Reebok 2014 Annual Report Download - page 183

Group Management Report – Financial Review
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2014
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adidas Group
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2014 Annual Report
Risk and Opportunity Report
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Strategic and Operational Opportunities
Sustainable products: As consumers demand more products that are environmentally benign and
produced on a sustainable basis, the adidas Group continues its efforts to create meaningful product
platforms that drive growth in this area. We remain focused on the extension of the adidas ‘Better
Place’ programme. Products and packaging in the programme are designed taking sustainability
principles into account, such as broadening the use of recycled materials and monitoring energy use
in material and product preparation.
Strategic partnerships: The adidas Group is constantly evolving its partnership network within
sports and culture, with academic organisations and other industries in research and development,
designers in the fashion industry, other brands and non-traditional sporting goods retailers. These
partnerships have generated multiple new growth avenues for the Group, as we have acquired
product or process know-how and gained access to new distribution channels or markets.
Partnerships, strategic alliances and collaborations may enable the adidas Group to pursue further
growth and efficiency opportunities.
Opportunities related to organisational and process improvements
Continued optimisation of key business processes and strict cost control are vital to achieving high
profitability and return on invested capital. We are confident that there is still significant opportunity
to further streamline cost structures throughout our Group. For example, we continuously search
for ways to increase efficiency in our supply chain and make it truly demand-driven. Furthermore,
by implementing end-to-end planning processes and improving our replenishment capabilities, we
see opportunities not only to better serve our customers but also to reduce our operating working
capital needs.
Furthermore, constant improvements in manufacturing excellence (e.g. process simplification),
manufacturing innovation or warehouse consolidation may help us increase efficiency and
profitability for the Group. Innovations in production could also support the Group in reducing its
environmental impact, while at the same time enabling the Group to provide consumers with the best
value proposition possible. For example, a higher level of automation in the production processes for
footwear and apparel manufacturing could result in productivity enhancements, shorten lead times
and improve overall quality.
In addition, consolidating and upgrading our distribution centres represents an opportunity for the
Group to realise further efficiency gains, reduce operating overheads and provide the operational
ability to drive additional revenue growth and working capital improvements. Process improvements
in other areas of the Group’s business activities could also positively impact profitability. For
example, further centralising ranging and product purchasing for our own-retail business could
lead to an increase in efficiency and drive additional sales, thus helping us increase overall Group
profitability. More consistent, effective and efficient in-store execution could lead to an increase in
conversion and therefore drive additional sales and profitability. In addition, we see improvement
potential in our rental expenses for own-retail stores by negotiating more favourable contract terms
with landlords.