Market Strategy of Adidas and Reebok

Bearing in mind the current position reached in the cycle of globalization in general, and the sportswear and equipment industry in general, it is our conclusion that the take-over/merger of these two businesses was the correct strategy to adopt. Our findings are based on the current and future development of the industry. We also reflect upon the impact and possible threats that outside elements may pose to both the industry and, in particular, the organization being studied.Adidas-Salomon AG formed Adidas-Reebok in January 2006 as a result of the acquisition of Reebok International Ltd. The purpose behind this was to reinforce the company as a global player in the sportswear and goods industry and to give it a stronger and more in-depth and diverse promotional and customer base across a number of sports and competitors. At the same time, it expands their product range and enabled it to increase market share.There has been a mixed reaction from some elements of the financial markets to this takeover. Whilst it has generally been accepted as a logical step, there is a small section of the financial community who feel that, with the cost being 18.5 time earnings, before any savings can be achieved, this is a very high price to pay, especially as it also represents a 40% premium on the share price, (John Spakak 2005). The concern is centered around the perception that the company may not be able to service this financing. Within this report, we intend to evaluate this position and endeavor to identify the reasoning behind Adidas actions in the takeover of Reebok.Reebok is the older of the two businesses by about thirty years, being started in the UK in the 1890s. It was amongst the first to make footwear for athletes. In 1979 its business expanded into the U.S. In 1981 the company sales exceeded $1.5 million.