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Global Economic Environment and Marketing

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Type of Academic Paper – Report

Academic Subject – Marketing

Word Count – 2915 words

 

Introduction

The rapid globalisation and changing economic scenarios change the working conditions for organisations in the global economic environment. Global corporations’ survival is based on effective competitive strategies, revolutionised innovations, and sustainable business practices (Ferraro et al., 2005). Strategic marketing initiatives are required for an organisation to excel in changing economic environments. Sustainable marketing activities are a relatively new practice in multinationals and global companies to meet the challenges of rapid deprivation of natural resources, threats to the natural environment due to industrial activities, and the increased awareness of environmental concerns in consumers (Miller & Cioffi, 2004).

According to Kotler and Pfoertsch (2006), strategic planning for effective utilisation of resources and understanding the market requirements are major tasks in new markets. This paper is based on the sustainable marketing strategies of leading global sports brand Addidas in the Chinese market, primarily because of its major products in this region and its major hub for export in this industry. The paper discussed company strategies’ changes to adjust the target market requirements innovatively and sustainably. The marketing strategies, segmentation and targeting, and sustainable business practices are discussed.

Company Description

Adidas was established in 1948 in Germany and rapidly progressed to a sports brand in local and overseas markets. The company has major competition with Nike in the international market and possesses a global presence in sports apparel, shoes, and perfumes. The company owned three leading brands of Adidas, Adidas Golf, and Reebok. Adidas has major store operations in more than 30 countries with more than 600 stores worldwide apart from superstores and shopping malls sales. The company is in China’s leading position and has served as an official sponsor in major events such as the Beijing Marathon in 2013. The company offers competitive positioning in the market with the highest sales recorded (Adidas, 2016).

Microenvironment Analysis-PEST

PEST analysis in Chinese macro-environment for Adidas is discussed below:

Political

The Chinese market has observed a recent change of government in 2012. The new government took strict actions against corruption. It provided a favourable and competitive environment for MNCs like AdidasThis market’s income disparity and economic growth is also monitored closely with effective regulatory policies in every sector. The reduction in import duties on shoe leather will boost the competitive manufacturing environment for Adidas. The fair wage policy of Adidas will help to manage the riots of labour for high wage rates. On the other hand, raised trade tensions of China and EU countries can negatively affect Adidas manufacturing in China (Adidas, 2016).

Economic

The stable tax structure and low import duties on leather have been favourable to Adidas’ production in China. On the other hand, Adidas’ counterfeit brands are also made in the region; therefore, the brand faces economic threats as it is difficult to control illegal production. The counterfeit brands also challenge the originality of brands in Chinese and international markets, resulting in the loss of brand image (BBC, 2012). The environmental concerns of production in China required effective supply chains and green production practices. The public sentiments against the company consider Adidas responsible for environmental degradation like other MNCs. Also, the demand for increased wages for Chinese labour is another economic issue that will decreaseChina’se manufacturing viability as a cost-effective alternative to Germany.

Socio-Cultural

The consumers’ base in China is the highest, and Adidas has a market of 1.3 million consumers in this market (CIA Factbook 2016). The youth constituted around 33% of the total population and comprised the major target market for Adidas. There is an increase in internal migration to urban areas, changes in lifestyles, and inclination towards a healthy and physical activitpositivelytive imp on Adidas sales. The rise in living standards made foreign sports brands accessible to local consumers (BBC, 2012). Adidas’s involvement as an official sponsor in the 2010 China Olympics and 2013 Beijing Marathon has also increased the awareness of the brand in local consumers.

Technology

The rapid changes in technology have enabled industries to access modern product developments at the lowest rates. The introduction of smart shoes by Adidas, green supply chain, air dry fabric production, and environmentally friendly materials used in shoes and accessories production has enabled the company to excel in Chinese and other markets. On the other hand, the issues of copyright breach, counterfeit products, and access to sustainable technology are major concerns of the company in the target market.

Marketing STP for Adidas:

The sustainable marketing strategies are dependent on the segmentation and appropriate targeting of the consumers market. Effective positioning is also a vital component (Kotler & Pfoertsch 2006).

Segmentation

According to Liqin et al (2009), sustainable marketing practices are based on the careful division of operation markets in homogeneous groups of suitable characteristics to the concerned brand. The segmentation profile in Chinese market is based on following criteria:

Table 1: Segmentation profile of Adidas

Segmentation Type Criteria Segment characteristics
Geographic
  • Region
  • Density
  • Climate
  • Greater China
  • Urban and rural
  • Tropical, medium to extreme weather
Demographic
  • Age
  • Gender
  • Education
  • Profession
  • Life Cycle
  • Race
  • Income
  • Personality
  • 10-30 years old
  • Males and females
  • school, college, and University, formal plus
    technical
  • Students, athletes, professionals
  • Individuals, single or married
  • Any ethnicity, universal brand
  • £20K per year and more
  • Athletic, health conscious, adventurous,
    variety seekers, inclined to foreign brands.
Psychographic
Lifestyle
  • Lifestyle
  • User
  • Brand Loyalty
  • Usage
  • Independent, Socially active and healthy life, influence on family and friends.
  • potential and existing users of sports shoes
    and accessories
  • High foreign brands loyalty
  • Regular, in daily practice
Behavioural Segmentation Benefits
  • -Trustworthy sports brand
  • -International rand image
  • -Comfortable and durable

Targeting

Globalisation and international companies’ arrival in this region have increased the awareness and changes in youth lifestyle in the last decade. The young population is the major segment targeted by Adidas due to the sporting lifestyle, preference of gym memberships, and endeavours to stay fit in life to be competitive. The actual target group of the company is youth and athletes of age group 10 to 30 years. The other group of this target market is local sports personalities playing the games like athletics, basketball, soccer and other sporting activities. Soccer is in the early development stage in China, so the company is targeting young soccer teams to promote its soccer shoes. Furthermore, the health-conscious and brand-oriented target market is aware of the latest fashion and sports trends. This trend of target market force company to adopt sustainable marketing strategies

Positioning

Positioning is the creations of the desired image in consumers’ minds to perceive the associated benefits and differences of the brand concerning competitors (Keller 2012). Adidas is positioned as a high price premium brand in the Chinese customers market. The closest competitors are Nike, Puma, Asics and Reebok. According to the international market position, the perceptual map of these brands is as follows:

Adidas is positioned as a sustainable sports shoe brand with a comparatively low price than the other foreign brands in this market. Adidas’ positioning as an affordable foreign sports brand has increased the sale in price-sensitive segments of the target market.

Sustainable Branding

The branding strategy defines rand activities to influence the purchasing decision and awareness of the target market in the long term (Keller 2012). Adidas follows a competitive branding strategy to influence the target market as a high quality yet affordable sports brand in China. The digital marketing campaigns easily termed Adidas as an active advertiser and sponsor of mega sports events. Online advertising is addressing the ever-increasing population of citizens in the region. Another important aspect is the status of a socially responsible brand in this market. The decision of a multilevel branding structure based on Adidas and Reebok’s functional characteristics has positively affected the sales in this region compared to the previous vertically integrated branding structure (Adidas website 2016).

According to Hower (2015), Adidas is included in 167 top brands with the “greenest” status of the supply chain. The brand is included in the top 10 brands in this list, along with Apple and H&M. The basic criteria of this ranking are the extent to use sustainable sources. This high score demonstrates that Adidas’s sustainable supply chain helped improve the information disclosure and public contribution in China (Hower 2015). The brand profile of Adidas can be expressed in Table 1 below:

Table 1; The brand profile of Adidas (extracted by author)

Brand Name Adidas
Product Category principal and most admired global sporting goods
Logo Logo Image
Packaging Sustainable, recyclable material packaging
Slogan Nothing is impossible
Brand values Authentic, Innovative, Passionate
Brand Image Inspirational, Honest, and Committed
PLC Stage Growth phase in the Greater Chinese market

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Sustainable Competitive Advantage

According to Andrew (2011), sustainable competitive advantages are long term superiority over competitors through socially responsible business innovation, resource development, or company assets benefits. Adidas’ competitive advantage in Greater China is to lead the market through sustainable business practices in the long term (Christopher & Russell 2008). The company has adopted the Route 2015 plan. According to Adidas (2016), this plan follows a strategy to achieve quality growth and sustainable progress in the long term by fulfilling customers’ desires with a unique brand experience and premium sporting products.

The challenging market scenarios in Greater China have allowed Adidas to compete with global leading sporting goods brands. The Route 2015 plan has generated enormous success through sponsorships of major events such as the Beijing Marathon 2013, a road race with IAAF Gold Label for the last five years in succession. The high profile sponsorship of the Beijing Olympics 2010 acted as the start of Adidas success in China. The sustainable strategies behind this leading position are discussed below:

  • Adidas is considered one of the top three most sustainable organisations globally and recognised as the best company of Europe with a leading status in the sporting goods industry in Global 100 Index (Adidas website 2016).
  • The creation of ‘4P’ strategy of sustainability has defined the core values of the business. These 4Ps provide bases for the marketing strategies and assist the corporate values of performance, integrity, passion and diversity. The successes from previous years are added in the efforts of next year’s strategy. As a result of these 4P’s, Route 2015 was formed.

mARKETING REPORT copy

  • The strategic partnership with blue sign technologies added another milestone in achieving sustainable green supply chain. The blue sign status of suppliers declares that they are used all permissible materials. Thus strategy provided chemical innovation that the company committed to producing 99% PFC free products by December 2017.
  • The revolutionary innovation of DryDye fabric saved company 100 million litres of water in water-free dyeing technology in 2014 alone (Adidas 2016). This carbon-based dyeing process also saved 60% energy as compared to the traditional dyeing mechanisms.

Hence, through the above strategies, the company has followed a culture of continuous innovation and gradually achieved company’s company’s status in the future sustainable economy of Greater China and worldwide.

Impact on Consumer Behaviour

Kotler and Armstrong (2012) asserted that the impact of marketing and branding strategies had impacted the decision-making process and consumers’ brand association. Companies adopt and promote strategies to positively impact consumers’ perception of the brand (Toften & Hammervoll 2010).

Consumer Decision making: Internal and external factors affect consumer behaviour and transform the impact of a brand through prior experiences, promotional activities, word of mouth, and other marketing communication modes.

consumer-behavior

According to a recent article by Russell (2016), Collin Currie’s interview, Adidas MD, for China was shared with firsthand information about consumer behaviour. According to Russel (2016), Adidas is moving from large cities of China to small cities’ consumers. The behaviour of consumers due to public relations and promotional campaigns in China is based on demographic and economic conditions. Adidas has closely observed these two segmentation criteria to understand the behaviour of the primary target market. According to Currie, affluent and middle-class consumers with a yearly income of RMB 80,000 (8,600 pounds) and above are the primary target market for Adidas. These consumers are proved to be educated, socially active, and influenced by foreign brands as status symbols.

Socio-Cultural behaviour: The cultural and social structure of Chinese consumers also plays a vital role in selecting a brand. According to Hofstede national culture dimensions, Chinese consumers behaved cumulatively compared to individualistic behaviour in Europe, with high power distance, and a long term view of the relationships.

With socio-economic and technological development in China, consumers are more internet savvy, future-oriented, and prefer cost and time effective purchases. Apart from the manual store, Adidas prime strategy is to reach small cities in China through online sales (Russell 2016). The increase in netizens in China is multifold due to the high proportion of youth. Therefore, the online sales model will be more successful due to its resource effectiveness.

Post-purchase dissonance: Another important aspect of consumer behaviour is post-purchase dissonance (Kotler 2012). To save the consumer from post-purchase issues, Adidas is providing effective after-sales services to Chinese consumers. The customized model’s design is also important in China due to the majority population’s short height and feet size. The website navigation assistance and after-sales services are also important considerations of these customers in online shopping. The establishment of a customer database, interactivity through the website, and handling customers queries on social media sites are important factors that affect customer satisfaction in online sales. Therefore, the collection of customer data in this market will also provide consumer trends, purchasing habits, and premium choices for Adidas products (Russell 2016). Successful management of long term customer relationships can increase brand association ad loyalty in Chinese consumers.

Conclusion and Recommendations

In conclusion, the Adidas group has successfully managed the Chinese market’s financial stability and sustainability through innovative production and marketing strategies. The reactions of consumers, employees, and other stakeholders supported the company’s efforts to stay as one of the top three sustainable companies in the world. Also, the company’s innovative and environmental friendly branding strategies assisted in penetrating the Chinese market faster than its competitors and acquired the status of the most preferable sporting goods brand in China.

Furthermore, the company is following a multi-brand portfolio with two distribution channels of wholesaling and retailing. This strategy shortened the distribution hierarchy and linked the global supply chain effectively. In the long run, the sustainable leading position of Adidas will need continuous innovation and research activities. The sensitivity to fair wage practices, environmental protection standards, and innovative material solutions will help the company sustain its competitive advantage. Moreover, close monitoring of consumer behaviour factors and effective control of marketing and sales activities will add value to green supply chain practices in China. The changes in customer’s trends and variations in competitors’ strategies will act as reliable sources to update existing strategies.

References

Adidas, (2010). About Us Retrieved on from: http://www.adidas.com/cn/shared/aboutadidas.asp

Adidas, 2016, sustainability history, accessed from http://www.adidas-group.com/en/sustainability/managing-sustainability/sustainability-history/

Andrew C., (2011). A sustainable workplace – we’re all in it together. Strategic Direction, 28(1), 3-5.http://dx.doi.org/10.1108/02580541211188987

BBC, (2012). Popular trainer brands lose out to fakes, http://www.bbc.co.uk/news/business-18508071

CIA, (2016). World Fact book: China, accessed on April 16, 2016, from https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html

Christopher H., & Russell K., (2008). The sustainable competitive advantage model for corporate real estate. Journal of Corporate Real Estate, 10(2), 85–109. http://dx.doi.org/10.1108/14630010810905606

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Ferraro, F., Pfeffer, J. and Sutton, R. I., (2005) ‘Economics language and assumptions: How theories can become self-fulfilling’, Academy of Management Review, 30: pp. 8–24

Hofstede centre, (2016), Chine National Cultural Dimensions, accessed from https://geert-hofstede.com/china.html

Hower, M., (2015), Apple, Adidas boast China’s greenest supply chains, accessed from https://www.greenbiz.com/article/apple-adidas-have-greenest-supply-chains-china

Keller, K. L., (2012). Strategic brand management: Building, measuring and managing brand equity. Upper Saddle River, NJ: Pearson-Prentice Hall.

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Liqin R., Guangya X., & Koos K., (2009). Sustainable competitive advantage and marketing innovation within firms: A pragmatic approach for Chinese firms. Management Research Review,33 (1), 79-89.http://dx.doi.org/10.1108/01409171011011580

Miller, A., & Cioffi, J., (2004). Measuring marketing effectiveness and value: The Unisys marketing dashboard. Journal of Advertising Research, (September), 237-243.

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Russel, C., (2016) Adidas in China: Chasing First, http://knowledge.ckgsb.edu.cn/2016/02/09/marketing/adidas-in-china-chasing-first/

Toften K,. & Hammervoll T., (2010). Niche Marketing and Strategic capabilities: An Exploratory Study of Specialized Firms. Marketing Intelligence and Planning.

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