Yesterday’s news was all about the merger between the global brands - Adidas and Reebok, with much speculation on how this would impact Nike. Apparently, Nike is estimated to have 30% of the world market and the combined "Adibok" will now have 20%. Even more interesting, as it touches upon subjects we’ve been discussing here on corporate culture, it’s effect on creativity and innovation, innovation and strategy et al, is this article in BusinessWeek today.
To quote some interesting bits for discussion,
While the combination
of Adidas and Reebok looks terrific on paper, successful mergers need
to work between real people who, in this case, will have to break down
cultural differences between companies with "two hugely different
cultures,” says Jeffrey Bliss, president of Javelin Group, a sports
marketing firm and a former New Balance executive. "The German
mentality of control, engineering, and production, vs. the U.S.
marketing- driven culture…in reality, I don’t think [the merged
company] is going to dent the market, because Nike is already too far
ahead."
….But the real test of
success for Adidas’ acquisition is how well the company manages its new
portfolio and executes new products and marketing plans that allow the
two big brands to complement each other rather than duplicate efforts.
….This makes it all the
more logical for Adidas to concentrate on higher-margin,
innovation-driven shoes as it leverages Reebok’s distribution and
product development resources to increase its presence into basketball,
hockey, and fashion/athletic segments like bicycling and skateboarding
where consumers have proved willing to pay top dollar for high-end
shoes.
As you can see, and I encourage you to read the full article as well as other coverage on this topic, the thrust of the issues seem to be
- Bringing two widely diverging corporate cultures together successfully in a synergistic mix that enhances their strengths while balancing their weaknesses, without tumbling into a downward spiral of cross cultural miscommunication and attitude clashes.
- Balancing two strong brands, each with it’s own identity and ownership in different market spaces. The consensus amongst the analysts seems to point to leaving each brand as a stand alone entity and focusing the benefits of the merger on below the line areas such as distribution channels, economies of scale and manufacturing network.
- And lastly, what does this merger imply for Nike, the market leader? Certainly, it does imply a certain amount of pressure on their innovation strategy and strengthening their brand value, as no leader can afford to stay standing still for too long if they are to retain their lead.
This will be an interesting story to follow in the near future, I think, especially to see how these companies manage innovation, brand building, corporate culture and creativity.
3 comments so far
Yes, M&A definitely is an interesting issue from a cultural point of view.
But I am very sorry to say that the article seems pretty weak to address it without neglecting the complexity it encomapasses.
when I read that :
“Adidas’ focus is on sport, but Reebok’s is on lifestyle,”
I can’t help thinking the very limited understanding of culture consultants may display. But as some journalists do not mind…
For the record adidas has collaborated with top designers like Y. Yamamoto for years and has even reorganised itself to establish a transversal “Originals/Heritage” division, centered around fashion and vintage products, which today drives a good deal of its growth and even more its profitability.
Of course the paroxistic misconception pops up in the stereotypical and simplistic opposition of German and American culture.
So now adidas=German=hardcore sport enthusiasts who don’t know about lifestyle or marketing.
Does the fact that Bush is US president means that 280m American believe in creationism ?
I am sorry that this kind of statement will probably be of very little help to manage the post merger period and get the best out of it in terms of organizational structure or internal collaboration between people, let alone improve international dialogue.
As I trully think that context matters and that we need to acknwoledge the diversity and dynamics of situations, of people’s strategies, conscious or not, in relation to the environement, culture can’t be said to be univoque and homogeneous.
This is true for national culture as well as corporate culture, especially at a time when border between them vanish.
To those who would like to go beyond useless generalizations I suggest, among others, the excellent work of Joanne Martin from Stanford and especially her book “Cultures in organizations: Three perspectives”.
From a more practical point of view, the work done by Renault and Nissan really impresses me. They forged a new type of alliance where the collaboration between very different cultures is proving efficient. Probably because insted of just hiring dozen of so called experts they sat together for 9 months and learnt to know each other, to listen to each other and work together, at ALL levels of the organizations and across functions.
But of course they were many people to say that the “japanese culture” would never accept such a disgrace because of their well-known sense of honor and that “the “French culture” and its elite from l’ENA would never understand how to handle it. I haven’t heard those people since…
very interesting.
please hit more debate on integration,product position, brand lotalty and sponsorship, competing brands,supplier relationships, employment conditions, restructuring issues and others.
I have a new idea for an existing product,who do i need to talk too?All the invention co. are hounding me about the idea. Thank You,John