Case 18. Adidas in 2008: Has Corporate Restructuring Increased Shareholder Value

Company

Overview

Image : courtesy from meetthebosstv.com

1920 – Adi Dassler makes his first shoe in his workshop

1936 – Jesse Owens won 4 gold medal in Berlin games1949– Adi Dassler registers the ADIDAS brands andthe three stripe trademark.1954 – German team wins the world cup for the first time. (boots with screw in studs)1978 – Adi Dassler dies at the age of 78. His son Horst Dassler carries on the Adidas heritage1987 – Horst Dassler unexpected death. Nike become undisputed leader in US

1993 – Robert Louis-Dreyfus becomes President of ADIDAS AG1997 – ADIDAS announces the acquisition of the Salomon Group (Saloman, TaylorMade, Mavic and Bonfire)2001 – Dreyfus step down and replaced by Herbert Hainer as the CEO of ADIDAS – Saloman AG

2005 – ADIDAS-Saloman AG enters into a sale and purchase agreement to sell its Saloman business segment

2006 – adidas-Saloman AG acquires Reebok International Ltd. With a new name Adidas AG2008 – Adidas business focus on 3 core brands – Adidas, Reebok and TaylorMade-adidas golf

Timeline

BCG MATRIX Relative Market Share

(Cash Generation)M

arke

t Gro

wth

Rate (C

ash

Usag

e)High

High

LowLo

w

Reebok

Adidas Solomon TaylorMade

FINANCIAL ANALYSIS

ADIDAS’S CORPORATE STRATEGY

Focusing on three core brands:i. Adidasii. Reebokiii. TaylorMade-adidas Golf

Company’s Corporate Strategy:i. Focus on product design and innovation contributed to the

differentiation strategies. (Product Innovation) -TaylorMade Golf (r7 CGB Max Limited driver), Adidas ( Super Nova and

Response), Reebok's (Trinity KFS III and Rbk Edge)

Cont….

ii. Creating differentiated image for the products offered (Promotion Strategy)

iii. Expanding controlled retail space (Location/Distribution Strategy)

iv. Achieving efficiencies in global supply chain processes and activities. (Production Strategy)

HAS CORPORATE RESTRUCTURING INCREASED SHAREHOLDER VALUE?

YES The potential benefits of the merger(Adidas and Reebok) were: greater sales growth improvement of financial performance stronger and wider distribution networks attainment of “critical mass” in the USA for Adidas increased bargaining power with suppliers and retailers acceleration of product innovation.

Cont….

Decision that Adidas makes is worth because : Increasing retail sales as a percentage of total sales Reebok contribute 80% of brand revenue in 2008 Integrated and repositioned Reebok help increase profitability Benefit from synergy which simply refer to financial benefits.