Challenges Adidas would face
Adidas creating factories in the US is a good business move. This approach would alleviate the shipping costs, tariffs, and insurance incurred by the company in the supply of its brands. Additionally, the creation of Adidas factories in the US means accessing more customers, distribution of risks, more innovative talent, cost minimization, increased consumer confidence, and secure handling of logistics (Thomas, 2019). Companies prefer to set up businesses in Asian countries because labor is cheap and in plenty. The Asian population posses a significant challenge in raising the standards of living in the respective countries. Even with consistent economic growth, millions of people still languish in poverty. On the other hand, new businesses in the US are few because the high cost of living makes labor so expensive.
The biggest challenge Adidas would face is the high cost of labor by moving its products to the US. Other Problems Adidas is likely to encounter include; high initial capital to set up the new factory, additional running costs, difficulties maintaining high levels of quality, and market share (Thomas, 2019). Adidas’ external expansion in the US is a high risk. However, Professor F.B Hawley, an economist, states that profit is the return for risk in commerce, and the higher the risk, the higher the potential reward. Considering the demand for footwear in the US, the risk seems worthwhile.
Business expansion is healthy, provided thorough research on the location, available resources, potential additional costs, the market, and potential risks assessment are done (Thomas, 2019). Adidas is a famous brand; therefore, the potential risks associated with expanding into the US seem low owing to the high economic standards in the US. Every business aims to grow and develop. Current and future companies should first expand internally before exploring the external market to ensure minimal risks.