adidas _ reebok merger

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Adidas – Reebok Merger Case Study

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Page 1: Adidas _ Reebok Merger

Adidas – Reebok MergerCase Study

Page 2: Adidas _ Reebok Merger

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

Page 3: Adidas _ Reebok Merger

INDUSTRY OVERVIEW

Page 4: Adidas _ Reebok Merger

Pre merger Sports Footwear market

Page 5: Adidas _ Reebok Merger

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

Page 6: Adidas _ Reebok Merger

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

Page 7: Adidas _ Reebok Merger

CORE COMPETENCIESadida

sReebo

k

Trend Identification

Design expertise

Women's shoe design

Celebrity relationships

Technology

Supply chain

Brand recognition

Collaboratively competitive

Page 8: Adidas _ Reebok Merger

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

Page 9: Adidas _ Reebok Merger

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

Page 10: Adidas _ Reebok Merger

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.

Page 11: Adidas _ Reebok Merger

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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Page 12: Adidas _ Reebok Merger

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)

Page 13: Adidas _ Reebok Merger

Was the merger successful?

Page 14: Adidas _ Reebok Merger

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.

Page 15: Adidas _ Reebok Merger

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Adidas Stock Price

Adidas’s Stock Price

Page 16: Adidas _ Reebok Merger

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

Page 17: Adidas _ Reebok Merger

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?

Page 18: Adidas _ Reebok Merger

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

Page 19: Adidas _ Reebok Merger

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.

Page 20: Adidas _ Reebok Merger
Page 21: Adidas _ Reebok Merger

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