The battle over leadership in the sport industry: Adidas vs. Nike

Résumé du document

According to public opinion, sport is undoubtedly related to pleasure, relaxation and physical activity. However the reality is in fact poles apart from this simplistic landscape and sport is above all a colossal industry, which represents a billion-dollar market. The recent acquisition of Reebok by Adidas is a good example of the stakes on this particular market.Indeed, on the 3rd of August 2005, German sporting goods giant Adidas agreed to purchase Reebok International Ltd. for approximately $3.8 billion, that is to say 34% more than Reebok's share price at the time. As indicated by Adidas CEO Herbert Hainer, “the deal represents a major strategic milestone for the group. 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 ». Therefore, the posted goal is clearly to challenge the leadership of Nike.
However, even though this deal represents a consolidation between the number 2 (Adidas) and the number 3 (Reebok) on the sporting goods market, the combined company remains behind the apparently irremovable leader Nike. As a result, we will focus our analysis on this burning issue: is Adidas able to become the leader on its market after the acquisition of Reebok?

Extraits

[...] Conversely, should Adidas not leave the basketball field? And what about running where the two brands are in frontal competition? In a few words, Adidas and Reebok have to achieve synergies of merger without delay otherwise the combined company will not be robust enough to challenge Nike. Yet, even in the case of a successful takeover, Nike has a joker. Indeed Nike has already said publicly that if the alliance Adidas- Reebok becomes too threatening, Nike would purchase Puma, the current number 4 of the industry. [...]

[...] Moreover, one cannot forget that Reebok is under contract with all the most famous American professional leagues such as basketball, baseball and football, which accounts for roughly millions. As a result, this unpredicted purchase is expected to become extremely profitable thanks to the new prospects it allows. On the other hand, we have to underline stakes involved in the Adidas/Nike match, that is to say the four areas in which the competition over leadership will occur. The first paramount battlefield will certainly be R&D. [...]

[...] Subsequently, consolidation seems to be the ultimate trend on the sporting goods industry. Yet, this is still a highly competitive marketplace and this will only be a structure that will evolve. Indeed, we will go towards a dual industry composed on the one hand by massive players (Nike-Puma, Adidas-Reebok) and on the other hand by a multitude of atomic brands (Lotto, Umbro, Kappa, Airness, etc). One substantial hope for Adidas to be able to reach leadership is is most likely the boost of sales that will take place in the wake of the 2006 World Cup Championship, which is taking place on its own land in Germany. [...]

[...] In the light of the above, the last stake involved in the Adidas-Nike match is marketing sponsoring. Indeed, sponsoring is a fantastic sales- booster, which pushes the two brands to compete to monopolize the best sportsmen in the world by detecting them as soon as possible. Zidane, Cissé, Beckham and Safin for Adidas; Rafael Nadal, André Agassi and Michelle Wie for Nike. The latter spends more on sponsoring than its two competitors put together to be precise versus millions. In 1985, the first deal had been signed between Nike and Michael Jordan for $ 4.5 millions. [...]

[...] As a result, we will focus our analysis on this burning issue: is Adidas able to become the leader on its market after the acquisition of Reebok? On the one hand, we can highlight the undeniable benefits of the deal between Adidas and Reebok. First of all, the deal increases market power of the combined company and especially on the American market. Indeed, the US market accounts for approximately half of the global sporting goods industry and margins are around 10% that is to say twice as much as the European average[1]. [...]