Group Management Report 2011

Group Management Report This report contains the Group Management Report of the adidas Group, comprising adidas AG and its consolidated subsidiaries, and the Management Report of adidas AG. The Declaration on Corporate Governance is part of the Corporate Governance Report including the Declaration on Corporate Governance which is published on the Group’s website at www.adidas-Group.de/corporate_governance. Appendix 4 Group Strategy The adidas Group strives to be the global leader in the sporting goods industry with brands built upon a passion for sports and a sporting lifestyle. Inspired by our heritage, we know that a profound understanding of the consumer and customer is essential to achieving this goal. To anticipate and respond to their needs, we continuously strive to create a culture of innovation, challenging ourselves to break with convention and embrace change. By harnessing this culture, we push the boundaries of products, services and processes to strengthen our competitiveness and maximise the Group’s operational and financial performance. This, in turn, will drive long-term value creation for our shareholders. To achieve this goal, we have made strategic choices and will prioritise our investments under our six key strategic pillars DIAGRAM 01. Creating long-term shareholder value No matter in which market we operate, we recognise that consumer Creating long-term value for our shareholders through significant buying behaviour and the retail landscape are unique. Therefore, to operating cash flow generation drives our overall decision-making fully exploit market opportunities, we tailor our distribution strategy to process SEE INTERNAL GROUP MANAGEMENT SYSTEM. Therefore, we are focused present our brands to the consumer in the most impactful way. This is on rigorously managing those factors under our control, making achieved by following a distinctive but coordinated channel approach. strategic choices that will drive sustainable revenue and earnings To this end, we strive to provide our customers with superior service growth, and ultimately operating cash flow. Across our operations, to secure prime shelf space for our brands, while continuing our we pursue the avenues for growth which we expect to be most value- commitment to building a strategic competency in own retail and enhancing, with particular emphasis on improving Group profitability. e-commerce SEE GLOBAL SALES STRATEGY. In addition, rigorously managing working capital and optimising our capital structure remain key priorities for us. Furthermore, we are Creating a flexible supply chain committed to increasing returns to shareholders with above-industry- Speed and agility are key to outpacing the competition. We are average share price performance and dividends. committed to meeting the full range of customer and consumer needs by ensuring constant product availability in the correct size and colour, Diverse brand portfolio providing game-changing technical innovations and also the latest Consumers want choice. Whether it is the athlete looking for the high-end fashion products to the highest quality standards. best possible equipment, or the casual consumer searching for the next fashion trend, we are inspired to develop and create experi- A key strategic priority is to enable faster product creation and ences that engage consumers in long-lasting relationships with our production by continuously improving our infrastructure, processes brands. To maximise our consumer reach, we have embraced a multi- and systems. By sharing information from point of sale to source and brand strategy. This approach allows us to tackle opportunities from vice versa, we strive to connect and more closely integrate the various several perspectives, as both a mass and a niche player, providing elements of our supply chain, to enable quick reaction to changing distinct and relevant products to a wide spectrum of consumers. In consumer trends. To this end, we focus on building maximum this way, each brand is able to keep a unique identity and focus on flexibility. While leveraging the efficiency of common infrastructure its core competencies, while simultaneously providing our Group with and processes, the Group strives to provide tailored solutions for a broad product offering, increasing our leverage in the marketplace all our business models, be it the wholesale or retail channels, or SEE GLOBAL BRANDS STRATEGY. the performance-oriented or style-oriented businesses SEE GLOBAL OPERATIONS. Investments focused on highest-potential markets and channels Leading through innovation As a Group, we target leading market positions in all markets where Every adidas Group employee is responsible for driving innovation. we compete. However, we have prioritised our investments based on Therefore, we foster a culture of challenging convention and embracing those markets which offer the best medium- to long-term growth change, and require all areas of the Group to generate at least one and profitability opportunities. In this respect, we place a consid- new innovation or meaningful improvement per year. In particular, erable emphasis on expanding our activities in the emerging markets, we believe that technological evolution and cutting-edge design in particularly China and Russia, as well as building our market share our products are essential to achieving sustainable leadership in our in underpenetrated markets for the Group such as the United States industry SEE RESEARCH AND DEVELOPMENT. Beyond this, enhancing services SEE SUBSEQUENT EVENTS AND OUTLOOK. for our customers SEE GLOBAL SALES STRATEGY, and implementing more efficient and effective internal processes are other areas where our organisation strives to innovate. Appendix 4 / Page 1 Develop a team grounded in our heritage Shared values Our culture is continuously shaped by influences from the past and the present as well as our future aspirations. We perpetuate our founder’s The adidas Group values help us to create brands that our customers believe in, commitment to the athlete/consumer, pride in what we do, quality and they commit us to playing by the rules that society expects of a responsible and love of sport. We win as a team through open communication, company: collaboration and our shared values found in sport SHARED VALUES. – Performance Therefore, we foster a corporate culture of performance, passion, – Passion integrity and diversity by creating a work environment that stimulates – Integrity – Diversity innovation, team spirit and achievement based on strong leadership and employee engagement SEE EMPLOYEES. Becoming a sustainable company Subsequently, at the beginning of 2011, we launched Driving Route Like any global business, the adidas Group must manage wide-ranging 2015, to act as a key enabler to reach our Route 2015 aspirations. It commercial and competitive pressure to deliver increased financial addresses solutions for optimising our organisational set-up as, over returns and growth. At the same time, we are accountable for our the years, it has become too complex and inconsistent. The objectives employees and have a high degree of responsibility towards the of Driving Route 2015 are very clear: speed, consistency and consumer workers in our suppliers’ factories and also for the environment. focus. We are committed to striking the balance between shareholder – Speed by implementing a leaner organisation that allows faster interests and the needs and concerns of employees and workers, and decision-making. the environment, or, in short, to becoming a sustainable company – Consistency by establishing a more aligned and efficient organisation SEE SUSTAINABILITY. We report publicly on the steps we take to have across functions and geographies. a more positive impact on society and the planet on our website at – Consumer focus by reducing internal complexity, enabling us to put : WWW.ADIDAS-GROUP.COM/SUSTAINABILITY. more of our energy into what really matters – the consumer. Route 2015 strategic business plan We have already taken key decisions in the first phase of Driving In November 2010, the Group unveiled its 2015 strategic business plan Route 2015, setting up clear roles and responsibilities for our brands, named “Route 2015”, which defines strategies and objectives for the markets, channels and Group functions. period up to 2015. This plan is the most comprehensive the adidas Group has ever developed, incorporating all brands, sales channels and Group functions globally. The key aspirations and targets of this plan are set out in the section Subsequent Events and Outlook SEE SUBSEQUENT EVENTS AND OUTLOOK, and also in various other sections of this Annual Report. 01 adidas Group strategic pillars Markets/Channels One Team Supply Chain Sustainable Brand Portfolio Innovation Focus investment on Develop a team that Become closest to Company Build and manage Require a culture the highest-potential is grounded in our every consumer We strive to be a a diverse brand of continuous markets and our rich heritage and by building and sustainable company, portfolio with innovation through distinct channel is committed to managing a supply one that recognises distinctive brands improvements of approach. the positive values chain that quickly its responsibilities covering consumers products, services found in sport responds to changing towards the from sport and processes. – performance, market needs and environment, our performance to sport passion, integrity and supports multiple employees and the lifestyle. diversity

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