The purpose of this paper is to analyze Adidas acquisition of Reebok and its external and internal consequences that represented an important shock that affected the dynamics and the mechanisms of the sporting industry. On August 2005 , Adidas-Salomon AG (Adidas) announced the intention to acquire Reebok International Limited (Reebok) for $ 3. 8 billion. The goal of this merger was to facilitate the Adidas Group’s strategic intent in the global athletic footwear, apparel and hardware markets.
In fact, both companies remarked the complementarity of their missions and activities, that allowed Adidas to benefit from a more competitive platform worldwide, well-defined and complementary brand identities, a wider range of products, and an even stronger presence across teams, athletes, events and leagues, allowing Adidas to compete in a better and stronger way with the giant of the sporting industry, Nike. “Adidas is the perfect partner for Reebok”, said Paul Fireman, Reebok CEO “ with Adidas we are able to offer an enhanced portfolio of global brands that truly adresses the needs of today’s and tomorrow’s consumers.
As an aspirational global sports performance and lifestyle brand, Reebok mission is to enroll global youth through sports, music and technology. This complements Adidas’s mission to be leading sports brand in the world with a focus on performance and international presence”. Adidas believed that the complementary nature of the two businesses in various geographies, products and consumer segments had the ability to provide a significant opportunity for increased value creation.
Managers hoped that through this merger the group could obtain a substantial reduction in costs as well as an increase in revenues and profits, deriving from a more complete coverage of all consumer segments. However the brands of Adidas and Reebok were kept separate because each brand had its own identity and value; thus the company continued to sell products under the respective brand names and labels. At the time of the acquisition Nike was the leader in US, and had about 36% market share in the athletic-footwear market as compared with Adidas 8. 9% and Reebok with 12. 2%.
Reebok was seen s a stylish or hip brand whereas Adidas was perceived to have good quality products; Reebok was strong in tennis, fitness and basketball while Adidas had a grip on soccer and team sports. The merger was aimed at helping Adidas increase its share in the US market and better compete with market leader Nike Inc. and fourth ranket Puma AG. The challenge was to integrate Adidas’s German culture of control, engineering, and production and Reebok’s US marketing-driven culture. The acquisition had also the objective of helping the growth of the Adidas brand in developing and fashion-oriented markets of Asia like China, Korea, and Malaysia. Also we suggest globalisation of Adidas
As result of Adidas’s move towards Reebok, the presence of the German company increased to $ 11. 8 billion globally and both the acquiring and acquired company recorded an annual saving of $150 million from their combined operations. After the merger, Adidas group decide that a reorganization was necessary to better leverage the strenghts of the management and deliver high quality services to customers. In 2009, the strategic decision was to move from a vertically integrated brand structure into a functional multi-brand structure for the Adidas and Reebok brands.
The consequence of this decision was the creation of a Global Sales function responsible for the commercial activities, and a Global brand function responsible for the marketing activities of both brands. Moreover, the Global Sales organization was split into Wholesale and Retail because of different needs of distinctive business models. An acquisition as the one of Reebok should be supported by a strong organizational culture, based on innovation, diversity and creativity in order to deliver long-term value for shareholders and customers.
In fact, Adidas’ aim is to embrace changes and innovation and, by harnessing a new culture, it pushes the boundaries of products, services and processes to strenghten its competitiveness. This is the reason why the company is well diversified with employees from various ethnicities, crucial for the success of an organization like Adidas, in which diversity and personality are the main tools used in order to obtain successful products and corporate performance.