Adidas is a world-renowned sports clothing and accessories brand that originated in Herzogenaurach, Germany in 1920 by Adolf and Rudolph Dassler. It is one of the leaders in the sports footwear industry and sells millions of products every year working with hundreds of different, new designers, some of which are celebrities, looking to grow their own profile as well as help Adidas grow theirs, with any company the size of Adidas’ there are many political, ethical, social, technological, legal and economic issues that they have to try and avoid, ranging from exploitation of child workers in Asia to tax evasion when operating in other continents, this essay aims to outline these issues. One of the countries that Adidas operates in is the United Kingdom, the UK is a country with a population of 65.65 million people (per the office for national statistics) and it also features a fair voting system on most big political events (Local elections, General elections and referendums like the EU referendum). The United Kingdom has the 5th biggest economy in the world, the second biggest in Europe, only being beaten by Germany. This essay aims to outline the political, ethical, social, technological, legal and environmental rules and regulations, specifically of the United Kingdom, that Adidas must follow.
Political
Adidas sells their products in over 100 countries worldwide, and with this comes many complexities, including taxation laws, some countries have very high tax laws and other quite low tax laws, Adidas has to remember that, when trading in different countries they must follow each tax law, in the United Kingdom the corporate tax rate is 19% but in the isle of man, which is a British dependency has a corporate tax rate of 0%, if they do not check on this they would have very big fines and potential prison sentences. Another complexity for Adidas currently, surrounding the United Kingdom, is the Brexit negotiations, Adidas do not know whether the tax rates in the UK will go up or down or if the import prices will go up or down and if these figures are effected significantly, Adidas would have to reevaluate whether it is beneficial for them to continue trading in the UK. Credit Suisse predicts a one third chance of a post Brexit recession within six months, by April 2018, (Martin, 2017). If this prediction were to come true, people would have a lot less disposable income and with a wide range of Adidas products being at a high price point, people simply will not be able to afford to buy them anymore, resulting in a huge loss of earnings if all three of those predictions were to come true.
Ethical
Adidas have one major ethical flaw, that is that they outsource 93% of their manufacturing, much of which is in Asia, these companies they use and the countries they operate in (China, India, Thailand) have very little ethics, often employing children to work long hours for little money. In the United Kingdom, Child labour is highly illegal and when it was revealed that children were involved in Adidas’s product line, many people wanted to boycott the brand due to its involvement in employing children. To fight this Adidas have hired a specialist to help combat slavery of all kinds, not just child labour. (Goldsmith, 2017) One product line Adidas has that has seen many people hail them as game changers in the fight against dumping into the ocean, Adidas released Adidas x Parley Shoes which are made solely from Plastics found within the ocean, many saw this as a sector defining move from Adidas as no other company in the sports wear sector has an initiative like this. They also have a line of swimwear and all profits go to the ‘Parley, for the ocean’ charity. Another ethical issue Adidas got caught up in was when they started using Kangaroo leather in some of their predator football boots, this lead to a kangaroo preservation charity called ‘Viva!’ boycotting all Adidas products until it stopped. Eventually Adidas conceded and declared that they would reduce kangaroo leather usage by 98% within 12 months, this was not enough for Viva! To give up the boycott however.
Social
Adidas products are built for the health-conscious consumer, events like the Olympics in 2012 in London and 2016 In Rio De Janerio are always very good opportunities for Adidas to release new products for athletes sponsored by them, which then encourages the consumer to buy the new product because the athlete won a medal using it. Olympics and world cups are usually when big brands release their new flagship products, revolutionary products you have never seen, because the social reach of an event like that is bigger than almost any other advertising opportunity on the planet. In the 2012 Olympics in London, in which Team GB were sponsored by Adidas, they saw their sales jump by 15% to $3.5bn in the second quarter, as opposed to the previous year. (Bryant, 2012). In addition, Adidas do a lot for humanitarian aid, helping in natural disasters or helping with the current refugee crisis. Most recently, Adidas have worked closely with a charity called ‘Luftfahrt ohne Grenzen’ or Wings of help, and donated €500,000 and over 250,000 products to refugee aid worldwide, not just in Germany (Adidas, 2017).
Technological
Adidas have excelled in the technological aspects of the sector, developing a shoe that contains a microchip that connects to smartphones and wireless mp3 players, then finding songs that are the same bpm that you are running to help you keep pace, this would be very beneficial to anyone that is training to run large distances, as they will be able to learn to pace themselves better and for longer distances. Away from the products they produce, they use environmentally friendly materials to package their products, the packaging is designed to survive humid climates, long distances and extreme temperature changes. Another huge innovative piece of technology Adidas brought out was the boost technology, which allows you to sink into the sole of the shoe, increasing the surface area on the floor, which takes stress away from your foot and adds stability, Boost technology has not been without controversy though, with Puma claiming to have invented it, but due to the fact neither company patenting the technology, they are both free to use it, however Adidas have sole rights to call it boost technology. This technology was brought to be a direct rival to Nikes ‘Air’ technology, and the fact it increased Adidas’s reporting record sales, up 19%, in the last 12 months, whilst Nikes has dropped, it has proved to be vastly popular. (Reuters, 2017)
Legal
One of the legal issues Adidas faces is with patents and copyrights, Adidas and Nike have been tangled in a lawsuit for years over a new kind of technology Adidas call Prime knit and Nike call Fly knit, both technologies are types of knitted materials used in shoes that were released around the same time. Another controversy is down to the stripes Adidas uses for branding, Forever 21 have been caught out many times mimicking the stripes Adidas uses, even going as far as to sell ‘Repurposed’ Adidas items that turned out to be counterfeit Adidas products. This is not the first time Forever 21 have been caught out doing this, they have been sued by Adidas in the past for the use of stripes like Adidas, and the most recent case was breaching a settlement made in court at a previous date (Haines, 2017). Another instance in which Adidas have been protective of their striped design is when, in 2017, Adidas sued Puma over a new range of football boots being released by the brand, these boots had four stripes on the side of the boot and they could be confused for Adidas boots, as Adidas have been using the three stripes branding for more than 60 years, (RTT News, 2017).
Economical
Due to their every growing range of products, celebrity endorsements and new technologies, Adidas able to boast that they are now the United States second most popular Shoe brand, overtaking Jordan Brand in sales for the first-time in over a decade (Bieler, 2017). Additionally, over the past 12 months, Adidas’s stock has grown over 50%, this is heavily down to the new boost technology being so popular and being released in over 8 new shoe silhouettes over the past year, it is also down to the influence Kanye West and Pharrell Williams have had with their Collaborations being wildly popular. One big trend of 2017 was retro clothing coming into fashion and luckily for Adidas, there retro models like the Adidas superstar, that were wildly popular in the past, have taken off again, becoming the most popular shoe of 2016, knocking Nike from the top spot for the first time in a decade. Sports teams sponsored by Adidas, such as Real Madrid, Bayern Munich, Juventus and Manchester United having such successful years in their respective competitions have also multiplied the exposure to consumers over the past 12 months, contributing to this exponential growth. Finally, The Olympics in Rio De Janerio in 2016, which attracted over 3.6bn viewers (according to Statista) and the European football championships, bringing in over 2bn people (per USA today) have seen Adidas sales grow by 15%, much better than the 12% projection at the beginning of the year (Thompson, 2016)
In conclusion, Adidas have many political issues surrounding the United Kingdom and Leaving the European Union that they will need to be wary of in the coming months and years, once every figure has been decided, Adidas will have to reassess the profits they are predicting in the UK and may have to adjust their prices to assure they make profit, but then they may lose out on a portion of their customers due to this price increase. Ethically, Adidas will need to think about the way in which they deal with employment, specifically how they can more accurately manage who they employ, which would subsequently lower the number of children they employ down to zero, the appointment of the specialist should aide this. They may also want to look at synthetic leathers to use in place of real leather as many people will happily boycott a company if they use leather goods. Socially, Adidas need to concentrate heavily on the upcoming world cup in Russia as this will be a great place to increase the exposure of the brand to a mass market, this could include a new shoe or a new piece of technology that will entice the public into purchasing. Technologically, Adidas need to keep developing their current Technologies, like boost, to hopefully bring it down from its premium price point and make it more available to mass markets. Legally, Adidas need to tighten up on the counterfeit industry, which is now worth over $1bn, as these products are of a worse quality and they make the Adidas brand look worse because uneducated people will think the product is genuine and this may stop them purchasing a product in the future. Economically, Adidas could collaborate with more high profile celebrities which would increase even further than the current collaborations, they would also want to hope that their sponsored teams have such good years in their respective leagues and cups again. The future developments of Adidas are very interesting and should be reviewed at a later date.
Bibliography
Grahame, A. (2017) What countries manufacture adidas. [Online] [accessed on the12th December 2017] https://careertrend.com/info-8187202-countries-manufacture-adidas.html