Reebok 2014 Annual Report Download - page 168

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2014
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adidas Group
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2014 Annual Report
Group Management Report – Financial Review
Risk and Opportunity Report
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Strategic Risks
Risks related to media and stakeholder activities
The adidas Group faces considerable risk if we are unable to uphold high levels of consumer
awareness, affiliation and purchase intent for our brands. Adverse media coverage on our products
or business practices as well as negative social media discussion may significantly hurt the Group’s
reputation and brand image, lead to public misperception of the Group’s business performance and
eventually result in a sales slowdown. Similarly, certain activities on the part of key stakeholders
(e.g. non-governmental organisations, governmental institutions, etc.) could cause reputational
damage, distract top management and disrupt business activities.
To mitigate these risks, we pursue proactive, open communication and engagement with key
stakeholders (e.g. consumers, media, non-governmental organisations, the financial community,
etc.) on a continuous basis. In addition, we have established clear crisis communication processes
to ensure a quick and effective response to adverse developments. On a case-by-case basis, we also
seek external advice from experts in communication and stakeholder management. We have also
defined clear mission statements, values and goals for all our brands. These form the foundation
of our product and brand communication strategies. Furthermore, we continue to invest significant
marketing resources to build brand equity and foster consumer awareness.
Competition risks
Strategic alliances amongst competitors and/or retailers, the increase of retailers’ own private
label businesses and intense competition for consumers and promotion partnerships from
well-established industry peers and new market entrants (e.g. new brands, vertical retailers) pose a
substantial risk to the adidas Group. This could lead to harmful competitive behaviour, such as price
wars in the marketplace or bidding wars for promotion partnerships. Sustained pricing pressure
in one of the Group’s key markets could threaten the Group’s sales and profitability development.
Aggressive competitive practices could also drive increases in marketing costs and market share
losses, thus hurting the Group’s profitability and market position.
To mitigate competition risks, we continuously monitor and analyse competitive and market
information in order to be able to anticipate unfavourable changes in the competitive environment
rather than reacting to such changes. This enables us to proactively adjust our marketing and sales
activities when needed. We also pursue a strategy of entering into long-term agreements with key
promotion partners such as FIFA, FC Bayern Munich or Lionel Messi, as well as adding new partners
to refresh and diversify our portfolio, e.g. Manchester United, UFC, James Rodriguez or Andrew
Wiggins. In addition, our product and communication initiatives are designed to drive market share
growth and to strengthen our brands’ market position.
see Global Brands Strategy, p. 53
see Other Businesses Strategy, p. 60