Under armour case study 2017

Group 4: Mark Keck Contribution

Instructor Merriman

MGMT479

February 9, 2017

Under Armour Strategic Audit (Team Suggestions)

Under Armour Current Situation

Current Financial Performance

18.1% increase net revenue over 2008, US$856,411,000

.71% decrease in gross margin in 2009 (attributed to liquidation of shoe inventory)

78% market share in the performance apparel clothing segment (UA created the segment)

94% of revenue generated from Canadian and domestic markets

Sports apparel industry down 4.3% as a whole due to recession

Strategic Position

Brand Mission:

“To make all athletes better through passion, science and the relentless pursuit of innovation.”

Objectives

Launch and establish a running shoe line to capture some of the $5 billion running shoe segment, and at least 3% of the $31 billion international branded footwear market

Strategies

Keep retail pricing aligned with competitors in apparel and foot wear

Policies

Strategic Managers

Board of Directors

8 Person Board of Directors including:

Kevin A. Plank, Chairman of the Board of Directors

Top Management

Kevin A. Plank, President & CEO

Wayne A. Marino, COO; Brad Dickerson, CFO

Henry B. Stafford, Senior VP of Apparel

Gene McCarthy, Senior VP of Footwear

Dan J. Sawall, VP of Retail

John S. Rogers, VP/General Manager of E-Commerce

J. Scott Plank, Executive VP Domestic and Global Business Development

External Environment

Natural Environment

Societal Environment

Sports apparel market is highly correlated to disposable income, recession had an industry wide negative net effect to revenues, recession ending

Primary target consumers for Under Armour are 15 to 25 year-old males. However recent trends show increases in female and older age segment of the sporting apparel and gear market

Task Environment

Rivalry

Though Under Armour controls 78% of market share in performance sports apparel, rivalry is intense because the market is fragmented by Nike, Addidas and Champion who are large competitors.

The switching cost is fairly low at consumer and retail level with all major competitors already controlling shelf space at retail and the relatively low cost to consumers for purchasing the sports apparel.

Manufacturing is outsourced by all competitors eliminating drastic differences in product or product manufacturing quality.

Brand identity is a big factor in rivalry as some people favor brands and the product is branded. Under Armour established the segment of apparel, but Nike has much larger brand equity.

Performance sports apparel is an under-developed segment globally

Under Armour wants to be a competitor in the larger, more competitive branded footwear segment worth $31 billion annually

Threat of Substitutes

Under Armour and its largest competitors have brand equity to create price inelasticity. Consumers prefer and place value on Under Armour brand. There are substitutes for the performance sports apparel products, but none offer the same benefits of temperature control, and weight advantage.

Buyer Power

Buyer Power is of little significance to the overall sale of goods because individual consumers do not form large centralized buying groups. Retailers may play a part through exclusivity agreements, but consumers dictate different brands due to brand preference at retail as well. Buying Power exerted by large organizations like the NFL, MLB, or NCAA, can create a shift in the balance of advertising power by shifting consumer brand preference (co-branding).

Supplier Power

Supplier power can be exerted by suppliers of Under Armour. Performance sports apparel brands all outsource the manufacturing of their products. The sporting apparel and gear industry seems to work on outsourcing of manufacturing.

Threats of New Entrants

Outsourcing of manufacturing allows for any existing sports brand to enter the segment of performance sports apparel. Outsourcing of athletic branded footwear also makes entry into the branded footwear segment relatively simple for a large product brand. All trade barriers and agreements affect major sports brands the same in regards to importing outsourced manufactured goods. Entry by new companies would be more difficult because of the time needed and capital for advertising to develop a consumer brand.

Internal Environment

Corporate Structure

Under Armour’s CEO and Chairman of the Board of Directors started the company as a college athlete, that designed a new undershirt to help him stay cooler, wick sweat, and minimize weight. The company’s humble beginning started with a $17,000 personal investment and with the support influencer athletes and Hollywood has grown into one of the most recognizable names in sporting goods. Under Armour is now a publically traded company operated in the United States, headquartered in Baltimore, Maryland.

Company Culture

Under Armour was built and continues to operate with the influences of football. The organization uses football terms to describe daily activities (Ex. Huddles, manage the clock, and execute the play). The culture is aggressive and highly competitive much like in football, with Under Armour seeking an offensive position to take on larger competition like Nike.

Corporate Resources

Marketing

The market for sports apparel and gear is primarily young males, and sports oriented and/or the active and health conscious consumer. Females and older people are beginning to uptrend in the purchase of sports apparel and gear, however the primary target consumer for Under Armour is 15 to 25-year-old males.

Under Armour uses professional athletes as influencers for consumer groups. Under Armour spends its marketing budget on athlete influencers (endorsements), print, digital and television ads, and payments to college teams to wear Under Armour products.

Advertising Campaigns were: “Protect this House”, “Click-Clack, I Think You Hear Us Coming”, “Athletes Run”, and “Protect This House, I Will”

78% of revenues were generated inside the US in 2009

Retail Channels consisted of Dick’s Sporting Goods and Sports Authority accounting for 30% of wholesale distribution. Also sold products through a variety of sporting goods stores. Distribution channels included independent and specialty retailers, institutional athletic departments, leagues and teams, Under Armour Stores and a company website.

Finance

Revenues for the company are reported in four segments: apparel, footwear, accessories, and licensing. Under Armour experienced a .71% decrease in gross profit margin due to liquidation of shoe inventory. Under Armour historically experiences strong 3rd and 4th quarters due to seasonality (fall football season).

R&D

Operations

Manufacturing is outsourced largely by contract to manufacturers in Asia and Latin America. A procurement team evaluates potential manufacturers verifying quality, social responsibility, and financial strength before contracting.

Manufacturers procure raw materials for production. Under Armour warehouses finished goods in one of two storage facilities.

Under Armour also operates a 17,000 square foot manufacturing facility in Maryland. The purpose of the small facility is to provide fast, high quality products for high profile athletes requiring special orders. The small facility’s expense of operation in handled as a marketing expense.

Human Resources

Under Armour employs approximately 3,000 non-union workers. Roughly half of Under Armour’s employees work in the company owed production facility and Under Armour company owned stores. The other half work in Under Armour distribution facilities.

Analysis of Strategic Factors

SWOT Analysis Here

Will complete SWOT analysis by Monday evening.

Review of Current Missions and Objectives

Attempting to capture 3% of global branded footwear market ($31 billion)

Strategic Alternatives and Recommended Strategy

Strategic Alternatives

· Most importantly pursue a global presence for performance sports apparel establishing Under Armour as the preferred brand to Nike.

· Design a comfortable shoe as part of product offering, but to not try to re-invent the wheel. A comfortable running shoe designed to match the colors of existing Under Armour apparel.

· Allow building global brand for performance sports apparel to establish Under Armour in the branded footwear market.

Recommended Strategy

Implementation

Evaluation and Control