Five Forces Analysis: Adidas

Five Forces Analysis Intensity of Competitive Rivalry There are several firms fiercely competing Adidas for more market share, including Nike, Puma, Reebok and Umbro to name a few. Adidas must ensure that their goods are of a high quality and at a reasonable price in order to keep their market share in this industry. Intensity in this industry is high as there are a large number of organisations with similar products all trying to gain market share. Threat of Entry to the Industry by New Competitors
There isn’t very much of a threat of new competitors to Adidas as there are high barriers of entry to this industry, such as, high set up costs, economies of scale, legal barriers, marketing barrier and control over raw materials. This means that not many new organisations could break into this industry, as it would be very expensive to start up and run a company that could be a threat to a major brand such as Adidas. Also, Research and Development costs are to be considered, as they would be extremely high due to the organisation not having any previous knowledge about the industry or about designing and producing the goods.
Another point why it is highly unlikely that a new organisation could enter the industry and compete with Adidas is they will either have to pay out loads of money on factories and machinery for producing their goods, which could backfire if they were not to succeed, or they could try to compete without a factory or machinery for production, this wouldn’t work as the new organisation wouldn’t be able to produce enough products to compete with any leading brands such as Adidas, Nike, Puma, Reebok etc.

Threat from Substitute Products or Services There is a threat to Adidas from other manufacturers’ products as there are many companies that produce football boots. However, Adidas produce football boots that have unique features, such as the rubber pads on the boots. Therefore, as Adidas’s products are unique they have an edge over their competitors as non of their products have rubber pads on their boots. This will help Adidas to sell more products and ultimately put the other organisations out of business.
Also, substitutes for football boots could also include footwear and sports clothes for other sports as people could take up new sports. Power of Suppliers Adidas raw materials to make football boots are not supplied by a monopoly. This gives Adidas more power to dictate the price at which they buy their raw materials, as there are a large number of competitive suppliers. Power of Buyers Adidas’s products are mainly sold in bulk to major sports outlets such as JJB Sports, JD Sports and Sports Soccer.
Also, large amounts of products are sold in bulk to online stores such as Pro Direct Soccer and Sports Shoes. As Adidas rely quite heavily o these buyers they have to sell their products at relatively low prices. However, there are a small amount of customers who buy products directly from Adidas, when Adidas sell their products to one off customers they can dictate the price as Adidas don’t rely on making these sales.