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?
[...] 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. So far, Nike invests more in R&D than its two joined together competitors, explicitly millions versus millions. [...]
[...] Actually, Nike has become aware that it cannot durably access European markets by neglecting the most popular sport over there. Thus, Nike concluded a partnership with Manchester United, Juventus and FC Barcelona. These businesses have vast repercussions: football shirts for instance are sold to fans at a price of whereas production costs account for only By controlling the merchandising of all these teams, Nike has learnt to be essential in the soccer field. Adidas resists thanks to his own merchandising contracts with reputed teams such as OM, Milan AC or the French and German national teams. [...]
[...] Thus, Adidas benefits from an advantage but it is only temporary in the sense that Nike will probably adapt to this process too. The third stake is to dominate the growing sectors: female market and soccer. Even if female sporting goods represent, for the moment, only 33% for Adidas and 15% for Nike of their global activity, female sporting goods consumption grows faster than that of the male against Moreover, price of female collections is on average 25% higher. Thus, female market becomes a priority for Adidas and Nike to such an extent that they employ the most reputed stylists to conceive collections such as Stella McCartney for Adidas. [...]
Online readingwith our online reader
Content validatedby our reading committee