The adidas Group is the market leader in numerous countries around the world. This strong competitive position offers us many advantages in terms of global brand visibility, market power and the ability to effectively expand our position in emerging markets. ...

The adidas Group is the market leader in numerous countries around the world. This strong competitive position offers us many advantages in terms of global brand visibility, market power and the ability to effectively expand our position in emerging markets. As a result of our strong partnership portfolio and marketing efforts, consumers around the globe are highly aware of our brands and are receptive to our brand messaging. This makes demand for our products more stable compared to smaller competitors. Hence, many retailers consider our products as core to their offering. The adidas Group can therefore compete more effectively for shelf space.

We believe there is a natural limit to the audience size a single brand can appeal to, given the diverse tastes and expectations of a highly fragmented consumer market. ...

We believe there is a natural limit to the audience size a single brand can appeal to, given the diverse tastes and expectations of a highly fragmented consumer market. Our multi-brand approach provides us with the opportunity to leverage the power of our brands in a more precise and meaningful way. We are able to utilise the combined strengths of each brand to compete for a higher percentage of the total market – covering a greater number of demographics, consumer needs and price points.

Today’s consumers are looking for choice and variety that go beyond choosing from a wide selection of products. ...

Today’s consumers are looking for choice and variety that go beyond choosing from a wide selection of products. We engage in developing unique and relevant products that fit specific functional and aesthetic requirements. For example, the adidas, Reebok and TaylorMade brands all offer different personalisation and customisation platforms reflecting each brand’s strategy. Key concepts at adidas include mi Performance, mi Originals and mi Team. In 2009, Reebok launched the “Your Reebok” iPhone application, which enables consumers to design and order personalised footwear with their mobile phones. At TaylorMade-adidas Golf, the myTPball online platform offers customers the opportunity to create and order their own golf balls and our Centers of Excellence™ provide customised fitting sessions for consumers with expert fitters and technicians. We expect the market for personalised and customised footwear, apparel and hardware to grow strongly and evolve further in the coming years and will therefore continue to invest in the space. For example, in February 2009, we acquired Bones in Motion, Inc., a specialist in developing, manufacturing and selling sports- and fitness-specific location-aware software applications and web-based services. This strategic move extended our innovation capabilities to further exploit the growing market of interactive, personalised training systems.

Exploiting the potential of emerging, fast-growing sports categories is another opportunity for our brands. Our brand teams conduct market research and engage in trend marketing to detect changes in lifestyle and consumer needs of their target audience as early as possible. ...

Exploiting the potential of emerging, fast-growing sports categories is another opportunity for our brands. Our brand teams conduct market research and engage in trend marketing to detect changes in lifestyle and consumer needs of their target audience as early as possible. Changes in lifestyle, habits and attitudes can potentially result in the emergence of new consumer needs that are not addressed by current market product offerings. For example, muscle toning footwear has evolved into a meaningful category, particularly for those who want to keep fit with a minimum investment of time. The toning category was the fastest-growing footwear category in the USA in 2009. According to market surveys such as those conducted by SportsONESource, the toning category is forecasted to grow rapidly in coming years, potentially to levels of about one billion US dollars. Having successfully launched the Reebok EasyTone™ in 2009, the Reebok brand will introduce additional styles and extensions within this category over the next two to three years.

The sporting goods retail environment is changing constantly. People increasingly want to get involved with our brands. ...

The sporting goods retail environment is changing constantly. People increasingly want to get involved with our brands. We therefore continue to adapt our distribution strategy to cater to this change and have made controlled space initiatives a strategic priority. This includes retail space management with key retail partners as well as the introduction of new own-retail store formats. For example in 2009, we launched Originals shop-in-shops with several key retail partners particularly in Europe and introduced our first adidas SLVR store in New York. In addition, in 2009 we also established a new dedicated team to take charge of our global e-commerce activities. Through initiatives like these, we believe we will be able to more effectively target consumers and involve them emotionally with our products.

Continued optimisation of key business processes and strict cost control are vital to achieving high profitability and return on invested capital. We believe there is still significant opportunity to further streamline cost structures throug Cost optimisation drives profitability improvementshout our Group....

Continued optimisation of key business processes and strict cost control are vital to achieving high profitability and return on invested capital. We believe there is still significant opportunity to further streamline cost structures throug Cost optimisation drives profitability improvementshout our Group. In North America, for example, we believe we will be able to realise medium-term economies of scale as we look for possibilities to further integrate adidas and Reebok functions. In addition, we continue searching for ways to increase efficiency in our supply chain and make it truly demand-driven. For example, as a result of our “Fast and Lean Creation” programme, roles and responsibilities will be restructured to reduce costly non-value-added administration and data entry, allowing our development teams to focus on their core tasks. Furthermore, by implementing end-to-end planning processes and improving our replenishment capabilities, we see opportunities to not only better serve our customers but also to reduce our operating working capital needs. Another example in this respect is the reduction of the number of articles, which reduces workload in the creation area and warehouse costs, and allows us to offer more focused ranges to our retail partners.