Under Armour Case

Study 2015
Lorraine
Under Armour started with an innovative idea by a former
football player that expanded into a global provider of
athletic wear. A competitor to Nike and Adidas, Under
Armour seeks to surpass their rivals in this industry.
Under Armour Assessment Case

Table of Contents

Executive Summary....................................................................................................................................... 2
Background ................................................................................................................................................... 2
Strategy ......................................................................................................................................................... 3
Mission .......................................................................................................................................................... 4
Five Forces .................................................................................................................................................... 4
Driving Forces................................................................................................................................................ 4
Key Success Factors....................................................................................................................................... 5
SWOT Analysis............................................................................................................................................... 5
Value Chains .................................................................................................................................................. 6
Corporate Strategies ..................................................................................................................................... 6
Key Managerial Issues ................................................................................................................................... 7
Corporate Social Responsibilities .................................................................................................................. 7
Business performance................................................................................................................................... 8
Recommendations ........................................................................................................................................ 8
References: ................................................................................................................................................. 10
Under Armour Assessment Case

Executive Summary

Although the company began in his grandmothers basement, Under Armour have been

able to overcome many financial hurdles and have continual growth in sales. Kevin Plank, founder

of Under Armour has been successful in producing new and innovative apparel to stay in

competition with their competitors. The company has always been confident in providing top

notch products and implementing new strategies in order to compete against its rivals.

Under Armour is the provider of Under Armour markets to the active lifestyle of people

whether it is sports, hunting, or outdoor activities. They offer a wide variety of products to their

customers that cover them head to toe. The UA logo is easily identified by many around the world

and has become synonymous with quality products.

Under Armours products are designed to make the athlete feel more comfortable during

their games, practices or workouts. There are several separate technologies that Under Armour

offers: HeatGear for hot weather, ColdGear for cold weather and AllSeasonGear changing

temperatures (Thompson, 2015).

Background

Under Armour was founded by Kevin Plank, a former University of Maryland football player

in 1996. The original apparel was engineered with a synthetic blend which was made to keep

athletes cool, dry and lighter feeling than the cotton shirts that were worn by athletes. Under

Armour began as KP Sports from 1996 through 2005 when they changed their name to Under

Armour and went public with an initial public offering of 9.5 million shares. The idea for this

performance gear came to Kevin Plank during his years as a University of Maryland football player.

He disliked the unpleasantness of wearing a sweat soaked cotton T-shirt while practicing and

during games (Thompson, 2015).

Under Armour Assessment Case

Strategy

The strategy of a company is its plan of action to outperform its competitors and achieve

superior profitability. Their strategy needs to achieve a competitive advantage over their rivals by

providing features such as higher quality, added performance, and/or superior products

(Thompson, p. 3)

Reading its mission statement to make all athletes better through passion, design, and the

relentless pursuit of innovation (pp. C-53) states its desire to become leader in its industry. A

major objective of Under Armours strategy is to achieve sales revenues of $4 billion by the year

2016 which would be approximately71 percent above its 2013 sales (Thompson, pp. C-53).

Under Armour looks to a growth strategy that would continue to broaden the current

product offerings. It is also targeting more customer segments and wanting to gain additional

distribution points in retail marketplaces in North America. The goal of the product line strategy is

to offer a diverse product line, including apparel, footwear and accessories (Thompson, pp. C-53-

57).

The sports marketing strategy consists of entering into agreements with various colleges,

professional sports teams, sponsoring professional and collegiate sporting events and targeting

team equipment managers as well as individual athletes (Thompson, pp. C-57).

Retail marketing strategy involves the increase of exclusively dedicated floor space of Under

Armour products in their retail stores. By gaining this increase, it will enhance the visibility of their

product.
Under Armour Assessment Case

Mission

To Make All Athletes Better Through Passion, Design And The Relentless Pursuit Of

Innovation (Under Armour, 2015). Under Armour has a straightforward mission statement that

seems to get right to the heart of the company.

Five Forces

Porters Five Forces Model is used to identify industry rivalry, barriers to entry and exit,

power of buyers, power of suppliers and threat of substitutes (Thompson, p. 49) .

There is intense rivalry in the sport apparel industry and the demand is very high for the

products offered. The top three competitors are Nike, Adidas and Under Armour although there are

many other companies in the market. There is also the low switching costs which lead to increased

competition. There are low barriers to entry into the industry with the ease of brand switching.

The threat of entry is low because the incumbents have high economies of scale and customers

have strong brand preferences. The bargaining power of buyers is quite high. Since there are no

switching costs and customers have many options to choose from, buyers have the ability to force

down prices which could increase a companys operating costs. The bargaining power of suppliers

is slightly high. Suppliers can sometimes increase their prices, but since there are an ample amount

of suppliers, this will keep suppliers from increasing their prices. Threats of substitute products

are high due to the increase in demand of performance products. (Thompson, pp. 49-61)

Driving Forces

The changing lifestyles of society are a direct link to this industry. Under Armour must

continually monitor and identify the forces driving industry change. Three of the driving forces that
Under Armour Assessment Case

Under Armour should follow are: product innovation, emerging new Internet capabilities and

application and increasing globalization.

a. Product Innovation The sports apparel industry is ever-changing. With the change to

lighter under wear and lighter, better performing shoes to enhanced gripping gloves, the sports

apparel industry continues to change and grow. Those that dont keep up with the latest innovation

will find themselves lost in the crowd (Under Armour).

b. Emerging New Internet Capabilities Internet technology and the advanced ability to

purchase products online are changing the way people are shopping. Under Armour needs to

ensure that it maintains the most up-to-date capabilities to allow customers to shop online for their

products.

c. Increasing Globalization All over the world, people love their sports teams. Under Armour

needs to focus on growing consumer demand around the world. Labor costs that are different

between countries are a reason for some companies to focus on using low-wage areas to produce

their products in order to remain competitive.

Key Success Factors

Key Success Factors (KSF) are the elements that are essential to surviving and thriving in

the industry (Thompson, p. 72)

SWOT Analysis

Strengths Under Armour is known as a company that makes high quality sports apparel.

Innovation is Under Armours best strengths; it was founded on innovation. Under Armour stays in

line or ahead of the changing athletic industry by offering new products. Under Armour has a very

effective marketing strategy by marketing appealing ads using top name athletes.
Under Armour Assessment Case

Weaknesses Many of the specialty materials that Under Armour uses are developed by

third parties and are only available from limited sources (C-63). Under Armour needs to become

more geographically diverse; their revenues are 94.1% to North America vs 5.9% to other foreign

countries (p. C-55).

Opportunities With the increase in technology, such as the internet, sales and innovative

means to attract consumers are increasing. Popular mobile apps are now connecting consumers.

Under Armour purchased the fitness app company, MapMyFitness hoping to generate customer

support for the app (p. C-57).

Threats A large part of athletic apparel contains petroleum based textiles. The instability

of the petroleum field can become a threat to the industry. In many cases suppliers have price

control in this industry and can set their pricing, but due to the fluxuation of the oil industry, the

markets can be volatile.

Value Chains

Innovation and design are at the core of Under Armours business activities. This

innovation is what drives the creation of the next generation products. Innovation and design are

performed internally with the oversight of their product development team.

Corporate Strategies

Offensive and Defensive Strategies

Kevin Plank stated that he want his team to always be on the offensive strategy. He stated

in a speech for UCLA, Sports metaphors aside, the key here is to continuously innovate and work to

reinvent yourself and not take success for granted. Related to competition, Kevin said that others
Under Armour Assessment Case

making your product validates your business and market and should be encouraging (Mednik,

2010).

International Strategies

Recently, the company attempted to expand its global presence by designing the outfits of

several U.S. teams at the 2014 Winter Olympics in Sochi.

Key Managerial Issues

From the information in the case report, the current key personnel seem to be appropriate

for the North American division of the company. A recommendation might be to hire personnel in

the foreign market they want to target that have the cultural knowledge necessary to gain

acceptance in the culture.

Corporate Social Responsibilities

Corporate Social Responsibilities describes a companys obligation to operate honorably,

provide suitable working conditions for their employees, be a good steward of the environment

and support local communities in areas where they operate. In its corporate responsibility

statement, Under Armour states that it will not work with any manufacturers that engage in child

labor, forced labor, discrimination, or poor health and safety standards. (Under Armour, 2015)

Under Armour has a new product called the UA Green clothing line. The products are

produced from two million recycled plastic bottles which are used to produce their clothes, shoes,

and hats. Considering the amount of plastic bottles that are used annually that manufacturers try to

find a means for reuse, this is quite a step in the right direction (English, 2014) .
Under Armour Assessment Case

According to their website, Under Armor is dedicated to helping charitable organizations.

They have initiated a Power in Pink selection which sends profits to breast cancer organizations.

The Freedom Collection supports the first responders, military support organizations, law

enforcement officers and veterans who they believe are committed to keeping us safe. Under

Armour promises a minimum of $250,000. Under Armor also assists Habitat for Humanity, Big

Brothers Big Sisters, Wounded Warrior Project and many more charities (Under Armour, 2015).

Business performance

During the years 2012-2014 Under Armour has increased its revenue each year. A point to note

is that their percent of net revenues has decreased from North America and increased to foreign

countries over that same time period. This means that they are increasing their performance

internationally.

(2014 Under Armour Annual Report, 2014)

Recommendations
Key Strategic Issues

According to MarketWatch, Under Armour has edged out Adidas for second place in

North America (Germano, 2014). The future focus for Under Armour needs to include more

international sales and innovation.

Under Armour Assessment Case

Under Armour needs to increase their foreign market presence to compete with their major

international competitors. Because Under Armour depends on 90 per sales revenue coming from

North America, it needs to become more focused in the foreign market. Focusing on the

international market has significant value for Under Armour.

Innovation was what started this company and innovation will keep it moving ahead. As

competition and risk of substitutes increase, Under Armour needs to invest in research and

development of innovative ideas.

Focusing on what the international market is looking for and investing in research and

development for innovative ideas should help propel the company forward into the next decade as

a leader in the industry.

Under Armour Assessment Case

References:
2014 Under Armour Annual Report. (2014). Retrieved from
http://investor.underarmour.com/annuals.cfm

Arline, K. (2015, February 18). Business News Daily. Retrieved from Porter's Five Forces: Analyzing the
Competition: http://www.businessnewsdaily.com/5446-porters-five-forces.html

English, N. (2014, November). The 14 Athletic Wear Companies That Are Actually Good for the World.
Retrieved from http://greatist.com/fitness/athletic-wear-companies-social-good

Germano, S. (2014, September 6). MarketWatch. Retrieved from Under Armour edges out Adidas in U.S:
http://www.marketwatch.com/story/under-armour-edges-out-adidas-in-us-2014-09-06

Mednik, M. (2010, December 8). Max Mednik. Retrieved from Lessons from Kevin Plank:
http://www.maxmednik.com/home/lessons-from-kevin-plank-under-armour-ceo

Thompson. (2015). Crafting and Executing Strategy: The Quest for Competitive Advantage, Concepts and
Cases, Twentieth Edition. New York: McGraw Hill.

Under Armour. (n.d.). Retrieved from Original #0039 Compression T:

http://www.uabiz.com/company/productInnovation.cfm

Under Armour. (2015). Retrieved from Our Mission: http://www.uabiz.com/company/mission.cfm

Under Armour. (2015). Retrieved from Corporate Responsibility:

http://www.uabiz.com/company/corpResponsibility.cfm

Under Armour. (2015). Retrieved from Corporate Giving:

http://www.uabiz.com/corporategiving/freedom.cfm
Under Armour Assessment Case

Exhibit 1

(2014 Under Armour Annual Report, 2014)