Reebok 2006 Annual Report Download - page 109

Strategic Opportunities
Multi-Brand Approach Provides Competitive Advantage
We believe there is a natural limit a brand can achieve given
the diverse tastes and expectations of a highly fragmented
consumer market. Our multi-brand approach provides us
with a major competitive advantage and significant addi-
tional commercial opportunities compared to a single brand
strategy. We can leverage the power of our brands in a more
precise and meaningful way, utilizing the combined strengths
of each to compete for a higher percentage of the market,
covering a greater number of consumer needs, price points
and demographics.
Greater Connection to the Consumer at Point-of-Sale
We believe there are significant opportunities to improve the
presentation of our brands at point-of-sale. This will not only
enhance our bond with the consumer, but also help to increase
the efficiency and profitability of our retail partners. Through
closer cooperation, we can significantly improve the in-store
experience for our product. Establishing shop-in-shop for-
mats (e.g. with JJB and Dick’s Sporting Goods) or retail part-
nerships (e.g. with INTERSPORT) are examples where we are
leading the industry. Through initiatives like these, we can
achieve more innovative product presentation, targeted ideas
and messages, as well as training of sales staff. We believe
such cooperations can be particularly effective in markets
that have become dominated by price and lack of differentia-
tion. With the vast experience we have gained from our own-
retail activities, we intend to transfer best practices to these
and similar formats in the future.
Promotion Partnerships Bring Authenticity
The importance of brand affiliation with premium partner-
ships is crucial to demonstrate authenticity, credibility and
support innovation. We have an enviable portfolio of partner-
ship assets including major events (e.g. UEFA EURO 2008™,
2008 Beijing Olympics, FIFA World Cup 2010™), leagues
(e.g. NBA, NFL, NHL and MLS), teams (e.g. Real Madrid,
Chelsea FC, AC Milan, FC Bayern Munich) and individual ath-
letes. Promotion partnerships are an important vehicle for our
Group, generating significant revenue opportunities through
product lines launched in cooperation with our partners, as
well as enhancing the Group’s brand image. Our broad plat-
form of partners provides our Group with significant visibility
and predictability for future revenue generation. We continue
to search for new opportunities to strengthen our portfolio of
high-profile teams, athletes and sports associations. We look
for premium partners that positively and uniquely showcase
our brand values and have high visibility with key consumer
groups. A core tenet of the selection process is that partner-
ships will enable us to generate a strong direct or indirect
return on investment. This underpins our positive expecta-
tions for the future in particularly iconic sports such as foot-
ball, basketball, tennis and golf.
Realizing Synergies from Reebok Integration
The acquisition of Reebok has created new business oppor-
tunities for our Group. As we already possess strong market
positioning and expertise outside of North America, Reebok’s
assets, including the exclusive license contracts with the
NFL, NHL and MLB, will be leveraged beyond Reebok’s
core US and UK markets to drive incremental sales for the
Group. We also have significant opportunities to reduce and
optimize costs, through scale benefits, back office consolida-
tion and combined capital expenditure planning. In total, we
have identified € 500 million in incremental annual revenue
synergies and € 175 million in annual net cost synergies for
the adidas Group from the acquisition which we intend to fully
deliver from 2009 onwards (see Subsequent Events and Out-
look, p. 106).
Cost Optimization To Improve Profitability
As in any organization, cost optimization and control are
crucial to achieving high profitability levels and return on
invested capital. Although we have made important progress
in recent years, our profit margins are still below those of our
main competitors. Given the scope of our organization, we
see significant potential to further optimize our cost drivers,
enhance profitability and reduce our working capital require-
ments. We also see opportunities to optimize our cost base
by continuously reducing complexity and increasing efficiency
in our supply chain. By being closer to the market with best-
selling product, extending lean manufacturing, and creating
a truly end-to-end supply chain, we strive to achieve this cost
savings potential. Our “World Class Supply Chain” initiative is
a cornerstone in seizing the cost optimization opportunities
(see Global Operations, p. 60).
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