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Adidas And Reebok Merger Marketing Essay

Introduction

Mergers and Acquisitions, quickly termed as M&A, generally refer to as the strategies that are followed in purchasing, retailing or merging different companies through money, strategies or management of the work force. The primary theme of the mergers and acquisitions is to save the fainted companies and offer them with the financial aid or to record the home based business areas with the merging of companies in a same type of industry under the name of an individual business entity. While using mergers and acquisitions, the merged companies' operations, work force, financial dealings, research & development facilities and the recruiting will work as an individual entity. With this document, I have taken the example of Adidas and Reebok merger. Adidas was a German activities goods manufacturer and was the world's second major following its nearest rival Nike. Reebok was the second biggest sports activities goods maker in america and was the toughest rivals to Nike before the merger. Adidas possessed a merger with Reebok and the merger was friendly and the offer was all around us $ 3. 8 billion.

Adidas and Reebok before merger

Adidas was reduced branded athletics equipment maker on earth while Reebok is a medium segmented activities equipment maker. Adidas has its strong existence around the world and its distinguished premium brand products are sports activities shoes, shoes or boots, sport equipment etc. Reebok has captured the varied products like women clothes, sports clothing and athletics equipment at very cheaper prices in comparison with Adidas. Usually, Reebok has captured the ladies sector with the making of the products related to them. Both companies want to merge and therefore the presence of both companies will be widened across the earth.

Pre merger conditions

Nike was the biggest activities goods and garments maker on the globe and it was posing very strict competition to Adidas and Solomon group. The United States was the largest market for the athletics goods and apparels. Practically 47% of the athletics market is in the United States and the annual sales are growing yr by yr. Nike is the biggest player in the United States. To be able to fight your competition with Nike, Adidas with the strategy of growth of the business in america, merged with Reebok which is one of the primary sports goods makers in the United States.

Advantages anticipated to Adidas and Reebok Merger

The merger between Adidas and Reebok led to many advantages to both companies. Although brand names are not changed and converted to single entity, both the brands as distinct possessed many advantages because of the merger. Some of the important advantages that will change the facial skin of the business in the next few years of the merger are:

Overlapping operations: The merger led to the overlapping operations in the regions of athletic goods like sportswear, clothing, sports activities goods etc. Thus both the companies can manufacture the products and apparel with minimal fixed and varying costs. Also, the time for the manufacturing of the goods will be decreased dramatically with the combo of the streamlined operations. Each company is experienced in the making techniques and therefore it would be helpful for both the companies with different brands to produce wide variety of sports goods, equipment and attire. Patents will be distributed among the companies so that the top and middle level products can be created with the same patents.

Technology showing: Both the companies are proficient in their own ways of manufacturing. Both companies can exchange the technological experience in the search engine optimization of the making processes, operations, human resources management and financial deal management. Adidas is proficient at the production of the activities apparel while Reebok is experienced in the athletics equipment making. Both can reveal the knowledge in the planning process for the betterment of the operational processes.

Cost cutting strategies: The merger got helped bring many cost lowering strategies to both the companies. Along with the merger, the companies can share the normal marketing strategies, developing procedures and financial functions. The employee exchange will be the most helpful program of the merger through the firms can show the employee experience and thus there will be lesser potential for employing the new employees and reducing the costs.

Emerging marketplaces: The marketplace analysts were doubtful about the merger being a strategy to tolerate the competition from the nearest competitor, Nike. Nike is the world's major sports goods, clothes and equipment manufacturer. Nike acquired strong market show in america and europe. While using merger, Adidas with the support of Reebok can outstand in the performance and can reach the rival Nike in the parts of america and the European nations. Reebok which has very little presence in the Asian continent will gain ability with the aid of Adidas. The merger will lead to the take of the businesses in the appearing markets.

Finally, the customers of both companies can be maintained and make them feel that the united company will produce different products in terms of quality and variety thus bettering the brand image and so the business enterprise of the Adidas group.

Obstacles and Drawbacks due to the Merger

The merger will always have some hurdles or disadvantages combined with the advantages. Some of the proposed negatives are:

Reebok is a discount activities goods brand where as Adidas is reduced brand. The clients will have a wrong perception in getting familiar with the brands if and only when the management can set up and clear from the doubts of the customers.

With the merger, the borrowings of the united company will be high. The borrowings will influence the shareholders' confidence and thus you will see less financing options to the company which will affect the company's strategies to the extension.

With the over dependence of the Reebok brand on Adidas will influence the sales of Reebok. Though Adidas recently purchased Salomon and TaylorMade, the performance of Salomon and TaylorMade is inadequate in the entire year 2003. The entire revenues of both the companies with the year is around 21% where as the revenues made by the Adidas brand is just about 79%. Hence, attention must be taken in order to market different brands of Adidas Group.

Adidas and Reebok Merger Process and performance of the stock

The merger between Adidas and Reebok took place in August, 2005. The merger package was around US $ 3. 8 billion. At the time of merger, the Adidas group was the second largest sports goods maker in the world with market capitalization of nearly US $ 9 billion. Reebok was the 3rd largest sports outfits and equipment maker on earth with market capitalization of all around us $ 4 billion.

The merger process was completed in the January month of 2006. The overall net value of the merger entity was almost US $ 12 billion. The show prices of both companies have increased because the merger process began till the conclusion of the merger. Adidas took over-all the companies of Reebok which can be granted by Reebok and even the shares from the open market. Adidas paid US $ 59 for each and every show of Reebok. On your day of decision of the merger, the Adidas stock in the Frankfurt stock exchange has increased by 7% which is from 147 on the next of August, 2005 to 158 on the 3rd of August, 2005. The Reebok stock in the New York Stock Exchange has increased by almost 30% about the same day. The show value increased from US $ 44 to US $ 57 from 2nd of August 2005 to 3rd of August 2005 respectively.

Strengths

The merger of the Adidas and Reebok offered rise to many strong aspects of the business operations and the marketplace shoot. The merger now will concentrate on making varied products to the several segmented customers. The merchandise line of the prevailing products of both the companies will be increased due to the frequent up gradation and research. The merged company will have large market segments around the globe and the show of the clients will be increased making Adidas the second biggest sports equipment machine and Reebok the third largest on the globe. Adidas is reduced brand and Reebok is a wholesaler brand and therefore the merger entity can acquire the higher, middle and lower level markets around the globe. The company will have the sharing in conditions of research and development, employee expertise, skill sets, operation methodology and human resources management.

Weaknesses

The primary problem of the merger is the complexity of the merger process. Both the companies are huge in conditions of global markets and production and hence it will be very difficult to bring both the companies under the same management. The merchandise of both the companies will be stock piled because of the merger. The products cannot be grouped in the initial stages of the merger and there may be a potential for wastage of the products till the company arises with appropriate strategy to clear off the left out goods of the pre merger entity. With the merger time, the management information of both companies will be different and hence it'll be a very rough job to control the required employees to make the company streamlined in the businesses.

Opportunities

The merger will certainly reduce the normal costs like the patents' costs, research and development costs and common production units procedures' costs. These costs will be the same for both companies and hence you will see reduction of the expenses involved. The business under the make of a single entity will have less threats from the next nearest opponents. Puma though is the next competitor to the company Adidas group is the most powerful in conditions of business marketplaces and the operations after the merger. The advertising of both the brands can be flexible with the star athletes under the same group. This cross promotion can help the company to find yourself in the hearts of more quantity of customers. The business will have different marketing strategies with fewer costs engaged and can talk about the global market segments and promote the brands under the same merged entity name.

Threats

Adidas and Reebok dished up as two different brands till the merger. Because of the posting of the global market segments, both the companies would face a issue of cannibalization and therefore this may reduce the market share. Both products are of different segments and one company concentrating on the second company's market share may ruin the trustworthiness of both the companies. The substitute products of the premium branded Adidas will risk the brand value of the same. This merger may pressure the competitors to consider self-defense options and therefore the competition may grow thus making many mergers to take place. By far the most feared merger that might take place soon is the Nike and the Puma merger.

Post Merger performance of Adidas and Reebok

Merger was always not really a smoother process. Precisely the same is the situation for the Adidas and Reebok merger. Both the companies are varied in terms of products, management and financials, the management possessed designed a separate strategic marketing methodology to enhance the performance of both the companies. Adidas group mainly concentrated on the premium soccer tournaments in Western european region. The group got sponsored many soccer night clubs like Real Madrid, Chelsea, Milan etc to improve the share of the market in the Western region. Adidas acquired little presence in Asian countries and was far behind Nike in the United States and the Western markets. Following the merger, Adidas with the help of Reebok was able to expand the marketplaces in the Parts of asia. Although companies faced strict problems in streamlining the operations in those countries soon after the merger, in the anticipated course of time both the companies got performed well. The company acquired increased the sales as well as the market capitalization because of the merger. The company's revenue in the year 2008 was practically US $ 15. 7 billion and the employee strength had risen to around 40000 by the end of 2008. The company had strategically exposed shops in the stores, hired spots in high traffic departmental stores and presented discount established marketing ways of enhance the performance of both the companies. The company had varied its products into athletics, entertainment, audio, music and technology areas. The main motto of diversification is to fully capture the portion of the youngsters around the earth to the music and entertainment life style.

Also, the managements of the both the companies were different and both the companies will sell their products with the own brand images. Even the investments will be motivated in both companies thus wiping out the probability of any discrimination. The share of the Adidas group had been increased twice in the United States market and thus the company got different segmented customers. Adidas and Reebok experienced tie up ups with different golf clubs of the United States like National Basketball Association, Country wide Hockey Category and National Football League to be able to market their products in the Untied Areas. The main gain is the fact Adidas group will have no nearest competitor apart from Nike and therefore there will be reasonable chance to concentrate on the introduction of the business and improvement of the functional and managerial procedures.

Conclusions

Adidas and Reebok are two top quality sport equipment, attire and sports goods companies. Both the companies have their own advantages in the manufacturing of the goods and global market talk about. Adidas had obtained Reebok in a friendly merger and Reebok will server under the Adidas Group. The merger value is practically US $ 3. 8 billion and Adidas will buy all the shares of Reebok International Inc. Adidas and Reebok will operate as independent entities following the merger and can share the existing global market segments and the technology. Adidas and Reebok can be the next and the 3rd largest athletics equipment manufacturers in the world respectively. The primary theme of the merger is to tolerate your competition of Nike in america and the European Union markets. Due to the merger, the companies will implement the price reduction techniques, writing of the patents, technology and recruiting. The management will continue as exactly like before the merger and both companies will work as distinct entities in the processing of the goods under the same brands as before the merger. This will likely be an edge for the Adidas group to fully capture the upper and medium level areas of the customers thus making the merger is a shared beneficiary for both the companies.

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