Adidas Business Strategy
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Adidas Business Strategy

To what extent has got the acquisition associated with Reebok International Ltd. through Adidas Team been effective like a growth strategy?

This essay responded to the research question "To what extent has got the acquisition associated with Reebok International Ltd. by simply Adidas group been effective as a growth strategy?" An analysis associated with secondary information for example income statements as well as annual studies regarding a extended time 2004-2007 had been conducted upon Adidas Team to judge income patterns before along with after the acquisition. Furthermore, the interview with the assistant strategic manager associated with Adidas-Reebok Business had been completed to locate out the extent of the merger’s growth.

To get the extent of growth, the actual essay conducted SWOT analysis and economic and performance analysis regarding Adidas prior to the merger, along with comparable analysis with the Adidas-Reebok merger following your acquisition. The Actual equipment that were considered inside the economic as well as performance analysis included cash flows statements, sales, market stock prices, along with net income. Coming From the actual SWOT analysis and the monetary analysis of the company, it was evident in which Adidas had grown to a significant extent. Similarly, the particular paper explored several growth indicators following the acquisition of Reebok international Ltd. simply by Adidas group in order to measure whether there had been declining or inclining growth and whether it was substantial, mediocre or even insignificant. Your growth indicators discussed included price of synergies, financial economies, economies of scale, increase of industry share, and furthermore the stock performance of the merger.

Through the actual analysis of the development indicators, your essay showed that Adidas-Reebok company benefited through expense regarding synergies, elevated economic economies and also economies involving scale, increased its market share to 20% globally, and has traded healthily in the stock markets. Your essay in addition highlighted a few of the challenges your merger had faced and so they include hindrance inside economic growth, insufficient control and coordination, poor operating relationships along with external diseconomies of scale. the essay had been then summarized by way of a conclusion

McCarthy (2013) defined an acquisition as the process of takeover of the company, by which any organization purchases just with regards to all or perhaps the vast majority of the particular ownership stakes of the prospective organization to have control. The Particular process entails a new buying and also selling strategy in order to rapidly grow a new organization through overpowering the firm’s niche and also operations. The Particular procedure for acquisition is actually one of the growth strategies of your organization and it is much more advantageous when compared with internal expansion. This specific is really because via acquisition, the organization will consider advantage of the particular synergies, lower risks, integrate easily, obtain less difficult financing, get economies associated with scale, broaden its market share and also distribution channels along with remove its competitors.

The main purpose of acquiring a firm based on Finkelstein et al (2010) is to adopt over the brand new enterprise places as well as finance the particular operations of the acquired firm in the same market below 1 umbrella. Your merged firms have numerous benefits as against single firms operating on their own inside the industry since each companies will combine his or her operations, human resource, research and development facilities, finance, and also the managerial team as well as operate together entity. Acquisitions are usually compensated via acquiring the actual stocks of the target business or perhaps in cash, or both.

Adidas team acquired Reebok international limited in 2005. both companies were operating inside the sports footwear and also apparel industry. while Reebok ended up being located in United States, Adidas group was a German based company. Nike Inc was your global market leader, followed by Adidas group as well as Reebok third. Therefore, the acquisition of Reebok international ltd by simply Adidas team ended up being bound to make tremendous changes inside the market place. Regardless of your proven fact that your acquisition regarding Reebok simply by Adidas team ended up being for strategic growth, the particular merger offers progressed although faced numerous challenges likewise, hence the research concerns "To what extent gets the acquisition associated with Reebok International Ltd. through Adidas Team been efficient as a growth strategy?"


Relevant secondary & primary data is likely to be extracted in the two sports companies, as well as the findings is likely to be explored along with evaluated. Secondary resources will consist associated with on-line articles along with annual reports prior to and following your acquisition occurred.

Primary research

  • Interview with assistant strategic manager associated with Adidas-Reebok Company, Robert Magill.

  • Secondary research

  • Adidas group Annual Report

  • Reebok International Ltd. Annual Report

  • Online article of acquisition

  • Relevant text books, Newspapers, Magazines

Company background

Recently inside the modern business world, organizations have discovered it to become exceedingly important to adopt external growth strategies through merging, overpowering as well as acquiring foreign firms either vertically as well as horizontally. Acquisitions happen for you to be substantially implemented throughout growing markets such since the sports industry. This particular involves the truth involving UK Company, Reebok being acquired by German based parent company Adidas Team upon Could 6th, 2006. Your acquisition was obviously a strategic maneuver to always be able in order to gain higher industry share, for you to gain a larger extent involving economies involving scale also to diversify his or her products.

Adidas group would easily be able to offer any wider product segment as Reebok had been initially specialized throughout meeting the specifications of "team" sports whereas Adidas had been specialized inside meeting the requirements of "individual" sports. The Particular 2 firms that will complimented each other would possess the possiblity to compete with marketplace leaders, Nike.

In 2005, each Adidas-Salomon along with Reebok reached an agreement where Adidas acquired Reebok for $3.2 Billion. . Your offer shaped your apparel and footwear business since Adidas-Reebok at present control 20% associated with the marketplace although still at the rear of the key competitor Nike which can easily be value to be $145 billion globally.

Smit (2008) noted that the transaction additionally brought collectively some other brand names of Reebok like the Greg Norman along with Rockport range associated with golf apparel, and other lines involving Adidas for example TaylorMade apparel business as well as golf clubs and also Salomon ski franchise

The shares regarding Reebok were provided by $59 regarding €3.2 billion. This furthermore included net minorities as well as cash, using a €3.1 billion transaction value. The Particular annual synergies expense had been estimated to be €125 million. Based on Adidas AG (2014), Reebok was obviously a globe leader throughout athletic apparel along with footwear having an estimated €820 million inside operating profits and €8,899 million inside sales. the organization had strong positions as well as had been better well balanced in 3 main regions; Asia 15%, America 35% and also Europe 46%.

Analysis of Adidas and also Adidas-Reebok

SWOT analysis of Adidas before acquisition


  • Strong brand name

  • Top industry position

  • Diversified operations geographically


  • Low inventory turnover

  • Poor margins


  • Growing global marketplace regarding footwear

  • Healthier lifestyles adoption

  • Sponsorship agreements


  • Many legal risks

  • Counterfeits

  • The rising raw material costs

SWOT analysis associated with Adidas-Reebok Merger


The acquisition involving Reebok by Adidas led to strengths such because the merger concentrates around the production of diversified goods to different consumer markets. Furthermore, due to end up being able to extensive analysis and also diversification associated with the merchandise lines in the merger, there has been a rise of product lines regarding Adidas and Reebok products. Furthermore, the massive global industry in the merger and the elevated shares regarding Adidas-Reebok following your acquisition can be considered strength. David (2007) indicated which Reebok sells within wholesale although Adidas is premium. Therefore, their particular merger features acquired the particular lower, middle and also upper level markets globally. Lastly, another strengths of the Adidas- Reebok merger is the really fact that each companies have become capable of share human resource, methodology associated with operations, skills set, expertise of the employees, and study along with development among them. Some Other strengths include:

  • It includes a strong innovation team within its analysis and also development using hyperlinks to other study partners such as Waseda School (Tokyo), University Or College involving Michigan, and also School involving Loughborough.

  • Adidas-Reebok has a stronghold in the soccer industry

  • It features no negative popularity like environmental pollution or even little one labor

  • In its distribution channel, This provides strong control

  • Variety and also diversity of products offered on-line for example sporting equipments, apparel, along with footwear amongst others

  • Reputation and recognition involving its two brands (Adidas along with Reebok) furthermore to become able to its 2400 worldwide retailers in various regions.

  • Strong management team from each Reebok as well as Adidas

  • It is the biggest sponsor in any amount of events such as UEFA as well as FIFA competitions, Olympics, NBA along together with other sports personalities like Reggie Bush along with David Beckam.


The biggest weakness identified simply by Fireman (2005) has been your sizes involving the 2 companies as well as the complexity associated with the entire procedure of acquisition. Each Adidas as well as Reebok had massive productions and also global markets and their management continues to be a challenge. Moreover, ahead of the merger rolled out an appropriate strategy involving disposing off your goods, there is wastage regarding goods. Lastly, your merger has been slow within streamlining the workforce regarding each a couple of companies since the particular management profiles of both Adidas and Reebok had been different. Questionable high quality of its items has additionally been raised since the organization outsources 97% Adidas global production from Asian third party manufacturers to reduce production costs. Various Other weaknesses based on DePamphilis (2007) include:

  • Some involving its items price is high

  • Unhelpful or perhaps absolutely no on-line customer care services

  • The merger sells right to its consumers along with hence creating conflicts with almost all the distributors as well as resellers regarding their products

  • Limited e-commerce within United states


Reduction associated with Operations expenses continues to be a fantastic chance for that merger as investment can be funneled in manufacturing units and on research along with development. Moreover, your acquisition has reduced your competition in the industry since your major competitors are generally Nike along with Puma. According to Peng et al (2007), Adidas-Reebok merger may be quite definitely flexible in promoting many brands, and furthermore this may be amplified through making use of celebrities just such as the star athletes pertaining to Adidas-Reebok to promote your brand. Lastly, your merger could adopt diversified marketing and advertising ways of promote the Adidas-Reebok brand. Various Other possibilities for the merger in accordance with Gaughan (2006) include:

  • Invest throughout e-commerce as well as outsource a web developer

  • Collaborate together with proven on-line merchants for you to offer its products

  • Increase female participation in sports

  • Global sponsorship regarding sports events in order to boost its brand name worldwide

  • The revival along with gradual growth associated with Reebok within latest years.


According to Kaplan (2010), cannibalization may be the biggest threat to the Adidas-Reebok company. Prior To the merger both Adidas group along with Reebok International Ltd had huge markets and also brands, however, following the merger the marketplace penetration involving unpopular product in a market formerly dominated by another partner’s product manufacturer has been difficult. This particular features resulted in order to cannibalization of the unpopular items hence decreasing industry share. Similarly, any similar merger in the future in between puma as well as Nike could show to become a substantial threat to the Adidas-Reebok merger. another threat may be that if the Adidas-Reebok merger concentrates on the market share involving among the actual specific companies, it could outcome to spoiling your mergers reputation. other threats highlighted by Begg (2006) include:

  • Increasing challenges upon its goods export as well as import duties

  • Negative images in the companies sponsored athletes, for instance the particular sexual assault case by simply Kobe Brayant

  • The strong status from its main competitor, Nike inside the apparel and footwear industry

Growth indicators following acquisition involving Reebok international limited simply by Adidas group

The acquisition that occurred among Adidas group as well as Reebok International Ltd. has been an inorganic growth strategy so as to be able to acquire a a lot more substantial concentration ratio within the industry.

Synergies through acquisition

The rewards any organization can get right after strategic acquisition are usually results regarding economies involving scale and synergies. Within an acquisition that is well executed, the particular buyer can take complete benefit of the actual synergies. This kind of signifies that the two merged companies will be much more profitable and stronger that both associated with the companies before. DePamphilis (2007) defined synergy as more or two things mixed will end up being more successful as well as better that the sum associated with his or her individual parts. Regarding instance, your merger regarding Adidas team along with Reebok international limited mixed their resources, and had a lot more than their own individual values.

According to end up being able to Finkelstein (2010), the accurate secret in order to company’s growth by simply acquisition is just by utilizing the synergies. A New business can broaden along with grow quickly, cheaply along with deal with fewer risks through acquisition, furthermore, it provides several; advantages for example instant economies of scale and simpler financing. the competitive benefit of your merger is actually formidable and it catches its primary competitors off guard, eliminates competitors and throughout addition in market penetrating for the places the company had been considered weak. Acquisition involving Reebok international ltd by simply Adidas group ended up being strategic transfer pertaining to cheaper as well as quicker growth.

The acquisition offered Adidas Business several benefits like expansion involving its economies regarding scale and simpler financing. Your monetary pool along with assets involving each companies have become at the disposal of Adidas group. Furthermore, the actual acquisition provided Adidas-Reebok company with competitive advantage along along with other competitors such as puma and made the actual merger the second largest company controlling the global footwear industry. Smit (2008) described the acquisition became popular guard the key rivals regarding Adidas such as Nike as well as Puma, and throughout addition enable it in order to penetrate much more markets where Adidas had been weak

Synergistic acquisition based on Kaplan (2010) isn't just limited by acquisition in the direct companies. The Organization can acquire an additional company to consider advantage of your distribution channels of each as well as every along with every of the companies. Regarding instance, Adidas acquired Reebok International Ltd as well as took advantage of Reebok’s already established channels associated with distribution. The Particular Adidas items were getting offered by means of the actual Reeboks distribution channels, as well as Reeboks items via the Adidas distribution channels

Acquisition could even be done through acquiring the company in a distinct geographic area but within the exact same industry. Expense synergies are generally realized when a number of services or even departments can be centralized in between the two companies to become able to acquire the particular economies involving scale by means of your volume associated with business increase. This is also evident after the acquisition involving Reebok simply by Adidas exactly where these folks were in various geographical places but in the same industry. Buffoni (2013) described that will Adidas-Reebok company centralized a number of of its operations and also services such because the customer care to adopt benefit of the economies involving scale because of rise in company volume

The catalysts that drive could acquisitions of numerous businesses involve synergies. Any time many different companies merge, that they grow in order to be higher compared to after they are operating individually. the synergies which involves economies regarding scale and advertising features benefits along with opportunities which involve reduced overhead expenses, purchasing volume discounts, and production

Increase of industry share

The easy logic benefit regarding investing within a competitor in the marketplace is getting fewer competitors following the purchase. Within the shoe market, there are many a range of players inside the sector along with few main players. However, following acquisition regarding Reebok Company, Adidas reduced his number of competitors through one, and now controls 20% of the marketplace reveal after Nike. This specific was an successful growth strategy for Adidas group.

Market discuss of a organization in which which has acquired an additional firm in the identical market can increase, using the accompanying influence within the market. Based on Finkelstein et al (2010), the firm using formidable talk about involving the marketplace could make rates a lot more confidently as well as other choices inside the business rather than responding as for you to the others do inside the market. Adidas-Reebok merger can easily increase their own prices without losing their own clients, which is likely for you to make all of them influence industry as some other small firms in the market will also increase their particular prices. However, other smaller sized companies within the market cannot influence Adidas-Reebok for you to adjust its prices that they improve theirs given that they do not possess access to economies of scale.

Stock industry performance regarding Adidas-Reebok merger

André (2013) observed that the discuss costs associated with Adidas as well as Reebok increased in the moment the entire procedure of merger has been commenced until its completion. Adidas acquired Reebok’s stocks as well as the open up market stocks also. Regarding each Reebok’s share, Adidas compensated $59 on the date associated with merger. Moreover, inside 2005 august 22nd, your stock regarding Adidas within Frankfurt stock exchange rose by simply 7% through €147 to €158 right after one day. Similarly, within Ny stock exchange, your Reebok stocks rose by simply 30% simply by eventually coming from $44 to $57 from 2nd for you to 3rd august 2005.

Adidas shares also dropped by just as much as 3% within Frankfurt trading from €64.91 about September 2012 this was a drop by simply 1.5% after gaining a new 30% increase in order to regarding €65.76 within 2012.

Challenges for the acquisition growth strategy within Adidas-Reebok Company

Despite the actual fact that your merger features seen significant rise in many areas, it has also seen challenges inside sectors.

  • 1)Fincial growth hindrance- your merger has faced economic downfall in Reebok company since its acquisition. This specific features hampered growth associated with Adidas group as well as necessitated injection regarding more monetary capital. The Particular branch regarding Reebok in India had economic mismanagement throughout 2012, and their contract together with NFL has been cancelled creating the organization free $400 million in total.

  • 2)Lack associated with manage along with coordination- both countries controlled distinct collection of products, had been in different geographical areas also. Generally there ended up the problem of coordination and manage since Adidas can be new within United States Associated With America market, the particular uncertainty regarding the future involving employees after the merger and also alter regarding management.

  • 3)Poor operating relationships- as much as the merger brought the 2 companies together, they were former rivals. Therefore, suspicion features prevailed in between and furthermore this offers triggered poor operating relationships.

  • 4)External diseconomies regarding scale- they are aspects that will at night mergers manage and furthermore have elevated their own total costs. With Regard To instance, boost in output inside the industry, industry costs as well as boost in uncooked supplies costs.

Conclusion essay

In conclusion, since the acquisition regarding Reebok international Restricted through Adidas group, the business is continuing to grow as well as expanded within many areas. Adidas-Reebok currently controls 20% associated with the market right after Nike Inc, the market leader. Your merger has taken economies involving scale, monetary economies and significant pool involving human source from your a couple of firms. Moreover, the particular merger has taken benefit of synergy expenses because of towards the merger and it is recording improvement throughout sales. As significantly since the revenue associated with Reebok continues to be slumping the development involving Adidas, your management has launched expansion and also item strategy to satisfy its goal projections through 2015. the merger in add-on has diversified its markets and also goods to match most levels of marketplace via low, middle as well as upper markets.

Other growth which includes been achieved because of to the acquisition are usually wider manufacturer recognition, trustworthy image and also reputation. However, the actual merger has additionally faced challenges in its operations like regional specialization, hindrance in economic growth, not enough manage as well as coordination, poor working relationships and also external diseconomies regarding scale

Related links:

Adidas AG. 2014. New York, NY: Datamonitor. <http://search.epnet.com/login.aspx?direct=true&db=buh&jid=BR5.>

Adidas. n.d. <http://www.weblinksresearch.com.au.>

Adidas-Salomon AG SWOT Analysis. n.d. Business Source Complete. Munster: Datamonitor Plc. <http://proxy.library.carleton.ca/login?url=http://search.ebscohost.com/direct.asp?db=bth&jid=%22BR5%22&scope=site&site=bsi.>

André Richelieu, and Michel Desbordes. 2013. "Sports teams and equipment manufacturers going international: The strategic leverage of co-branding". Sport, Business and Management: An International Journal. 3 (1): 63-77.

Begg, P. F. C. 2006. Corporate acquisitions and mergers: a practical guide to the legal, financial, and administrative implications. London: Graham & Trotman.

Buffoni, Franco. 2013. Adidas. Paris: Créaphis.< http://www.Adidas-group.com/en/investors/key-financial-data/five-year-overview/>

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