In the Adidas PESTLE Analysis, the environmental elements affecting its business are as below:
Adidas claims that all the factories and manufacturing units of the company does not produce any restricted products. This helps the company to reduce volatile and compound emissions. The company aims to its green company targets by 2020. They have developed a “low waste initiative program”, where they focus on two aspects- the choice of the materials and how they are manufactured in order to reduce their carbon footprint. Avoiding oil-based plastic which helps reduce carbon emissions. Thinner or lighter also lead to less waste and less embedded carbon.
Some of the initiatives taken by Adidas are – Parley for the oceans, Futurecraft Loop, Sport Infinity, Biosteel Fiber, Dyeing Processes, Low waste and Reducing waste and emissions- Adidas Formotion Technology. The company ensures ethical sourcing and supplying of the resources. It has developed various regulations, to ensure that supplies follow these regulations in every country that the company has operations in.
To conclude, the above Adidas PESTLE Analysis highlights the various elements which impact its business performance. This understanding helps to evaluate the criticality of external business factors for any brand.
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