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explain two reasons for which 'scale matters' in the sportswear industry and suggest two reasons for which merger and acquisition should not, however be necessarily

explain two reasons for which 'scale matters' in the sportswear industry and suggest two reasons for which merger and acquisition should not, however be necessarily encouraged.

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Extract 3 Fragmented sportswear sector creating merger and acquisition opportunities Despite the presence of a handful of large international and regional players, the sportswear market remains relatively fragmented. Significant players include Nike, Adidas, V.F. Corporation, Puma, and Under Armour. The remainder of the market is comprised of smaller firms with strong local brand recognition, but with limited resources to develop a broader market presence. The larger players have shifted to more of an internal focus with organic growth driving expansion across international markets and new product categories. The larger industry players have also shown an increased focus on profitability and cost efficiency, which has included implementing strategies to optimise the supply chain, improve inventory management, reduce lead times and improve product quality Scale matters and the large brands are focused on chasing growth in emerging markets by building out their delivery platforms in high growth markets and pursuing acquisitions that fill a gap in either technology or a product category. Long-term success in the sportswear industry will be driven by product innovation, where companies have focused on providing technical advancements balanced by aesthetic design to drive brand recognition, revenue growth and higher gross margins. Smaller industry players with innovative designs and niche brands, but which lack the financial resources to expand, have a history of being acquired. Source: Adapted from Catalyst Corporate Finance, Spring 2014

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