Chap 3: Evaluating a company’s external environment

I, PESTEL Analysis
1, Starbucks
 The constant global economic recession has dented the macroeconomic environment which Starbucks
operates in. The recession has hurt the consumer’s purchasing power. Recent market research reflects
that consumers have not cut down on their coffee consumption. Instead, they are shifting to options
with lower prices. This means that the firm can still influence the buying power by offering cheaper
products.
 Starbucks has taken steps to be a part of the mobile computing revolution. It has worked with Apple
and introduced discounted coupons via iPhone apps. They also attempt co-branding and cross selling.
Starbucks is well poised to enjoy the benefits of the Smartphone revolution.
 Consumers in the US are also becoming more and more conscious of ethics. This means the brands
they buy from should abide by social and environmental norms during production. Consumer
awareness is challenging Starbucks.

These are the most obvious factors affecting the firm’s business. But there are many other factors seeking
attention.

Impacts of Political Factors on Starbucks

 The main political factor is about sourcing the raw materials. This has gathered a lot of the attention
from politicians in the West and from the source countries. For this reason, the company wants to
adhere to social and environmental norms. It is willing to follow the sourcing strategies. It gives
importance to fair trade practices.
 Another impact is the need to follow the laws and regulations in the countries from where Starbucks
buys the raw materials. Activism and increased political awareness in developing countries have
made this essential.
 The regulatory pressures within the home market in the US are also a factor. Multinationals based in
the US are now subject to greater scrutiny of the business processes. The company must monitor
political stability within the country as well.
Impacts of Economic Factors on Starbucks
 The ongoing global economic recession is the prime external economic driver for Starbucks. This
factor dented the profitability of Starbucks. This has convinced buyers to shift to cheaper alternatives.
As they did not quit buying coffee, Starbucks should seek an opportunity here.
 The company has to deal with rising labor and operational costs. The inflationary environment and
falling profitability is causing a lot of stress.
 Some other economic factors which can affect Starbucks are: local currency exchange rates, local
economic environment in different markets, taxation level
Impacts of Socio-Cultural Factors on Starbucks
 As already stated, Starbucks can offer cheaper products but it might have to sacrifice the quality. This
is the main socio-cultural challenge that the start-up faces. It will expand consumer base to include
the buyers from the lower and the middle-income tiers.
 The baby boomer generation is retiring. This means spending by older consumers will decrease. Now,
Starbucks will have to tap the Gen X and the Millennials as customers.
 Other socio-cultural factors to focus on are: changing family patterns in USA and Europe; consumer
preferences; changing work patterns; changes in lifestyles of population; the level of education of the
population in local markets; changing values among population
Impacts of Technological Factors on Starbucks
  Starbucks is in a good position to enjoy benefits of the emerging mobile wave. Its partnership with
Apple to bring app-based discount coupons is helping it ride the mobile wave easily.
 The company introduced Wi-Fi capabilities in its outlets already.  Internet is important to the
consumers. They can now surf the web and do work while sipping Starbucks coffee. This is an added
value to the brand. It enhances the overall consumer experience.
 Starbucks is also enabling mobile payments. They are testing this in pilot locations in the US.
Impacts of Environmental Factors on Starbucks
 Some of the other environmental factors Starbucks should worry about are: environmental rules and
regulations; environmental disasters in countries which produce coffee beans; global warming and
other environmental issues in a global level
Impacts of Legal Factors on Starbucks
 Starbucks must ensure that it does not violate any laws and regulations in the home market and
countries from where they buy raw materials.
 It should also stay alert about introduction of caffeine production and consumption related policies
and regulations by health authorities.
 Others factors that might affect the company are: introduction of stricter customs and trade
regulations; licensing regulations related to the industry.

2, Coca-Cola
Political factors
 Coca Cola products are at the mercy of the FDA. They must meet regulations, given by the
government, to put products on store shelves.
 Changes in established laws may prevent Coca Cola from distributing drinks. Accounting, taxes,
internal marketings, and changes in labor laws can affect Coca Cola in this way.
Economical factors
 Coca Cola products are distributed to hundreds of countries. These countries have different customs,
cultures, tastes, and desires. Coca Cola has changed and updated how it handles its products by
creating new flavors to accommodate these customers.
 They have $80+ billion worth of equity. The majority of that comes from the beverage industry. And
their income (roughly 70%) is from countries outside the United States.
 But people are looking for healthy alternative drinks. Coca Cola is making minimal efforts to move in
that direction.
Social factors
 Coca Cola distributes the majority of its products in cultured countries. And they meet the demands of
these customers. In Japan, they created 30 alternative flavors to appeal to Japanese consumers. In
China, they are making similar efforts.
 But in America, people focus on their health. They’re swapping sugary drinks for waters and teas.
Because these drinks are better for their health. Coca Cola needs to respond to these needs by creating
a product the healthy American public will respond to.
Technological factors
 Machinery have helped Coca Cola manufacture products in better and higher quantities. Coca Cola
has factories in Britain with top of the name machinery to ensure fast delivery times and quality
product development.
 Coca Cola has used social media technology to connect with audiences. When they launched their
name campaign — putting real names on their bottles — customers lined up to take photos of bottles
with their name on it. These photos trended on social media sites like Facebook, providing social
proof and encouraging Coca Cola sales.
Legal factors
 Coca Cola retains all rights related to their business, including past and future products developed
with a patented process.
Environmental factors
 Coca Cola is affected by water accessibility. Water is necessary for soft drink development. But
should something happen, like climate change, the company may be under fire.
 This affects their competitor, Pepsi, as well. But since Coca Cola’s products are primarily soft drinks,
with a water accessibility issue, the company will suffer losses.

II, Assessing the company’s industry and competitive environment

1. Starbucks
Coffee is as much a part of American culture as are blue jeans and rock-nroll. Although getting a late
start on the coffee wagon, the US has since revolutionized the coffee scene from the introduction of
Starbucks to the modern resurgence in coffee rituals and expertise. Coffee is among the most consumed
beverages in the country. The average consumption of coffee is almost two cups per day. In the United
States, ready-to-drink coffee products are booming, hence boosting the demand for instant coffee, as it is
easy and convenient to prepare at home. Starbucks predominantly uses dark roast coffee which also
represents the majority of the coffee that is being consumed in North America. The coffee quality was much
better than instant abominations in the early 80s.
The most significant forces for Starbucks Coffee Company’s strategic consideration are competitive
rivalry, the bargaining power of customers, and the threat of substitutes. Still, the other forces also influence
the company’s business performance. Following are the intensities of the Five Forces in Starbucks
Corporation’s industry environment:
 Competitive rivalry or competition – Strong Force
 Bargaining power of buyers or customers – Strong Force
 Bargaining power of suppliers – Weak Force
 Threat of substitutes or substitution – Strong Force
 Threat of new entrants or new entry – Moderate Force
Competitive rivalry with Starbucks Coffee
Starbucks faces the strong force of competitive rivalry or competition in the food service and
coffeehouse industries. Starbucks Corporation has many competitors of different sizes. In addition,
competition is strengthened because of the low switching costs, which are the disadvantages to consumers
when shifting from one provider to another. Based on this component of the Five Forces analysis,
competition is among the company’s top-priority challenges. Starbucks Corporation’s generic strategy and
intensive growth strategies are a reflection of strategic responses to competition.
Bargaining power of Starbucks Customer/Buyer
Based on the low switching costs, customers can easily shift from Starbucks to other brands. In
addition, the high substitute availability means that customers can stay away from Starbucks if they want to
because there are many substitutes like instant beverages from vending machines. Thus, this component of
the Five Forces analysis shows that the bargaining power of customers is a top-priority strategic issue.
Bargaining power of Starbuck’s coffee’s suppliers
Starbucks Coffee faces the weak force or bargaining power of suppliers. The moderate size of
individual suppliers is an external factor that imposes a moderate force on Starbucks. However, the high
variety of suppliers weakens their bargaining power. For example, suppliers have various strategies and
competencies that they use to compete against each other with the aim of gaining more revenues by
supplying more materials, such as coffee beans to Starbucks Corporation. This external factor limits the
influence of individual suppliers. This component of the Five Forces analysis is the weak force or bargaining
power of suppliers on the company.
Threats of substitutes to Starbucks products
Starbucks Corporation experiences the strong force or threat of substitution. For example, substitutes
like ready-to-drink beverages, instant beverage powders and purees, and food and other beverages are readily
available from various outlets, such as fast food and fine-dining restaurants, vending machines, supermarkets
and grocery stores and small convenience stores. In addition, the low switching costs further strengthen the
threat of substitutes, as it is easy for consumers to buy substitutes instead of Starbucks products. Moreover,
many of these substitutes are affordable and cost less than the company’s products.
Threats of New entrants
Starbucks Corporation faces the moderate force or threat of new entry. For example, the cost of
operating a small coffeehouse is lower compared to the cost of operating a coffeehouse chain. In relation,
smaller cafés have lower supply needs and corresponding supply chain costs. These external factors enable
smaller firms to do business and compete against Starbucks Corporation. On the other hand, brand
development is costly. Brand development typically requires years to reach the level of strength of the
Starbucks brand. The combination of these external factors imposes the moderate force or threat of
substitutes against the company.

2, Coca Cola
Carbonated soft drinks belong to the non-alcoholic beverage industry. This industry produces regular
and diet fizzy drinks, juice, bottled water, sports and energy drinks, and hot and iced coffee and tea. The
market leaders in this industry are The Coca-Cola Corporation, Pepsi-Co. Inc. and Dr Pepper Snapple. The
industry as a whole faces challenges as a result of the slumping economy and changes in consumers’
consumption patterns due to increased health consciousness. Marketing is an important component of the
industry chain, used to generate demand and build consumer loyalty.
Threat of New Entrants
In case of the beverage industry, the barriers to entry are low owing to the low cost of setting up a
production unit and marketing expenses to make the product available to the target market. There are small
scale companies entering in the beverage industry which suggests the ease of market entry for new firms.
Since Coca-Cola is a globally recognized brand that is consumed in more than 200 countries, the presence of
small-scale players and new entrants has no significant impact on the operations of Coca-Cola. Companies
such as Coca-Cola can benefit from the market dynamics by using its strong market presence to expand its
portfolio and further penetrate into new markets.
Threat of Substitute
Consumers can select a beverage from the wide range of options available in the market. There are
different companies supplying soft drinks, juices and bottled water which increases the threat of substitute
products. However, consumers that prefer the taste of soft drinks produced by Coca-Cola are not likely to
switch to other beverages. Nevertheless, the availability of other brands besides Coca-Cola affects the
industry dynamics as the consumers have the option to select other beverages. It can be concluded that the
threat of substitute products in the beverage industry is moderate, thus the switching decisions of the
consumers have the potential to have some effect on the financial performance of Coca-Cola.
Bargaining Power of Buyers
The beverage industry comprises corporate buyers as well as individual buyers. Coca-Cola has
established its market presence through forming favorable ties with its leading corporate buyers such as fast
food chains. In addition, the company has taken advantage of the other distribution options such as vending
machines and convenience stores to expand the reach to the target market. Based on this background, it can
be seen that the buyer power is higher when it comes to the retail stores and fast food outlets which purchase
the beverages in bulk quantity. On the other hand, individual consumers seem to have limited bargaining
power. Therefore, it can be stated that the bargaining power of buyers is moderate.
Bargaining Power of Suppliers
 Since supplier view their contract with large scale beverage companies such as Coca-Cola as an
important part of their distribution network, they are not likely to exert much influence or use bargaining
power in setting up price of the ingredients. In addition, the suppliers have to abide by the guiding principles
such as Agriculture Guiding Principles, suggesting that they have low bargaining power and the company has
greater influence on supplier contracts and pricing.
Competitive Rivalry
The intensity of competitive rivalry in the beverage industry is moderate. The main competitor of
Coca-Cola is Pepsi while the other producers of soft drinks, bottled water and juices have a comparatively
lower market share. Moreover, the small-scale companies do not have the potential to affect the market share
of Coca-Cola to a significant degree, thus indicating that the main competition is among Pepsi and Coca-
Cola. Since Coca-Cola has a well-established brand identify and a loyal set of consumers, it is not likely to be
affected by competitors. This competitive landscape suggests that there is moderate threat of competitive
rivalry, with the main competition originating from Pepsi Co.

III, Forces Driving Industry Change

1. Coffee Industry
Expansion/Growth
 A significant driver in the coffee shop industry is growth in the form domestic and international
expansion. The key channel of distribution in this industry is “company-operated stores located in
high-traffic, high visibility centers,” and industry competition is structured around vying for market
share by opening new retail shops in cities around the world.[12] Starbucks, for example, opens on
average three stores a day and has already made significant inroads into countries like Japan, the UK,
Australia, the Middle East and Latin America.
Product/Service Innovation
 A second driving force in this industry is tied to product innovation. Serious coffee shop contenders
now offer a product selection broader than the traditional cup of coffee. National chain and even local
coffee shops boast menus including coffees, teas, hot chocolate, pastries, bottled water, and even
sandwiches. A factor which contributed to Starbucks’ ability to surpass early coffee house entrants,
such as Gloria Jeans, has been the company’s extensive R&D. For example, the company has been
able to sustain and grow its customer base by launching a new seasonal drink each year and also via
its $400 million bottled drink business. Importantly, product innovation for Starbucks includes not
only factors regarding customer acceptance but also the extent to which the product would fit into a
store’s “ergonomic flow.”
 Equally critical to the structure of the coffee industry has been the role of service innovation. An
example of such innovation which has been hugely successful was the introduction of SVCs – store
value cards. Starbucks, Caribou Coffee and Peet’s Coffee now offer customers pre-paid cards which
not only shorten transaction times for customers but can also bring in new customers via gift cards
and supply stores with valuable customer data. Schultz, CEO of Starbucks, has called this innovation
“the most significant product innovation since Frappuccino.”
 Service innovation is also impacting the industry in that companies are now required to offer a
diverse set of services including music, drive-through services and newspapers to stay competitive.
For example, to compete with Starbucks’ alliance with T-Mobile which offers wireless capabilities to
its customers, Caribou now offers free wireless Internet access (for up to an hour) to its customers.
Collaboration/Partnership
 Starbucks was the first to realize the benefits of partnering when it reached out to powerhouse brands
like Pepsi, Barnes and Noble, Nordstrom, Kraft and United Airlines to create new products, reach
new customers and enter new channels of distribution like grocery, cruise lines and the airline
 industry. Caribou has followed suit and partnered with General Mills to produce a breakfast bar,
USAToday to provide a news services to its customers, and most recently, Coca-Cola, to directly
compete with Starbucks ready-to-drink iced coffees.[18] (See exhibit 2 regarding major competitors
and their partners.) These alliances, in short, allow for innovation, channel extension and even
geographic extension (in the case of Starbucks’ alliance with Japanese retailer Sazaby).
Image/Lifestyle
 Additionally, this industry is increasingly impacted by consumer’s perception of what a brand stands
for. When Starbucks was first created, its CEO’s vision was to create a “third place” for Americans.
Americans already spent considerable time at home and work and his vision was to provide a third
place for Americans to not only drink coffee but to invest significant personal time. For this reason,
industry marketing efforts are closely tied the image/lifestyle projected by the chain.
 For example, in an effort to respond to Starbucks’ dominance, several competitors have attempted to
differentiate themselves from the “upscale, pseudo-European” store by projecting different lifestyle
brands. Caribou Coffee, for example, projects a more rugged image via its stores’ mostly wooden
interiors which feel like “an Alaskan lodge.” Further, the corporation promulgated its alternative
lifestyle by associating itself with Apple during its 2006 "Wake Up and Smell the Music" promotion.
Caribou’s CEO described the partnership as synergistic due to the fact that “We're both challenger
brands.”
Technology
 A further driving force is the role of technology. Line management is a significant issue for coffee
houses as often the demand is concentrated in the early mornings. For example, Starbucks has been
able to achieve customer service efficiency by introducing automatic espresso machines. Starbucks,
efficiency is a key driver in customer satisfaction as customers “want their beverage in under three
minutes”. However, it appears these efficiencies must be balanced with creating a mystique around
the coffee experience and having an awareness of the consumers’ price-value ratio. For example,
Starbucks customers, who pay a premium for coffee, seem to miss the elaborate process of brewing
and drink creation. Starbucks’ CEO recently expressed a concern that the brand was becoming
“watered down” and such gains in efficiency threatened to commoditize the brand.
 Finally, technology is impacting this industry in the form of increasingly sophisticated home brewing
machines which are able to at least replicate, if not beat, the quality of coffee prepared at many of
these stores. Though it is unclear of the impact of these machines on the coffee players, this is an area
of increased growth and one for these competitors to monitor.

2, Soft-drink industry
 Continuous product innovations constitute one of the primary growth drivers for the global soft drinks
market. Players are continuously innovating their products in terms of ingredients, formulation, and
packaging to increase sales. Realizing the potential of the growing health and wellness trend among
consumers, players are introducing products with added benefits. In April 2018, Sprite launched a
reformulated product in the UK market. The new product uses a combination of sugar, acesulfame K,
and aspartame, which claims to reduce the sugar content in the product by about 50%. Thus,
continuous product innovations will help in the growth of the global soft drinks market during the
forecast period.
 Apart from product innovations, various innovative marketing campaigns adopted by players to
attract consumers will help in driving market growth. Players such as the Coca-Cola Company and
PepsiCo are revamping their marketing strategies to counter the global decrease in the sale of
carbonated soft drinks. In April 2018, Coca-Cola launched a new marketing campaign under the
 banner “We Do" in the UK. This campaign included billboard advertisements and social media
campaigns as well. The campaign included images of Elvis Presley in the advertisements and was
carried out to celebrate 132 years of Coca-Cola Classic. Such new marketing and advertising
campaigns will help in the growth of the global soft drinks market during the forecast period.

III, KSFs
1, Coca-Cola
Strong global presence
Coca-Cola is a carbonated soft drink sold in the vending machines, stores, restaurants in more than 200
countries. Coke’s marketing tactics and global expansion strategies led it to dominate the world soft-drink
industry during the 20th century.
Licensed Bottlers
  Coca-Cola’s bottling structure also permits the firm to take advantage of immeasurable growth
opportunities all over the world. This approach provides Coke the opportunity to serve a greater geographic
diverse area. The Coke manufactures concentrate which is afterward sold to licensed Coca-Cola bottlers all
over the globe. The bottlers, who have territorially limited contracts with the Coke, manufacture finished
goods in bottles and cans from concentrate in mixture with sweeteners and filtered water. The bottlers then
distribute and sell Coca-Cola to vending machines and retail shops.
High utilization of fixed assets 
      Coca-Cola’s bottling system allows it to operate on a global scale while preserve a local approach. The
bottling firms are locally operated and owned by autonomous business persons who are authorized to trade
brands of the Coca-Cola Corporation. Because Coca-Cola does not have complete possession of its bottling
system, its major basis of revenue is the sale of concentrate to its bottlers.         
Advertising and differentiation
  Coke mainly is competing on advertising and differentiation rather than pricing. This resulted in higher
profits and disallowed a massive depression in profits. Soft drink industry needs huge amount of money to
spend on advertisement and marketing.  In 2000, Coke and their bottler’s invested approximately $1.3
billion. Coke has different advertisement campaigns according to situation. Its advertising has significantly
exaggerated American culture and run different campaigns such as holiday and sport sponsorship etc which
attracts and appeal different segment.
Well recognized and cherished brand name
  Brand recognition is the important feature affecting Coke’s competitive spot. Coca-Cola’s brand name is
recognized well right through 90 percent of the world today. The main brand of the Coca-Cola Company is
sold globally and is recognized as the best-known brand name in the globe. More prominently, its consumers
would not do without it, and have confirmed a loyalty. Coca-Cola also has further well-known brands on its
lists – Sprite, Evian, Fanta, PowerAde and Minute Maid.
Retail and distribution network
  Coke provides significant margins to retailers up to 15-20%; these margins are reasonably enough for
retailers to keep Coke’s products. Coke has strong network of convenience stores, fast food fountain,
vending, food stores, and restaurants etc globally.
Product innovation capabilities
  The Coca-Cola Company offers different products lines according to the specific needs, preferences and
tastes of the customers such as Coca-Cola Vanilla, Cola-Cola Zero, and Coca-Cola Cherry etc. 
Breadth of product line
The Coca-Cola organization has occasionally launched other cola drinks beneath the Coke brand name.
The most familiar of these is Diet Coke with supplementary including Diet Coke Caffeine-Free, Caffeine-
Free Coca-Cola, Coca-Cola Vanilla, Cola-Cola Zero, Coca-Cola Cherry and special versions with lemon,
coffee or lime. Coca-Cola franchises in different countries offer different product lines.
2, Starbucks
Starbucks brand philosophy
 Unlike most other companies, Starbucks made its employees its partners, by offering them stock
options and health insurance. In 2014, it announced that it would pay for its US employees to
complete an online bachelor’s degree at Arizona State University. Although the pros and cons of
this employee benefit and Starbucks’ motivation behind the offer were widely debated, it again
defined the organisation’s intent to go against the norms.
 Starbucks’ approach towards gathering customer insight is also quite unique and different
compared to multi-million-dollar marketing research budgets utilised by global organisations.
Going against rigorous and complex customer surveys, Starbucks chose casual and informal
chats with customers to capture overall mood, understand experience with the store and gather
valuable feedback.
 By offering a pleasurable and relaxing customer experience, Starbucks has been successful in
focusing the customers’ attention on the quality of the experience, the enjoyable memories that
can be woven together in its stores and not on the pricing of its products.
 The company operates with a strong sense of attention towards details, and replicating a
consistent customer experience across all its stores and its products is a critical focus area.
 In addition, another pillar of Starbucks’ brand philosophy is to be a responsible and socially
ethical company. This includes responsible purchasing practices, including supporting farmer
loans and forest conservation programs; as well as creating opportunities through education,
training and employment. Starbucks also initiates many programs to reduce its environmental
footprint through energy and water conservation, recycling and green construction.
These are examples of consistency, attention to detail and a strong customer orientation in practice.
Brand strategy
 The company has invested significantly in creating a standardised look and feel of its stores,
merchandise and food and drinks. The Starbucks Siren logo is one of the most recognisable logos in
the world. The global expansion strategy has a key objective of recreating the Starbucks experience in
every new country the company enters.
 The brand strategy, as mentioned before, focuses in detail on the experience the store creates. In the
United States, where the company estimates that majority of its stores will become drive through, it
has embraced stunningly appealing design principles to create stores out of unused shipping
containers. Interiors of stores are continuously spruced up through clever and artistically appealing
ways of using definite materials, lighting arrangements etc. In its international stores, the strategy is
around localising some of the store elements but still staying true to the Starbucks experience.
 The company’s brand strategy has kept pace with time and has evolved to take advantage of new and
emerging customer engagement platforms. The company operates a website called
ideas.starbucks.com, where customers can leave ideas for the company to expand and improve its
products and customer experience, improve engagement with the community and enhance social
responsibility. This is akin to the emerging methodology of “crowd-sourcing” in the field of
innovation.
 The brand has a sizable social media and digital presence, which has received renewed focus in recent
years. This has been driven by the need to better engage with customers and also be visible on
platforms where target or future customers spend time online. The brand has an active Facebook
page, a Twitter account, Instagram page, a Google+ community, a Pinterest page and a video channel
on YouTube
  The brand invests heavily and believes strongly in mobile marketing. It has embraced digital
innovation by developing and rolling out a Starbucks app for paying for products, tipping baristas,
earning and redeeming rewards. Besides its success in using technologies like QR codes, coupon
downloads and virtual gift cards in its promotional campaigns, Starbucks has leveraged on Artificial
Intelligence to allow customers to place their orders via voice command or messaging interface
through the mobile app. This has resulted in a tangible increase in customer engagement, reflected by
a 20% increase in Starbucks Rewards member spend.

CHAP 4: EVALUATING A COMPANY’S RESOURCES, CAPABILITIES, AND COMPETITIVENESS

1. ADIDAS
STRATEGIC FOCUS AREAS
Credibility
 Sport: focus on the most important sport categories: Football, Training, Running, and Outdoor.
Football is the biggest sport in terms of viewership, while Running, Training, and Outdoor are the
biggest participation sports
 Lifestyle: introduce a new consumer proposition called Sportswear. These products are born from
sport and worn for style. At the same time, extend Originals, which is inspired by sport and worn on
the street, into the premium segment through top-quality manufacturing processes and materials. 
 Women: execute on a cross-category plan to achieve product excellence and elevate the women’s
experience through membership program to become indispensable sports brand. The goal is to grow
currency-neutral net sales for our Women’s business at a mid-teens rate per annum on average until
2025, thereby significantly increasing the Women’s share of overall business. 
 Partnerships: amplify credibility through partnerships by leveraging their power, authenticity, and
reach.
Experience
 To grow long-term relationships with our consumer, we excite and empower them by creating
personalized experiences in both digital and physical spaces. With this in mind, we will accelerate our
transformation into a direct-to-consumer-led (DTC-led) business built around membership. 
 Membership: With the launch of our membership program in 2018, we laid the foundation for
offering personalized experiences to our most valuable consumers. Through membership, we reward
engagement and purchasing activity by offering exclusive hype products, access to launches and
special events, and more. 
 DTC-led: e-com continues to be our most important store. Both adidas.com and the adidas app will
see enhancements across the entire consumer journey. While e-com is the pinnacle of our retail
strategy, our physical stores will continue to play a crucial role in creating a physical and emotional
connection with our brand. We will also continue to leverage our strong relationships with strictly
selected wholesale partners and ‘win-with-the-winners’ to ensure a holistic experience for the
consumer no matter the point of sale. 
 Key Cities: We are building on our Key Cities portfolio of London, Los Angeles, New York, Paris,
Shanghai, and Tokyo, by adding Mexico City, Berlin, Moscow, Dubai, Beijing, and Seoul. These
cities represent the beating heart of our global consumer experience and exert influence on the rest of
the world, while at the same time offering commercial opportunities as urbanization continues. 
 Strategic markets: We will double down on Greater China, North America, and EMEA to bring
exciting consumer experiences to life, pursuing a tailored approach that appeals to local trends. Our
ambition is to gain market share in all three strategic markets. 
Sustainability
  It’s rooted in our purpose that, ‘through sport, we have the power to change lives’. As we continue to
pioneer in sustainability, we will move from strong stand-alone initiatives to a scaled and
comprehensive sustainability program.  
 What we offer: We keep pushing the boundaries of our sustainable offering, so that our consumer will
be able to choose from a uniquely comprehensive range. How we will do this revolves around how
we expand and innovate our 3-loops: made from recycled materials, made to be remade, or made with
natural and renewable materials. We define products as sustainable when they show environmental
benefits versus conventional products due to the materials used or their respective production
technologies. 
 What we do: We are committed to reducing the CO2 footprint of our product offerings as we work to
reach climate neutrality by 2050. We will achieve this through initiatives such as driving zero-carbon
within our own operations and promoting environmental programs along our entire value chain in
close cooperation with our suppliers.  
 What we say: We will be vocal about our efforts that focus on creating low-impact products that are
made to be remade. To guide our consumer to make more sustainable choices, we will also simplify
our labelling strategy and scale up our product takeback program. 

SWOT ANALYSIS
Strengths
 Strong brand recognition and a large marketing budget have allowed Adidas to score large
sponsorship deals with sports teams and athletes.
The company has been FIFA and UEFA’s sponsor for the footballs and apparel used in major
tournaments for many years, a position that even Nike cannot overthrow. They are also the main
sponsor for Germany National team, Manchester United, Real Madrid, as well as famous footballers
such as Paul Pogba, Lionel Messi, and Gareth Bale.
 Innovative and top-quality products keep Adidas’s sales high and affirm its position among
competitors.
Collaboration with artists and other celebrities allows Adidas to penetrate the premium casual
fashion. Adidas is also in the race with Nike for the carbon-sole running shoe market, and its latest
product received positive reviews from professional athletes.
 Strong financial performance over the last 10 years, Adidas is only second to Nike in terms of
revenue and profit.
Weaknesses
 Adidas’s overall sales rely too much on the footwear segment.
To avoid the negative effect of changing consumer taste on revenue, Adidas should diverse its
revenue to apparel and sporting equipment, or introducing new and innovative shoes to reignite the
demand. 
 Fewer brands under management limits Adidas’ abilities in brand positioning compared to Nike.
At the moment, the company markets its products under Adidas and Reebok brand, while Nike has
NIKE, Jordan, Hurley, and Converse brands to market its products, therefore Nike could reach out to
different customer groups using its lifestyle products lines. 
 Too little market shares in North America even though Adidas is a global force.
Adidas used to be the main apparel sponsor for the NBA, however, it lost the contract to Nike.
Opportunitie s
 Many opportunities on digital platforms for sales and customer engagement, given its early-stage
succession in e-commerce.
 Adidas only launched its mobile application in 2017, but it is now available in 30 countries and
features the latest augmented reality technology for customers to try on products virtually. Adidas can
also merge its mobile app with digital touchpoints in stores to enhance customer engagement. Adidas
also sells products on its website, in which it is forecasted to continue its double-digit growth rate.
 Focus on six key cities: Los Angeles, New York, London, Paris, Shanghai, and Tokyo to expand sales
and enhance customer experience there.
These urban markets are very important since they generate about 80% of global GDP and they are
expected to host 60% of the world population living there by 2030. Adidas’s management plans to
double revenues in these cities.
 Focus on penetrating the North America market to catch up with Nike in sales and market shares,
which are relatively low compared to other regions.
Threats
 Environmental–conscious consumers are on the rise and it might force Adidas to further innovate its
products to cut wastes and encourage recycling.
A few Adidas products are already made from recycled material; however, environmentalists would
demand further efforts from sports apparel companies, for a better environment.