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    Adidas - Reebok Merger

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    Anil Kotaga
    Adidas acquired Reebok in 2005 to become a stronger competitor to Nike. While the companies had complementary strengths like geographic markets and product categories, integrating their distinct cultures proved challenging. Initial post-merger results were mixed as management changes, distribution networks, and brand imaging took longer than expected to combine successfully. Now, Adidas aims to realize revenue synergies from the merger and grow both brands to overtake Nike as the top player in the sportswear industry by 2015.

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    Adidas - Reebok Merger

    Uploaded by

    Anil Kotaga
    1K views21 pages
    Adidas acquired Reebok in 2005 to become a stronger competitor to Nike. While the companies had complementary strengths like geographic markets and product categories, integrating their distinct cultures proved challenging. Initial post-merger results were mixed as management changes, distribution networks, and brand imaging took longer than expected to combine successfully. Now, Adidas aims to realize revenue synergies from the merger and grow both brands to overtake Nike as the top player in the sportswear industry by 2015.

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    Adidas _ Reebok Merger

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    Adidas acquired Reebok in 2005 to become a stronger competitor to Nike. While the companies had complementary strengths like geographic markets and product categories, integrating their distinct cultures proved challenging. Initial post-merger results were mixed as management changes, distribution networks, and brand imaging took longer than expected to combine successfully. Now, Adidas aims to realize revenue synergies from the merger and grow both brands to overtake Nike as the top player in the sportswear industry by 2015.

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    1K views21 pages

    Adidas - Reebok Merger

    Uploaded by

    Anil Kotaga
    Adidas acquired Reebok in 2005 to become a stronger competitor to Nike. While the companies had complementary strengths like geographic markets and product categories, integrating their distinct cultures proved challenging. Initial post-merger results were mixed as management changes, distribution networks, and brand imaging took longer than expected to combine successfully. Now, Adidas aims to realize revenue synergies from the merger and grow both brands to overtake Nike as the top player in the sportswear industry by 2015.

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    Case Study

    Content
    1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

    Industry overview Background of companies Core competencies & synergies. SWOT analysis How Merger was implemented Was the Merger successful Post integration Results. Whats Happening now Strategies for Success. Key Learning Synopsis of Merger. Q&A

    Pre merger Sports Footwear market

    BACK GROUND OF COMPANIES


    Adidas
    Founded in 1926 by Adolf

    Reebok
    Founded in 1895. Mr. Fireman, a Boston

    Dasler was know as Adi World leader in soccer shoes #2 behind Nike worldwide #4 in the US Three acquisitions before Reebok: - Company Sports Inc in 1993 - Salomon in 1997 - Arc'Teryxin 2002 Culture of control, engineering, and production

    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 20022004 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 COMPETENCIES

    adidas
    Collaboratively competitive Brand recognition

    Reebok
    Celebrity relationships Women's shoe design Design expertise

    Supply chain

    Technology

    Trend Identification

    Synergies
    Geographies and Categories
    Consumer & Demographics
    Ability to identify sport/style

    Sharing across markets and

    geographies Capitalize 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

    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 contd
    Distribution 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 Merger


    Tough competition by Nike and Puma in sportswear

    market Adidas 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
    STRENGHTS

    Adidas is strong in Europe, Reebok is strong in US, & Asia Complementary licenses and contracts Reduced costs for retailers Reebok is extremely strong in Womens wear Leverage combined R&D strengths & budgets Bring Reeboks womens wear to Europe Reduce costs to retailers by larger distribution networks Ability for better reaction to global trends

    Many overlapping products Two HQs that will be hard to integrate Two very strong, distinct corporate cultures

    WEAKNESSES

    OPPORTUNITIES

    Competition between brands employees Cannibalization of sales Realization of revenue growth synergies Adidas may treat Reebok as a second tier brand

    THREATS

    How merger was implemented


    Blending 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.

    Stock Price (in euros)


    10 20 30 40 50 60 0

    Adidass Stock Price

    Year

    19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11

    Adidas 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

    Whats happening now?


    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.

    STRATEGIES FOR SUCCESS


    Adidas-Reebok Customer Relationship

    Management (CRM) -Product performance excellence -Price performance excellence -Transactional excellence -Relationship excellence Manage their relation with small retailer -By giving them attractive commision. Analyzing buying behavior - Demographic analysis

    Key Learning
    Adidas-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.

    Thank You

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