Adapted from “Robot revolution helps Adidas bring shoemaking back to Germany” By

Question

Adapted from “Robot revolution helps Adidas bring shoemaking back to Germany” By James Shotter and Lindsay Whipp June 8, 2016 Financial Times. Use firm level analysis tools/frameworks—in particular resources and capabilities and sources of competitive advantage—to explain Adidas’ strategic positioning.

In a small factory in Bavaria, Adidas is about to do something that it has not tried for three decades: bring shoe production back to Germany. After a six-month trial, the world’s second largest sportswear group has decided to start large-scale production next year at a custom-built, highly-automated facility near Ansbach. Here — and at another factory to be built in the US — Adidas plans to produce about 1m running shoes in developed markets within the next three to five years… In the past 30 years, when western manufacturers were busy shifting production to emerging economies in an attempt to cut their labour costs, such a move would have been unimaginable. But, as wages rise in China, and advances in robotics allow more tasks to be automated, there are signs that the tide may be turning.

Adidas’s pilot factory in Ansbach is an example of how robots are revolutionising manufacturing. In a small hall, about half a dozen machines are set up in two production lines: one making soles, the other making the upper part of the shoe. In total, the process of making a pair of trainers from start to finish takes roughly five hours. In Adidas’s existing supply chain in Asia, the same process can take several weeks. At the new factory, automation means the production process requires minimal human involvement. Once it is up and running, the so-called “speed factory” will have just 160 staff. That number could even shrink, although Mr Hainer says that full automation is not the goal.

Adidas claims the speed factory has a head start of a couple of years on the facilities used by its rivals, such as Nike and Under Armour. Indeed, while Nike has been talking about localising manufacturing for a number of years, it has yet to build a factory. But analysts say it is only a matter of time before the rush to bring production back nearer to end consumers increases. “There’s no hiding it, it’s a race to see who can revolutionise the manufacturing process first,” says David Weiner, an analyst at Deutsche Bank in New York. “They’re all going to get there, and that means combining the automation of footwear manufacturing with localising production. It’s the Holy Grail.”

One big advantage of Adidas’s robot-led factory is efficiency. Adidas says it will need to carry out larger production runs before it can quantify the gains precisely. But the consultancy BCG estimates that by 2025 advanced robots will boost productivity by as much as 30 per cent in many industries, and lower total labour costs by 18 per cent in countries such as the US, China and Germany.

For Adidas, any resulting boost to profit margins will be welcome. In 2015, shoe sales contributed €8.36bn ($9.5bn) of sales to the group’s total of €16.92bn — but its overall operating margin was just 6.5 per cent. By contrast, rival Nike had total footwear sales of $19.07bn in the four quarters to the end of November 2015, taking its total in the period to $31.34bn — and its overall operating margin for 2015 was 13.9 per cent, according to John Guy, an analyst at MainFirst Another benefit of locating the entire production of one range of trainers in a single location is that it simplifies what is currently an immensely complex supply chain. Not only will this reduce logistics and storage costs, it will also allow Adidas to be much quicker, and more flexible, in how it makes its shoes. At the moment, it typically takes 18 months for Adidas to develop and finally sell a new style of trainers — a long time in a market that is sensitive to trends. However, Mr Hainer says a future in which customers can have shoes made on demand, perhaps even one day by a robot in a sports shop, is edging closer.

Analysts say this will be necessary to keep up with a growing demand for customisation — an area in which Nike currently has the edge on Adidas. “Right now, consumers really want products that are new and trendy, so companies really need to speed up the delivery,” said Ayako Homma, an analyst at Euromonitor. “Having production at major markets including local locations will certainly help to deliver in a timely manner.” Producing closer to the final consumer should also help Adidas to match its supply of trainers more closely to demand. This could allow it to cut the number of shoes that it has to sell at a discount in order to avoid being left with excess stock, which, in turn, should help improve margins further.

For now, though, that day remains a way off. At 1m shoes, the output from Adidas’s two new speed factories is just a fraction of the 301m it made last year, which means the initial impact on overall margins will be minimal. Nor are the speed factories meant to supplant Adidas’s production in Asia — not least because demand in that region is growing rapidly.

Explanation / Answer

A ) Adidas’ strategic positioning :

Adidas Inc.is the German footwear manufacturer, a global marketer of sports apparel and athletic shoes. Adidas group is quite a complex and ever innovating a designs for satisfying their customer tastes and preferences. Mission statement is “ Impossible is Nothing “ .The strategy focus on the major global lifestyle markets. The brand emerged as a premium rand and has a significant mark in the market.

Marketing strategy & 4P’s :

Product Strategy : The main motto is to satisfy the customer needs and be innovative in approach. They have various methods to identify the trendy patterns and understand the needs of the consumers. The competitive advantage of the brand is its continuous product innovation methodology and constantly upgrading their technology for improving their quality in services.

Positioning Strategy : . Target population : youth and upper middle population. The consumers have a good taste to look trendy at the same time fashionable The shoes make a great impression as they look trendy and stylish .The eye gear and perfumes serve best as the niche elements to boost up the brand. The primary focus on the sportswear, this comprises around 70% of their income.

Pricing Strategy : The prices target the upper middle level income population. The price setting enables them to penetrate deeper into the market. This gives a additional competitive advantage as the product is comparatively less priced than its competitors.

Promotional Strategy : The promotional objective is to show the audience how comfortable and trendy the product is. Advertising and marketing through mass media channels, use of internet and social networking media sites. The strategy is to become No.1 sporting brand in the world.

Nike’s competitive advantage is that they have a very aggressive integrated marketing model that explore more potential markets for the company. This gives the market a better way to advertise their products and great stage to display their products.Analysts say this will be necessary to keep up with a growing demand for customisation — an area in which Nike currently has the edge on Adidas.

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