At its Investor Day, Thursday, in Herzogenaurach, Germany, the Adidas Group introduced its new strategic business plan to be followed until 2020. The strategy, based on the mantra “creating the new,” is designed to improve growth by significantly increasing brand desirability.
Adidas’ new plan is centered around three major strategic choices: speed, cities and open source.
In terms of speed, Adidas said it has already set new standards by significantly reducing production lead times and increasing in-season creation. The company aims to extend this mantra across the entire brand, and intends to increase its sales through controlled space activities to more than 60 percent of sales and to expand its e-commerce business to more than 2 billion euros by 2020, using an omnichannel approach. It would also like to provide more product customization options for consumers.
“We are living in a fast-changing world. Only what is new is relevant to the consumer,” said Adidas CEO Herbert Hainer. “Therefore, we have to relentlessly focus on ‘creating the new’ for our consumers. And we have to constantly re-invent ourselves as an organization to lead the change in our industry. Going forward, speed will be a key competitive advantage for us as we transform the Adidas Group into the first true fast sports company.”
Because 80 percent of the brand’s global gross domestic product (GDP) is produced in cities and global trends are increasingly influenced in metropolitan areas, Adidas hopes to continue its growth in global markets by focusing on major cities including, Los Angeles, New York, London, Paris, Shanghai and Tokyo.
To take advantage of all growth opportunities, Adidas will focus investments across its core brand portfolio, which includes, Adidas, Reebok and TaylorMade. The group also decided on an open source model to strengthen the connection between itself and its customers, and the company will include consumers, athletes, retailers and partners in how the company creates, designs and presents products to build brand advocacy.
“We are closest to every consumer with our unique brand portfolio,” said Eric Liedtke, the executive board member responsible for global brands at Adidas. “In the future, we will not only talk to and talk with our consumers. We will be the first sports company that invites athletes, consumers and partners to be part of its brands. We will open up so that they can co-create the future together with us.”
As a result of focusing on speed, cities and open source, Adidas’ brands intends to increase its market share over the time period and encourage its ability to produce attractive margin expansion and operating leverage.
“Our new strategy is built on speed, focus and openness,” added Hainer. “As a result, we will accelerate our growth story and deliver superior returns to our shareholders. I am very much looking forward to ‘creating the new’ together with the adidas Group’s more than 53,000 employees across the globe.”
The group hopes this new plan will encourage top-and bottom-line growth. Its revenue is predicted to increase at a high-single-digit annual rate, on a currency-neutral basis until 2020, compared to the expected 2015 results. Its net income is also expected to grow at a higher rate than the top line and is projected to expand around 15 percent on average in each of the next five years.