Contemporary Demand Input Models

Question: Discuss about the Contemporary Demand Input Models. Answer: Introduction: Adidas, famously known as the three stripes company, is a multinational company headquartered in Herzogenaurach, Germany. Adolf Dassler founded this company in July 1924 and named it Gebrder Dassler Schuhfabrik. In August 1949, the name was changed to Adidas. The company is a manufacturer of sports shoes, accessories and clothing. It is Europes biggest sportswear manufacturer and worlds second largest (Adidas-group.com. 2017). The Adidas Group is a parent company of Reebok, Rockport, TaylorMade-Adidas and golf company. 1996 onwards, Adidas has become one of the global leaders in the sportswear market, earning 14.88 billion in 2012 (Successstory.com. 2014). The company started with manufacturing of athletic shoes and after the success of the shoes, it expanded its business into manufacturing of other athletic products such as clothing, accessories, perfumes, watches etc. It captured the industry with comfort, durability, style, price and brand (Tolani et al. 2013). The topic of discussion of this essay is the demand and supply side factors of Adidas athletic shoes. The revenue from the footwear segment of Adidas is worth of $10.68 billion in 2016 and the employee base of the company is around 60,617 across the world in 2016 (www.statista.com 2016). Today Adidas sponsors shoes and other sportswear to biggest teams of various sports in the world. Demand for a commodity is the want or desire of the consumers to gain that commodity. Supply of a commodity refers to the accessibility of that commodity in the market in exchange for a price. Market equilibrium is the condition where the forces of demand and supply of a commodity are balanced and this value does not change if other factors remain unchanged (Varian 2014). The major factors of demand for a product are the price of that product, income level of the consumers, taste and preferences, and market competition. The factors for demand for Adidas sports shoe are described below (Petroff 2013). Price: this is the primary factor of demand for a commodity. Law of Demand states that demand is a function of price and there is an inverse relationship between the two. If price increases, the demand for that product falls and vice versa, other things remaining unchanged. Hence, if the price of Adidas shoes rise, the demand would fall and vice versa. Price of substitute products: the demand for a commodity is affected by the price of a substitute product. Substitute products are those, which can be replaced with one another. The close substitutes of Adidas shoes are the shoes of Nike, Puma, New Balance, Reebok. If the price of a Nike shoe rises, it would push up the demand for Adidas shoe, as Nike becomes relatively costlier than Adidas (Pataki and Sagi 2015). Income of the customers: Adidas shoes are normal commodities. Hence, an increase in the income level of the customers would lead to an increase in the demand for Adidas and vice versa. Tastes and preferences of customers: this factor directly affects the demand for a particular product. Adidas became a market leader in athletic products because it provided the comfort and style to the customers. Thus, a majority of the population wants to buy Adidas shoes even if it is high priced. Speculation of higher prices in future: if people speculate that the price of the Adidas shoe would increase in the near future, they tend to buy more now. This phenomenon occurs especially during the sales, when the company gives discount offers. The law of demand for Adidas shoes. As the price increased from P1 to P*, quantity demanded decreased from Q1 to Q*. Here, price is the determining factor of demand. The factors of supply for Adidas shoes are (Pataki and Sagi 2015): Price: this is the major factor of supply for any commodity. Law of supply states, that price and supply of a good are directly related. If price increases, the supply of that good also increases, and vice versa, other factors remaining unchanged. Thus, supply is a function of price. Hence, when the price of Adidas shoes rises, the company increases the volume of supply of the shoes. Cost of factors of production: as the price of any or all factors of production, that is, land, labor, entrepreneurship and capital, increases, the production cost rises too. Then the producers reduce the supply of the product to maintain profit. For example, if the wages of the workers rises, Adidas decreases the supply of the shoes temporarily. Change in technology: the innovation and implementation of new and smart technologies increase the cost efficiency of the products, and profit margin of the producers. Adidas has implemented many new technologies in the shoe designing. It not only increased the demand for the shoes, but decreased the production cost also. Hence, the supply has increased. Taxation policy: when the government imposes tax on the Adidas shoes, the price rises, as the company shifts the burden of the tax to the customers. Thus, higher tax leads to a fall in the profit margin, and fall in supply as well (Roscoe and Baker 2014). Speculation of price fall: the expectation a price rise in the future tempts the producers to supply more of the product. When there is a speculation of price rise of the shoes, Adidas would supply more shoes to increase profit. Depicts the law of supply for Adidas athletic shoes. When the price falls from P1 to P*, the supply also falls from Q1 to Q*. Here, price of the shoes is the determining factor of supply. Conclusion: Adidas is one of the global leaders in the market of athletic shoes and other sportswear. The German company has captured the athletic market of the Europe and majority of the rest of the world with its innovative design, style, brand value and comfort. This essay focuses on the factors of demand and supply for the Adidas sports shoes, which shows that price is the most important factor for demand and supply. References: Adidas-group.com., 2017. History. [online] Available at: https://www.adidas-group.com/en/group/history/. Pataki, E. and Sagi, A., 2015, September. Contemporary demand input models in the conditions of imperfect competition. InIntelligent Systems and Informatics (SISY), 2015 IEEE 13th International Symposium on(pp. 189-194). IEEE. Petroff, J., 2013. Demand and Supply. PEOI. org. Roscoe, S. and Baker, P., 2014. Supply chain segmentation in the sporting goods industry.International Journal of Logistics Research and Applications,17(2), pp.136-155. Successstory.com., 2014. Adidas Story. [online] Available at: https://successstory.com/companies/adidas-ag. Tolani, V., Puri, G., Quereshi, N., and Kaushal, S., 2013. Analysis on Footwear industry. Varian, H.R., 2014.Intermediate Microeconomics: A Modern Approach: Ninth International Student Edition. WW Norton Company. www.statista.com., 2016. Adidas Facts. [online] Available at: https://www.statista.com/topics/1257/adidas/.