Adidas-Reebok Merger | acmilan

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Adidas-Reebok Merger Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â* OVERVIEW Footwear is no longer viewed as a commodity thats just offers protection for feet. Hitherto What Was Considered a ‘Want’ is today a basic ‘Need’. Today, the footwear trade Is A Vast and dynamic operation Involving huge economies of scale. The low-cost countries are Gaining foothold in International Markets Leading Developed Countries to Import and outsource so as to Meet Their Requirements. The athletic shoe segment IS Highly competitive in nature with the major players Such as Nike, Adidas, Reebok and New Balance Striving to retain market share and Their smaller players Such as the Puma Trying to gain market share. Important features of this competitive segment are heavy advertising, celebrity endorsements, brand etc. Awareness Program. Until the 1970s, Adidas, the German sports company, the market leader in WAS the US icts <a href="http://anfu.putianb2b.com/"><strong>安ç¦�市场</strong></a> due to product innovation. In the 1970s and 1980s, Nike &amp;amp; Reebok grabbed Their share by redefining the product offering and aggressive marketing. Adidas failed to retaliate. Their market Undergoing WAS SEVERAL due to currency crises in leadership. In the 1990s, though Adidas WAS revived by a turn-around specialist, It Was not a challenge to Nike. Adidas takeover of Reebok icts Expected to Give INcreased clout with dealers’ leverage of sponsorships and endorsement deals and access to basic consumer WIDER. The Adidas-Reebok merger the combined entity vaulted Into the second place in the American market behind Nike Athletic Shoe. The takeover of Reebok Doubled the German group’s North America sales. The Adidas Group’s purchase of Reebok North America Showed year Obvious attitude to Ensuring That the Corporation’s Overall Objective Will Be Achieved. With the acquisition, a focus on Increasing the band’s apparel offering and sharpening the brand’s image has been set. This year Will allow for expansion of the overall position at Broad and Gaining presence in key Markets. Emphasize to this Fact, Adidas Reebok HAS Replaced now as the official apparel begging to the American National Basketball Association for the next 10 years. With The Two combined company’s Strengths, an AIM to Widen the organization’s profile and global dominance overalls Is Now More Than Ever as possible EXECUTIVE SUMMARY The Three Leading sportswear companies in the world are Nike, Adidas and Reebok. In August 2005, Nike Was The leader in global market share with 32.9% Compared to the Adidas-Reebok Recently constituted organization That HAD 26.3% market share. In the Largest market in the world, the United States (U.S.), Nike HAD market share 36.3% in August 2005. FOLLOWING the acquisition of Reebok in August 2005, the market share of Adidas-Reebok in the US Jumped to 21.1% from 8.9%. The purpose of this study Is To Provide An analysis of the merger in the newest footwear and Apparel Industry Between Adidas and Reebok. It aussi to Identify and examine the further Top Ways in Which the Adidas Group Will Achieve a sustainable competitive advantage relative to market leader (Nike). We inform the reader about the type of current market standings in the Industry and Identify Specific synergies Developed Through the acquisition in order to Evaluate the impact of Adidas-Reebok merger on the Sporting Goods Industry. INTRODUCTION On August 3, 2005, Adidas-Salomon AG Announced plans to buy icts all outstanding shares of Reebok International Ltd..’s stock at .00 per share, for a total of .8 billion. Upon announcement, Reebok stock rose 30% while Adidas climbed 7%. As Stated by Herbert Hainer, CEO of Adidas, “This is a once-in-a-lifetime Opportunity to combine Two of the Most respected and Well-Known companies in the worldwide sporting goods industrie. Together, We Will expand our geographic reach, particularly in North America, and create a footwear, apparel and hardware Offering That addresses a Broad Spectrum of Consumers and demographics “(Adidas.com). A primary goal of the acquisition has-been to challenge leader Nike industrie for a Higher share of the United States sporting goods market as well as the overall sporting goods market. The acquisition HAS Prompted Much discussion as to What the Future Holds for the Sporting Goods Industry and Its Major Players. Athletic Wear Market Share I-Core Competencies &amp;amp; competitve ADVANTAGE Competitive advantage edge That Is A special organization to allow year deal with market forces and Environmental icts Better Than Competitors. Whereas, sustainable competitive advantage Is One That Is Difficult for Competitors to imitate. This essential distinction IS When Evaluating the acquisition and Its effects. A merger of this scale IS inherently complex, dealing with issues Such as global positioning of companies, corporate cultures, and the allocation of resources. To better Understand the advantages Gained from the Adidas-Reebok merger, We Have Examined the Following: Through Various thesis analyzes, That We Have discovered the importance of branding IS paramount for success in this Industry. Aussi Our research identified the threat of competition Between Specific Adidas and Reebok. Our analysis of the Adidas-Reebok merger shows how Will it gain a sustainable competitive advantage That May One Day Dominate the Footwear Industry Both domestically and Internationally. The Fact That Adidas and Reebok Such control different aspects of the shoe Industry Will help to Ensure Their Success. To fully Understand how Adidas-Reebok Will gain a sustainable competitive advantage over Nike, the situation Must Be Looked at from SEVERAL different points. Thesis include industrial, customer and competitor analysis, as well as a look at the different marketing strategies and Changing marketing trends. 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 Reebok technology with design – Adidas Reebok sports with women’s market – Adidas shoes with Reebok apparel – Adidas &amp;amp; Reebok US global strength strength Implementation Blending The Two cultures successfully (learning to work together)Protect The Strength of Acquired Company (Keeping development of Both organizations separate)Maintaining Both brands (ESTABLISHED Keeping market share)Capitalising on supply chain economies of scale (Suppliers, manufacturing, distribution channels)Nurturing the partnership Between technology and design (growing market share leadership by Combining areas) Sustainable competitive advantage The athletic apparel and footwear branding emphasises industrie More than Any Other competitive advantage. Through the use of advertisements, endorsements, promotions, and licensing agreements, the top companies in this Industry Have Devoted Much of Their resources to brand recognition and loyalty. Adidas acquisition of Reebok INcreased Will Develop Opportunities to Achieve Competitive Advantage Through branding. Furthermore, extended licensing agreements and contracts Will allow the Adidas Group to sustain this advantage. Sustainable competitive advantage Can not Be Reached Without The Successful merging of Adidas and Reebok. The key to this success how well THEY IS Identify Themselves. There Is a very real threat of cannibalization to Occur Between the Two Separate brands, Where one brand Takes Away The Others consumer base. However, Adidas Chairman and CEO Herbert Hainer made clear That “It Is That important EACH of These brands must retain Their Own Identity.” That Hainer points out Reebok’s strategy IS Focused on the engagement of youth-through sports, music, and technology. Reebok, ET points out, IS a lifestyle brand. On the Other hand, Adidas’ focus on superior technology and IS performance, coupled with a large international presence. As Hainer points out, “Adidas HAS ITS Positioned share of product range in the lifestyle segment, the company aims RELATED performance on the market. To success Lifestyle Is A year company bonus authentic.” Adidas Will Benefit from INcreased distribution in North America, Reebok Already HAS Where significant presence. The addition of Reebok Will Enhance not only position icts Among the top US distributors like Foot Locker and Dick’s, drank Will Also Give Adidas-Reebok more power over promotions and in-store displays. Increasing STI presence Is the Key to Achieving sustainable competitive advantage, Because The presence INcreased Further Fertilizers The Most important advantage in this industrie, brand name. The acceleration of Both brands IS Brought about Through INcreased operating cash flows. Along with the INcreased operating capital Other operating synergies Such as Savings are Realised. Catching up to Nike’s huge marketing budget IS a challenge, the goal INcreased operating cost coupled with the synergies Will Further Promote help-through brand recognition marketing. Reebok HAS year extensive line of men and women’s apparel. The new company combines Canon’s Reebok apparel with Adidas’ new addition of fashion designer Stella McCartney, Who has created year apparel line That Integrates Both sport and style. This innovative move That shows continuing to look for Adidas New Opportunities and Markets in order to gain a competitive advantage. In the past , Adidas HAS not Been Able to expand Because It Had Problems shipping goods to the United States. It Takes’ em about 14 days to ship from Their factories in the Far East while Reebok Can ship overnight. In the future, Adidas Will Be Able to take advantage of Reebok’s Existing distribution infrastructure in the US, while Reebok Will Be Able to Benefit from Adidas’ Existing distribution infrastructure in Europe. The Reebok brand Will Also gain sustainable competitive advantage-through INcreased brand recognition. Globally, Reebok Will Benefit Greatly from Adidas’ distribution around the world. Coupled with the cost INcreased Savings and cash flow, Reebok’s marketing resources Could Increase. Combined R &amp;amp; D IS Helping speed development of cutting edge technologies, an important feature of the increasingly fast paced Industry. Expedited research Will Develop Higher consumer demand for innovation across all brands, putting pressure on Nike’s R &amp;amp; D capabilities. II-FROM CORPORATE STRATEGY TO MARKETING Porter’s Five Forces Barriers to Entry – Low Adidas <a href="http://anfu.putianb2b.com/"><strong>莆田安ç¦�商城网å�€</strong></a> and Reebok combined are Able to Control Their Costs Effectively, Giving Them year advantage over Emerging Competitors in the Industry. Their web sites are well-prepared and updated attractive promotions online shoppers. There are Many exclusive product differences in this Industry Brand Identity That Gives Year immediate competitive advantage. The Adidas and Reebok brand Is Well-Known Globally and plays a major role in consumer decision making. Highly Competitive IS selling footwear, however, Barriers to enter Into this Industry are quite low. Therefor, the footwear IS Broad Industry with Hundreds of retailers. Switching cost IS low for the consumer, and May Occur Frequently DEPENDING on consumer preference and Other Factors Affecting consumer buying decision. Power of Buyers Bargaining – High There are a large number of buyers relative to the number of firms in this Industry. Therefor, companies like Adidas, Reebok and must Continuously Their product and market brands Differentiate Their Against Competitors, in order to Increase sales and market share. The use of online tools HAS helped to Enhance the accessibility Among users. Brand identity plays a critical role in the buying Behaviour; strong identity Consumers Will offer trust and loyalty. Power of Suppliers Bargaining – Low There are Many Suppliers in this Industry. In essence, very little differentiation There Is Suppliers Which Makes Among the suppliers’ bargaining power non-existent. Leather, rubber, and cotton are commodity items and are abundantly available in the market place. Conglomerates Such as Adidas, Reebok and Have a definite advantage and power over Their suppliers. Suppliers Become thesis thesis dependent on FIRMS as Means to Their survival. Additionally, Adidas, and Reebok Have Their input Standardised procedures Pertaining to the materials Used, Their labor force, supplies, services, and logistics. Firms are Able to Quickly Switch Between Suppliers and cheaply, due to the globalized networks of cheap labor are: various continents. Threat of Substitutes – Low Buyers’ propensity to substitute is low. Substitutes for athletic footwear Consumer products are low Because There Are Alternatives to little switch, Some Substitutes for athlete footwear Could Be boots, sandals, dress shoes or bear feet. Consumers Are Not Likely to substitute due to the performance specification of the product. For instance, a basketball player Would not wear boots to play basketball. Therefor, There are no real Substitutes for athletic footwear. Rivalry Among Existing Competitors – High Among Existing Competitors The rivalry in the footwear Industry IS quite high. Large FIRMS Such as Nike, Adidas and Reebok Have grown immensely over the last Two decades. Their global reach-through expanded HAS all continents; This is evident using the Internet and e-commerce. Online selling HAS enlarged the reach for thesis FIRMS allowing em to Increase sales while Minimising operating cost. Almost Every large firm HAS web site, and MOST of These Web Sites Which Contain Virtual Stores Provide Convenience to Consumers. Most Individuals in North America Have access to high speed Internet and online Purchasing HAS Become the new trend for the twenty first century. Threat of Substitute Products or Services (low) ↓ Supplier Power (low) → Rivalry Among Existing Competitors (high) â†� Buyer Power (high) ↑ (low) Threat of New Entrants Reebok IS Located in the upper-left portion of the chart, Identifying it as a cost leadership strategy Employing. It Is Concerned with Offering a very affordable shoes to Broad market. Adidas IS Located in the upper-right portion of the chart, Identifying it as a differentiation strategy Employing. This company IS Constantly Developing new technology and innovation in the Industry. Examples of this include the new microchips Adidas HAS Mechanically Developed to adjust the shoe’s cushioning. SWOT Analysis Adidas-Salomon SWOT Analysis (before the merger) Adidas-Salomon Was a Leading player in the sports Good Manufacturing Industry. The company posted a very HAD steady growth in sales revenues icts in recent years, as a result of Essentially icts strong brand image. The company HAD Leading market products and strong brand names Including Adidas, Salomon, TaylorMade and others Which Were Further Strengthened by strong ITS Commitment to product innovations. Furthermore, on the supply-chain side the company’s Commitment to Reduce lead time for manufacturing footwear HAD enabled the company to Avoid the warehousing of products. Strengths Leading player in the Sporting Goods Industry The company WAS Amongst the top players in the Sporting Goods Industry icts due to strong brands, market-leading products for sports and Commitment to meeting consumer expectations. The global sportswear market (Euro 45 billion) WAS Dominated by Nike and Adidas-Salomon and, at a certain distance, Reebok, Puma and New Balance. Adidas-Salomon’s brands include Adidas, Salomon, TaylorMade and others, Which HAD very strong brand name recognition in Markets served. The company’s products Served Many markets and include footwear, hardware, apparel, snowboard, golf-related and Other Products. Steady Increase in dirty back Adidas-Salomon’s revenues from sales Have Been Increasing steadily as Reflected in the last five years’ sales performance ending in 2002. Of one billion from E5.1 to E6.5 sales in 1998 one billion in 2002, the HAS Improved performance by a CAGR of 7%. Though dirty Declined by 3.9% in 2003 over 2002, It Was Mainly due to currency translations. The company has-been Able to Achieve this steady growth in revenues due to strong brand image icts, continuous <a href="http://www.putianb2b.com/"><strong>莆田贸易网å�€</strong></a> product innovation Commitment to burn That Is Focused. Such a steady growth in the company’s revenue performance helped in Maintaining a very good image for the company and Improved investor confidence. Additionally, the company Reported outstanding year Operational and Financial Performance in the first half of fiscal 2004. This Underlined the company’s momentum, with quarter on quarter sales Improvements for all brands, and a record gross margin and earnings growth of Almost 40%, marking the first half year performance Strongest in the company’s history. Successful new product innovations The company HAD Consistently Launched new products and this enabled it to Widen HAS ITS ITS portfolio and enhanced competitive position aussi. Each company has Specific Targeted brand and market new products based on Their Were Introduced Requirements. This helped the company HAS Achieve a Greater degree of success. DURING 2002-2003, the company Launched in icts a3 and ClimaCool running shoes category, Which Were big time. The company sold over 500.000 peers in a3 and over one million in one ClimaCool. Furthermore, basketball shoes in the division, the T-MAC and T-MAC Were the bestselling in the US market in 2002 led to the HAS Which release of T-MAC 4 footwear lace less for 2004. The company’s continuous new product innovations Commitment Towards Improved back end not only helped in aussi Strengthening relationship with STI STI Customers New Customers and Attractions. In May 2004 the company Introduced What the company Described as the first Intelligent Shoe – Called “1″, the intelligent cushioning shoe Provided by Automatically and Continuously Adjusting for itself. Lead time Improvements The company HAD Improved considerably the lead-time required for manufacturing footwear-through lean manufacturing principles. Earlier in 2000, the company Used To take 120 days for Producing footwear, by 2003, this HAD Been Reduced to around 60 days. Such a reduction can have Was Made a result of the company’s efficient implementation of lean manufacturing Principles Which helped in Removing non-value-adding procedures and Activities, Improved labeling, special handling and Other Such Activities to Reduce time taken. Thesis Process Improvement Have helped the company in warehousing Avoiding icts of footwear products. strength Marketing The company HAD Planned and Implemented major advertising Campaigns DURING 2004. The company’s immense size and strong position afforded it Have the Opportunity to Global Advertising Campaigns undertaker with focus on TV, print media and outdoor advertising as well as point of sale and PR Activities. The campaign “Impossible is Nothing” included top athletes from different disciplines Such as Muhammad Ali and His daughter (brand image, lifestyle and boxing), Haile Gebrselassie (brand image, running), David Beckham (brand image, football) and Tracy McGrady (brand image, basketball). Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â* Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â* Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â*Â* Weaknesses Unfocused strategy The strategy of Adidas-Salomon WAS Lacking focus. This is Because it HAS a very Broad product portfolio, Including sport performance products for athletic sports, basketball, golf, tennis, Nordic disciplines, cycling and fashion oriented products. Rival Puma HAS Demonstrated That Can Translations into focus a high Profitability. Over-dependence on Adidas brand segment While the purchase of Salomon, the French maker of ski and golf gear, steered the company Into the arena equipment, the company generated 79% (.9 billion) of total revenues of E6.3 icts one billion from the Adidas brand segment in 2003, while The Other Two Contributed to the balance. Despite a strong image for the brands Salomon and TaylorMade, They generated only about 21% of the total revenues. The company’s over-dependence on the Adidas brand segment, Which Mainly Serve the athletes’ requirements, the company’s Makes Overall revenues susceptible to the requirements in this market segment. High level of long-term borrowing Though the company icts Reduced Borrowing Against one million by 2002 E181, the level of borrowing WAS still very high. At the end fiscal year 2003 the company’s long-term borrowing as a per centage of equity were very high at around 146%, Which amounted to E1, 574 million. Such high debt level Affected investor confidence in the company and Makes Funding of low-cost growth plans difficult. By fiscal year 2004 half strong cash flow enabled HAD more progress in debt reduction has-been (net borrowing at June 30, 2004 Were E967 million, down 39% or one million versus E616 E1, 583 in the one billion Prior year) goal made Remained high debt . Order cancellations 2003 revenue growth below WAS Substantially the company’s first printing from year-end 2002 order backlog, Which Were up a strong 14%. As WAS 2003 growth returned only 5%, significant order cancellations in the course of the first half of 2003 are evident. The company That Achieved revenues totalled E6, 267 million (, 570.4 million), a DECREASE of 3.9% Against the previous years revenues totalled That E6, 523 million. Opportunities Strategic acquisitions and agreements The company made a few acquisitions Strategic DURING 2004. In September adidas and Stella McCartney Announced long-term partnership in New York, Presenting the Adidas by Stella McCartney sport performance collection. For the first time ever a high-end fashion designer has created HAD functional sport performance range for women. The first collection available in stores across WAS the US, Japan and Europe in spring / summer 2005. It Offered products for running, gym / workout and swimming as well as cover-ups. The Adidas by Stella McCartney range shows the company’s willingness to innovate in the women’s sportswear market. Adidas-Salomon Acquired Valley Apparel Company of Cedar Rapids, Iowa in June 2004, producer and distributor of collegiate and professional league apparel and accessories. It Served small-to mid-size retailers, Such as sporting goods stores, department stores, fan shops and college bookstores. It HAS a reputation of Producing and Delivering large quantities of branded apparel and accessories Within hours of a team’s victory. In early 2003, the company Acquired the Maxfli brand of golf accessories and Other Related Products from Dunlop Slazenger Group TaylorMade-Adidas-through ITS division. This acquisition helped the company in HAS Offering Leading market products in all categories and the golf HAS ITS Improved global market share to 16% from less than 1% Prior to the acquisition. The company aussi Entered Into a Strategic agreement in June 2003 with the INTERSPORT International Corporation (IIC), a multi-sports retailer, in order to Strengthen STI sales and distribution network. Specifically, the oven year agreement will – in time – Strengthen the company’s performance sport, casual, Salomon and Other Products’ sales. manufacturing and supply-chain initiatives The company’s success in footwear manufacturing Reducing Time Was Likely to continue in the future also. The company production STI Planned to Reduce time Furth, Which helped the company HAS Achieve faster delivery of STI products to the retailers, thereby Reducing Inventory Costs. On the supply-chain side, The industry faces a problem due to along time to market. The total time taken IS ABOUT 15 to 18 months of Which are Spent 12 months in creation of the product, while the balance of the time in the raw materials for Arranging, production and delivery to the retail stores. The company Also Planned to Implement a new model for ITS supply chain, Which Will Reduce the time taken considerably and Improve cost efficiency, etc.. This initiative helped the company in serving Customers icts faster, thereby Gaining a competitive edge over peers icts. Sponsoring sporting events The company’s sponsorship of major sports events Brought great recognition to STI products. Supplied Adidas More than 1.4 million products to federations, Volunteers, Officials and others DURING the 2004 Olympics. FOLLOWING a Successful marketing campaign at the Euro 2004 Soccer Tournament in Portugal, the company Once Again Expected to Achieve new record sales in football DURING 2004. DURING 2002, the company sponsored FIFA World Cup Championship in Korea and Japan and WAS acclaimed as The Most visible Among the brands advertised WAS DURING the event and viewed by one billion cumulative 44 spectators DURING the course of the event. Furthermore, in the Winter Olympics of 2002, the company sponsored over 50% of the Participating Athletes Who won about 200 medals. Adidas HAS a life-time agreement with Kevin Garnett (Most Valuable Player of the NBA 2003/2004). Also it has signed six-year cooperative agreement with Chinese Football in June 2003. The company sponsored the World Cup in 2006 Held in Germany. Sponsorship of These events help The company building in STI Sport Heritage, and Other Such Sport Style divisions. For instance, the Sport Heritage division Grew Into year Euro 900 million Business and ITS Doubled sales from 2001 to 2003. Own retail stores In 2003 Adidas generated 9% of group revenues in retail outlets Own. A significant number of new shops POSITIVELY Did not Contribute to earnings Because the cost for new shops (of Hiring and training of sales people etc. Costs.) Exceeded returned early. This Will begin to level out and the company going forward Will continue to open retail shops Own. Recently Management Explained That Own retail sell-through in the US WAS positive in 2003 in contrast to external Customers. The company planning to open Therefor IS 15 new shops in the coming US Two years and 40 worldwide. Sport Heritage Management Expects to grow again from 2004 driven by retail stores and more Own no more cutting of external points of sales. Threats Competition Adidas operated Within a Highly Competitive Market in Which Many boxes have overlaps Into Other Markets sportswear retailers increasingly compete with fashion retailers. The company’s traditional Competitors like Reebok, Nike and Puma made competitive Levels intense, the purpose of adding casual footwear and apparel Manufacturers Such as Tommy Hilfiger, Adding a designer edge to the market, competitive HAD INcreased Levels. Companies come HAD Under Increasing pressure from products Recently Designed for the value conscious consumer. Adidas Have long-been one of the premium brands in sportswear and charged accordingly Have, though this strategy is coming Under more pressure as cheaper substitute products are Bought by Consumers Adding to Problems in terms of customer retention. Foreign exchange fluctuations The company’s manufacturing Activities Were Mostly Concentrated in China and Other Southeast Asian Countries. Since MOST of These Countries US transact in dollars, the company incurred You about 70% to 80% of ITS outsourcing Expenditure in US Dollars, where, the company’s revenue generation in non-US dollar-Euro and Other currencies IS comparatively lower. Hence, adverse currency exchange rate in the dollar and Euro between us Had a negative impact on ITS overalls back. Weak global economy The GDP of European Countries Have grown at a negligible rate and are Unlikely to Improve in the near future. Similarly, the Latin American Markets Such as Argentina and Brazil continues to witness weak Economic conditions, while the Southeast and Middle-East regions continue to reel from Political unrest. Malthus, the company’s revenues <a href="http://mobicomm.biz/blog.php?user=jamesd0cn&blogentry_id=121475"><stro ng>Air Jordan 1 Retro High Black Are Very Popular | Nike Air Jordan</strong></a> Were Significantly Affected due to opposing thesis Economic conditions. 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