Executive Summary
Adidas, along with other international corporations, is currently facing a challenging economic and social situation related to the pandemic that requires innovative solutions. This paper proposes introducing a new Adidas product personalized selection and delivery service based on a specific type of activity of a customer within a mobile application. It analyzes the organization’s market environment using PEST and Porter’s Five Forces and discusses the added value of the proposed service. The paper also describes the components of the New Service Development (NSD) process and presents a detailed Blueprint for it. It also analyzes five features of the services and determines their impact on the new service.
Introduction
Adidas AG is a German manufacturing company specializing in the production and sale of sports shoes, clothing, and equipment under the Adidas and Reebok brands. According to Crasto et al. (2020, p. 1), “innovation is at the core of all products at Adidas,” and the company applies modern solutions in manufacturing and supplying “world-class sports products in their clothing, footwear, and accessories.” It should be noted that the new service should correspond both to the image of the company and the most advanced customer requests. Moreover, the service should be in line with the current organizationâs environment and future economic challenges.
Environment Analysis
PEST Analysis
Political decisions, changes in legislation, and geopolitical trends strongly influence the activities of global companies. The Adidas supply chain is international and, therefore, highly dependent on cross-border trade regulations. According to Adidas Annual Report (2019), during the last year, the tariffs for importing materials have increased. The report also indicates that Vietnam, Indonesia, and China are the main sourcing countries where the products are manufactured (Adidas, 2019, p. 65). Therefore, tariff escalation could have a significant impact on the cost of production. It should also be noted that due to the spread of the COVID-19 virus, many governments decided to close their borders and establish a national quarantine.
These circumstances have a severe impact on the economic situation in the world and, consequently, on the company. Until recently, the economy was experiencing growth, and people were more willing to buy sports clothes and shoes (Pratap, 2018). At present, the economy is forecast to decline since many businesses have suspended operations or lost customers due to quarantine measures. Accordingly, it is to be expected that the number of visits to the Adidas stores will drop dramatically, and the level of sales will seriously decline.
The productivity and profitability of the company’s activities are highly dependent on major sporting events, the popularity of healthy lifestyles, and related social trends. Adidas Annual Report (2019, p. 117) states that the industry is expected to grow due to such sporting happenings âas the UEFA EURO 2020 and the 2020 Olympic Games in Tokyoâ. However, these events, along with all other mass arrangements, have been moved to 2021 or other later dates. Thus, Adidas should adapt to the socio-cultural trends associated with the pandemic and related precautions.
Technological innovations now play a crucial role in the activities of the society, including business. A significant number of employees have switched to a remote mode of working, and customers use online shopping and service delivery whenever possible. According to Pratap (2018, para. 22), “Adidas has made huge investment in digitizationâ and âis using digital technology for marketingâ and supply chain management.
Given the above political, economic, and social circumstances, these technological resources should be employed especially in this period in order to minimize the decline in sales. The proposed new service will allow customers to perform all operations related to the selection of necessary clothes and shoes online in the mobile application, as well as to receive delivery effectively. Its primary added value is that customers will have the opportunity to switch to a new shopping mode, rather than to abandon it. Besides, it is especially relevant due to the increased tendency to maintain health care, including through sporting activities.
Porterâs Five Forces Analysis
First of all, the bargaining power of suppliers and customers should be assessed. In the past, Adidas has reduced the number of suppliers from 296 to 109 due to the high quality and sustainability requirements of the production processes (Pratap, 2018). Hence, the company has a wide range of possible suppliers. In the present environment, their bargaining power remains at the same level, as they are also interested in selling their products.
At the same time, the bargaining power of customers is dramatically increasing. Previously, there were many buyers, and competition between different brands was smoothed out by a large number of those willing to acquire the products. In the current and future economic conditions, the number of customers will decrease, which will make the competition more intense. The choice of clients will be primarily determined by the adaptation of brands to new market conditions.
Given the circumstances of the expected economic downturn, the danger from new entrants is virtually non-existent. At the same time, according to Pratap (2018, para. 27), this market is characterized by fierce competition, and the major rivals are Puma, âNike, Skechers, New Balance and Under Armour.” It should be noted that all major companies have updated mobile apps with the functions of viewing the product assortment, fitness-tracking, and delivery.
The customer should be given the opportunity to describe his/her needs, for example, domestic or related to a particular sport, and be able to choose among several most suitable options. In addition, the marketing of this service should be aimed at its relevance to the pandemic conditions, which will nullify the threat of substituents. This service is extraordinary and associated with quarantine, but it may prove to be very convenient and continue to exist later.
New Service Development Process
The new service development process consists of a business strategy review, new service strategy development, idea generation, concept development and evaluation, business analysis, and implementation. The researchers note that the implementation of the service is preceded by the process of thorough analysis (Biemans, Griffin and Moenaert, 2016). The first stage involves an assessment of the environment, competition, customer expectations, and core capabilities and resources. In addition to the above, the enablers of the new service, such as people, products, systems, and technology, should be mentioned.
Implementation of the service will not require the recruitment of new employees and will use existing products. However, it will require a significant improvement in the mobile application and the new service channel.
The strategy involves providing a new service to current customers. In order to be relevant and to minimize the consequences of the economic downturn, it should be designed, evaluated, and implemented in a short time. It targets the same market segments, and its success will consist of avoiding sales minimization. In this case, the generation of the idea is determined by extraordinary conditions and the need to create a service that will allow people to carry out shopping in quarantine.
The service concept is to transfer the process of real shopping to the digital space of the mobile application. A detailed description of the service provision process is given in the âService Blueprintâ section. According to Biemans, Griffin, and Moenaert (2016, p. 387), contextual factors profoundly “influence the development and delivery of new services.” This concept is entirely in line with present political, social, and market conditions.
However, some preliminary market studies regarding customer interest in such a format should still be conducted, as there may be a risk that people will not be able to spend money on such products at all. Also, the business analysis should confirm that the new application functionality will meet the criteria of profitability and feasibility. If it succeeds, Adidas not only would not lose many customers but would also be a pioneer in efficient, entirely remote shopping.
Service Blueprint
Service Blueprint is a comprehensive way to clarify and detail every single aspect of service. âUnderstanding customers’ needs and culturesâ directly affects the future popularity and attractiveness of the service (Joly et al., 2018, p. 1155). Therefore, customer actions should be considered in the first place. First of all, the customer should be able to specify in detail the purpose with which he/she would like to purchase clothes or shoes. Two possibilities are then available: either an automated system or a contact employee selects the required options for the customer. The first alternative, of course, is more appropriate, given the mass of sales, but it is possible to include an additional employee consultation service.
The customer is then provided with possible options, which he/she can relate to his/her personal characteristics and needs. The key feature of this service is that it implies a virtual fitting room. It is reasonable to develop such an alternative as the one used in the âWanna Kicksâ application that allows you to try on sneakers in AR mode (Montes, 2019). It is assumed that people will also be able to try on other types of clothing. At least, the application will be able to determine the required size and demonstrate how the clothes will appear on the customer through the camera. Then the customer will be able to order the delivery of the purchased product.
In this scheme, physical evidence will imply the interaction of the client with the Adidas application. Front-stage action is a consultation of the client with a specialist in case of need at any of the stages of service provision. The main effort will be to perform back-stage actions and support processes. First, it will be necessary to develop a new version of the application. Secondly, the company’s employees and IT specialists will have to create virtual versions of the product assortment, which will also be time-consuming.
Then, sales consultants will only have to perform functions of advising and selecting products for customers. According to Crasto et al. (2020), Adidas has an innovative and high-quality chain of production processes, which are dependent on demand. Efforts to develop this service will prevent the loss of the demand and the depreciation of this chain.
Five Features of Services
This service is not much affected by intangibility, because it has an apparent physical manifestation â a mobile application with clear functionality. Explicit visualization and understandable social context of this service occurrence will minimize the impact of this feature. Classic services truly have the characteristic of inseparability from the provider. However, in this case, the service is attached to a mobile application that can be downloaded to a consumer’s smartphone.
Accordingly, a person can use the service 24 hours a day, 365 days a year. With regard to variability, it should be noted that this service will be subject to the same fluctuations in demand as the regular purchase of Adidas products. At the same time, a severe decrease in demand is expected due to the pandemic and quarantine. The ability to purchase clothes and shoes online with the option of fitting and consultation will prevent the loss of such a large number of customers. This service will be automated and almost entirely adapted for the self-serve.
This service is not characterized by perishability, as the customer can use it all the time using a mobile application. It is a completely digital way to choose and buy products that do not perish. The same applies to the rental and access to the service. The application installed on the customer’s smartphone forms the perception of the transfer of ownership of the services it offers. Thus, the classic features of the services will have almost no impact on the service proposed.
Conclusion
It may be concluded that this service is strongly connected with the present and future economic and social context. It is a way to put the purchase process fully online while maintaining all the benefits of real shopping. This service will require certain resources and efforts but has the potential to contribute to ensuring that Adidas will survive the upcoming economic downturn with the least loss.
Reference List
Adidas. (2019) Annual Report 2019. Web.
Biemans, W. G., Griffin, A. and Moenaert, R. K. (2016) âPerspective: New service development: How the field developed, its current status and recommendations for moving the field forwardâ, Journal of Product Innovation Management, 33(4), pp. 382-397.
Crasto, S. et al. (2020) âProduct innovation by Adidas Group through Sustainabilityâ, Journal of the Community Development in Asia, 3(1), pp. 1-7.
Joly, M. et al. (2018). âService designers, unite! Identifying shared concerns among multidisciplinary perspectives on service designâ. Service Design and Innovation 2018 Conference Proceedings, Politecnico di Milano, Milano, Italy. Web.
Montes, P. (2019) âWannaby’s Wanna Kicks AR app lets you digitally try on sneakersâ, Hypebeast. Web.
Pratap, A. (2018) âStrategic analysis of Adidas Groupâ, Notesmatic. Web.