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