Under Armour Essay Example

product line, introducing different types of performance gear and venturing into women's clothing, footwear, and other items.

This case study aims to evaluate Under Armour's background, assets, skills, and primary strengths. Additionally, it will examine the company's business and corporate strategies, as well as the overall environment and competition. By analyzing these factors, we can gain a better understanding of what has contributed to Under Armour's current success and potential challenges. Currently, Under Armour has around 5900 employees and is ranked third globally in terms of revenue among providers of performance sports apparel.

Under Armour is currently competing directly with Nike and Adidas. In 2012, their estimated revenue was $1.8 billion dollars, and it is expected to grow to a range of $2.84 billion to $2.87 billion in 2014, showing a growth of 22 percent to 23 percent from 2013. The estimated operating income for Under Armour is $85.3 million. Among their product lines, the shoes of Under Armour have experienced the fastest growth, with sales increasing by about 31 percent from 2011 to reach $239 million in 2012.

Under Armour has gained a reputation for providing high-quality equipment and sports apparel, resulting in sponsorships with various sports teams and individuals like the Tottenham Hotspurs of the Barclay’s English Premier League. Moreover, Under Armour is well-known for its charitable contributions, supporting causes such as the battle against breast cancer, the Wounded Warrior Project, and various youth outreach programs in the community.These factors define Under Armour's industry structure.

Under Armour, an emerging competitor in the athletic apparel industry, must prioritize quality and innovation to meet customer demands and keep up with competition. Nike and

Adidas are the leading competitors in this industry (Figure 1 shows a strategic group model comparing Under Armour's performance to its competitors). The size of each bubble represents market share, and according to the map, Under Armour ranks third. This indicates that changes are needed for long-term competitiveness.

Figure 2 presents a Porter Five Force Analysis of the athletic apparel industry. It reveals that overall rivalry is medium to high. Under Armour faces challenges from Nike and Adidas due to their significant capital resources and assets. Additionally, private labels of retailers and newer sports apparel companies could potentially threaten Under Armour because it lacks fabric or process patents.

Competitors find it easy to duplicate products or processes without consequences. However, the industry is not too worried about new entrants as branding, advertising, and meeting product demand are expensive. Additionally, the sports apparel industry is currently in its maturity phase, requiring every company in the oligopoly to directly compete for market share.

To avoid becoming a weaker company and being forced to exit, Under Armour must consistently update their product line with better quality and new innovations. To analyze the external environment of Under Armour, including political, economic, socio-cultural, technological, ecological, and legal trends were examined. Politically, Under Armour encounters few obstacles and even receives government subsidies for eco-friendly practices in its domestic operations.

Due to the infrequent participation of this industry in campaigns, Under Armour is unlikely to experience significant alterations in corporate taxes and political pressures both in the short and long run. The United States GDP growth over the past four fiscal years has witnessed a gradual increase

of around 2.4 percent, although it remains below the anticipated 3 to 4 percent growth. Nevertheless, with low interest rates and consistent economic expansion each quarter, the overall economic prospects seem more favorable for prominent corporations such as Under Armour.

This is also positive for Under Armour as consumer confidence is increasing and disposable income is becoming more accessible due to rising employment rates in the past year. Additionally, the analysis of the socio-cultural environment reveals emerging trends worldwide. Initially focused on providing the finest equipment to athletes for achieving their utmost potential, Under Armour has also gained recognition in the accessories industry. Moreover, Under Armour products are not only worn by individuals in athletic events but also in classrooms and outdoor environments.

Individuals with diverse backgrounds are purchasing products from the industry. In today's business world, a company's success can be determined by technology. Under Armour constantly improves its products using advanced fabrics and adjusts them to meet athletes' changing needs. By staying up-to-date with technological advancements, Under Armour remains unaffected by potential threats. Furthermore, the environmental and legal aspects were also carefully considered.

In the US, companies must adhere to environmental and labor laws, which include regulating carbon consumption and practicing sustainability in order to receive tax credits. Additionally, businesses are legally required to promote fair hiring and promotion practices. Under Armour has received positive feedback from employees regarding their human resource policies, resulting in an above-average approval rate. By implementing a strategic typology, Under Armour has become one of the top athletic wear and accessory companies across various categories.

Under Armour has acted as a prospector, following the

Miles-Snow model, by bringing new materials to athletic wear and clothing. This has resulted in the creation of a previously non-existent product for both competitive and non-competitive sports. Additionally, Under Armour has functioned as an analyzer by assessing other aspects of production such as accessories and future generations of apparel and gear. They have involved athletes in testing their latest products, gathering valuable insights on the requirements of professional and amateur athletes, as well as young athletes.

Under Armour, led by CEO Kevin Plank, has a strong and driven internal structure. Plank's fervor, commitment, and drive were crucial in establishing the company, which has now become a major global competitor. Despite being younger than Nike and Adidas, Under Armour has consistently demonstrated growth throughout its history.

Under Armour has experienced significant growth in its net income since 2004, with numbers increasing from 25.38 million to 208.2 million in 2012 and showing potential for further expansion. However, when compared to Adidas' market capitalization of 24.90 billion and Nike's market capitalization of 66.47 billion, Under Armour falls behind with approximately 11.20 billion in market capitalization. In terms of revenue in 2013, Under Armour generated 2.33 billion, while Adidas and Nike generated 18.62 billion and 26.29 billion respectively.
Despite surpassing the industry average of generating revenue at around $763.1 million, Under Armour still faces challenges when competing against Nike and Adidas in various financial aspects.

Both Under Armour and Adidas are leading the industry with a gross margin of .49. While Nike and Adidas have long dominated the sports apparel market, Under Armour is experiencing consistent growth. Through an impressive research and development program and a

high margin, Under Armour is gradually narrowing the gap with the industry leaders and establishing itself as a strong contender. Despite facing tough competition from established sports apparel companies since its inception, Plank has effectively assembled a formidable team.

Former lacrosse player at Maryland and schoolmate of Plank, Kip Fulks joined Under Armour to promote the product to lacrosse players and athletes in Maryland. Ryan Wood, a high school acquaintance of Plank, also became a partner to expand the business. With Fulks and Wood as vice presidents, Plank had trusted partners who shared his passion for enhancing athletes' performance in all sports.

Having a strong upper management is vital for Under Armour's expansion into the worldwide sports apparel market. Under Plank's guidance, a revolutionary product was created - a compression shirt made from wicking performance fibers. In contrast to regular cotton t-shirts soaked in sweat, this innovative shirt kept athletes feeling cool and light. Besides improving comfort, it also prevented athletes from being slowed down by the additional weight of sweat accumulation.

Despite the lack of patent protections, Nike and Adidas can copy Under Armour's wide range of products such as footwear, pants, hats, headbands, and other accessories that are designed to regulate athletes' body temperature in various conditions. However, Under Armour has successfully positioned itself as a reputable and popular sports apparel brand. This achievement was the result of further research and occurred following a rebranding in 2005.

The brand's success, similar to its top competitors, is attributed to its reputation for high quality and the resulting customer loyalty. This success has expanded beyond the east coast and achieved a

national and international scale. Under Armour highlights quality by employing a limited number of skilled employees who engage in extensive research and development as well as offer exceptional customer service. Additionally, their committed team consistently generates new products, providing them with a competitive advantage over rivals.

Under Armour has established a strong customer base by providing excellent post-purchase support and actively engaging with their customers. Although the company already possesses a solid foundation, there is still potential for further expansion. At present, performance apparel accounts for approximately 80 percent of their revenue, while footwear, accessories, and licensed products only contribute about 20 percent. Moreover, around 90 percent of their revenue is generated from domestic sales through two distributors: Dicks Sporting Goods, Inc. and The Sports Authority.
To achieve even greater growth, Under Armour can broaden their product range and enter emerging sports markets worldwide. With notable events like the upcoming Olympics and FIFA World Cup on the horizon, the company has an exceptional opportunity to showcase their apparel, footwear, and accessories on renowned athletes in front of a global audience. Nevertheless, successfully competing against well-established sports apparel brands such as Nike,Puma Adidas Reebok ,and others will require dedicated effort.

The problem at hand is that Under Armour is currently the second-ranked brand in athletic clothing and apparel, while Nike holds the top position. Nike outperforms Under Armour by a large margin in categories like apparel, shoes (including Jordan and Converse brands), and accessories. The primary reason for Nike's continued success as the leading brand is its strong reputation and established name.

Under Armour not only competes with Nike but also faces numerous rivals

in the industry, including Adidas, Puma, Mizuno, Reebok, and others. This poses challenges for companies aiming to secure a substantial market share. Despite being able to boost its success through marketing initiatives, product development, and expanding its product range, Under Armour primarily concentrates on competing against well-established brands.

Cam Newton is currently the main face of Under Armour, but other well-known athletes have their own exclusive endorsement deals. However, the lack of top-tier athletes as brand ambassadors may lead younger consumers to seek clothing and sports gear from competing brands. Adidas, which endorses Derrick Rose, Dwight Howard, Robert Griffin III, and is an official NBA sponsor, along with Nike—who has endorsed Michael Jordan, LeBron James, Derek Jeter, Tiger Woods—already hold a slight advantage.

The increased prices of specific clothing items from Under Armour could affect sales in areas with lower average incomes, causing some customers to opt for Adidas or Reebok instead of Under Armour or Nike. Nevertheless, this circumstance can also serve as a chance for Under Armour to entice customers away from smaller companies and potentially expand their market share. Despite already possessing a substantial portion of the market in comparison to rivals, Under Armour still has the possibility to venture into untapped markets.

Under Armour has the potential to expand its presence in international markets, such as the Barclays English Premier League, BBVA La Liga, and the German Bundesliga in Europe. They can also explore opportunities within Latin American Baseball Leagues and European Rugby Leagues. This strategic move not only helps them increase their market share in apparel sales but also ensures long-term team sponsorships. Additionally, entering these markets

allows Under Armour to strengthen brand awareness and drive overseas apparel sales. Moreover, leveraging their overseas expansion presents an excellent opportunity for securing high-profile endorsements to enhance their marketing efforts.

Having a presence on various platforms will result in a more competitive market for household sales. In sports such as rugby, cricket, and soccer, athletes are actively seeking popular corporate sponsors, which presents Under Armour with a chance to expand their market share through marketing campaigns. An additional strategy to boost sales and gain market share is for Under Armour to reintroduce their original brand name, KP Sports, Inc., as a more affordable option compared to their primary product line.

The product line of KP Sports, Inc. would consist of all previous Under Armour products, which would be sold at a lower price and targeted towards lower income regions worldwide. This strategy would enable Under Armour to boost their sales without compromising the reputation and image of their higher priced, higher quality brand. Additionally, it would ensure that regions lacking access to such products still receive quality equipment and apparel. Another suggestion for Under Armour is to expand their retail presence by opening more specialty store locations.

To resolve the issue of limited availability in Under Armour specialty stores, customers have no alternative but to shop at retail establishments like Dick’s Sporting Goods and Sports Authority. Nevertheless, these busy retail locations already face competition from brands such as Nike and Adidas. To provide customers with a broader range of athletic apparel options and expert assistance, it is advised that Under Armour expand its specialty locations. These new locations can also offer sales

and discounts comparable to those found at factory outlets while still maintaining a reputation for quality.

After considering the options, it is clear that expanding into foreign markets is the best choice for improving market share, sales growth, and brand image. Currently, almost all sales (approximately 98 percent) come from North America. Therefore, entering international markets would create several opportunities for increasing sales even further. Under Armour has already achieved significant success and now has the potential to become a dominant force in athletic apparel worldwide by capturing a larger market share globally. The next step is to put this strategy into action.

Under Armour must adopt a broader perspective and employ these strategies in order to maintain competitiveness and flourish. Although the company has achieved success under Plank's guidance, it must extend beyond its current standing and explore untapped international sports markets. Plank's dedication to excellence is apparent in his recruitment of highly talented personnel. In terms of organization, he should seek out global partners with established networks in foreign markets.

To successfully promote a product, it is crucial to have a deep understanding of the product as well as the cultural norms and customs of the target market. Under Armour can achieve a strong presence in markets like Latin America, Europe, Asia, Africa, and Australia by involving foreign presidents and vice presidents in their company. Moreover, they should focus on regions with extreme climates to leverage their expertise in creating performance wear for both hot and cold weather conditions. This might involve expanding their workforce.

To expand into new markets, Under Armour must reallocate its resources by searching for

more affordable labor markets and establishing new distribution centers. This will help reduce labor and shipping expenses, enabling the company to lower prices and effectively compete with Nike in terms of pricing. Additionally, licensing the more affordable KP Sports brand can provide a cost-efficient alternative without compromising the reputation of Under Armour's renowned top-notch quality.

Under Armour should expand their dedicated outlet stores and form partnerships with Bass Pro Shop, Champs Sports, Foot Locker, and Fanatics to increase their market presence in the United States. However, they should avoid distributing their products through Walmart and Target to protect their brand reputation. Additionally, implementing effective marketing strategies is crucial for achieving growth in market share and boosting sales.

In order to effectively compete with Nike and Adidas in the advertising industry, Under Armour should improve its public exposure by targeting the youth market and securing endorsements from emerging athletes. This entails prioritizing athletic gear for specific sports, as attracting young athletes can lead to a substantial increase in customers who switch to their products.

On a financial level, it is essential for Under Armour to continue funding a robust research and development team in order to keep developing revolutionary products. By innovating, Under Armour can establish a competitive edge over Nike and Adidas, prompting these companies to create their own new products to maintain the competition with Under Armour.