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Under Armour Inc. Final Report

Under Armour has experienced steady growth due to a focus on sports apparel innovation, strong company culture, and streamlined leadership. The report recommends strategies for Under Armour to continue expanding globally while maintaining their innovative culture, focus on research and development, and expand into footwear and youth markets. A SWOT analysis found strengths in brand loyalty and quality products, and opportunities in women's/youth apparel and footwear. International expansion and technology were also identified as opportunities.

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Under Armour, Inc. (UA) Andrew Buryak Eden Lichtenberg Kevin Mclamb Jamie Rogers
EXECUTIVE SUMMARY: The main intent of this report is to analyze the strategic position of Under Armour, Inc. and to recommend the most appropriate strategies for growth, given current market conditions. The company’s steady rise is primarily derived from a focus on innovation of sports apparel, a healthy company culture, and a streamlined leadership focused on building brand equity. Our analysis is based upon SWOT, BCG Matrix, Ansoff’s Matrix, and the Clarity Framework. UA holds a strong leadership position in the performance apparel market and is expanding into other areas such as shoes and athlete biometric measurement. Coupled with its reputable brand, we believe that UA can leverage these strengths in pursuit of further expansion. The strategies include focusing on global expansion while maintaining their innovative company culture, a continued focus on research and development, and further expansion into the footwear market and youth apparel market. HISTORY: Under Armour, Inc. (UA), incorporated on August 1, 1996 was started by Kevin Plank from his grandmother's basement in Washington, DC. After extensive research on the athletic benefits of synthetic fabrics, he designed the first Under Armour HeatGear T-shirt, which he named the #0037. Engineered with moisture- wicking performance fibers, the shirt helps keep athletes cool, dry, and light in the most brutally hot conditions. Plank traveled up and down the East Coast selling his revolutionary new product out of the trunk of his car. By the end of 1996, Plank made his first team sale, and Under Armour generated $17,000 in sales. In 1997, Under Armour introduced the now-famous ColdGear fabric, which keeps athletes warm, dry, and light in cold conditions, and then the AllSeasonGear line, which keeps athletes comfortable between the extremes. By the end of 1998, Under Armour outgrew grandma's basement and moved to an all-new headquarters and warehouse in Baltimore. UA is engaged in the development, marketing and distribution of apparel, footwear and accessories for men, women and youth. Its products are sold worldwide and are worn by athletes at all levels, from youth to professional, on playing fields worldwide. Most of its products are sold in North America. Internationally, UA sells its products in certain countries in Europe, a third party licensee sells its products in Japan, and distributors sell the Company’s products in other foreign countries, such as Panama and Brazil. In addition, it opened a store in China during the year ended December 31, 2012. In February 2013, they opened a retail store in Harbor East in downtown Baltimore and in November 2013, the Company acquired MapMyFitness. UA’s expansion and growth does not seem to be slowing anytime in the near future. We decided to look into its possible opportunities through extensive research and applying different frameworks we learned throughout the semester. SWOT ANALYSIS:
Strengths Brand loyalty and equity - Under Armour has incredible brand loyalty among its performance apparel customers and more importantly, fosters brand loyalty among young athletes, which translates into life-long customers. More importantly, UA frequently gets free endorsements from athletes who choose to wear their apparel without being paid to do so, because it works. This brings significant brand recognition to UA. Similar to other inspiring and strong brands such as Apple, Under Armour sports a styling and functional appeal, which is easily recognizable among customers. Also, UA’s recent acquisition and development of MapMyFitness increases brand loyalty and brand recognition. Currently, UA has about a 70% market share of synthetic performance apparel market and is estimated to be worth about $3 billion. High quality, innovative products - Going along with brand loyalty, Under Armour’s signature moisture-wicking, tight fitted clothing are the hallmark of the UA product lines that attract most customers and keep them coming back for more. They are currently expanding and integrating into athletic biometric measurement with their acquisition of the MapMyFitness app. Also, they have always been known to have a vibrant and innovative research and development department, comprising a large part of the company’s workforce. Brand Recognition through Increased Sponsorship (marketing) - Under Armour’s marketing strategy is highly effective, as the company hosts professional and college sports games, camps and clinics. They are the title sponsor of UA All-America Lacrosse Classic and All-America Games (softball and volleyball for high school athletes). They have ad campaigns with Lindsey Vonn, Lauren Cheney and Monica Hargrove, as well as contracts with famous athletes, such as Patriots quarterback Tom Brady, Heisman Winner Cam Newton, Giants Catcher and NFL Rookie of the Year Buster Posey, Milwaukee Buck’s Brandon Jennings, Raven’s Ray Lewis and multiple Olympic Gold Medalist Michael Phelps. They are the official footwear supplier for the MLB, the official supplier of gloves to the NFL and they sponsor the NFL Combine. These deals are in place to promote the Under Armour logo on millions of TV screens, exposing their brand to tens of millions of youth athletes. They recently signed a deal to extend their sponsorship of the Summer Olympic Games from 2016 all the way through 2020. Strong growth - Recent earnings report reflects profit growth of more than 70%; revenue grew 36%. - Average revenue growth of about 20% per quarter. - High profit to earnings ratio. - Competes effectively with Nike, taking away market share. Weaknesses Young Company- Although Under Armour has risen to near the top of the sporting apparel industry, they are still a young company that has only been around for about 16 years, and only been really in the public’s attention for about 10 of those years. This is a distinct disadvantage for companies such as Nike, or Adidas who have been around for many years. Limited Product Line- Under Armour could be credited with being one of the first to create
their moisture wick technology shirts, and those shirts have been the foundation of their company. They do produce cleats and running shoes, but they are lacking in other equipment areas. For example Nike makes cleats, shoes, football gloves, baseball gloves, baseball bats, hockey shafts, lacrosse shafts, etc. Point being Nike has a lot more actual products rather than just apparel. Small International Presence- they have a strong dependence on domestic market. Their competitors (Nike and Adidas) have an exponentially larger share in international markets. For example, international sales account for about 10% of UA’s revenue whereas international sales account for approximately 60% of Nike’s revenue. High prices- they have higher prices compared to their competitors. UA’s brand strength is huge, which allows them to sell their products and make higher profits however, it deters many from buying their products. Low Barrier to Entry- The athletic-wear retail market has low barriers to entry, which allows for increased competition. Smaller Company Relative to Main Competitors- Under Armour is smaller compared to its main competitors, which creates some barriers, such as less financial capital. This may make it more difficult for them to emerge in international markets or expand their youth or women’s apparel product lines. Opportunities Women’s & youth apparel- Women’s apparel has outpaced overall company growth and is expected to be about a $1 billion business in 2016. CEO Kevin Plank explains his focus on women’s apparel expansion will be through product development and placement. He explains they want more than just the “shrink it and pink it” philosophy and wants to distribute products more where women commonly shop, for example, department stores. As far as youth apparel, Under Armour introduced the “Alter Ego” line in which they paired with Marvel and D.C. Comics and showed that they have a good grasp of this market. A focus on marketing to youth clients who are future product purchasers and users would also combat the threat of obesity, which looks to cause a decrease in sales. Footwear - Under Armour is under-represented in shoe sections of sporting goods stores. Since its launch, the company has been able to grab 2.7% and 2.1% of the running shoes and footwear markets respectively. The footwear market is a highly segmented space and Under Armour can leverage the brand loyalty it has generated from its performance apparel customers to increase its share in these markets. It aims to grow its revenues in the footwear division from $290 million currently to approximately $600 million by 2016. Under Armour also aims to make movement into the basketball shoes segment and has recruited several NBA stars to endorse its products. UA currently makes its revenues in their footwear department by selling at 30% lower costs than other departments. In order to make a dent in the medium to higher price ranges, UA has a big opportunity ahead, which will require significant brand positioning. Technology – The biggest opportunity UA has recently taken advantage of is their expansion into technology, with the acquisition of the MapMyFitness app. Under Armour has a variety of tech gadgets that couple with the MapMyFitness app, including MapMyFitness Universal
Sport armband, a Quad Lock Universal Bike Mount, which holds your phone while you track your bike route/trip. There is also the MapMyRun all-in-one heart rate monitor with Bluetooth capabilities and the MapMyRun Spi-belt, appealing for runners who want to hold on to necessities (i.e. keys, money, etc.) while on their run. UA also has a new performance fitness technology line, including their Armour39, which tracks heart rate, calories, real- time intensity, and WILLpower—the first true measure of an athlete that boils your workout down to a single score 1.0-10.0. And, unlike other heart rate monitors that only average your heart rate data, Armour39 precisely captures every heartbeat no matter your workout—from endurance running to interval training. International expansion – International revenues right now only amount to 6% of Under Armour’s net revenues. The company plans to grow these revenues by expanding internationally. In a presentation on Investor Day, the company’s management revealed that it expects the contribution of international sales to grow to 12% by 2016. There are exponential opportunities for UA to expand internationally. Recently, their expansion include: - Panama City, Panama - Brazil - Chile - The Philippines - Singapore - UA is available in Central America via a partnership with an exclusive distributor, Sport House International, Inc. - Under Armour and Rugby Canada announced a new multi-year sponsorship as the official technical partner for the sport's national governing body starting this year (2014). The brand will manufacture and design training and match day kits for Rugby Canada national teams effective immediately. Under Armour will outfit the Men's Under 17, Men's Under 20, Women's Under 20 and all senior teams. Threats Relationship issues with foreign suppliers and manufactures - Under Armour is very dependent on suppliers and manufacturers in foreign countries. This dependence is caused by their need to reduce costs in the U.S. Because of this reliance, UA must ensure that their management of relationships with their overseas suppliers and manufacturers is done properly or it could threaten their supply chain. Foreign currency translation - Since Under Armour is expanding globally, they are vulnerable to currency translation fluctuations. They generate revenue in Canada and Europe and incurred transaction losses of $3 million in fiscal year 2012. Economic recession - An economic recession reduces the amount of consumer spending and it also increases manufacturers inventory. People become more conscious on what they spend and where they spend it and purchasing UA products are a luxury they will do without. Substitutes - Substitutes threaten the price structure at Under Armour because it inhibits their ability to raise prices. If consumers are satisfied with substitutes of the UA brand they will take advantage of the cost savings. This is also true in a recession, where consumers
have less residual income and are searching for cost savings. Adidas, a major competitor, has created a substitute for the UA performance gear. Obesity - The increasing rate of obesity in the U.S. is reducing the number of potential consumers for Under Armour. This is a threat because this demographic commits little to none of their time to physical activity and, thus, does not require Under Armour gear. The reduction in a potential customer base reduces sales and profits. Exporting the Under Armour company culture - The Under Armour company culture is a distinct competitive advantage and difficult to export globally, should UA pursue more overseas options. Employees of UA who are part of the current culture consider themselves part of a team and the environment makes the company so desirable to be a part of. Because UA has foreign suppliers and manufacturers producing and distributing their global brand in diverse cultures, not being able to export these values that they have created is a major threat to their culture and overall vision. BCG MATRIX: Under Armour (UA) receives 94% of its revenue from domestic sales, which is the focus of this framework. The Men’s Apparel business unit is a cash “cow” with a sizable market share in a market segment where growth has slowed. The accessories business unit is a potential “star” if UA is able to leverage current and future products with their newly acquired “MapMyFitness” app, an open fitness tracking platform. UA currently has two “stars” that are in high growth markets. The business unit produces Youth Apparel, which has a moderate market share relative to their rival industry leaders, Womens Apparel Performance Apparel Footwear Accessories Kids Active Wear Mens Apparel MarketGrowth Relative Market Share Dog ?Star Cow
Nike and Adidas. UA’s biggest “star”, holding a significant 60% of the market, is their Performance Apparel wear. This is by far the most successful business unit and it is in a rapidly growing marketplace. There are three product question marks: Active Wear, Footwear and Women’s Apparel. All three product markets are relatively new to UA and continue to demonstrate steady growth--thus, the potential for future growth in these markets is high. The BCG Framework supports increased investments and aggressive marketing strategies in markets where consumers are: 1.) Extremely receptive and 2.) In markets that are also relatively small. The most lucrative product market, relative to current market share and future market growth is the Women’s Apparel. UA has already made inroads into the footwear and active wear markets, and revenues from the “cows” and “stars” are available to fund an aggressive strategy. ANSOFF’S PRODUCT-MARKETEXPANSIONGRID: Products Markets Current New Current Market Penetration UA holds about 70% of market share of PA market in the U.S., holding a leadership position. Shoes have only 2.1% market share. Strategy: Maintain leadership position in PA market and leverage brand/acquisitions to increase market share in shoes/accessories markets. Focus on women and youth. Product Development UA has a vibrant R&D department that continues to innovate and stay on top of its game. Existing products are enhanced by new business of athlete biometric measurement. Strategy: Continue to innovate and develop athlete biometric measurement, integrating it with existing and new products. Acquisitions of innovative start- ups. New Market Development UA has very low presence in international markets. International revenues account for only about 6% of UA’s net revenues. Strategy: Leverage UA brand and high quality of products to carefully expand into international and emerging markets. Focus on women and youth. Diversification Difficult to penetrate new markets with new products. Potential consumers can be unfamiliar with UA and its quality standards. Strategy: Push current, well established products into new markets and leverage this expansion to promote new products.
Strategic Priority 1 – High 2 – Moderate 3 – Low Products Markets Current New Current Market Penetration 1 Product Development 1 New Market Development 1 Diversification 2 CLARITYFRAMEWORK: Performance is word that commonly presents itself in the sports industry--athletes train to perform, whether it is practice or game day. Performance is also a word that presents itself in any organizational setting--every business strives to achieve organizational performance. Much of Under Armour’s success is owed to their resilient attitude, and their mission: To make all athletes better through passion, design, and the relentless pursuit of innovation. President and CEO Kevin Plank, credits their reputation for excellence as a driver for their sustained environmental growth explaining, “Our attitude gives us an entrepreneurial edge that makes us hungry, passionate, driven, and committed to the challenge at hand.” Back in 2012 Fortune magazine ranked U.A. among their top 100 Fastest-Growing Companies; for a company that was (then) only 16-years young--that's quite the feat. Today UA operates in 98 countries, employs more than 5,900 employees, and is the official footwear supplier of the NFL and MLB. In an increasingly digital, competitive, and fast-paced economy, it makes sense for a company such as UA to expand globally; but within any foreign venture, shifting external environments tend to place pressure on existing business strategies, which then must be modified or changed to achieve intended outcomes. Domestically, UA has done an incredible job of yielding strong organizational performance, but it’s not as easy to succeed in an unfamiliar environment. UA has a strong following; they have many loyal customers, stakeholders, and partners--and a lot of that falls back on their culture. From an international strategic standpoint, our group felt that culture was one of the most critical areas worth emphasizing. In order to execute this initiative, our group evaluated and analyzed a few key areas within The Clarity Framework model, which, when viewed as a whole system, aligns leadership vision, strategic goals, and intended outcomes:  Process Integrity- defining how the work gets done: identifying which processes work well and measuring how well these processes support UA’s strategy and
goals. Being an efficiency-seeking firm, it’s important to consider the extent of institutional distance between UA’s personal culture, versus the culture they’re operating in. Above all, there must be perceived value in the delivery of UA’s products and services to their customers. UA currently conducts business with suppliers and subcontractors that comply with their core values, follow established work place practices, and comply with their Code of Conduct. Thus far, their processes fit their strategy.  People Readiness- Being that UA’s culture is built upon innovation, design activities are an important area of focus: identifying the intended results and the methods to produce them. In the past UA has had a few product failures, most recently the Olympic speed skating suits. Had UA facilitated and encouraged collaboration between their partnering engineers and their own team, solutions could have been identified and developed more quickly to better serve their customers’ needs. The key is communication, which must be frequent, direct, and aligned, laying out a clear understanding of what people need to do especially when partnering with other companies.  Organizational Context and Vanguard Leadership- A performance-focused work environment is something UA has always done really well in the past, but going forward internationally, it is important for UA to be cognizant of future obstacles that may require restructuring, especially changing working relationships and business processes. Aligning leadership and facilitating a supportive organizational environment are imperative to UA’s culture.  Intent- Too often leaders focus on the change itself as opposed to emphasizing the objectives of the strategy. If UA’s intent isn’t monitored and if standards aren't in place to address execution, all is lost. Kevin Plank and his executive team (supply chain officer, international affairs president, global marketing president, and president of sales) have to document a clear understanding of their global initiative and its intended outcomes, and be on the same page, and continually support it moving forward. CONCLUSION: Together, all of these frameworks present the strengths and weaknesses of Under Armour in a different light. Furthermore, the frameworks highlight the overall liability or asset of foreignness, and more so, the decision of whether to expand globally or remain regionally diversified. Under some circumstances, being in foreign markets can be an asset, or a competitive advantage. To say that UA is viewed as a “cool” and trendy label among U.S. customers is a fair statement, but who’s to say if customers abroad interpret UA just the same. This perception, sometimes referred to as country-of-origin effect, changes depending on a culture and it’s geographic location and will always be different from place to place. Overall, the decision to expand, particularly overseas, boils down to post entry strategies. Managing competitive dynamics, making alliances and acquisitions work cohesively, and creating a supportive, productive work environments will really affect the whole scheme of things. Future Expectations The sports apparel industry is expected to experience continuous growth, and UA is positioned to expand and increase its market share across all product lines. The women’s
apparel industry in particular, is expected to experience accelerated growth; 27% in the next three years according to the Boston-based research firm Trefis. Given UA’s innovative research and development, and their strong organizational leadership roles, they should continue investing in operations that have always worked well for them-- particularly performance apparel. The sports apparel industry itself will remain highly competitive with industry leaders such as NIKE, Adidas, Columbia, and UA at the forefront. Since these industry giants have such a large market share and such strong brand awareness, it will be difficult for new entrants to break into the industry. UA’s distinct competitive advantage coupled with their vanguard leadership and culture will make it difficult for existing competitors and new entrants to imitate. While NIKE is expected to continue as the leader in the athletic footwear industry, UA is expected to invest more in their footwear product lines, which show favorable investment opportunities. The expected growth in all areas of the UA brand should increase revenue across the board creating more opportunity to invest in innovative product development. UA’s global market share is expected to increase through licensing agreements, strategic alliances and acquisitions. The result of this expansion is expected to increase its current imbalance in revenue creation, which is 94% from domestic sales and 6% globally. RecommendedStrategy The recommendation is for Under Armour to expand globally and increase their marketing efforts in the lucrative women’s apparel market. Under Armour is the industry leader in performance apparel and development of innovative fabrics for this purpose. They have a dominant market share in the United States but have not transitioned this success globally. UA must ensure that the strength of their domestic success, their culture and brand recognition is exported along with their innovative products internationally. This task should be accomplished by creating strategic alliances with local distributors. As UA expands globally they must also increase their market penetration into the women’s apparel industry. They currently have a very small market share in an industry projected for accelerated growth over the next three years. While UA has increased its efforts to penetrate this industry it has not been aggressive enough to keep pace with the marketplace growth. This more aggressive marketing strategy should include sponsorships of women’s sports and endorsements with popular female sports figures to increase brand awareness in this demographic. The BCG framework for UA clearly supports that it is time to increase investment in this industry. UA should continue to invest heavily into R&D, the main engine of its growth and long-term success. The company should focus on the latest innovations and technologies in the industry, thereby maintaining its leadership position in the performance apparel market. Innovations and diversification, such as its new business of athlete biometric measurement, should be positioned to complement existing products and add to sales growth. Any acquisitions should be related to its product lines so as to create synergies that would drive sales and growth. If old and new product lines complement each other through technologies such as MapMyFitness, this would add to brand equity. Brand recognition and loyalty would
be a key factor in expanding to new markets and introducing new products. As such, brand loyalty should be maintained rigorously by upholding high standards of quality and constant innovation. Under Armour is severely under-represented in shoe sections of sporting goods stores. The footwear market is a highly segmented space and UA can leverage the brand loyalty it has generated from its performance apparel customers to increase its share in these markets. UA recently spent 11 years developing their newest footwear release, Speed Form Apollo at the beginning of 2014 but currently makes its revenues in their footwear department by selling at 30% lower costs than other departments. In order to make a dent in the medium to higher price ranges it will require significant brand positioning, which will be able to be achieved through its already loyal customer-base, as well as the customers it hopes to win over with its innovative new running shoe. Continued research and development of other footwear varieties will also be key in attaining the increased market share they hope for. UA should market its products more heavily towards the youth segment in order to foster long-term brand loyalty. Many youth customers are likely to develop brand loyalty and would likely remain life long customers. This translates into long-term tendency for stability of sales. UA can achieve this by sponsoring more athletic events in high schools, colleges, and in any other youth-centered entities. The challenge with any company expanding globally is the ability to merge their current culture with the diverse global market. Things that work domestically for UA will need adjusting in order to fit the culture where they are attempting to do business. Partnering with businesses that have an existing relationship through licensing agreements, strategic alliances or acquisitions will be an effective approach. Once the UA brand recognition is more established and they understand and adjust to the diverse cultures, they will be able to expand more aggressively.

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Under Armour Inc. Final Report

  • 1.
    Under Armour, Inc.(UA) Andrew Buryak Eden Lichtenberg Kevin Mclamb Jamie Rogers
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    EXECUTIVE SUMMARY: The mainintent of this report is to analyze the strategic position of Under Armour, Inc. and to recommend the most appropriate strategies for growth, given current market conditions. The company’s steady rise is primarily derived from a focus on innovation of sports apparel, a healthy company culture, and a streamlined leadership focused on building brand equity. Our analysis is based upon SWOT, BCG Matrix, Ansoff’s Matrix, and the Clarity Framework. UA holds a strong leadership position in the performance apparel market and is expanding into other areas such as shoes and athlete biometric measurement. Coupled with its reputable brand, we believe that UA can leverage these strengths in pursuit of further expansion. The strategies include focusing on global expansion while maintaining their innovative company culture, a continued focus on research and development, and further expansion into the footwear market and youth apparel market. HISTORY: Under Armour, Inc. (UA), incorporated on August 1, 1996 was started by Kevin Plank from his grandmother's basement in Washington, DC. After extensive research on the athletic benefits of synthetic fabrics, he designed the first Under Armour HeatGear T-shirt, which he named the #0037. Engineered with moisture- wicking performance fibers, the shirt helps keep athletes cool, dry, and light in the most brutally hot conditions. Plank traveled up and down the East Coast selling his revolutionary new product out of the trunk of his car. By the end of 1996, Plank made his first team sale, and Under Armour generated $17,000 in sales. In 1997, Under Armour introduced the now-famous ColdGear fabric, which keeps athletes warm, dry, and light in cold conditions, and then the AllSeasonGear line, which keeps athletes comfortable between the extremes. By the end of 1998, Under Armour outgrew grandma's basement and moved to an all-new headquarters and warehouse in Baltimore. UA is engaged in the development, marketing and distribution of apparel, footwear and accessories for men, women and youth. Its products are sold worldwide and are worn by athletes at all levels, from youth to professional, on playing fields worldwide. Most of its products are sold in North America. Internationally, UA sells its products in certain countries in Europe, a third party licensee sells its products in Japan, and distributors sell the Company’s products in other foreign countries, such as Panama and Brazil. In addition, it opened a store in China during the year ended December 31, 2012. In February 2013, they opened a retail store in Harbor East in downtown Baltimore and in November 2013, the Company acquired MapMyFitness. UA’s expansion and growth does not seem to be slowing anytime in the near future. We decided to look into its possible opportunities through extensive research and applying different frameworks we learned throughout the semester. SWOT ANALYSIS:
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    Strengths Brand loyalty andequity - Under Armour has incredible brand loyalty among its performance apparel customers and more importantly, fosters brand loyalty among young athletes, which translates into life-long customers. More importantly, UA frequently gets free endorsements from athletes who choose to wear their apparel without being paid to do so, because it works. This brings significant brand recognition to UA. Similar to other inspiring and strong brands such as Apple, Under Armour sports a styling and functional appeal, which is easily recognizable among customers. Also, UA’s recent acquisition and development of MapMyFitness increases brand loyalty and brand recognition. Currently, UA has about a 70% market share of synthetic performance apparel market and is estimated to be worth about $3 billion. High quality, innovative products - Going along with brand loyalty, Under Armour’s signature moisture-wicking, tight fitted clothing are the hallmark of the UA product lines that attract most customers and keep them coming back for more. They are currently expanding and integrating into athletic biometric measurement with their acquisition of the MapMyFitness app. Also, they have always been known to have a vibrant and innovative research and development department, comprising a large part of the company’s workforce. Brand Recognition through Increased Sponsorship (marketing) - Under Armour’s marketing strategy is highly effective, as the company hosts professional and college sports games, camps and clinics. They are the title sponsor of UA All-America Lacrosse Classic and All-America Games (softball and volleyball for high school athletes). They have ad campaigns with Lindsey Vonn, Lauren Cheney and Monica Hargrove, as well as contracts with famous athletes, such as Patriots quarterback Tom Brady, Heisman Winner Cam Newton, Giants Catcher and NFL Rookie of the Year Buster Posey, Milwaukee Buck’s Brandon Jennings, Raven’s Ray Lewis and multiple Olympic Gold Medalist Michael Phelps. They are the official footwear supplier for the MLB, the official supplier of gloves to the NFL and they sponsor the NFL Combine. These deals are in place to promote the Under Armour logo on millions of TV screens, exposing their brand to tens of millions of youth athletes. They recently signed a deal to extend their sponsorship of the Summer Olympic Games from 2016 all the way through 2020. Strong growth - Recent earnings report reflects profit growth of more than 70%; revenue grew 36%. - Average revenue growth of about 20% per quarter. - High profit to earnings ratio. - Competes effectively with Nike, taking away market share. Weaknesses Young Company- Although Under Armour has risen to near the top of the sporting apparel industry, they are still a young company that has only been around for about 16 years, and only been really in the public’s attention for about 10 of those years. This is a distinct disadvantage for companies such as Nike, or Adidas who have been around for many years. Limited Product Line- Under Armour could be credited with being one of the first to create
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    their moisture wicktechnology shirts, and those shirts have been the foundation of their company. They do produce cleats and running shoes, but they are lacking in other equipment areas. For example Nike makes cleats, shoes, football gloves, baseball gloves, baseball bats, hockey shafts, lacrosse shafts, etc. Point being Nike has a lot more actual products rather than just apparel. Small International Presence- they have a strong dependence on domestic market. Their competitors (Nike and Adidas) have an exponentially larger share in international markets. For example, international sales account for about 10% of UA’s revenue whereas international sales account for approximately 60% of Nike’s revenue. High prices- they have higher prices compared to their competitors. UA’s brand strength is huge, which allows them to sell their products and make higher profits however, it deters many from buying their products. Low Barrier to Entry- The athletic-wear retail market has low barriers to entry, which allows for increased competition. Smaller Company Relative to Main Competitors- Under Armour is smaller compared to its main competitors, which creates some barriers, such as less financial capital. This may make it more difficult for them to emerge in international markets or expand their youth or women’s apparel product lines. Opportunities Women’s & youth apparel- Women’s apparel has outpaced overall company growth and is expected to be about a $1 billion business in 2016. CEO Kevin Plank explains his focus on women’s apparel expansion will be through product development and placement. He explains they want more than just the “shrink it and pink it” philosophy and wants to distribute products more where women commonly shop, for example, department stores. As far as youth apparel, Under Armour introduced the “Alter Ego” line in which they paired with Marvel and D.C. Comics and showed that they have a good grasp of this market. A focus on marketing to youth clients who are future product purchasers and users would also combat the threat of obesity, which looks to cause a decrease in sales. Footwear - Under Armour is under-represented in shoe sections of sporting goods stores. Since its launch, the company has been able to grab 2.7% and 2.1% of the running shoes and footwear markets respectively. The footwear market is a highly segmented space and Under Armour can leverage the brand loyalty it has generated from its performance apparel customers to increase its share in these markets. It aims to grow its revenues in the footwear division from $290 million currently to approximately $600 million by 2016. Under Armour also aims to make movement into the basketball shoes segment and has recruited several NBA stars to endorse its products. UA currently makes its revenues in their footwear department by selling at 30% lower costs than other departments. In order to make a dent in the medium to higher price ranges, UA has a big opportunity ahead, which will require significant brand positioning. Technology – The biggest opportunity UA has recently taken advantage of is their expansion into technology, with the acquisition of the MapMyFitness app. Under Armour has a variety of tech gadgets that couple with the MapMyFitness app, including MapMyFitness Universal
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    Sport armband, aQuad Lock Universal Bike Mount, which holds your phone while you track your bike route/trip. There is also the MapMyRun all-in-one heart rate monitor with Bluetooth capabilities and the MapMyRun Spi-belt, appealing for runners who want to hold on to necessities (i.e. keys, money, etc.) while on their run. UA also has a new performance fitness technology line, including their Armour39, which tracks heart rate, calories, real- time intensity, and WILLpower—the first true measure of an athlete that boils your workout down to a single score 1.0-10.0. And, unlike other heart rate monitors that only average your heart rate data, Armour39 precisely captures every heartbeat no matter your workout—from endurance running to interval training. International expansion – International revenues right now only amount to 6% of Under Armour’s net revenues. The company plans to grow these revenues by expanding internationally. In a presentation on Investor Day, the company’s management revealed that it expects the contribution of international sales to grow to 12% by 2016. There are exponential opportunities for UA to expand internationally. Recently, their expansion include: - Panama City, Panama - Brazil - Chile - The Philippines - Singapore - UA is available in Central America via a partnership with an exclusive distributor, Sport House International, Inc. - Under Armour and Rugby Canada announced a new multi-year sponsorship as the official technical partner for the sport's national governing body starting this year (2014). The brand will manufacture and design training and match day kits for Rugby Canada national teams effective immediately. Under Armour will outfit the Men's Under 17, Men's Under 20, Women's Under 20 and all senior teams. Threats Relationship issues with foreign suppliers and manufactures - Under Armour is very dependent on suppliers and manufacturers in foreign countries. This dependence is caused by their need to reduce costs in the U.S. Because of this reliance, UA must ensure that their management of relationships with their overseas suppliers and manufacturers is done properly or it could threaten their supply chain. Foreign currency translation - Since Under Armour is expanding globally, they are vulnerable to currency translation fluctuations. They generate revenue in Canada and Europe and incurred transaction losses of $3 million in fiscal year 2012. Economic recession - An economic recession reduces the amount of consumer spending and it also increases manufacturers inventory. People become more conscious on what they spend and where they spend it and purchasing UA products are a luxury they will do without. Substitutes - Substitutes threaten the price structure at Under Armour because it inhibits their ability to raise prices. If consumers are satisfied with substitutes of the UA brand they will take advantage of the cost savings. This is also true in a recession, where consumers
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    have less residualincome and are searching for cost savings. Adidas, a major competitor, has created a substitute for the UA performance gear. Obesity - The increasing rate of obesity in the U.S. is reducing the number of potential consumers for Under Armour. This is a threat because this demographic commits little to none of their time to physical activity and, thus, does not require Under Armour gear. The reduction in a potential customer base reduces sales and profits. Exporting the Under Armour company culture - The Under Armour company culture is a distinct competitive advantage and difficult to export globally, should UA pursue more overseas options. Employees of UA who are part of the current culture consider themselves part of a team and the environment makes the company so desirable to be a part of. Because UA has foreign suppliers and manufacturers producing and distributing their global brand in diverse cultures, not being able to export these values that they have created is a major threat to their culture and overall vision. BCG MATRIX: Under Armour (UA) receives 94% of its revenue from domestic sales, which is the focus of this framework. The Men’s Apparel business unit is a cash “cow” with a sizable market share in a market segment where growth has slowed. The accessories business unit is a potential “star” if UA is able to leverage current and future products with their newly acquired “MapMyFitness” app, an open fitness tracking platform. UA currently has two “stars” that are in high growth markets. The business unit produces Youth Apparel, which has a moderate market share relative to their rival industry leaders, Womens Apparel Performance Apparel Footwear Accessories Kids Active Wear Mens Apparel MarketGrowth Relative Market Share Dog ?Star Cow
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    Nike and Adidas.UA’s biggest “star”, holding a significant 60% of the market, is their Performance Apparel wear. This is by far the most successful business unit and it is in a rapidly growing marketplace. There are three product question marks: Active Wear, Footwear and Women’s Apparel. All three product markets are relatively new to UA and continue to demonstrate steady growth--thus, the potential for future growth in these markets is high. The BCG Framework supports increased investments and aggressive marketing strategies in markets where consumers are: 1.) Extremely receptive and 2.) In markets that are also relatively small. The most lucrative product market, relative to current market share and future market growth is the Women’s Apparel. UA has already made inroads into the footwear and active wear markets, and revenues from the “cows” and “stars” are available to fund an aggressive strategy. ANSOFF’S PRODUCT-MARKETEXPANSIONGRID: Products Markets Current New Current Market Penetration UA holds about 70% of market share of PA market in the U.S., holding a leadership position. Shoes have only 2.1% market share. Strategy: Maintain leadership position in PA market and leverage brand/acquisitions to increase market share in shoes/accessories markets. Focus on women and youth. Product Development UA has a vibrant R&D department that continues to innovate and stay on top of its game. Existing products are enhanced by new business of athlete biometric measurement. Strategy: Continue to innovate and develop athlete biometric measurement, integrating it with existing and new products. Acquisitions of innovative start- ups. New Market Development UA has very low presence in international markets. International revenues account for only about 6% of UA’s net revenues. Strategy: Leverage UA brand and high quality of products to carefully expand into international and emerging markets. Focus on women and youth. Diversification Difficult to penetrate new markets with new products. Potential consumers can be unfamiliar with UA and its quality standards. Strategy: Push current, well established products into new markets and leverage this expansion to promote new products.
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    Strategic Priority 1 –High 2 – Moderate 3 – Low Products Markets Current New Current Market Penetration 1 Product Development 1 New Market Development 1 Diversification 2 CLARITYFRAMEWORK: Performance is word that commonly presents itself in the sports industry--athletes train to perform, whether it is practice or game day. Performance is also a word that presents itself in any organizational setting--every business strives to achieve organizational performance. Much of Under Armour’s success is owed to their resilient attitude, and their mission: To make all athletes better through passion, design, and the relentless pursuit of innovation. President and CEO Kevin Plank, credits their reputation for excellence as a driver for their sustained environmental growth explaining, “Our attitude gives us an entrepreneurial edge that makes us hungry, passionate, driven, and committed to the challenge at hand.” Back in 2012 Fortune magazine ranked U.A. among their top 100 Fastest-Growing Companies; for a company that was (then) only 16-years young--that's quite the feat. Today UA operates in 98 countries, employs more than 5,900 employees, and is the official footwear supplier of the NFL and MLB. In an increasingly digital, competitive, and fast-paced economy, it makes sense for a company such as UA to expand globally; but within any foreign venture, shifting external environments tend to place pressure on existing business strategies, which then must be modified or changed to achieve intended outcomes. Domestically, UA has done an incredible job of yielding strong organizational performance, but it’s not as easy to succeed in an unfamiliar environment. UA has a strong following; they have many loyal customers, stakeholders, and partners--and a lot of that falls back on their culture. From an international strategic standpoint, our group felt that culture was one of the most critical areas worth emphasizing. In order to execute this initiative, our group evaluated and analyzed a few key areas within The Clarity Framework model, which, when viewed as a whole system, aligns leadership vision, strategic goals, and intended outcomes:  Process Integrity- defining how the work gets done: identifying which processes work well and measuring how well these processes support UA’s strategy and
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    goals. Being anefficiency-seeking firm, it’s important to consider the extent of institutional distance between UA’s personal culture, versus the culture they’re operating in. Above all, there must be perceived value in the delivery of UA’s products and services to their customers. UA currently conducts business with suppliers and subcontractors that comply with their core values, follow established work place practices, and comply with their Code of Conduct. Thus far, their processes fit their strategy.  People Readiness- Being that UA’s culture is built upon innovation, design activities are an important area of focus: identifying the intended results and the methods to produce them. In the past UA has had a few product failures, most recently the Olympic speed skating suits. Had UA facilitated and encouraged collaboration between their partnering engineers and their own team, solutions could have been identified and developed more quickly to better serve their customers’ needs. The key is communication, which must be frequent, direct, and aligned, laying out a clear understanding of what people need to do especially when partnering with other companies.  Organizational Context and Vanguard Leadership- A performance-focused work environment is something UA has always done really well in the past, but going forward internationally, it is important for UA to be cognizant of future obstacles that may require restructuring, especially changing working relationships and business processes. Aligning leadership and facilitating a supportive organizational environment are imperative to UA’s culture.  Intent- Too often leaders focus on the change itself as opposed to emphasizing the objectives of the strategy. If UA’s intent isn’t monitored and if standards aren't in place to address execution, all is lost. Kevin Plank and his executive team (supply chain officer, international affairs president, global marketing president, and president of sales) have to document a clear understanding of their global initiative and its intended outcomes, and be on the same page, and continually support it moving forward. CONCLUSION: Together, all of these frameworks present the strengths and weaknesses of Under Armour in a different light. Furthermore, the frameworks highlight the overall liability or asset of foreignness, and more so, the decision of whether to expand globally or remain regionally diversified. Under some circumstances, being in foreign markets can be an asset, or a competitive advantage. To say that UA is viewed as a “cool” and trendy label among U.S. customers is a fair statement, but who’s to say if customers abroad interpret UA just the same. This perception, sometimes referred to as country-of-origin effect, changes depending on a culture and it’s geographic location and will always be different from place to place. Overall, the decision to expand, particularly overseas, boils down to post entry strategies. Managing competitive dynamics, making alliances and acquisitions work cohesively, and creating a supportive, productive work environments will really affect the whole scheme of things. Future Expectations The sports apparel industry is expected to experience continuous growth, and UA is positioned to expand and increase its market share across all product lines. The women’s
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    apparel industry inparticular, is expected to experience accelerated growth; 27% in the next three years according to the Boston-based research firm Trefis. Given UA’s innovative research and development, and their strong organizational leadership roles, they should continue investing in operations that have always worked well for them-- particularly performance apparel. The sports apparel industry itself will remain highly competitive with industry leaders such as NIKE, Adidas, Columbia, and UA at the forefront. Since these industry giants have such a large market share and such strong brand awareness, it will be difficult for new entrants to break into the industry. UA’s distinct competitive advantage coupled with their vanguard leadership and culture will make it difficult for existing competitors and new entrants to imitate. While NIKE is expected to continue as the leader in the athletic footwear industry, UA is expected to invest more in their footwear product lines, which show favorable investment opportunities. The expected growth in all areas of the UA brand should increase revenue across the board creating more opportunity to invest in innovative product development. UA’s global market share is expected to increase through licensing agreements, strategic alliances and acquisitions. The result of this expansion is expected to increase its current imbalance in revenue creation, which is 94% from domestic sales and 6% globally. RecommendedStrategy The recommendation is for Under Armour to expand globally and increase their marketing efforts in the lucrative women’s apparel market. Under Armour is the industry leader in performance apparel and development of innovative fabrics for this purpose. They have a dominant market share in the United States but have not transitioned this success globally. UA must ensure that the strength of their domestic success, their culture and brand recognition is exported along with their innovative products internationally. This task should be accomplished by creating strategic alliances with local distributors. As UA expands globally they must also increase their market penetration into the women’s apparel industry. They currently have a very small market share in an industry projected for accelerated growth over the next three years. While UA has increased its efforts to penetrate this industry it has not been aggressive enough to keep pace with the marketplace growth. This more aggressive marketing strategy should include sponsorships of women’s sports and endorsements with popular female sports figures to increase brand awareness in this demographic. The BCG framework for UA clearly supports that it is time to increase investment in this industry. UA should continue to invest heavily into R&D, the main engine of its growth and long-term success. The company should focus on the latest innovations and technologies in the industry, thereby maintaining its leadership position in the performance apparel market. Innovations and diversification, such as its new business of athlete biometric measurement, should be positioned to complement existing products and add to sales growth. Any acquisitions should be related to its product lines so as to create synergies that would drive sales and growth. If old and new product lines complement each other through technologies such as MapMyFitness, this would add to brand equity. Brand recognition and loyalty would
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    be a keyfactor in expanding to new markets and introducing new products. As such, brand loyalty should be maintained rigorously by upholding high standards of quality and constant innovation. Under Armour is severely under-represented in shoe sections of sporting goods stores. The footwear market is a highly segmented space and UA can leverage the brand loyalty it has generated from its performance apparel customers to increase its share in these markets. UA recently spent 11 years developing their newest footwear release, Speed Form Apollo at the beginning of 2014 but currently makes its revenues in their footwear department by selling at 30% lower costs than other departments. In order to make a dent in the medium to higher price ranges it will require significant brand positioning, which will be able to be achieved through its already loyal customer-base, as well as the customers it hopes to win over with its innovative new running shoe. Continued research and development of other footwear varieties will also be key in attaining the increased market share they hope for. UA should market its products more heavily towards the youth segment in order to foster long-term brand loyalty. Many youth customers are likely to develop brand loyalty and would likely remain life long customers. This translates into long-term tendency for stability of sales. UA can achieve this by sponsoring more athletic events in high schools, colleges, and in any other youth-centered entities. The challenge with any company expanding globally is the ability to merge their current culture with the diverse global market. Things that work domestically for UA will need adjusting in order to fit the culture where they are attempting to do business. Partnering with businesses that have an existing relationship through licensing agreements, strategic alliances or acquisitions will be an effective approach. Once the UA brand recognition is more established and they understand and adjust to the diverse cultures, they will be able to expand more aggressively.