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Tuesday, August 09, 2005

Adidas and Reebok Team Up Against Nike

In one corner, Adidas and Reebok.  In the other, Nike.  Will the combined forces of Adidas and Reebok be able to battle fiercely enough to overcome the brutal competitiveness Nike is known for?:

Nike's new nemesis, Editorial, The Oregonian:  People who were put off by Nike's rough treatment of a budding young basketball star this summer got a reminder last week about why the company can seem so downright ornery at times.  The Beaverton-based giant is at war … and it just got hotter with news that Nike's top two rivals are teaming up to knock it off its perch ... Adidas-Salomon AG announced it has agreed to buy Reebok International Ltd. in a $3.8 billion deal. By combining strengths, the two brands aim to grab market share from Nike. … And what does this have to do with a high school basketball player? In July, Nike abruptly dropped Oregon's prep player of the year, Kevin Love of Lake Oswego, from the prestigious Nike-funded Portland Elite Legends team. The young man's sin: playing at Reebok's summer camp instead of Nike's, held at the same time. That unforgiving -- some would say ruthless -- response struck a lot of people as harsh punishment for a 16-year-old kid. Others would say it was just business, and an accurate reflection of the enormous stakes involved in the international sneaker war.

Nike's annual sales have soared to $13.7 billion. The company toiled more than 30 years to become this wondrous marketing machine. And it didn't get there by virtue of a Mohandas Gandhi-style corporate culture. Its success is fueled by a competitive ethic so ferocious that loyalty is sternly demanded and generously rewarded, while disloyalty is swiftly punished, no matter the offender's excuse or tender age. Such values helped propel Nike into global dominance ... That will change after the Adidas-Reebok deal gains regulatory and shareholder approval. Their combined sales of $11 billion will nip at Nike's numbers. And if the two formerly rival brands mesh well, the newly enlarged Adidas-Salomon could even overtake Nike by gaining access to bigger markets and capturing some of its share. On paper, the deal looks threatening to the Oregon leader. ... But does that mean the combined new company can really challenge Nike? Market analysts say it will depend in part on the ability of Adidas-Reebok to merge two quite different corporate cultures into a new one that can kick butt. In that light, Adidas could learn from the gritty Kevin Love story. The company, after all, has a rather lame slogan, "Impossible is nothing." If it really wants to take on Nike, it'll need something a lot more bruising than that. A slogan, perhaps, like "No more Mr. Nice Guy."

I guess we can say that Love was a casualty of war.

    Posted by on Tuesday, August 9, 2005 at 12:15 AM in Economics | Permalink  TrackBack (0)  Comments (11)


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