2014

Under Armour Case Analysis

Ciro Njinyaho

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Table of Contents

Executive summary

1. Introduction ………………………………………………………………………………………3

2. Summary of the Current Situation………………………………………………….……4

2.1 Current financial Performance………………………………………………………….…5

3. External Analysis……………..…………………………………………………………………..7

3.1 Driving Force for Change……………….……………………………………………………7

3.2 Porters Five Forces Model……………………………………………………………………8

3.3 Key Success Factors………………………………………………………………………….11

3.4 Summary of External Analysis…………………………….…………………………………13

4. Internal Analysis………………………...…………………...……………………………...……13

4.1 Resources and Competences………………………………………….………………………14

4.2 Value Chain Analysis……………………….………………………………………………15

4.3 Comparison of Strength to Rivals…………………………………………..……………….16

4.4 Summary of Internal Analysis………………………………………………………………17

5. SWOT Analysis…………………………………………………………………………………17

6. Strategy Recommendations, Alternatives Analysis and Arguments……………………………

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7. Appendices………………………………………………………………………………………21

Appendix 1: Under Armour Revenue……………………………………………………………………21

Appendix 2: Under Armour Key ratios………………………………………………………………….21

Appendix 3: Value Chain…………………………………………………………………..……………22

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Appendix 4: Major competitors market share………………………………….……………..………..23

Appendix 5: SWOT analysis……………………………………………………....................................23

8. Citations………………………………………..……………………………………………….24

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Executive Summary

Under Armour is a company started by the former University of Maryland football player Kevin

Plank. Although the company started in a basement, they have overcome many obstacles financially to

have a continual growth in sales. The founder has been successful in developing new and innovative

gears and apparels to help stay ahead of their competitors. Under Armour finds it extremely important

to maintain relationships with their managers and more importantly with professional teams. The

company has prided itself on maintaining a competitive advantage by always having top notch products

and adopting new strategies and ideas to outcompete the rivals. The company strategy and initiatives

clearly seems to be working since Under Armour is able to compete with Nike and Adidas. Under

Armour mainly markets to people with active lifestyle, as a result the company made it a priority to be a

major player in the life of people who play sports or enjoy being physically active globally. Some

competitive advantages enjoyed by Under Armour are the amount of fitness product they offer. Also

the ability to recognize the company is simple because their logos are easy to identify. With the strong

brand loyalty and the cost advantage that the company has, it is evident that the company will expand in

domestic as well as international market.

The company needs to expand their target market from national to international and develop

clothes for people interested in a more casual look. The company should move from the performance

based apparels to a more diverse set of product segment which include athletic and sportswear. The

fact that Under Armour narrows its product to athletes makes the company to lose customers to their

competitors who sell both athletic and casual wears.

Introduction

Under Armour is a profitable and ‘well-known company whose strategy and initiative edge has

giving it a greater recognition and attention. My analysis starts by looking at a summary of the current

situation i.e. the strategic posture and the current financial performances. Secondly the analysis will

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summarize the external analysis of Under Armour by describing the attractiveness of the industry,

threats and opportunities that are associated with the growth of the company. This section will focus on

the driving forces for change, Porter’s Five Forces Model, and the key success factors. The third segment

of my analysis will summarize the internal analysis of Under Armour. This section will focus on the

company’s resources and competences, value chain analysis, and a comparison of strengths to rivals.

The fourth segment of my analysis will summarize the SWOT analysis of Under Armour. Hear, my

analysis is to compare the external and internal factors that have helped the industry archived its

objectives. Based on my comparison of the internal and external factors affecting the company, I will

conclude my report by providing recommendations that when properly executed will provide a

significant and continued competitive edge to compete in the 21st century.

Summary of the Current Situation

This section provides a summary of the current situation, current financial performances and

posture. It provides a clear inside on Under Armour’s aggressive push that involves many steps to

further the company’s accomplishments. Some of which includes promotion and marketing, evolving

sales strategy, increase presence in the retail market, networking and referrals, widening its product

offering, targeting team managers.

1. Under Armour main focus is to “make all athletes better through passion, design, and

relentless pursuit of innovation”. The goal is to empower athletes everywhere. This

approach is very successful in that the company is constantly coming up with new

merchandise for consumers so as to outcompete their biggest competitors.

2. Their main objective is to have “universal guarantee of performance”. Under Armour is

determining to dominate the market since every product that they put out must be better

than what is currently out in the market. Their main goal is “best in class”, since the

company is determined to increase its presence in the retail market. Under Armour’s

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strategies are consistent due to the fact that they are striving to provide the best possible

products for the consumers. These strategies have giving Under Armour a sustainable

competitive advantage over it competitors. Thus giving the company a priority to expand

into international markets.

Current Financial Performance

Under Armour has proven itself as one of the powerhouse in the sport apparel industry in North

America. The overall performance of the company in recent year shows a net revenue increase of 24.6%

from 2011- 2012 giving it a dollars increase of $362.2 million. It’s net income increase of $32.1 million

dollars. Analysis on its financial statement (see Appendix Table 1 and Appendix 2 below) shows that the

company has an average growth rate of more than 25 percent in the last 10 years. A significant increase

in growth of revenue over the past years hit its maximum at 38.4%. This was from 2010 to 2011 with a

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dollar amount increase of 65m as a result of introducing new products such as hats and bags that

decreased license revenues on the one hand and increased accessories revenues on the other hand in

2011. In this same year the net sales increased by 411.5M or 40.2% from the previous year due partially

to a 62.2% increase in direct consumer sales. At the same time, there was a significant decreased in

License revenues by 7.1% or 2.8M. With the current strategy at hand, Under Armour was able to beat

the other competitors in terms of its financial performance.

Although the company was able to increase its factory house stores by 48% or 26 additional

factories, and also updated e-commerce website, gross profit has remained around the same at 48%,

while the EBITDA was at 13.5% and Net income at 6%. The decrease in gross margin percentage was as

a result of the following: About 110 basis point decrease that was driven primarily by higher apparel

production input costs, this include cotton, in the current financial year. While higher input costs

continued to negatively impact apparel product margin in 2012 and are predicted to continue to the first

half of 2013.

Like every other company within the apparel industry, Under Amour’s recognizes revenue via

the time of sale. It’s 10K notes the following: “Net revenues consist of both net sales and license

revenues. Net sales are recognized upon transfer of ownership, including passage of title to the

customer and transfer of risk of loss related to those goods. Transfer of title and risk of loss are based

upon shipment under free on board shipping point for most goods or upon receipt by the customer

depending on the country of the sale and the agreement with the customer. In some instances, transfer

of title and risk of loss take place at the point of sale, for example at our retail stores. We may also ship

product directly from our supplier to the customer and recognize revenue when the product is delivered

to and accepted by the customer. License revenues are recognized based upon shipment of licensed

products sold by our licensees. Sales taxes imposed on our revenues from product sales are presented

on a net basis on the consolidated statement of income and therefore do not impact net revenues or

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costs of goods sold.” The revenue recognition method of the company is fairly conservative, since it

doesn’t provide a chance for revenue recognition until the goods are delivered to it consumers. Our

conclusion is that the company’s revenue recognition policy is aligned with the industry standards and

exceeds on the conservative end of the spectrum.

External Analysis

Due to the important of the external environment in a company’s ability to compete, the external

analysis of the sports Apparel will describe the attractiveness of the industry, opportunities and threats

by providing valuable data and information that are associated with the industry. My analysis will focus

on the driving forces of change, Porter’s Five Forces Model and Key success factors.

Driving Forces for Change

1. Rapid growth in the performance based apparels and gears globally: Due to the increase

demand in Footwear, it is becoming more difficult to center the focus on Nike and Adidas as

two of the most competitive players over its rivals as a result of past records. This has

proven not to be true since there has been a significant increase in the youth population in

the world and thus led to a significant increase in the number of sporting activities and also

the number of people participating in sports. As a result of these, Adidas and Nike have got

to compete with Under Armour and many order players in the industry and they are doing

significantly well and are not falling wayside. A second factor that could affect the sports

clothing company is the growing population of staying in shape. This has led to new

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customers for Under Armour because they are currently focusing their market on products

that benefit sport players.

2. Growing buyer preference for the apparel that is differentiated from the rest: Furthermore,

a decrease in consumer spending as a result of the current weak economy has made

consumers to become very critical in making choices. As a result of these, Under Armour

has got to continue to provide a superior product so as to convince today’s customers of the

value of their brand and the quality of the product they are paying for. Providing consumers

with the assurance of a better brand equity needs to be the focus of all marketing

communicators. An increase in the unemployment rates that has not only affected the

United States, but also the rest of the world and Europe in particular as dramatically

decrease the net income of Nike and Adidas thus providing Under Armour a chance to

compete on a central stage as it makes more of its revenue in the United States.

3. Employing technological innovation to keep up with changing trends in fitness: Every

company has a different level of strategy that they operate on at the various level of

management. Due to the degree of competition that exists in the industry, innovation has

help companies to get their product in the market faster so as to get an absolute advantage

over their competitors. On the case of the footwear division of Under Armour, the Senior

Vice President thus operate at a functional level thus, he brings the strategic way of thinking

into the core of the company. As a result of the strategic nature of the functional level over

the corporate level, we are going to center our discussion more on the functional level.

Porter’s Five Forces Model

This next model explains the competitive dynamics of the industry. The first part of Porter’s Five Forces

Model is the analysis of the competitive rivalry.

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1. Competitive rivalry within the industry: Under Armour has two large rivals which are Nike

and Adidas, these two competitors own a large portion of the market share. The

competitive rivalry within this industry is medium to high. The biggest rival in the industry is

Nike and it holds approximately 7.0% of the market while Adidas follow second with 5.4% of

the market. Under Armour only controls 2.8% of the market in 2011. Under Amour lack of

patent on the cooling shirt provides a strong competitive pressure on Under Armour due to

the ease of being able to recreate the product that helped build the company name by its

competitors. As the demand for the breathable sports shirts grows, other sports clothing

companies are able to take advantage of the opportunities to gain the customers that have

not yet invested in Under Armour.

2. Bargaining power of suppliers. The strength of suppliers bargaining power is low since Under

Armour is able to manufacture its product in different countries. In 2001 Under Armour was

purchasing materials from 23 primary manufacturers from 16 different countries. Under

Armour has a very diverse base of suppliers thus providing the company with the ability to

make a choice and hence weakening the bargaining power of suppliers.

3. Buyers bargaining power: Due to a significant presence of Under Armor’s product in various

retail stores in North America has made the bargaining power of consumers to be medium.

Since the technology is fairly new and is in high demand by athletes. This can also be

justified by the significant presence of Under Armour’s products in shops like Sports

Authority and Dick’s Sporting Goods which comprises of 26 percent of Under Armour’s

revenue.

4. Threats of new entrants: The barriers to entry are strong due to the brand loyalty.

Companies require a large amount of capital in other to compete since the sport apparel

industry need a large amount of resources on brand advertisement and endorsement.

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Brand loyalty place a large factor in the threats to new entrants since there are many

customers who trust the quality that comes from the most popular brand makers as well as

the feds that they carry with the products. As for companies that are already present in the

apparel market, it is easy for them to move into the performance apparel market. With a

lack of patents, as with the case of Under Armour, it may be easy to enter but the bottom

line remains that it is difficult to compete as a result of no patent.

5. Threats of substitute products: Pressure from sellers of substitute products are high due to a

significant increase in the demand for performance apparel. Due to the increase demand in

Footwear, it is becoming more difficult to center the focus on Nike and Adidas as two of the

most competitive players over its rivals as a result of past records. This has proven not to be

true since there has been a significant increase in the youth population in the world and

thus led to a significant increase in the number of sporting activities and also the number of

people participating in sports. While the replication of Under Armour ‘s specific cold gear

and hot gear technology has yet to occur, one can see that the competitive gape between

Under Armour and its rivals are beginning to get close. As a result of a high threats of

substitute, all of Under Armour’s other products can easily be substituted by any one of the

clothing manufactures.

Competitors’ positioning and future moves are the next factor in the external analysis. Under

Armour’s biggest competitors are Nike and Adidas. These two companies when compared together hold

a great amount of similarity. They both specialize in apparel, equipment, sports footwear and

accessories. They are also involved in the production of casual wear to helps expand the demand of their

products. Under Armour compete with Nike a company that has created footwear for a list of sports

including but not limited to: soccer, running, baseball, basketball, training, cheerleading, golf, football,

lacrosse, skateboarding, outdoor activates, tennis, volleyball, walking and wrestling. Nike also makes its

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shoes similar to their sports apparel and the company has a lot of endorsements with professional

sports players such as Tiger Woods so as to promote their products.

Adidas on the other hand is exceptionally a similar brand to Under Armour and Nike in that they

also carry a vast variety of sporting gears as well as their large footwear collection. Adidas like Nike also

sponsors professional sport players and sporting events around the world. As far as rivalry between

these companies and their anticipated moves for the future, Nike and Adidas thus attempt making

apparel with similar materials used by Under Armour for their shirts. If Under Armour is able to obtain a

patent on all its products, they will be able to stop Nike and Adidas from completely copying their

product.

Key Success Factors

This part of my analysis of the industry examines the key success factors in achieving success in

the Sport Apparel and Active wear industry key factor plays are the main completive factors that enable

company to prosper and out compete their rivals. Here are some important key factors that Under

Armour uses to out-compete its competitors.

1. Innovative performance based apparels and gears: Under Armour’s goal is to have a brand

that lives up to its promise of having an authentic brand. This started from the beginning as

the company main strategy for success has been that of innovation. The company

introduced the first performance and training based apparels and gears that was designed

to have a brand that lives up to its promise of having a quality product that has multiple

benefits for sports players and to keep athletics dry, cool and light during the period of the

game. This is also done by having a product that does not have any stipulations or hidden

requirements behind it. As a result, when an under Armour shirt is purchased it does not

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need anything to bring out the qualities that are promoted. These have made the company

to experience a significant growth in the sports apparels industry.

2. Good marketing and promotion: Under Armour took every opportunity they could to get to

show off their brand. The company has an in house marketing team that have been doing a

great job in designing and producing advertising and marketing campaign amid at promoting

growth and increasing sales. They would sponsor everyone and everything from individual

athletes to entire team, from youth programs to nationally televised competitions. As a

result of their great marketing skills consumers are becoming more aware of the product

and the brand visibility is increasing. Under Armour is very aggressive in its promotion

strategy to the point that it provides new up-and –coming athletes with clothing and

accessories to bring the official footwear supplier of the MLB. This has helped the company

to be visible among the consumer as the leading performance apparels. As a result of its

aggressive promotion, the company in 2011 was able to spend $168 million dollars in

marketing expenses including the endorsement of players (Under Armour: Challenging

Nike). Under Armour also worked with retailers to devise space in the store dedicated

solely to Under Armour. In stores where such space where not allowed, the company

worked to show off their merchandise in each individual department. As a result they were

able to open their own company-owned retail stores. The fact that they were constant

changes in athletic needs made the company to develop and implement new designs,

products, and technology to fit the changing needs of the athletes.

3. Research and development: Under Armour is a company that has invested a lot on research

and development so as to out-compete its competitors. Operating in a market where

products substitutes are high, Under Armour has made research and development the

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center point of its operation. This as a result to be able to develop new and superior

products so as to attract more customers and also to compete with Nike and Adidas.

Summary of External Analysis

After analyzing the threats and opportunities facing Under Armour and the industry, it becomes

clear that Under Armour faces a high threat of substitute product, high competitive rivalry, and a

pressing need for differentiation. The industry boasts many qualities that have been seen in the five

forces model. If the company makes changes to combat these threats, the company will continue to

grow but if not, then what they are helping to grow is not going anywhere and their competitors are

going to benefit from their product. There are many key success factors in the industry that Under

Armour has taken advantage of such as having an authentic brand, having room for growth,

sponsorships, specific marketing, and company integration. Although Under Armour faces many threats,

there are still many opportunities for Under Armour to grow as shown by the external analysis. The

significant increase in population provides a market for growth in the sportswear and apparel industry,

which allow Under Armour the opportunity to grow the company. All of these factors bring a positive

outlook on the future of Under Armour’s sales and the sports and active wear industry.

Internal Analysis

The internal analysis shows that Under Armour is a strong company and has an excess of

momentum; they have an excellent product, low production cost, significant brand recognition, and

room for growth. After examining the external analysis form the previous section above, this section will

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look at different aspects of the company. This section will look at the factors that directly impact the

company such as, what Under Armour is ill-suited for in manufacturing and sustaining themselves on the

same levels as bigger rivals companies such as Nike, choices the company has made, and a comparison

of Under Armour competitors. This analysis will provide an in-depth on Under Armour’s strengths,

weaknesses, opportunities, threats and steps that can be taken to compete in the long run.

Resources and Competences

Based upon the strengths, weaknesses, threats and opportunities of the company, Under

Armour separates itself from the competitors by expanding its operations and growth with efficient use

of resources and acquiring an unprecedented expertise and core competences. Under Armour has great

strength in its internal environment that has help it to compete efficiently with the rivals. One of the

strength is that their working strategy is based on innovation technology used in their material, and the

great marketing development has given them an edge over other competitors.

Many product lines – Under Armour’s ability to offer anything and everything that has to do

with fitness and athletics i.e. socks, hats, shoes etc. online and the company’s brand name and

reputation to make performance gear have given them an advantage over their competitors.

One of the main weaknesses faced by Under Armour is that their supply chain management

fares poorly. While under Armour competitors such as Nike had an average inventory holding time of

81.05 days, Under Armour was able to hold inventory for 132 days in 2012. This brings me to a

conclusion that Under Armour lacks efficiency in its supply chain process.

One other weakness the company is having is that of customization, since the general public can

only buy what is sold in shops or online. They cannot order items and request specific off brand color,

have a name embroidered on the shirt, or have an item tailored to their specific body measurements.

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Value Chain Analysis

While Under Armour ‘s value chain does not differ greatly from its competitors, they have found

a way to keep cost down by having suppliers complete two or more separate parts of the supply chain.

The value chain proved us with a crystal idea of the various steps Under Armour takes in doing business

and proceeding in the environment. The design looks at the raw material network that consists of

Natural fibres (Cotton, wool, silk, etc.) and Synthetic fibres (Oil, natural gas). While the source and

manufacturing explores the component network of textile which in this case is Yarn (spinning), Fabric

(weaving, knitting, finishing), Petrochemicals and Synthetic fibres. The marketing stage focuses on the

production networks which talks about apparel manufacturers. In North America an example would be

US garment factories (designing, cutting, buttonholing, ironing and sewing), with domestic and

Caribbean/Mexican basin subcontractors. In Asia on the other hand, an example would be the Asian

garment contractors with domestic and overseas subcontractors. Securing clients focus more on the

export networks which is all about all retail outlets from Brand-named apparel companies to overseas

buying offices to trading companies. Distributing turn to look at the marketing networks which pays

more attention on retail outlets such as department stores, specialty stores, discount chains, off-price,

factory outlet, mail order, and lastly but not the list Mass merchandise chains.

Under Armour has a strong Corporate Environment Code of Conduct which states that: “Under Armour

was founded on the following core values: Innovation, Inspiration, Reliability and Integrity.” “Consistent

with these values, we seek to do business with suppliers and their subcontractors that adhere to these

practices, follow established work place practices and comply with our Code of Conduct.

Value chain statement of Under Armour: Respect the Universal Guarantee of performance (UGOP).Every

product we build must be better than what's currently available on the market-best in class. Every

product must be tested and every product must make athletes better, that’s our guarantee.” This roles

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which are developed by the company’s top level management and branding heads of Under Armour

footwear division are been followed by the company responding to matters that affects their customers.

The role of the value chain of Under Armour is in sync with its compelling user experience, background

support and relevant distinction, downstream solution, familiarity and visibility of the company. Under

Amour’s mission statement includes the following: To make all athletes better, through passion, design

and relentless pursuit of innovation. This mission statement to a larger extend is too open in nature.

Under Armour customize their mission statement to be more specific to specific units of the company.

An example is: To run athletes based on the confidence of products which are motivated through

innovation, passion, design and comfort and are performance driven. (See Appendix 3)

Comparison of Strengths to Rivals

Under Armour is devoted to “the relentless pursuit of innovation” and making products to

support the changing needs of athletes. Although the company’s innovation allows it to gain market

share and stay competitive within the industry, Under Armour is overall weaker than its rivals. Even

though Under Armour is engineered for both athletes and the general consumer, their loyalty base is

not large enough to compete with substitute products. Under Armour researches new textiles to keep

current with the best product options and often experiment with color, fabric, and texture to flex with

changing fashion trends and enhance product awareness. The biggest issue facing Under Armour is the

lack of patent on their designs, meaning that any of Under Armour’s rivals could design a product almost

exactly like theirs without fear of retaliation.

While Under Armour has a recognizable design, it is not nearly as recognizable as Adidas and

Nike, who have been in business longer and have more experience of how to market to customers and

athletes, and have a much higher market share than Under Armour as well as years and years of

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financial and accounting data needed to properly identify trends in the market and forecast accordingly.

(see Appendix 4 for major competitor and market share chart).

Another weakness faced by Under Armour is the limited presents in international markets. The

company gets about 90% of their total sales from the North American market while only 10% of its sales

is coming from international market. The strengths and weaknesses of Under Armour in comparison to

their competitors have a large impact of their future competitiveness, Whether or not Under Armour

can overcome these weaknesses will play a large part in determining if the company can survive in the

industry, and eventually surpass their rivals.

Summary of Internal Analysis

In conclusion, the internal analysis shows that Under Armour has both strength and weaknesses

when it comes to its structure, competitors and resources, but they still have a long way to go before

they can truly call themselves competitive with companies like Nike and Adidas. Under Armour’s main

strength are their innovative products, low production costs, brand loyalty and high quality of their

apparel. Under Armour will need to survive until they can amass the same resources, experience, and

recognition as the bigger rivals. The major primary weaknesses faced by Under Armour is the lack of

international market share, their lack of product line in comparison to their competitors, their limited

number of distributors, and their lack in the female market segment. The weaknesses put forth in the

internal analysis are what Under Armour needs to focus on in other to stay competitive and also stay in

business in the long run.

SWOT Analysis

The SWOT analysis provides a clear summary of the strength, weaknesses, threats, and

opportunities facing Under Armour. This analysis provides an in-depth combination of the internal and

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external environment surrounding Under Armour on a company level, and the entire industry. (see

Appendix 5 for SWOT Analysis Chart).

1. Strengths: Under Armour is the leader in providing high tech undergarments for athletes

competing in diverse climates using innovative technology, high quality of their apparel,

their brand loyalty, in producing a moisture-wicking fabric geared to high demand of a

narrow target market. Their ability in dealing with the pressure of changing industry

conditions by creating opportunities using technology and honing in on product

differentiation keeps them from losing market share to substitute products. As a result,

Under Armour is gaining market shares at a higher rate than their competitors. They have

one of a kind product that allows them to stay competitive in their industry. A big factor for

their brand is that it is recognizable to consumers. It is simple in design, which allows

consumers to easily identify the products. Under Armour inherits selling power through

buyer’s loyalty to the brand. Under Armour’s customers are high end professional athletes

paying for quick production of customized products based on Under Armour’s image and

brand recognition.

2. Weakness: Under Armour suffers from a variety of weaknesses which includes their lack of

patent, international market, female market segment, product line in comparison to their

competitors, limited number of distributors, and the lack of individual customizations. Their

lack of patent on popular cooling shirts provides Nike and Adidas a chance to make their

own product with the same benefit. This is significant because they could lose their

customers, and their competitors could come up with better products. Under Armour’s lack

of international market presence provide its competitors an edge in the industry.

3. Threats: In an industry where competition is high, there are also significant threats such as,

the need for product differentiation within the industry, high risk of substitute products, and

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high raw material expenses. Under Armour’s lack of patent poses a high risk since all of their

products are at a high risk of substitution. Due to the degree of competition in the industry,

a substitute product could drastically hurt their company and its market share. Also the

price of Under Armour raw material is high since the company uses petroleum to produce

most of their products.

4. Opportunities: Irrespective of the many weaknesses faced by Under Armour, there are also

many opportunities for growth in the industry. These opportunities include Under Armour’s

customization and growing number of customers, innovation, growing population, and the

expansion into international market. There is a growing population of staying in shape and

going to the gym, which would bring Under Armour a lot of new costumers. Also the need

for innovation within the industry provides Under Armour with more opportunities to

outcompete its competitors.

Strategy Recommendations, Alternative Analysis and Arguments

These next few pages will discuss some recommendations that will help Under Armour to

strengthen its current weakness with its narrow product offering and provides ways to better adapt

them for the future. My recommendation includes increasing research and development, expanding

their products into international markets, get patents on their products, focus on differentiation

strategy, developing new product line to appeal to more consumers, shifting their strategy from a

focused niche to more of a broad segment, and diversifying their product to carter for none athletes.

Mindful of the degree of competition that exists in the industry, Under Armour as a matter of urgency

needs to focus on the following recommendations in other to compete in the long run.

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1. Expanding Under Armour’s presence in International Market. Although Under Armour’s

marketing strategy sought shop-in-shop approach making it easy and appealing to stores’

decision to integrate the product, Under Armour must increase their foreign market share

to compete internationally with their major competitors. This is important since Under

Armour depends on North America for about 90% of its sales. Going international will not

only generate significant revenue for the company, but will also help the company

outcompete its rivals. Under Armour failure to enter international poses a risk of saturation

on the current market and also making it difficult for the company to compete or stay in

business in the long run.

2. Increase Research and Development: The investment in Research and Development is

probably the most important recommendation for Under Armour’s continued growth. This

is due to the fact that Under Armour’s quality design and strong buying power are the key

success factors to its current market position. As competition and risk of substitute’s

increases in the industry, Under Armour needs to invest a substantial amount in not only the

development of new product, but also in endorsements and advertisement of the product.

Furthermore, Under Armour needs to offer more street clothing, more individual

customization, and more products targeted at female market. By doing so, they will have

the ability to stay competitive in the industry.

These recommendations if well executed should have the highest positive effect on Under

Armour’s future. Based upon all the analysis, I am confident that the implementation of these

recommendations will have a positive impact for Under Armour to maintain a competitive advantage.

Thus provide growth and success for the company.

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Appendices

Appendix 1: Under Armour Revenue Graph

Source: financials.morningstar.com

Appendix 2: Under Armour Key Ratios:

  Sep 2013 2012 2011 2010 2009 2008 2007

Earnings/Share 1.38 1.21 0.90 0.67 0.46 0.38 0.52

Profit Margin, % 6.88 7.02 6.58 6.44 5.46 5.27 8.66

Return on Equity, % 16.93 15.76 15.23 13.78 11.70 11.54 18.74

Return on Assets, % 11.94 11.13 10.54 10.14 8.57 7.84 13.45

Price/Sales 3.39 4.12 2.47 1.81 1.35 2.18 0.00

Price/Earnings 61.21 40.99 39.02 28.25 25.04 42.24 0.00

Price/Book 9.22 6.35 5.71 3.88 2.89 4.78 0.00

Debt/Equity 0.05 0.06 0.11 0.02 0.03 0.04 0.03

Interest Coverage 174.94 40.27 41.85 49.40 36.22 83.24 0.00

Book Value, $ 9.16 7.81 6.15 4.87 3.99 3.36 2.89

Dividend Payout, % 0.00 0.00 0.00 0.00 0.00 0.00 0.00

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Appendix 3: Value Chain

Ronantonnoel. “Strategic Management in a Global Context: Under Armour”. May 31, 2012.

http://www.slideshare.net/Ronantonnoel/strategic-management-in-a-global-context-under-armour.

Viewed Dec. 5, 2013.

I do not take credit for the creation of this slide/value chain design. The source of the document has

been retained and cited in the Bibliography, as well as the original sources of the information. The

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intended purpose of the diagram is to be a visual aid used to extrapolate data relevant to the case study

Appendix 4: Major Competitor Market Share

Source: CNN Money

Appendix 5: SWOT Analysis

Strengths

● Product Technology Innovation● Brand Loyalty● High Quality Apparel

Weaknesses

● International Market Share● Lack of Female Customers● Limited Number of Distributors● Focused Segment● Product Lines● No Individual Customization

Threats

● Substitute Products● Highly Competitive Industry● Need for Differentiation

Opportunities

● Growth in Sports Wear Industry● Need for innovation● Foreign Market

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Citations

Appelbaum, R., and Gereffi, G., 1994. Power and Profit in the Apparel Commodity Chain in Edna Bonacich et al. Global Production : the Apparel Industry in the Pacific Rim. PA: University Press.

Associated Press (2009, January 31). Under Armour Takes a Chance on the Shoe Market. CBS http://www.cbsnews.com/stories/2009/01/31/business/main4766488.shtml IMC, WVU lesson 2: IMC Foundation and Key Principles. Retrieved from https://ecampus.wvu.edu on October 24, 2009

Burke, M. (2013, November 14). Under Armour, With First-Ever Acquisition, Enters The World Of Software. Forbes. Retrieved December 13, 2013, from http://www.forbes.com/sites/monteburke/2013/11/14/under-armour-with-first-ever-acquisition-enters-the-world-of- software/

Cammett, M., 2006. Development and the Changing Dynamics of Global Production: Global Value Chains and Local Clusters in Apparel Manufacturing, Competition & Change, 10 (1), pp 23-48.

Fool, Motley. (2011,Oct 31). Where Under Armour Is Finding Its Growth Retrieved from http://www.dailyfinance.com/2011/10/31/where-under-armour-is-finding-its-growth/ Roberts, Daniel. (2011,Oct 26). Under Armour Gets Serious. Retrieved from http://management.fortune.cnn.com/2011/10/26/under-armour-kevin-plank/

Industry Canada, 2008. A Canadian Approach to the Apparel Global Value Chain, [online] Available at http://www.ic.gc.ca/eic/site026.nsf/eng/h_00102.html.

Ronantonnoel. “Strategic Management in a Global Context: Under Armour”. May 31, 2012. http://www.slideshare.net/Ronantonnoel/strategic-management-in-a-global-context-under-armour. Viewed Dec. 5, 2013.

Team, Travis. (2012,Nov 25). Breaking Down Under Armours $53 Fair Value. Retrieved fromhttp://www.forbes.com/sites/greatspeculations/2012/11/29/under-armour-has-growth-but-is - still-a 53-stock/

Under Armour, Inc. - Our Mission. (n.d.).Under Armour, Inc. - Our Mission. Retrieved December 13, 2013, from http://www.uabiz.com/company/mission.cfm

Under Armour, Inc. ClassA.(n.d.).Growth,Profitability,and Financial Ratios for( UA) from Morningstar.com. Retrieved December 13, 2013, from http://financials.morningstar.com/ ratios/r.html?t=UA®ion=USA&culture=en-US

Under Armour(UA). (n.d.).www, Barchart.com. Retrieved December 13, 2013, from http://www.barchart.com/profile.php?sym=UA&view=ratios

Under Armour: challenging Nike. (n.d.).Global Business Strategy Simulation Game. Retrieved from /http://www.glo-bus.com/Book2012

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