Adidas _ Reebok Merger
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Transcript of Adidas _ Reebok Merger
Adidas – Reebok MergerCase Study
Content1. Industry overview2. Background of companies3. Core competencies & synergies.4. SWOT analysis5. How Merger was implemented6. Was the Merger successful7. Post integration Results.8. What’s Happening now9. Strategies for Success.10. Key Learning11. Synopsis of Merger.12. Q&A
INDUSTRY OVERVIEW
Pre merger Sports Footwear market
BACK GROUND OF COMPANIES
Adidas ReebokFounded in 1926 by Adolf
Dasler was know as AdiWorld leader in soccer shoes#2 behind Nike worldwide -
#4 in the USThree acquisitions before
Reebok:- Company Sports Inc in 1993 - Salomon in 1997 - Arc'Teryxin 2002Culture of control,
engineering, and production
Founded in 1895. Mr. Fireman, a Boston
businessman who bought the rights to the Reebok name from an old British shoemaker in 1979
First athletic shoe for woman #2 in US - #4 in Europe Strong sales growth from 2002-
2004 Unique portfolio of long term
league licenses Creative marketing-driven
culture
Two Brands Running as a Team to Overtake Nike
During the Athens Olympic Games they both sat down for a drink the conversation drifted and shared about what's good, what's bad.There was a natural sympathy between them- that sympathy gave birth to a $3.8 billion deal, in which Adidas of Germany will acquire Reebok, creating a formidable competitor to Nike for the first time in more than a decade
Reebok Chairman and CEO Paul Fireman (left) and Adidas-Salomon CEO Herbert Hainer as they announced the merger last August
CORE COMPETENCIESadida
sReebo
k
Trend Identification
Design expertise
Women's shoe design
Celebrity relationships
Technology
Supply chain
Brand recognition
Collaboratively competitive
SynergiesGeographies and CategoriesSharing across markets
and geographiesCapitalize on Reebok's
skills and know how to accelerate Adidas position in North America
Benefit from Adidas expertise in Europe and Reebok's in Asia
Combine expertise in branded and licensed athletic apparel
Consumer & Demographics
Ability to identify sport/style trends Better product and category
prioritization More products and more price
points Continue brand developments
into new segments Benefit from Reebok's
expertise in Women's segment Capitalize from Reebok's skills
in sport lifestyle and leisure
Synergies – cont’dDistribution Channels Capitalize on Adidas in-
depth understanding of specialized sporting goods channel
Benefit from Reebok's strong insights into department store and general merchandise channel
Selective Channel Diversification Expand on retail initiatives
in emerging markets
Reasons for MergerTough competition by Nike and Puma in
sportswear marketAdidas was sportswear focused while Reebok
was lifestyle focused. The merger would provide synergies in both the markets.
Adidas would get benefitted from merger by tapping North American market. Similarly, Reebok would get benefit from Adidas European presence.
Sportswear industry was already consolidating with a series of acquisitions by top players.
SWOT Analysis•Adidas is strong in Europe, Reebok is strong in US, & Asia•Complementary licenses and contracts•Reduced costs for retailers•Reebok is extremely strong in Women’s wear
•Many overlapping products•Two HQ’s that will be hard to integrate•Two very strong, distinct corporate cultures
•Leverage combined R&D strengths & budgets•Bring Reebok’s women’s wear to Europe•Reduce costs to retailers by larger distribution networks•Ability for better reaction to global trends
•Competition between brands employees•Cannibalization of sales•Realization of revenue growth synergies•Adidas may treat Reebok as a second tier brand
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How merger was implementedBlending the two cultures successfully (learning to
work together)Protect the strengths of acquired company (keeping
development of both organisations separate)Maintaining both brands (keeping established market
share)Capitalising on supply chain economies of scale
(suppliers, manufacturing, distribution, channels)Nurturing the partnership between technology and
design (growing market share by combining leadership areas)
Was the merger successful?
Post Merger Sales Figures
Adidas-Reebok merger was finished in August 2005.Sales for the adidas segment in 2005 grew 12%, with double-digit increases in all regions except Europe, where sales grew at a single-digit rate. Stock prices improved the day of announcement Adidas paid $3.527 billion for Reebok.Reebok's share price at the New York Stock Exchange rose to $57.14 on August 03, 2005, an increase of 30% over the August 02, 2005 share price of $43.95.
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Adidas Stock Price
Adidas’s Stock Price
Post-Integration Results Management/Structure Changes
Successful through speed, efficiency and cooperation Distribution Centers
Taking longer than anticipated R&D
Successful at reaching companies goals on new products & efficiency Brand Imaging
Continue to face uphill battle and challenge Success is still possible in long term
Geographies and Product Lines Expansion into new countries has partially offset loses in mature
markets New product lines and strategies have produced mixed results
Licenses, Events and Teams With little change no success or failure has been noticed
The company has yet to prove the Combo as successful. Adidas Chief Executive Herbert Hainer said in a statement. "It's going to take time, but we're moving in the right direction."
Adidas aims to grow sales to 17 billion Euros ($24 billion) by 2015, up two thirds on 2009 levels, as it strives to overtake market leader Nike.
What’s happening now?
STRATEGIES FOR SUCCESSAdidas-Reebok Customer Relationship
Management (CRM)-Product performance excellence-Price performance excellence-Transactional excellence-Relationship excellenceManage their relation with small retailer-By giving them attractive commision.Analyzing buying behavior- Demographic analysis
Key LearningAdidas-Reebok merger is a classic case of merger
of two rivals to tackle a bigger rival (Nike)The cultural differences between the two
organization played a vital role in post merger business. Due to this, Adidas started to realize the synergy as late as three years after the merger.
Branding is paramount for the success in consumer driven industry this aspect was well taken care and both individual brand images were kept intact.
Growing market share by combining leadership areas like technology & design.
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