Adidas and Reebok, what went wrong?

 Kasper Rorsted, CEO of Adidas recently made a stunning statement signalling the divorce between Adidas and its major subsidiary Reebok: "Reebok and Adidas will be able to significantly better realize their growth potential independently of each other." Like in most marriages that go on rock it was “compatibility that is stupid.” Read more for the failure of Adidas business strategy:

In 2006, when Adidas bought Reebok for US$ 3.8 billion the latter was in good form and health giving a steady competition to Nike the largest sports footwear giant in the world. Even though Adidas was number one in Europe it was lagging behind Nike in the U.S.  To counterbalance Adidas thought it would be a major scoop to have Reebok with them, in their business strategy

Surprisingly, from the day one of the marriage between Adidas & Reebok things started to be sour as the narrative failed. Adidas focused more on sports & lifestyle whereas Reebok was passionate about fitness & training. Besides Adidas was placing emphasis on techno & fashion while Reebok was too classic minded? These conflicting objectives were not easy to be reconciled.

Major strength of Reebok was her excellent relationship with sporting associations, professionals and celebrities. Such celebrity appeal was undoubtedly a big plus point. Yet translating it into sales dollars was a different ball game. Credibility is the balancing factor that could be fused on so that Adidas and Reebok would have grown together with much synergies generated.

This did not happen mainly because Adidas was applying German management style of rule based system which became an anathema in the corporate office of Reebok where freewheeling style prevailed. Kasper Rorsted who took over as CEO of Adidas group in 2016 wished to arrest the downward slope of Reebok with a turnaround program that considered cost-cutting as a major feature, resulting in closure of more than 40 sales outlets.

Succinctly stated, both Adidas and Reebok were catering to same market with sets of two different objectives and management styles for the delivery of value to customer segments that too without much of differentiation. As a flash Rorsted got Reebok into women’s sportswear, a safe anchor that could have stabilized performance. But male dominance was much more powerful and his efforts on women’s footwear simply failed to take off.

Finally common-sense prevailed in the board room of Adidas which prodded by investor clamour for divestment on one side and  lack of compatibility on the other, decided to focus on Adidas products and to palm off Reebok to be owned by someone else other than competitors like Nike!

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist