Are business plans really necessary in 2019?

Corporate strategy

Everything we do has its roots in sports. Sport is becoming increasingly important in many people's lives - both on and off the field. That is why we are active in an extremely attractive industry. Against this background, we set new standards for products, experiences and services with our authentic sports brands. In this way, we increase the attractiveness of our brands and can take advantage of growth opportunities in sports and in sports-inspired leisure products.

OUR CORE BELIEF: WE CAN CHANGE LIVES THROUGH SPORT

But the importance of sport goes even further: Sport plays a central role in every culture and society and is elementary for the health and satisfaction of every individual. That is why we are convinced that we can change lives through sport. We are always committed to inspiring people and empowering them to benefit as much as possible from the power of sport.

OUR MISSION: TO BE THE WORLD'S BEST SPORTS GOODS COMPANY

We have a clear goal: to be the best sporting goods company in the world. To be the 'best' means that we develop, manufacture and sell the best sporting goods in the world and that we offer the best service and the best experience for our products in a responsible manner. We are convinced that we will improve in terms of market share, market leadership and profitability if our consumers, athletes, teams, partners, media and shareholders see us as the best.

STRATEGIC BUSINESS PLAN: 'CREATING THE NEW'

Our strategic business plan up to 2020 is called 'Creating the New'. The focus of 'Creating the New' is the goal of further increasing sales and profits by significantly increasing the attractiveness of our brands. Our brands are therefore the focus of our strategic business plan. We use them to get in touch with our consumers. This consumer-oriented approach has already significantly increased the attractiveness of our brands and increased our relevance with consumers worldwide. As a result, we have gained market share in those categories, cities and markets that we have identified as future growth drivers for our company.

Our strategic business plan: 'Creating the New'

  • Brand attractiveness

    Our strategic business plan up to 2020 is called 'Creating the New'. The focus of 'Creating the New' is the goal of further increasing sales and profits by significantly increasing the attractiveness of our brands. Our brands are therefore the focus of our strategic business plan. We use them to get in touch with our consumers. This consumer-oriented approach has already significantly increased the attractiveness of our brands and increased our relevance with consumers worldwide. As a result, we have gained market share in those categories, cities and markets that we have identified as future growth drivers for our company.

  • Culture

    We have talented employees within our organization who are characterized by their passion for sport and our brands. While our employees bring the strategy to life, our corporate culture makes a decisive contribution to achieving our long-term goals. We are convinced that a culture based on creativity, collaboration and trust (the 3Cs: Creativity, Collaboration and Confidence) is an important factor in creating something new in the context of 'Creating the New'.

  • speed

    In order to increase the attractiveness of our brands, we have to put the consumer at the center of everything we do and offer them the best possible service. This is the only way we can always offer you current and attractive products and an unmatched brand experience, regardless of time and place. To do this, we have to be as close as possible to consumers, know their wishes and react to them early on. Being fast will give us decisive competitive advantages. These include higher product availability, lower inventory risks, increasing sales and higher margins. That is why speed is an important and effective lever for us.

  • Cities

    Urbanization is still a megatrend. A large part of the world's population already lives in cities that generate around 80% of the gross domestic product. In cities, global trends as well as the perception, perspective and purchase decisions of consumers are shaped. In order to be successful in the future, we must therefore win over consumers in the most influential cities in the world. We have identified six metropolises in which we want to invest disproportionately in order to be even more present, gain market share and shape trends: London, Los Angeles, New York, Paris, Shanghai and Tokyo.

  • Open source

    With Open Source, we have introduced an innovative model based on the principle of collaboration. With this model, we want to increase brand loyalty by opening our doors to consumers and inviting them to shape the future of sport and sports culture together with us. It's about learning together and exchanging ideas with one another. We want to promote a close dialogue between the brand, external experts and consumers and give them the opportunity to influence our actions. We enable external access to the means and resources that we use for product development. In this way, we want to gain and maintain creative capital for ourselves and to break new ground in order to create unprecedented brand value for consumers that goes far beyond business transactions.

  • Financial targets 2020

    The focus of our business decisions is on creating long-term value growth for our shareholders. Therefore, we concentrate on strictly managing factors that we can control ourselves and making strategic decisions that enable sustainable growth in sales and profit and ultimately also serve to increase operating cash flow. We strive to increase the return for our shareholders through an above-average share price and dividend development compared to the industry.

STRATEGIC PILLARS

'Creating the New' is based on our unique corporate culture as well as on the three strategic pillars that help us to focus even more on our consumers and to increase the attractiveness of the brands: speed, cities and open source.

Culture

We have talented employees within our organization who are characterized by their passion for sport and our brands. While our employees bring the strategy to life, our corporate culture makes a decisive contribution to achieving our long-term goals. We are convinced that a culture based on creativity, collaboration and trust (the 3Cs: Creativity, Collaboration and Confidence) is an important factor in creating something new in the context of 'Creating the New'.

Our managers set a good example. In order to further improve our management structure, we have set up the 'Core Leadership Group' (CLG). This group includes members of the upper management level who are responsible for the most important functions within the company. You lead the implementation of the strategic business plan; her particular focus is on improving cross-functional collaboration and decision-making. In addition, we have further refined our management structure through the establishment of an 'Extended Leadership Group' (ELG). This group supports the Core Leadership Group in implementing our strategy. In addition, our framework for leadership, the so-called 'Leadership Framework', gives all managers in our company clear guidelines on what good leadership and the strengthening of performance and culture at adidas mean. In 2018, the Global High Potential Group (GHIPO) was also formed with the aim of developing highly gifted talents who are able to take on more complex and demanding tasks with a higher degree of responsibility at the upper global management level. In addition, we introduced the 'Local High Potential Group' (LHIPO) in 2019, whose members are to be prepared for more complex tasks at the local upper management level. Each of these management groups forms a successor pool for the level above in order to ensure the continuous promotion of internal talent. Furthermore, the managers in these groups should serve as role models for the rest of the organization.

We believe that a culture of performance is essential for the successful implementation of our strategy. In order to promote such a culture within the company, we have taken new paths in personnel development and performance appraisal. We have also made significant progress in revising our approach to performance evaluation so that compensation and benefits are more closely aligned with performance. For example, we have simplified the long-term compensation of our executives and linked it to the development of the company's profit and share price in order to align the interests of executives with those of our shareholders.

Diversity and integration are valued and promoted in our company. We have a diverse employee base with employees of different genders, age groups and origins. In addition, we want to continuously increase the proportion of female managers within the organization. In this regard, we have made further progress and globally increased the proportion of women in management positions in our company from 29% to 34% between 2015 and 2019. In the GHIPO and LHIPO leadership groups, there is an almost balanced ratio of women and men. In this way, we want to ensure that the proportion of women who take on management positions continues to increase. In addition, we offer global training on gender intelligence to promote inclusion in the workplace. SEE EMPLOYEES AND CORPORATE CULTURE

speed

In order to increase the attractiveness of our brands, we have to put the consumer at the center of everything we do and offer them the best possible service. This is the only way we can always offer you current and attractive products and an unsurpassed brand experience, regardless of time and place. To do this, we have to be as close as possible to consumers, know their wishes and react to them early on. Being fast will give us decisive competitive advantages. These include higher product availability, lower inventory risks, increasing sales and higher margins. That is why speed is an important and effective lever for us.

We use our experience as an industry leader in this area to further develop our entire business model - from collection planning and product development through procurement and supply chain to market launch and sales. In 2019, we further developed and sharpened the strategic priority of speed. With the revised approaches of "fast creation", rapid product development, and "fast replenishment", the guarantee of rapid replenishment, we can increase the proportion of articles with short lead times. Together with our customers, we determine which articles are taken into account for these approaches. In this way, we enable our brands to be constantly up-to-date in the stores and give consumers constant access to the most popular and sought-after products. This in turn leads to higher-margin sales and increased inventory turnover.

Since the introduction of the strategic priority "speed", we have gradually expanded the range of the "speed" programs in this area. All categories and markets are now fully integrated into the programs and benefit from their advantages. The proportion of "faster" products in our sales has risen continuously over the past few years to 47% in 2019. We are therefore fully on target with regard to our overall goal of increasing the proportion of these products to at least 50% by 2020.

In addition to our focus on speed in the supply chain and in our current production process, we are also trying to become faster through new, industry-changing business models and technologies. Together with Oechsler AG, adidas founded two Speedfactorys in 2017 to test new processes for the faster production of sports shoes and to develop new manufacturing technologies that can be integrated into the company's global supply chain. In 2019 we decided to discontinue production in the two Speedfactorys in Ansbach and Atlanta by April 2020 and to use the Speedfactory technology at supplier companies in Asia. The development, improvement and testing of manufacturing processes will be continued at the adidas production site in Scheinfeld - in the so-called 'adiLab'. SEE GLOBAL OPERATIONS SEE INNOVATION

Cities

Urbanization is still a megatrend. A large part of the world's population already lives in cities that generate around 80% of the gross domestic product. In cities, global trends as well as the perception, perspective and purchase decisions of consumers are shaped. In order to be successful in the future, we must therefore win over consumers in the most influential cities in the world. We have identified six metropolises in which we want to invest disproportionately in order to be even more present, gain market share and shape trends: London, Los Angeles, New York, Paris, Shanghai and Tokyo.

We want to offer consumers in these cities exceptional experiences across all touchpoints by increasing the exchange with them - at their place of residence, at their workplace, in places where they play sports and in the stores where they shop. At the same time, we want to achieve high synergy effects between our commercial initiatives and our activation measures. This also includes aligning our own initiatives with similar activities by our key retail partners.

Our goal is to create a closed system in these cities. We want to bring our consumers into contact with relevant products via 'bottom-up' activations and holistic retail experiences:

  • Activation: Our key cities offer our brands a unique platform. Throughout the year we carried out individual, city-based activations with the support of some of our key brand ambassadors, including Pharrell Williams in London and James Harden at the Republic of Sports event in Shanghai. In order to interact with our consumers, we have also provided brand experiences in the everyday life of our communities, such as: B. by adidas Runners, Tango League and Versatile Female Athlete.
  • Products: We continue to rely on broad product launches with a focus on all six cities. This includes global campaign launches and exclusive collections such as B. the presentation of the Futurecraft Loop in New York City to media representatives from all over the world. In 2019 we used our Speedfactory concept to create shoes with and for consumers in our six major cities, for example together with our e-gaming partner Team Vitality in Paris. SEE INNOVATION
  • Adventures: