CIRCUMSTANCES THAT LED ADIDAS ACQUIRE REEBOK

Adidas-Salomon AG happens to be the worlds second largest sporting-goods maker and one of the top three most popular shoes brand around. Now, they are considering buying out one of the other two brands, Reebok in order to gain and provide decent competition to Nike, which continues to dominate the scenario. The deal can be worth around 3.1 billion euros ($3.8 billion) and with the deal; Adidas should get the much-needed boost in the American market. The company is offering as much as $59 for each share of Canton, Massachusetts-based Reebok. This is quite a premium over the market price of the Reebok share. They would also be assuming 69 million euros of cash as per the reports from the company released today. The move is also expected to give Adidas around 28 percent of the global $11.5 billion athletic-shoe market share and would be closer to Nikes 31 percent. Adidas would also be acquiring Reeboks clothing business, which are sponsors of the National Football League and the National Basketball Association outfits. The company has suffered massively in this region and the move would boost the confidence of the company in one of the biggest markets for their products. The news helped Reebok gain immensely in the share market as the price of their share touched $51.80 in extended trading after the official close of U.S. markets. This was a rise of around $7.85. Rumors about the possibility of such a deal were going on since reports came out in leading financial newspapers.

So, It is quite evident that this merger was beneficial for both the companies and can be considered as a move by compulsion for this merger.

Adidas Core Competencies Technology Customer focus Brand recognition Supply chain Collaboratively competitive

Reebok Core Competencies Trend Identification Ability to market to a niche segment Women's shoe design Design expertise Celebrity relationships

Combining Core Competencies

Combine Adidas technology with Reebok design Adidas sports with Reebok women's market Adidas shoes with Reebok apparel Adidas global strength & Reebok US strength

Implementation

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)

SWOT Analysis after the Adidas- Reebok merger

Strength

Opportunity

More products for different customers Increase in product line Acclivity in market share Now both upper and middle priced markets are covered. Shared R&D, Patents, technology & innovations

Reduction in costs Decreased competition Cross-over promotion by sponsored athletes Enter to new market/Segments

Weakness

Threat

Differing values among management Complexity of joining two corporate cultures Both companies belong to different countries

Nike Nike's possible acquisition of Puma. Danger of cannibalisation between the two separate brands.

Strategy could have been opted after the merger of Adidas Reebok
Adidas Group website gives their potential customer possibility to zoom in on the product and also to see full information even its technology. Consumer also can choose colour and size easily, the website also offer product preferences by consumer behaviour. Adidas-Reebok should offer discount for specific product or promotional in their website. Process of buying is quite easy and easy to understand by customer. Adidas-Reebok can also provide their websites with product tracking and account managing, so that customer can easily track their order and or review their cart. In managing their relationship with consumer, Adidas-Reebok should give them services to subscribe their newsletter. Customer can contact Adidas-Reebok through easy steps and if they aren't satisfied with the product, they can refund it and the procedure of refund should be explained in their website.

Effects on sporting goods industry

The sporting goods industry is dominated by three major players: Number one in the market in terms of turnover is Nike with an annual turnover of around 11 bn. Through the acquisition of Reebok, adidas Group became number two in the sporting goods market with an annual turnover of around 9 bn. Puma is now number three in the market, with a remarkable gap between it and adidas, as its annual turnover is 1.7 bn. The gap between adidas and Nike was reduced through the acquisition of Reebok: The revenue of Q1 2006 of adidas was 2.5 bn, while Nike reached 2.8 bn. The net profit of the new adidas Group in 2004 was 450 million. However, in Q4 2005, a loss of 4 million was recorded as a result of high marketing expenses and the costs associated with the Reebok acquisition. The sporting goods market segment is characterised by a high level of competition between these rivals, especially in Europe and Japan, where Nike wants to expand its efforts. Particularly, in Japan, Nike's business has suffered due to lower price competition from Adidas and Asics, better product offering from Asics and the strong move to low-profile products . Therefore, Nike wants to aggressively get into this category of products. Puma also has plans to expand into new business segments, such as swimwear in 2007. Puma announced that it will enter in six new business segments from now until 2010 and it has already presented its own jeans collection as well as products for the golf and motor sports segments. Another example illustrating the high level of competition is the fight between some of adidas rivals and adidas in the matter of positioning its three stripes as design elements on the clothes of athletes: Nike, Reebok and Puma criticised before the International Olympic Committee (IOC) that adidas has been allowed to place its three stripes noticeably on the athletes clothes, while its competitors only have the prescribed 20 square centimetres to position their logos. Later, the IOC stated that company logos including the three stripes must be replaced if they are bigger than the provided 20 square centimetres. Also in the 2006 Wimbledon tournament, adidas had to replace its stripes due to a complaint filed by Nike and Puma. In addition to the high level of competition, there is also a trend towards concentration in the sporting goods industry. In the past two years, there have been several acquisitions:The Finnish Amer Group bought Salomon from adidas, the U.S. group Quicksilver bought the French winter sports company Rossignol and the U.S. company K2 acquired the Bavarian ski and snowboard brand Vlkl.