Big Data Project Analysis
February 24, 2022
FNN 7102 Financial Management Individual Assignment
February 26, 2022
Introduction
In every area of the sector, there are many companies who are leading or take lead in it along with the trust of the consumers within its industry. The discussion on this report is totally based on the operational strategy and financial analysis of the Adidas group. The group originated a long time ago in Germany and has become a key competitor in its industry. Adidas group is known for becoming the fast-growing sports company in the world. With the changing years, the Adidas group made some operational strategies in its business model for developing and building their brand image across the world. For growing at a faster rate across the world the company strategy was mainly focused on the metropolitan cities. The brand also developed the use of sustainable materials for producing their sports items with an aim of being environmentally friendly. The main objective of the report was to find the Adidas strategy of how the company competes with its key competitors for sustaining in the market. For this, the company mainly focused on the three main factors named as speed, city and sources. Along with this Adidas also developed this research and development program on being more innovative with their products which were desirable for the athletes. The group also invested in product innovation by around 180 million euros in the year 2016. They also convert their marketing strategies into digital ones for interacting and analysing their product across the world. They faced many challenges in their growth due to the presence of the key competitors who were a; os developing their strategy effectively such as Nike, Jordan, reebok, puma etc. In this report, the researchers discussed the strategies for competing in the sports industry with the five force model along with the vision and mission of the company. Following the section, the researchers also discussed the PESTEL strategy of the company along with the VRINE model for visualizing the overall strategy made by Adidas to compete within the industry among the key competitors. The report also contains the value and chain of an organisation. In the last section, the report contains the financial analysis of the ADIDAS group as compared with the key competitors in the sports market named NIKE financial analysis.
Discussion
Vision and mission
The brand vision gives an expression for achieving its highest goals and motivation within its industry. Our vision provides consumers, employers and each and everyone who connects with our brand is to believe in and always belong to. Its aim was that its employees should organize their energy passion and efforts in the development of the industry. The principle of the Adidas sports performance division group was to equip all the athletes for achieving their impossible goals with some motivation. They also bring the passion for their products to the athletes of each and every sport mainly focusing on the key sports such as football, running, training equips, basketball.
Mission: They want to become the world’s leading sports product industry by building their brand image for passion towards sports and its lifestyle. The mission statement clearly shows a developed strategy for identifying the company products, specifying the needs of the buyer, consumer satisfaction towards their product, and setting their organisation platform apart from the rivalries.
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Five forces model of Adidas
The aim and objectives of the five forces are to examine the organisation in the principles in which the operation was done. These above forces were always creating an impact on the organisation’s performance rate on a larger basis. Several factors were :
Rivalry, supplier power, buyer power, threat regarding its substitutes, threat regarding its new materials.
- The power of the supplier deals with the approach of bargaining and can be calculated appropriately because it helps in the determination of the cost in the local areas of the market.
- The rivalry between firms was also considered as the most effective factor in creating
revenue. In the sector of the sports industry, the competitors were developing in a huge manner with their innovative goods for making into the market which leads to the threat in Adidas group.
- The threats of the replicable goods were not high but at a moderate level. The sports items which replace the product of Adidas were available, but they are not the
proper substitute of the Adidas so, they considered the threats in a moderate stage on the basis of Adidas products. But the bargaining power were arises, so the raw material which was used for producing their goods were required in a large context, therefore the amount of the raw materials was set at an affordable rate.
- The fourth force which was imposed by Adidas for evaluating was the rate of competition by other brands to capture the sports industry at a larger rate globally.
Therefore several policies and rules were made for competing in the market without getting indulged between them. The share of the market with respect to brands was also dependent on the competitiveness factors.
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- The last force imposed by Adidas for competing with the substitutes in the market was the power of the buyer regarding bargaining aspects.
PESTEL Analysis
This analysis basically comprises the following terms as per its name where P stands for political factor, E stands for economic factor, S stands for sociocultural, T stands for technological factor, E stands for an environmental factor, L stands for legal factor.
Political factor: The Adidas group finds this factor very crucial in their strategies due to the stability in the political areas of different countries. The risks such as war, specific changes in the policies of the trade, taxation system, trading strategies etc were different for every country which leads to the delay in the shipment along with the delivery of the goods. This makes the overall system more complex in nature. Countries like China have very low labour charges which also becomes a challenge for the Adidas group.
Economic factor: This factor mainly deals with the taxation system inflation rate along with the rate of unemployed people in per capita income. Sometimes the stock market of the countries becomes unstable which may lead to the fluctuation of the rate of interest where the Adidas group growth rate gets deteriorated.
Sociocultural factor: this factor mainly deals with the culture, religion, caste system of any community, gender diversity and inequalities, habits of buying products along the lifestyle of the people. All the above factors play a key role in the Adidas operation strategy. For eg, if they made advertising on a community they need to take care of the sentiments of this community because the ads will telecast over all the platforms across the nations.
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Technological factors: This mainly deals with the development of unique technology which makes them compete with their rivalries. With the change in the revolution of the technical industries Adidas news developed its strategy as per the requirements. It will help in producing innovative products, quality rate, reduces manpower, proper utilisation of the time period, several online stores were also developed where they can easily make marketing strategy for increasing their sales growth rate along with evaluating the consumers feedback toward their product.
Environmental factor: This factor ensures that the production factories of Adidas should avoid the usage of harmful substances, colours, emission of harmful gases etc. its objective was to make their products with sustainable material without deteriorating the functions and the quality of their products.
Legal factors: Several factors need to be determined by Adidas as it made its brand image across the world such as commission of the press complaint, description of the trade act, the act of supply goods and the sales, a commission of the interdependency of television, export rate and the import rate etc.
Adidas should be aware of these following factors while dealing in different countries with their products along with avoiding plagiarism with the third party.
VRINE MODEL
The vrine model comprises valuable, rare, inimitable factors, non-substitutable, exploitable.
It mainly deals with the allocation of the resources, organisational capability, and analyzing the above factors.
Valuable factor: This factor deals with the diversification of the country with its changing behaviour of selecting the products which make the product valuable to them. The organisation analyzes the valuable data for innovating their production in some respective areas, thus in many countries, Adidas also started the development of the headset as an innovative one. However, this could not be possible for any organisation without evaluating the diversity factor with respect to their products.
Rareness: The rareness factor developed in any companies with the development of the research and development program for coming up with new and innovative ideas for designing their products. The diversified portfolio of the Adidas group according to their brand image across the world creates some uniqueness in their business model which makes other companies invest in their product and build some healthy partnerships within the industries also helps Adidas to drive fire them with their partners.
Inimitable factor: The inimitable deals with the rare factor of the product which was discussed in the above point.
Non- substitutable: This factor only works with the innovative and the diversity factor from the organisation over point. But from the consumer side overprint, it deals with the loyalty with the brand image along with their products and contributes to the organization between the rivalries competing at their levels. This type of behaviour of the organisation and the consumer towards the companies were non-substitutional.
Exploitable: from the above mentioned discussion on the factors it was clear that the Adidas group is taking full advantage of their innovation strategy and the capabilities of evaluating the rate of diversification.
Value chain: The main objective of this model is to draw attention to the production line processes after the activities of the sale rate and also visualize the company value creation for its consumers and to convince them for buying and provide proper services across the ovr]erall process. It includes two types of activities such as primary and secondary.
In primary it involves:-
Inbound logistics: This type of logistics process deals with the things which came to the organisation or were exchanged within the organisation such as raw materials like rubber, leathers, colours, fabrics etc.
Operational function: It involves the whole manufacturing process from converting the raw material into the final product. Following with the receiving the orders from the retailers and consumers along with the processing of the billing process.
Outbound logistics: This mainly deals with the process in which the products were going out from the factories to the various outlets along with some retailers.
The secondary activities include the activities which were considered by the organisation for increasing the value of their services and the products. It involves the infrastructure of the organisations, human resource department, research and development department, procurement cell.
Financial analysis of the Adidas group
Horizontal analysis
From the above table, the researcher discussed the financial data of the years 2013 and 2014 where it clearly shows the horizontal analysis of the Adidas group which was evaluated in euros. It includes the net sales recorded as 14,253 million in the year 2014 as compared to 14,203 million in the year 2013 with a change of 2 percent. The cost of sales was recorded as 7610 million in the year 2014 against 7202 million in the year 2013 with a change of 5.3 per cent. The gross profit recorded as 6924 million in 2014 as compared to 7001 in the year 2013 with a change of negative percent around -1.1. The overall net income was recorded as 496 million in the year 2014 against 790 million in the year 2013 with the change of decreasing rate of around – 37 percent.
From the above graph, it can clearly show the Adidas financial data of the year 2014 and 2013, where several factors were recorded and evaluated. The current ratio of Adidas in the year 2014 was recorded as 1.7: 1 as compared to the year 2013 data shows as 1.4:1with a change of around 21 percent. While on the other hand the interest cover was recorded as 13.50 in the year 2014 as compared with the year 2013 as 15.20 with a change of around -11 percent. The earnings per share were recorded as 2.43 euro in the year 2014 against 3.78 euro in the year 2013 with a change rate of -35 percent.
Financial analysis of Nike group
The ratio analysis in the financial sector helps the organisations as well as the investors to evaluate the overall performance rate along with comparing the relationship between the information which obtained from past, industry or overall business sector.
Advantages
- It evaluates the overall accounting information in a quick and organised manner.
- It is an effective tool that was used to measure the outcomes that are needed for the organisation for analysing.
- It provides a platform for the management team to discharge the responsibilities.
Liquidity ratio: The liquidity ratio mainly deals with the short term liability through using the current assets.
The above graph clearly shows the data of the liquidity ratio which include the current ratio, cash ratio and a quick ratio of the year 2016,17,18 and 19. The researcher considers only the two years of data for analysing such as 2016 and 2017.
The current ratio was recorded as 2.9 in the year 2017 as compared to the year 2016 as 2.8. While on the other hand the quick ratio was recorded as 2.01 in the year 2017 against 1.9 in the year 2016. The cash ratio shows the ratio of 1.13 in the year 2017 as compared with 1.02 in the year 2016.
Activity ratio: The activity ratio mainly deals with how effective the working mechanism of the company Lebarge its asset into the balance sheet, so it can help the company to manage and generate more money and revenue.
From the above graph and table, it can clearly show the data of activity ratio, the researchers take only 2016 and 2017 data for analysing the company financial movement throughout the year.
The following formula was used for calculating the data :
Receivables turnover = account receivables / sales * 365
Inventory turnover = cogs / inventory
Assets turnover = net sales / total assets
The company recorded a turnover on the receivables as 9.34 in 2017 whereas 9.99
in 2016. It mainly deals with the time period required for collecting the receivables from the consumers. The inventory turnover recorded the data as 3.77 in 2017 whereas 3.59 in 2016 while on the other hand the assets turnover recorded as 1.48 in 2017 as compared to 1.51 in 2016 which mainly deals with the companies capabilities for generating the sales revenue through assets.
Conclusion
The above report concluded the overall strategies used by the Adidas company for making their trademark in the sports industry. In this report, the researchers have given some points of view on the mission of the company along with the five forces of the strategy used by the Adidas group. Although the report also contains some strategy models developed by the Adidas group name as pestle analysis and the vrine models for competing within the industry across the world.
The second part of the report summarised the financial analysis of the Adidas group of the year 2013 and 2014 along with the financial analysis of key competitors named as Nike and evaluates its overall financial ratios.
