US Company That Has Acquired Another Company And Is Operating Internationally
One of the leading sportswear companies in the world is Reebok. Reebok is a US company that has recently been acquired by Adidas. Their common adversary is the US company Nike which owns about a third of the global market share for sportswear. In 2005, Nike had a total market share of about 36.3%. In the same year when the merger between Adidas and Reebok was finalized, their market share jumped to 21.1% from a dismal 8.9%. The merger was announced in August 3, 2005, with Adidas-Salomon AG planning to buy all outstanding shares of Reebok International Ltd. Reebok’s stock was priced then at US$59 per share, with the purchase calculated to be about US3.8 billion. Reebok’s stock rose by 30% the day the announcement was made while Adidas’ stock value rose by 7% on the same day. The reason for the appreciation is a combination of the two of the most popular sporting brands in the world, which benefits both organizations in terms of geographic and demographic reach, significantly so that it challenges Nike’s dominance.
The merger allowed both companies to integrate their respective competitive advantages. Competitive advantage is the unique feature of the company that allows an organization to compete better than its competitors. Because of the complexity of the merger, such as the effect of the merger on both company’s positioning in the global market place, the difference in corporate cultures, the equitable allocation of resources and the integration of operations, it was important for the company to zero in on a single strategy that would facilitate the merger and turn it into a successful joining of two independent organizations.
- Strategy that led to the merger or acquisition to determine whether or not this merger or acquisition was a wise choice. Justify your opinion.
Articlebase (2010) states that the strategy required for the merger to work is Brand Management. In the sportswear industry, branding is the most critical strategy to ensure sustained market share. This is why sports brand have to market their products extensively with role models that expand the company’s image by borrowing the characteristics of its endorsers and making these characteristics identifiable with their products. A matrix of the strategies, ranked according to importance is shown below:
In implementing its strategy, both Adidas and Reebok had to blend its corporate cultures but at the same time protect its internal strengths. Kiley (2005) wrote that both brands are visible in the market today which means that the merger did not dissolve the identity of any one of the merger participants. Adidas is a youth-oriented brand while Reebok is a lifestyle brand. These distinctions have been retained to effectively implement the merger’s strategy. What did change were the approach to a few critical operational items such as distribution wherein Adidas benefited from Reebok’s distribution, marketing, and sales network in the US. Reebok’s cash flow management was augmented by Adidas’ resources, which helped Reebok focus more on its design and market research expertise. Adidas also helped catapult Reebok into the global market place, with its affiliation to Adidas providing it market access and brand recognition. Adidas also helped Reebok reposition its brand to improve its market appeal. This included the development of the street-wear line RBK as well as the relocation of Reebok’s factories from Indonesia to help reduce costs. To increase revenues, Adidas is moving Reebok from low-end malls to high end retailers, getting more celebrity endorsers and expanding its product offerings to appeal to a broader market.
The merger between Adidas and Reebok is spectacular. This merger combines two companies that both benefit from joining forces, to challenge the entrenched leader Nike. McCarthy and Grant (2005) believes that the impact of the merger is widespread, from both Adidas and Reebok getting more marketing and sales clout, to increase in marketing and ad expenditures, to more efficient supply chain management to more product offerings in the market. While the spending decision relies still on the consumer, it is not a secret that the more choices a consumer has the better since it drives innovation up and prices down. Even if prices do not reduce because of the merger, the availability of newer, better products for the public is still an outcome that is most desirable. My opinion is that this merger is logical and its bottom line effects could be spectacular for both Adidas and Reebok.
- Evaluate the company’s international business-level strategy and international corporate-level strategy and make recommendations for improvement.
After the merger, the Strengths –Weaknesses – Opportunities – Threats for both Adidas and Reebok were evaluated. This is the precedent for the recommendation of the business level and international corporate level strategies.
The SWOT analysis indicates that one possible business level strategy is the retention of the brand’s identity to mitigate the possible risk of cannibalizing their markets. For example, Adidas should remain within the competitive, highly-technical market while Reebok should remain in the middle to low cost lifestyle market. This would ensure that both brands are kept separated yet working together in acquiring and retaining market share.
An international corporate level strategy could be the faster integration of the corporate cultures and the alignment of the corporate management objectives through cross-platform work groups. This is done in many globally oriented companies (such as Johnson & Johnson) wherein groups from each department interact with other departments to share best practices, innovations and strategies. This would work well with the Adidas-Reebok group for the entire organization to harmonize itself leading to a higher degree of operating proficiency.
US Company that has not acquired another company and is operating only in the US
Target Corporation is the second largest US retailer and operates only in the US. Before 2011, the company operated only in the US. Originally headquarter in Minneapolis in Minnesota, it ranked at number 33 on the Fortune 500 list of most profitable companies in 2010. Target operates very efficiently, offering food to fashion to furniture to electronics in its 1,740 retail outlets throughout the US.
- Identify one (1) company that would be a profitable candidate for the corporation to acquire or merge with and explain why this company would be a profitable target.
Target’s strength is in actual physical retail and logistics. It would gain more if it could create a seamless customer experience, i.e. having a strong web presence that complements its business model and adds growth prospects for Target. Johnston (2012) thinks that Target should acquire Best Buy, a company that like target has a lot of retail stores across the US and a very strong internet presence. Best Buy, because of its financial woes, could escape its growing liabilities by selling its stake to Target. Target then could apply its customer service strength and rebrand its electronics sections into Best Buy stores, bringing to the merger its brand and selling experience. This merger will provide a strong presence on the internet that is very similar to what JC Penny is doing, essentially give the customers the ability to shop ahead, then pick up their pieces at the store or have it mailed to their homes or preferred addresses.
Both companies are geographically related as well making the integration of the two Minnesota-based companies easier.
- Propose one business-level strategy and one corporate-level strategy that you would suggest the corporation consider. Justify your proposals.
One business level strategy that would fit Target Corporation is its specialization for logistics. The company has numerous vendors and transhipping points that could be optimized for movement of its products. If Target can veer away from being just a physical retailer and have a complete solution for moving its products from its stores to its clients, then the potential for growth is limitless. To do so it must ensure that its transport network operations are optimized through a computer aided transport management system that would improve its load factors, reduce errors, reduce the data required for processing, determine the optimum routing decisions and disseminate solutions that would improve the timeliness of its supply chain. NTE has proposed a similar undertaking to Target for transport optimization.
One corporate level strategy that it should consider is venturing into related businesses, particularly its expansion into other Northern American countries. Like many vendors and retailers, the market in North America still holds growth prospects and moving into geographically located areas could expand its revenue base and operations. This has to be balanced out though since expansion into other territories put a strain on the organization’s management capabilities. However there are ways of moving this about, including merging with a smaller yet localized partner that could provide Target access to those markets, a ready operational infrastructure and invaluable information that it could build improvements upon.
References
Articlesbase. 2010. Adidas - Reebok Merger. Retrieved from
Kiley, D. 2005. Adidas – Reebok: A Good Fit. Bloomberg Business Week. Retrieved from
Johnston, L. 2012. Target Should Acquire Best Buy. MinnPost. Retrieved from
NTE Customer Success Stories. Target Corporation: Nte Oms Tm Improves Retailer’s Ready-To-Ship Process, Offers Enhanced Visibility And Supply Chain Control. Retrived From
McCarthy, M. and Grant, L. 2005. Adidas-Reebok Merger Lets Rivals Nip at Nike’s Heels. USA Today. Retrieved from
