Adidas group: IT multi-sourcing at Adidas Harvard Case Solution & Analysis

Adidas group: IT multi-sourcing at Adidas Case Solution

Introduction

Adidas is the second largest company in the world among sportswear manufacturers. It was established in 1924. Its revenue rose to €14.5 by 2012. Adidas had a long-term relationship with the single vendor Alpha by 2010. However, it incorporated multi-sourcing from the two vendors Beta and Gamma in 2012.

 The multi-outsourcing strategy was very much beneficial for the Adidas. The cost of the company was reduced by 20%. Furthermore, in response to the multi-sourcing of global IT group for the service sourcing and software development, the number of defects massively cut to the half. It was a massive improvement of the quality of production.

Apart from multi-sourcing Adidas also strived for the collaboration with it's long – term supplier, Alpha. Hence, in order to improve relationship Adidas and Alpha had an openly critical review. Alpha in response welcome the critics and implemented strategies to improve its price and quality. Hence, with the multi-sourcing strategies both of the parties, Adidas and Alpha were the beneficiary. Adidas developed its production through multi-sourcing. While Alpha improved its quality and price in order to show improvement in its procedures.

Evaluation of the problem

The CIO of Adidas, Jan Brecht knew that the multi-sourcing strategy has launched successfully. The company achieved more than it expected from the multi-sourcing. However, it was very critical for the Brecht to consider the best timing for the implementation. Moreover, he was also concerned about maintaining the relationship with its newly developed vendors for IT. However, the relationship could be managed by the development of external relationships as well as skills of internal management IT organization.

Analysis

Porter’s Five Forces

Five forces of the Porter elaborate the circumstances of the industry in which company progresses. Adidas deals with the sportswear, and it is headquartered in Germany. Following is the brief analysis of the industry of Adidas:

Bargaining Power of Buyers

As there is a generous quantity of sportsperson and the sports fan, hence, there are numerous buyers in the industry. Moreover, there are two types of businesses with which company deals; one is B2B while another is B2C. The products of the Adidas are standardized that is why it approaches with high pricing strategy. The buyers, however, cannot easily switch due to the standardization of the products. There are threats as well with the perspective of buying behavior. The target market does not have knowledge about the sportswear of Adidas appropriately. Furthermore, in B2B business, there are few buyers of the Adidas due to its high prices. Adidas also lacks in backward integration. Hence, it can be anticipated that the bargaining power of the buyers is overall low.

Bargaining Power of Suppliers

There are the numbers of suppliers in the industry. Products delivered by the suppliers are not unique. There is incentive market of competitors to buy the raw materials from the suppliers. Forward Integration is not a hurdle for them. However, they charge the high price for the raw material. Nonetheless, bargaining power of the suppliers is expected to be low.

Threat of Substitutes

There is the small capacity for buyers to switch the product. Moreover, competitors have the similar or much lower price strategy. The industry has high growth and the demand. The products however, are not comparable because Adidas has the quality of goods. Hence, the bargaining power is supposed to be low.

Threat of New Entrants

The industry has progressed with large economies of scale. Moreover, the industry is also required a capital intensive investment. Distribution channels are not easy to access by the companies. The industry has high profitability and the Growth. Great competition would also not allow any new entrant. Hence, the threat of the new entrants has foreseen as low....................

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