With Adidas and Reebok Combined,

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With adidas and Reebok Combined,
Will Nike Still Crush the Competition?

September 21, 2005

Letter of Transmittal

September 21, 2005

"Will adidas' forthcoming takeover of Reebok help the new company achieve sustainable competitive advantage over industry leader Nike?" After researching the many aspects of this question, we were able to come to a conclusion. In order to address the full scope of the question our team evaluated the following areas:

•Background Information
•Corporate Culture
•Market Shares and Manufacturing
•SWOT Analyses

The combination of adidas and Reebok appears to be a step in the right direction. However, it is important to analyze the strategies behind the acquisition and to consider possible obstacles the company will face. Overall, each issue will need to be addressed so that adidas and Reebok can compete to the best of their advantage against Nike, but we don't foresee them taking Nike's spot as the industry's leader.

Executive Summary

The purpose of this report is to evaluate the impact of adidas' pending acquisition of Reebok on the sporting goods industry in relationship to Nike's position. Evaluation of background information and corporate culture combined with SWOT analyses have helped form the arguments presented in this report and have assisted in answering the question, "Will adidas' forthcoming takeover of Reebok help the new company achieve sustainable competitive advantage over industry leader Nike?" Nike's current position in the industry along with the strengths, weaknesses, opportunities, and threats concerning adidas' acquisition of Reebok help convey the following arguments.

•Nike's Current Position
oStrong brand recognition
oTop endorsers
oGlobal leader in athletic shoe market

•adidas-Reebok Strengths
oComplementary global strengths
oComplementary brand identities and market segments
oShared R&D, patents, and technology

•adidas-Reebok Weaknesses
oComplexity of joining two corporate cultures
oDiffering values among management

•adidas-Reebok Opportunities
oReduced costs
oDecreased competition
oCross-over promotion

•adidas-Reebok Threats
oNike's possible acquisition of Puma

It has been concluded that adidas-Reebok will have a greater ability to compete aggressively with industry leader Nike. However, while they are working out the finalities of the acquisition, Nike will be running at full speed. Therefore, Nike will remain in the top spot for the athletic shoe market, but adidas-Reebok should be a very close second.

Table of Contents

Letter of Transmittali

Executive Summaryii


A Look at Competitive Advantage1

The Big Three and Their Competitors1
adidas-Salomon AG1
Reebok International Inc2

Legal Issues3

Corporate Culture3

Market Shares and Manufacturing4
Market Shares4

Brand Identities5

Opportunities and Strengths of the Acquisition5


Appendix A : Legal Information7
Appendix B : Corporate Culture11
Appendix C : Nike SWOT Analysis14
Appendix D : adidas SWOT Analysis17
Appendix E : Reebok SWOT Analysis20
Appendix F : adidas-Reebok SWOT Analysis23




On August 3, 2005, adidas-Salomon AG announced its plans to buy all outstanding shares of Reebok International Ltd.'s stock at $59.00 per share, for a total of $3.8 billion. Upon announcement, Reebok stock rose 30 percent while adidas climbed 7 percent. The negotiations are expected to close before the end of the first quarter of 2006. 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 industry. Together, we will expand our geographic reach, particularly in North America, and create a footwear,...
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