Reebok 2007 Annual Report Download - page 77

074
ANNUAL REPORT 2007 --- adidas Group GROUP MANAGEMENT REPORT – OUR GROUP -- Corporate Functions - Research and Development
2003 1)
2004 2)
2005 2)
2006 3)
2007
1) Including Salomon business segment, which was more research intensive due to its
si
g
ni
fi
cant hard
g
oods exposure.
2
)
Fi
g
ures refl ect continuin
g
operations as a result of the divestiture of the Salomon
bus
i
ness segment
.
3
) Including Reebok business segment from February 1, 2006 onwards.
I
ncludin
g
Gre
g
Norman apparel business from February 1, 2006 to November
3
0, 2006
.
INDUSTRY-LEADING R & D AT TAYLORMADE-ADIDAS GOLF
TaylorMade-adidas Golf’s R & D team is focused on continually
designing and developing in dustry-leading products. Before
products are brought to market, the R & D team conducts
extensive testing including frequent and thorough input from
Tour professionals such as Sergio Garcia, Justin Rose or
Natalie Gulbis. In addition to the segment’s own R & D activi-
ties, and utilizing ait’s know-how in adidas Golf footwear and
apparel, TaylorMade-adidas Golf works together with external
partners such as the Universities of Calgary, Ca nada, and
Portland, USA. TaylorMade purchases external hardware
expertise amounting to 7 % of the total R & D ex penditure at
the brand. In 2007, this included a study of all stages of a golf
ball’s trajectory, from impact to fi nish, and an ongoing analysis
of the golf swing using motion analysis technology (MATT).
ACTIVE TRADEMARK AND PATENT PROTECTION POLICY
To capitalize on the Group’s R & D achievements, we seek to
gain trademark and patent protection for our key footwear,
apparel and hardware products, technologies and innovations
in all major markets. We hold registered trademark rights or
have applied for trademark protection for the Group’s brands
and other proprietary names in most countries around the
world. However, because our Group holds numerous patents
we are not dependent upon any single patent or licensed
technology. As part of our business policy, we rigorously
defend the Group’s trademarks and patents by monitoring
and prosecuting infringements of our trademark and patent
rights around the world. In addition, we rigorously defend
our brands’ innovations against counterfeiting and imitation.
 see Risk and Opportunity Report, p. 104
EFFICIENCY IMPROVEMENTS REDUCE R & D EXPENSES
R & D costs at the adidas Group are recognized as expense in
the period in which they are incurred and are not capitalized
as a result of the short product lifecycles in the sporting goods
industry. Effi ciency improvements due to the collaboration
of the adidas and Reebok product development teams led to a
decrease of adidas Group R & D expenses by 14 % to € 84 mil-
lion in 2007 (2006: € 98 million). In 2007, R & D expenses
re presented 2.1 % of total operating expenses versus 2.6 %
in the prior year. R & D expenses as a percentage of sales
decreased slightly to 0.8 % from 1.0 % in 2006.  see Note 24, p.184
Other related expenses for product development and market
research, for example, were incurred as part of the Group’s
other operating overheads.
HIGHLY SKILLED TECHNICAL PERSONNEL For all our brands,
the success of our R & D efforts depends on bringing together
a diverse and highly skilled workforce. Personnel expenses
represent by far the largest portion of R & D expenses, accoun t -
ing for 65 % of total R & D expenditure. At December 31, 2007,
976 people were employed in the Group’s R & D activities
com pared to 1,040 employees in 2006 (– 6 %). This represents
3% of total Group employees (2006: 4 %). The decrease in
employees was mainly driven by the elimination of duplicative
R & D efforts as part of the Reebok integration into the adidas
Group. The R & D departments for each brand comprise experi-
enced teams from dif ferent areas of expertise including
mechanical engineering, materials engineering, industrial
design, biomechanics, fi nite element analysis, advanced CAD
design and product development. As a result, our teams
include engineers as well as experts in product development,
design research and other areas.
R & D EXPENSES
€
in million
s
2003 1)
2004 2)
2005 2)
2006 3)
2007
1) Including Salomon business segment, which was more research intensive due to its
si
g
ni
fi
cant hard
g
oods exposure.
2
)
Fi
g
ures refl ect continuin
g
operations as a result of the divestiture of the Salomon
bus
i
ness segment
.
3
) Including Reebok business segment from February 1, 2006 onwards.
I
ncludin
g
Gre
g
Norman apparel business from February 1, 2006 to November 30, 2006
.
59
63
98
8
4
86
R & D EXPENSES
i
n
%
of net sale
s
2003 1)
2004 2)
2005 2)
2006 3)
2007
1) Including Salomon business segment, which was more research intensive due to its
signifi cant hard goods exposure.
2) Fi
g
ures refl ect continuin
g
operations as a result of the divestiture of the Salomon
business se
g
ment
.
3)
Including Reebok business segment from February 1, 2006 onwards
.
I
ncluding Greg Norman apparel business from February 1, 2006 to November 30, 2006
.
1.0
0.9
1.0
0
.
8
1.4
2.5
2.6
2.1
3.7
2.6
R & D EXPENSES
i
n % of operating expense
s