Adidas, the global sportswear giant, has chosen Tamil Nadu as the location for its first Global Capability Center (GCC) in Asia. The GCC, which will be operational by mid-2024, will provide digital and technology services to Adidas’s global operations.
Why Tamil Nadu?
According to Adidas, Tamil Nadu was selected for its talent pool, infrastructure, business environment and government support. The GCC will be based in Chennai, the capital city of Tamil Nadu, which is a hotbed of GCCs in India. Chennai hosts over 200 GCCs from various sectors, including Banca Sella, one of the first GCCs in India dating back to 1995-96 .
Tamil Nadu is also known for its strong manufacturing base, especially in the textile and leather industries. Adidas has been sourcing products from Tamil Nadu for over 25 years and has more than 40 suppliers in the state. The GCC will further strengthen Adidas’s presence and partnership in Tamil Nadu.
What will the GCC do?
The GCC will support Adidas’s digital transformation and innovation agenda by providing services such as data analytics, artificial intelligence, cloud computing, cyber security and e-commerce. The GCC will also collaborate with Adidas’s other GCCs in Spain and Germany, as well as its global headquarters in Herzogenaurach, Germany.
The GCC will initially employ around 500 people, with plans to scale up to 1,000 in the next three years. The GCC will also create indirect employment opportunities for local vendors and service providers. Adidas expects the GCC to enhance its operational efficiency, customer experience and competitive edge in the global market.
How does this impact China?
The decision to set up the GCC in Tamil Nadu instead of China reflects Adidas’s strategy to diversify its global footprint and reduce its dependence on China. China has been Adidas’s largest market in terms of sales and sourcing, but also poses several challenges such as rising labor costs, trade tensions, human rights issues and consumer boycotts.
Adidas has been shifting some of its production from China to other countries such as Vietnam, Cambodia and India. The GCC in Tamil Nadu will further reduce Adidas’s exposure to China and increase its presence in India, which is one of the fastest growing markets for sportswear. Adidas aims to double its sales in India by 2025 and expand its retail network to over 1,000 stores.
How does this benefit Tamil Nadu?
The GCC in Tamil Nadu will have a positive impact on the state’s employment and economy. According to a report by JLL-CRE Matrix , GCCs are expected to generate over 1.5 million direct jobs and 3 million indirect jobs across India by 2025. The report also estimates that GCCs contribute about 20% of India’s IT-BPM exports and 25% of India’s office space demand.
The GCC in Tamil Nadu will also boost the state’s digital and innovation capabilities, as well as its attractiveness for foreign investors. The state government has been proactive in facilitating the establishment of GCCs by offering incentives such as land allotment, tax exemptions, infrastructure support and skill development programs. The state government has also launched initiatives such as Tamil Nadu Startup Policy, Tamil Nadu Innovation Fund and Tamil Nadu e-Governance Agency to foster a culture of entrepreneurship and innovation.