Adidas
Strengths
- Leaders in marketing sports products especially shoes &s apparel
- Marketing strategy is very effective
- Recognized brand name
- Prices are competitive
- Strong international presence
Weaknesses
- Sometimes their products are of low quality as compared to other competitors esp Nike.
- Product line is limited
Opportunities
- Can make new products line
- Enter new markets to expand their consumer base
- New technological innovations can help boost their business
Threats
- High competition from foreign and local market
- With changing consumer lifestyle they’ll need to change and improve their products
Nike
Strengths
Nike is No. 1 sports brand in the world and global leader in athletic hoes
- Nike is a worldwide corporation with many levels within their business process. As other companies in the apparel industry the most important departments are the management, design, manufacturing and marketing (Cart, 2001).
- Besides these research and development is also very important within Nike because of the importance to create good, up to date sport shoes.
- Nike has been highly successful in sports goods because of its aggressive promotion schemes using famous athletes.
- Nike is an industry leader in developing innovative new products.
- One of the strength of Nike Corporation is its brand name recognition, because Nike has been around so long, the brand is recognized and respected both internationally and domestically. Nike’s important sustainable competitive advantage is their intangible assets, such as brand image and organizational culture.
- Nike has effectively marketed their products and in addition understands the importance of a quality product.
- They are continually improving their shoes through new technologies that are developed by their research teams.
- Nike is a global corporation with offices and factories in various parts of the globe. Its corporate headquarters is located in Washington Country.
- Today Nike is also considered being a typical wear for the “superior” athletes, attracting many desiring sports companies to buy their products.
Weaknesses
- Nike will be able to offer lots of jobs for people; however their history of underage workers and minimum wage policy will definitely have an effect.
- However, Nike was caught up in a law case in 1998 where they were sued for the use of sweat shops with underage / under wage employees. In response Nike began to create strict standards for its manufacturing facilities.
- Nike lacks diversified sports products.
- It lacks its own retail section, they sell to retailers
Opportunities
- Nike appears to be doing better than their competition, earning yearly revenue of $13.7 billion dollars simply because of their lies against the minimum wage policy and the use of sweatshops.
- Nike will not have much effect to the environment because most of their products are made in under-conditioned factories. Also, the company will unlikely to harm any nature species (Manning, 1999).
- Nike’s Customer Base strategy is derived from evaluation of product based upon customer needs, customer benefits and product features. Facing customer needs on a global level for brand name athletic shoes, Nike succeeded in innovating fashion with technology to cater to the these specific needs of the consumer.
- They doubled their design staff and tripled their design budget since 1995 and have over 300 designers working on the latest trends in fashion, to ensure durability and comfort. Nike scanned the world for the best labor productivity in terms of cost and maximizes Economies of Scale in order to compete globally (Mattison, 2002).
- Nike Offshore Outsource Manufacturing Strategy formulates contracts with other firms to carry out its manufacturing operations; thereby, utilizing the abundance of cheap labor in various Asian countries. In a sense, this is a combination of the Centralization and Specialization Strategy.
- In fact Nike’s Capital spending – investment on infrastructure – is not on factories but on distribution infrastructure, such as Warehouses, Computerized Management Information System and Retail Locations.
- Nike’s Global Scale Distribution Strategy scaled their distribution network to minimize costs and time and provide constant and timely deliveries.
- Nike developed a reputation of authenticity and high quality based on cheap gym shoes and used it to develop a range of technologically advance and highly qualitative sports footwear. They marketed it successfully to different type of customers – men, women & children and used the strength its brand name acquired to diversify into other related markets, such as sports clothing, bags & even sunglasses.
Threats
- Nike markets its products internationally and buys & sells in different currencies hence their costs are not stable. Resultantly they might be sometimes selling in loss.
- Their competition is very tough, and many new & old companies are now emerging that will affect Nike’s market share.
- Consumers are always looking for low-priced quality products even with low life-cycle. They tend to compare prices with other branded or unbranded but similar items.
Rebook
Strengths
- Good products line and market
- Use of new innovative technology to make their products better
- Renowned brand and among top competitors in shoe industry
- Research and development to find out customer’s preferences
- Shoes are both stylish and comfortable
Weaknesses
- Their market for apparel section is not very strong because of very high competition
- Due to price elasticity may loose the market in long run
- With too many segments they are not able to handle all of them well
Opportunities
- International marketing prospects
- Implement new technology
- Extend their distribution network to increase sales and promotion
Threats
- Fads are unpredictable
- High and tough competition
- Strong competition in all products lines
- Currency fluctuations, trade restrictions and political instability in international market
Qs2 Analyze and discuss the benefits and risks of the Adidas Reebok merger.
European Commission approved Adidas Rebook merger. “We are excited to have reached this important milestone,” said CEO & Chariman, Herbert Hainer, of Adidas-Salomon AG. “We now expect that the transaction will close shortly, following approval of Reebok’s shareholders. To help ensure we hit the ground running on day one, our two companies have jointly developed an integration plan that leverages the talents and expertise of both companies, which we will implement as soon as the transaction closes. We look forward to quickly realizing the many benefits afforded by our combination with Reebok.” Herbert Hainer
The merger of Adidas-Saloman AG’s and Rebook International Ltd was expected to produce positive results and that would make both companies strongest than ever and in a better position to compete with their leader Nike. When the two complementary business models will unit, it will definitely make positive changes at both ends and new innovations in their products. The new price strategy will be introduced and production costs will be saved when the two will aid each other in different sectors. Adidas acquired USD 3.1 billion deal in order to expand its business, increase its share in the market and compete better against Nike and PumaAG. Reebok acquisition would enhance and grow their brand recognition and is a key factor in the growth & development of their business in Asian markets especially in Pakistan, India, China, Malaysia, and Korea.
At the time of acquisition, Reebok had an estimated value of USD 3.78 billion with a net income of USD 209 million and sales of USD 4 billion. Adidas net income was USD 423 Million per year and sales of USD 8.1 Billion and market capitalization of about USD 8.4 billion. Adidas is the second-largest while Reebok 3rd the largest sports shoe company (Eli et al, 2005).
Adidas-Reebok are complementary global brands, their combination will increase their strength globally, and will invade new markets and strengthen their already existed market. Their weakness will be that the two different cultures will unite, Adidas from German Culture and Reebok from USA culture, hence, different engineering & technology and different management techniques may have some problems in settling down together. The opportunities are that they will introduce competitive price strategies, improved production with new products lines and new designs in existing products, increased market and promotion, and decreased competition. The threat is that Nike can acquire Puma and increase its market share with a new price strategy and new products line.
Adidas, Reebok and Nike are the leaders in sport’s shoes, apparel, and other athletic equipment. Each one is recognized globally and continues to expand its business in new markets. Adidas-Reebok combination has doubled-tripled their net income and annual sales (Adidas-Reebok Merger). Nike with 36% of the market share in the USA while Adidas has 32% and Reebok 9% still holds a strong position. However, Adidas and Reebok combined will hold 75% in the Indian market as compared to 25% Nike. This is mainly because of their low-price strategy as the Asian market is more driven towards buying low-priced items. However, Nike still holds a strong position in the American market and it’s not easy to beat sports giants.
References
Eli, K., Irwin, J., McClain, S., Rendlesham, B., Laura, S. (2005) With adidas and Reebok Combined, Will Nike Still Crush the Competition? Web.
Adidas-Reebok Merger Case study. Web.
Nike. Web.
Adidas. Web.
Rebook. Web.