Under Armour
Danny Fields
PEST/Industry Analysis
Snapshot
• Headquartered in Baltimore, MD
• Employ approximately 2200 people
• Under Armour has built a leading brand name in hi-tech
athletic gear – which is broken down into HeatGear, ColdGear,
AllSeasonGear
• Expanded into wider range of sportswear, casual apparel, and
footwear
Snapshot
• Under Armour is the clear leader in the athletic apparel
market in the U.S. (75% market share, $30 billion industry)
• They have 31% market share of the overall U.S. athletic
market (Nike leader at 36%)
• 2010 net income of $68 million ($46 million – 2009)
Company
2010 Net Income
Under Armour
$68 million
Nike
$1.9 billion
Adidas
$800 million
Snapshot
• Under Armour depends heavily on the U.S. Market
Country
Percentage of Sales (2008)
United States
91%
Canada
4.4%
Other
4.6%
PEST- Political
• Some leagues and organizations across the U.S. have banned
certain accessories that can be worn during games
– Could reduce the number of potential customers in certain regions of the
country
• The U.S. Government has put pressure on performance apparel
companies to reduce their carbon footprints
– Under Armour has started producing apparel that is made with “green”
technology, leaving less of a carbon footprint
• Unrest in countries where manufacturing takes place
– Approximately half of Under Armour’s products are manufactured in
Central America and Mexico, relatively unstable regions with some
political violence
– This could possibly lead to factories being shut down, shipments being
delayed
PEST- Economic
• The economic recession that started in 2008/2009 that led to
a significant increase in unemployment
– Under Armour’s products tend to be more expensive than their
competitors and that could lead to people looking for cheaper
alternatives
• Exchange rate fluctuations
– Under Armour has used foreign currency forward contracts to reduce
some of the risk of exchange rate fluctuations
• Increase in raw material prices
– This has increased the cost to produce Under Armour products
PEST- Social
• The marketplace is becoming more eco-conscious
– More pressure from performance apparel companies to reduce their
carbon footprint and create eco-friendly products
• Consumer trends in the performance apparel industry:
– Compression (clothing that fits closely to the body, increases
circulation and can increase strength, stamina, endurance, and
recovery time)
– Moisture wicking synthetics (takes moisture away from the body and is
hydrophobic, meaning that it won’t become wet and heavy like
cotton)
– Antimicrobial fabrics (prohibits growth of bacteria)
– Lifestyle integration (performing outside of fitness club, use in
everyday life)
– Fashionable (looks attractive to wear)
PEST- Social
• Dominance of soccer in foreign countries
– Getting involved with soccer in these countries could help increase
market share and awareness overseas
PEST- Technological
• E-Commerce
– Websites allow for customers to purchase apparel over the internet
without having to go through retailers
• Social Networking
– This allows for companies to interact with their consumers and
increase interest in their products
PEST- Summary
Factor
Trend
Evaluation
Political
League bans
Threat
2
Carbon footprint
Opportunity
3
Unrest in manufacturing countries
Threat
4
Recession
Threat
5
Exchange rate fluctuations
Threat
3
Increase in raw material prices
Threat
5
Eco-Conscious market
Opportunity
4
Economic
Social
Technological
Impact
(1=low
5=high)
Performance apparel trends
Opportunity
5
International Sports (soccer)
Opportunity
3
E-Commerce
Opportunity
4
Social Networking
Opportunity
3
Rank in terms of
importance
4
1
2
3
Defining the Industry
• The performance apparel industry has been growing
significantly over the past few years
• Performance apparel accounts for over 10% of the sportswear
market
• Forecast to be worth $4.29 billion in 2012
• Sold to the individual consumer at retail prices and businessto-business at wholesale prices
• The competition is global with the major players (Under
Armour, Nike Adidas) selling products worldwide
Industry Analysis - Buyers
• Retailers are the major buyer in this industry
– Including: Dick’s Sporting Goods, Modell’s, The Sports Authority,
Footlocker, Finish Line, etc
– In 2010, 73% of Under Armour’s net revenue came from wholesale
distribution
• Individual consumers are another buyer
– Through factory house stores, website, catalog, specialty stores, etc
– In 2010, 23% of Under Armour’s net revenue were from direct sales to
consumers (through e-commerce and factory stores)
Industry Analysis - Suppliers
• Under Armour products are supplied from manufacturers all
over the world
Country/Region
Units produced
Asia
53%
Central America
25%
Mexico
19%
• The suppliers have low power since Under Armour has many
suppliers and they could easily switch to suppliers in other
countries.
Industry Analysis –
Intensity of Rivalry
• The intensity of rivalry is high in the performance apparel
industry
• The industry has continued to grow
– The market is estimated at $6.40 billion, up 19.4% over the past 4
years
– Expected to grow another 18.75% by 2014
• Many competitors
– Nike, Adidas, Columbia, Champion, Russell, etc.
Industry Analysis –
Threat of Substitute Products
• Substitute products for this industry could include:
– Brands like Polo or Tommy Hilfiger
– Consumers opting to dress more casual or professional, instead of
going with the sports apparel look
Industry Analysis –
Threat of New Entrants
• The threat of new entrants into the performance apparel
market is relatively high
• Even though there are well-known established brands in the
industry (Nike, Adidas) the barriers to entry are relatively low
– Low switching costs, access to distribution channels, low government
restrictions
• Under Armour is an example of a new entrant to come into
the industry and have success using innovation and a
differentiation strategy
Industry Analysis Summary
Factor
Evaluation
Buyer Power
Strong Force (UA relies too heavily on few
number of distributors. They rely on good faith
policy and do not enter into any long-term
customer contracts.)
Supplier Power
Benign (UA has many suppliers and it would be
easy to switch)
Intensity of Rivalry
Strong (Due to the fact that the industry has
been growing continually and the number of
competitors in the industry)
Threat of Substitute Products
Benign (The possible substitutes don’t seem
like they will have a likely impact on the
industry)
Threat of New Entrants
Strong Force (Low switching costs, access to
distribution, and low government restriction)
Industry Analysis –
Suggestions
• Under Armour relies too heavily on a limited number of
distributors
– 31% of their 2008 sales came from two retailers (Dick’s Sporting Goods
and The Sports Authority)
• Under Armour needs to work harder on direct customer sales
– If they increase their direct sales through their website, factory stores,
or specialty stores, then they would lower their dependency on
retailers
• They could also look into forward integration and buying retail
space to sell their products
Conclusion
• Performance apparel is a growing industry
– Market is up 19.4% over the past 4 years
• The recession and increase in raw material prices are major
threats to companies in the industry
• The biggest opportunities come from the trend of more active
lifestyles, e-commerce, and international sports
• Overall the economic factor is the most important to
companies in the performance apparel industry
Competitor/ Market Analysis
Key Competitors
Company
Headquarters
Brands
Sales (2009)
Nike
Beaverton, OR
Umbro,
Converse, Hurley,
Jordan
$5.24 billion (apparel
only)
Adidas
Herzogenaurach, Germany
Reebok,
Ashworth,
Rockport
$14.6 billion (total)
Columbia
Portland, OR
Sorel
Corporation,
Mountain
Hardwear, Pacific
Trail, Montrail
$1.24 billion
Russell Corporation
(subsidiary of Berkshire
Hathaway)
Bowling Green, KY
Spalding, Huffy,
Brooks
N/A
Champion (subsidiary of
HanesBrands)
Winston-Salem, NC
N/A
Under Armour
Baltimore, MD
$606 million
Strategic Grouping
Company
Product Diversity
Geographic
Coverage
Marketing Effort
Nike
Performance apparel, casual apparel, jerseys,
footwear, equipment
Global
Strong brand identity, well
known logo and slogan,
athlete sponsorships
Adidas
Footwear, performance apparel, casual
apparel, jerseys, soccer kits, equipment
Global
Focus on promoting
running and soccer
products, international
sports and events
sponsorships
Columbia
Outerwear, footwear, headgear, camping
equipment, accessories, skiwear
Global
Focus on outdoors
activities (skiing, hiking,
camping)
Russell
Footwear, apparel, sports equipment,
uniforms
Global
Lower cost clothing,
provides uniforms for
some high schools and
colleges
Champion
Sportswear (Hoodies, t-shirts, mesh clothing)
Global
Lower cost clothing,
urban fashion
Under Armour
Performance apparel (Heatgear, Coldgear,
AllSeasongear), footwear
Global
High quality products,
international
sponsorships to increase
global reach
Strategic Grouping
• Because of the similar products and geographic coverage,
Nike, Adidas, Russell, and Champion are the main competitors
to Under Armour in performance apparel
How they compete
• Strong marketing campaigns
– Nike, Adidas, Under Armour are well known for their marketing campaigns
– Adidas was sponsor for the FIFA World Cup but Nike is better known for
their commercial using popular players like Ronaldo, Rooney, Ronaldinho,
Landon Donovan, etc
– UA used “Click-Clack” and “We must protect this house” slogans
• Low cost outsourcing for manufacturing
• Innovation
• Distribution
– Through retailers and factory stores
• Endorsements
– Nike – Michael Jordan, Tiger Woods, Lance Armstrong, Ronaldinho, LeBron
James, etc
– Adidas – David Beckham, Lionel Messi, etc
– UA – Michael Phelps, Ray Lewis, Lindsey Vonn, etc
Product Scope
• The products are all sports related in some fashion
–
–
–
–
Performance apparel that is used for a sport activity
Licensed apparel that is worn casually
Footwear that can be used for both sport and everyday life
Uniforms provided to leagues, teams, and schools
Geographic Scope
Company
Regions
Percentage of Sales (2009)
Nike
United States
34.1%
Europe
28.7%
Middle East and Africa
17.3%
Asia Pacific/Latin America
20%
North America
22.9%
Asia/Latin America
34.8%
United States/Canada
91% (2008)
Rest of the world
4.6% (2008)
Adidas
Under Armour
• Nike and Adidas have a much bigger global reach than Under
Armour.
• All 3 have sponsorship deals with international sports teams
and events to help increase exposure and awareness
Core Competencies
Company
Core Competencies
Nike
Innovative products, marketing,
globalization, teamwork, competitiveness
Adidas
Brand identity with running and soccer
Columbia
Brand association with outdoor activities
Champion
Staple in hip-hop and urban fashion
Under Armour
High quality, innovative products that
increase athlete performance
Market Size
• Performance sportswear global market is estimated at $6.40
billion
• Risen 19.4% over the past 4 years
• Forecasted to rise to $7.6 billion by 2014
Key trends
• Consumers are becoming more eco-conscious
– Impacts the type of technology that will be used in performance
apparel
• Performance apparel being worn in everyday life
– This makes style and fashion more important in product design
• People are more conscious about their health
– An increase in active lifestyles will increase the demand for
performance apparel products
Market/Product Growth
• Performance apparel is a fast growing retail segment in Asia
– Average sales of $3 billion annually
– 2008 Beijing Olympics helped increase exposure of performance
apparel
• Competitors are also looking to other emerging markets like
Turkey, Russia, and Brazil for growth opportunities
– Sales for competitors have increased over the years in these countries
Target Market
Company
Target Consumer
Nike
Active people who want high
quality sporting goods
Adidas
Athletes mainly involved in running
and soccer
Columbia
People who enjoy the outdoors
(hiking, skiing, camping)
Russell
People looking for low cost
alternatives to Nike, UA, Adidas
Champion
Low cost alternative to Nike, UA,
Adidas. As well as people living in
urban areas
Under Armour
Athletes who are serious about
increasing performance in their
respective sport
BCG Matrix
Social Media
• Social Media allows companies to reach consumers directly
and receive feedback
– Under Armour ran a social media advertising campaign to try to
engage hard-to-reach females
– Nike’s Jordan brand uses social media to increase brand loyalty
– During the 2009 NBA All-Star Game, Adidas allowed fans of their
facebook page to follow Dwight Howard throughout the All-Star Game
with videos and photos from him
Conclusion
• The main competitors to Under Armour are Nike, Adidas,
Russell, and Champion due to their similar product categories
– Nike and Adidas compete on a differentiation strategy with Under
Armour, while Champion and Russell compete on a low cost strategy
• They compete using effective marketing campaigns
– Well known logos and slogans
• Nike and Adidas have large geographical coverage
– Which lowers the dependency on their home country for sales: Nike
(U.S.), Adidas (Germany)
Conclusion
• The performance apparel market continues to increase
– 19.4% rise in worth over the past 4 years
• People are having more active lifestyles
– Increased demand for performance apparel
• Emerging markets will be important for future growth
– Competitors have seen an increase in sales in China, Turkey, Russia
and Brazil
Internal Analysis/SWOT/Strategy
Business Model
• Under Armour develops innovative products
• They outsource their production to low cost subcontractors
• They distribute to large retail stores (Dick’s, Sports Authority)
and have their own retail stores
• Secure endorsements with high-profile athletes and
sponsorships with teams and events
• Develop a strong brand
Performance
Year
Sales
Net Income
2010
$1.06 billion
$68.5 million
2009
$856.4 million
$46.8 million
2008
$725.2 million
$38.2 million
2007
$606.6 million
$52.6 million
2006
$430.7 million
$39 million
Performance
• Increased performance was a result of higher revenue
margins in their Direct-to-Consumer channel
– Expansion of factory house stores
– Less reliant on retailers (Dick’s, Sports Authority)
Product Performance
2010
2009
% Change
Apparel
$853,493
$651,779
30.9
Footwear
$127,175
$136,224
(6.6)
Accessories
$43,882
$35,077
25.1
Total Net Sales
$1,024,550
$823,080
24.5
Licensing Revenues $39,377
$33,331
18.1
Total Net Revenues
$856,411
24.2
$1,063,927
BCG Matrix
Performance
Apparel
Footwear
Accessories
Value Chain Analysis
Primary Activity
Inbound Logistics
Manufacturers receive raw materials
Operations
Raw materials used to create UA products
Outbound Logistics
Finished products are sent to retailers and UA
owned stores
Marketing and Sales
UA has well recognized athletes to endorse their
products and sponsorships deals with many teams
around the world
Service
Websites and social media allow for interaction with
customers
SWOT
Strengths
Weaknesses
Opportunities
Threats
• Brand Equity
• Innovation
•Quality of
Products
• Lack of
international sales
• Prices
• Relies heavily on
distributors
• Emerging Markets
• Performance
apparel industry is
growing
• Consumers are
more health
conscious
• Increase in active
lifestyles
• E-Commerce
• Increasing cost of
raw materials
• Rules and
Regulations for
performance
apparel
• Economic
Recession
• Exchange rate
fluctuations
Generic Strategy
Generic Strategy
• UA has always used a differentiation strategy
• Originally, they just sold performance apparel but now that
are broadening their scope by adding footwear, accessories
and more casual apparel
Grand Strategy
Innovation
Continue to create innovative products to stay
ahead of competitors (Nike, Adidas)
Market Development
They need to work on getting their existing
products into new markets. UA relies too
heavily on North America
Market Penetration
They are very successful with performance
apparel in the NA market but they need to
work on other product categories that are not
as successful (footwear, accessories)
Product Development
They have also been successful at developing
new products in their existing NA market
Ansoff Matrix
•They are very
successful in their
market (90% of sales)
• They should focus
on developing new
markets
• If they can
successfully get their
existing products into
those new markets,
then they can move
towards
diversification
International Performance
• UA is highly dependent on North America for sales
– Around 90% of sales comes from North America
– About 4% from Europe
• UA is using sponsorships and licensing to increase
international exposure
–
–
–
–
French rugby club ASM Clermont– French champions last year
Wales national rugby team
Tottenham Hotspur (EPL)– Champions League Quarter-finalists
Other teams in Mexico, Greece, Germany
Conclusions
• UA has seen an increase in sales over the past 5 years
• They have increased their revenue in the Direct-to-Consumer
channel
– Expanded factory house stores
– Lowered reliance on retailers
• Strengths include innovation and brand equity (North
America)
• Biggest weakness is international sales
– About 10% of sales from outside North America
• Competes using a differentiation strategy and moving towards
a broad scope
Recommendations
• Find recognizable international athletes to endorse UA
products
– They have endorsers that are well recognized world-wide but are U.S.
based (Michael Phelps, Tom Brady)
• Continue to expand on factory house stores (locally and
globally)
– Lowers dependence on retailers
– Will increase their profit margin
• Remain innovative to differentiate from competitors (Nike,
Adidas)