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Under Armour Strategic Analysis & Recommendations


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Strategic analysis of Under Armour, complete with recommendations.

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Under Armour Strategic Analysis & Recommendations

  1. 1. Matt Bigelow, Chaz Fiorino, Amber Guinther, Jonathan Levitt, Matt Mehlman, Zac Wolfman
  2. 2. <ul><li>Headquarters: Baltimore, MD </li></ul><ul><li>  </li></ul><ul><li>Under Armour focuses on the development, marketing and distribution of branded performance apparel, footwear, and accessories for men, women and youth.  </li></ul><ul><li>Why: A member of our team was already in contact with Under Armour and it is an expanding company/brand that is trying to take on the giants of the Sports Apparel industry. </li></ul>
  3. 3. <ul><li>Manufacturers - major sporting goods companies and independent textile makers </li></ul><ul><li>Service Providers - retailers, apparel companies </li></ul><ul><li>  </li></ul><ul><li>Buyers - retail stores, individuals, professional and collegiate teams </li></ul><ul><li>  </li></ul><ul><li>Sellers -  retailers and apparel companies themselves </li></ul><ul><li>  </li></ul><ul><li>End Users - athletes/consumers </li></ul>
  4. 4. <ul><li>INTENSITY OF RIVALRY - VERY HIGH </li></ul><ul><li>Powerful, large competing brands </li></ul><ul><li>Similar products </li></ul><ul><li>Similar prices </li></ul><ul><li>  </li></ul><ul><li>  </li></ul><ul><li>  </li></ul><ul><li>This leads to battles for market share based on BRAND.  </li></ul><ul><li>There are few other ways to differentiate. </li></ul>
  5. 5. <ul><li>THREAT OF ENTRY - LOW to MEDIUM </li></ul><ul><li>Interesting because UA was a new entrant not long ago </li></ul><ul><li>  </li></ul><ul><li>Entrants must differentiate somehow </li></ul><ul><li>Powerful companies not willing to surrender market share </li></ul><ul><li>Increasing apparel technology raises start-up costs </li></ul><ul><li>  </li></ul>
  6. 6. <ul><li>SUBSTITUTE PRODUCTS - MEDIUM </li></ul><ul><li>Low cost apparel attracts casual athletes </li></ul><ul><li>Anything that could be worn during a workout could deliver similar value for consumers </li></ul>
  7. 7. <ul><li>SUPPLIER POWER - MEDIUM </li></ul><ul><li>Many producers of textiles, raw materials for apparel </li></ul><ul><li>Large apparel companies would be attractive to them </li></ul><ul><li>However... </li></ul><ul><li>Some apparel in this industry is technologically differentiated </li></ul><ul><li>Suppliers of these materials could have increased leverage </li></ul>
  8. 8. <ul><li>BUYER POWER - HIGH </li></ul><ul><li>Both retail outlets and consumers have many options </li></ul><ul><li>Other brands offer similar products and prices </li></ul><ul><li>Low switching costs </li></ul><ul><li>For some consumers, little to no relationship with brand </li></ul>
  9. 9. <ul><li>Use of Product Endorsers  </li></ul><ul><li>  </li></ul><ul><ul><li>Other industries use endorsers, but not to this extent </li></ul></ul><ul><ul><li>Bidding wars for top athletes </li></ul></ul><ul><li>  </li></ul><ul><li>  </li></ul><ul><li>Strong Personal and Emotional Connections </li></ul><ul><li>  </li></ul><ul><ul><li>Consumers' passion for teams and players carries over to their apparel choices </li></ul></ul>
  10. 10. <ul><li>Compete in a highly competitive market, that includes a strong mix of new and already established companies that are expanding into performance products. Many are large apparel, footwear and sporting goods companies. Also compete with against companies that specialize in outdoor apparel. </li></ul><ul><ul><li>Nike </li></ul></ul><ul><ul><li>Adidas </li></ul></ul><ul><ul><li>Columbia Sportswear </li></ul></ul><ul><ul><li>The North Face </li></ul></ul>
  11. 11. <ul><li>Vision Statement: To be the world's #1 performance athletic brand </li></ul><ul><li>  </li></ul><ul><li>BHAGs: </li></ul><ul><ul><li>Double sales, to $2 billion by 2013 </li></ul></ul><ul><ul><li>Have women's sales surpass men's  </li></ul></ul><ul><ul><li>To overtake Nike </li></ul></ul><ul><li>Core Purpose: To make all athletes better through science, passion, and the relentless pursuit of innovation </li></ul><ul><li>Core Values: </li></ul><ul><ul><li>Innovation </li></ul></ul><ul><ul><li>Inspiration </li></ul></ul><ul><ul><li>Reliability </li></ul></ul><ul><ul><li>Integrity </li></ul></ul>
  12. 12. &quot;It is great to work for someone as motivated as he (Kevin Plank) is - it makes you want to work harder each and every day. You think about his mindset and how hard he had to work to get this company off the ground and to where it is - it makes you realize that when you are tired at 3:30 in the afternoon after a long day that you can still go and you need to still go - never letting up. Working for this company isn't just me representing UA, but it is representing him and this company is and will always be his life.&quot; - (Ben Leigh, Manager of grassroots and collegiate marketing) <ul><li>CEO and Owner Kevin Plank </li></ul><ul><li>High quality performance apparel </li></ul><ul><ul><li>moisture-wicking synthetic fabrics </li></ul></ul><ul><li>Product Endorsers (Tom Brady, Ray Lewis, Cam Newton, Kemba Walker, Jose Reyes, Bryce Harper, Buster Posey, Tyler Seguin) </li></ul><ul><li>Increase in overall PA sales every year </li></ul><ul><li>Core competence in research  development and innovation </li></ul><ul><ul><li>25% of 3,900 employees in R&D </li></ul></ul>
  13. 13. <ul><li>Rely heavily on wholesale distribution (Dick’s and Sports Authority) </li></ul><ul><li>Global brand recognition (90%> total sales in U.S.) </li></ul><ul><li>Product line expansion experience (ex. footwear, cleats, basketball shoes) </li></ul>
  14. 14. <ul><li>Opportunities </li></ul><ul><li>Global expansion </li></ul><ul><li>Female market </li></ul><ul><li>Sponsorship activation (e.g., critical sales events) </li></ul><ul><li>Exit strategy (e.g. sell to Nike) </li></ul><ul><li>Threats </li></ul><ul><li>Intense competition (Nike, Adidas, etc.) </li></ul><ul><li>Substitute Products </li></ul><ul><li>Changes in consumer trends/behavior </li></ul><ul><li>Relatively new company (ability to continuously generate ideas?) </li></ul>
  15. 15. <ul><ul><li>4/5 of all revenue from apparel sales </li></ul></ul><ul><ul><li>Also draw revenue from footwear, accessories & licensing </li></ul></ul><ul><ul><li>Most sales via wholesale distribution within North America </li></ul></ul><ul><ul><ul><li>1/4 of revenue from Dick's and Sports Authority </li></ul></ul></ul>
  16. 16. <ul><ul><li>Inputs  </li></ul></ul><ul><ul><ul><li>Specialized fabrics developed by 3rd parties in collaboration with UA product development team </li></ul></ul></ul><ul><ul><ul><li>Allows UA to ensure they have the most advanced fabrics </li></ul></ul></ul><ul><ul><li>Production </li></ul></ul><ul><ul><ul><li>Products produced by unaffiliated manufacturers around the world </li></ul></ul></ul><ul><ul><ul><li>Small production facility at main office </li></ul></ul></ul><ul><ul><li>Distribution </li></ul></ul><ul><ul><ul><li>73% of revenue comes from wholesale distribution </li></ul></ul></ul><ul><ul><ul><ul><li>retailers, athletic depts., leagues, teams </li></ul></ul></ul></ul><ul><ul><ul><li>Also sell direct to consumer through factory stores & online </li></ul></ul></ul>
  17. 17. <ul><ul><li>Sales & Marketing </li></ul></ul><ul><ul><ul><li>Attention-grabbing effective marketing campaigns </li></ul></ul></ul><ul><ul><ul><li>Focus on young consumers, leagues and teams </li></ul></ul></ul><ul><ul><ul><li>Most sponsored athletes young and up-and-coming </li></ul></ul></ul><ul><ul><ul><li>Use variety of marketing mediums including sponsorship, TV and print </li></ul></ul></ul><ul><ul><li>Customer Service </li></ul></ul><ul><ul><ul><li>Nothing out of the ordinary for customer service </li></ul></ul></ul>
  18. 18.   +   +   +   +   +   +   +   +   +
  19. 19. <ul><ul><li>Initially Niche </li></ul></ul><ul><ul><ul><li>Technologically advanced apparel </li></ul></ul></ul><ul><ul><li>As company developed and grew, shift to differentiation </li></ul></ul><ul><ul><ul><li>More products </li></ul></ul></ul><ul><ul><ul><li>Shift towards a more diverse selection of products </li></ul></ul></ul><ul><ul><ul><ul><li>More sports </li></ul></ul></ul></ul>
  20. 20. Vertical Structure - Each level has people reporting &quot;up the ladder&quot;
  21. 21. <ul><ul><li>Partnership with Tottenham Hotspur </li></ul></ul><ul><ul><ul><li>Largest European Sponsorship, 1 st with a EPL team </li></ul></ul></ul><ul><ul><ul><li>“ For us being able to partner with Tottenham is a little bit like winning the Super Bowl. It’s our most significant investment to date outside the United States.” </li></ul></ul></ul><ul><ul><ul><li>- Blair Tripodi, Director of Int’l Marketing </li></ul></ul></ul><ul><ul><li>Increased focus on the footwear industry </li></ul></ul><ul><ul><ul><li>Footsteps Campaign </li></ul></ul></ul><ul><ul><ul><ul><li>Largest footwear ad campaign and 1 st to be solely focused on footwear </li></ul></ul></ul></ul><ul><ul><ul><li>Introduced line of Basketball shoes in 2010 </li></ul></ul></ul>
  22. 22. <ul><ul><li>Focus on women’s market </li></ul></ul><ul><ul><ul><li>2 nd attempt to increase presence in women’s market </li></ul></ul></ul><ul><ul><ul><ul><li>Shrink it and Pink it </li></ul></ul></ul></ul><ul><ul><ul><li>“ Protect This House I Will” campaign </li></ul></ul></ul><ul><ul><ul><li>Under Armour Women Facebook fan page </li></ul></ul></ul><ul><ul><li>Sign up and coming stars to sponsorship </li></ul></ul><ul><ul><ul><li>Strategy= Find the next generation of stars to represent the brand along with established stars </li></ul></ul></ul><ul><ul><ul><li>&quot;We have positioned ourselves as a brand for the next generation of athletes.“ </li></ul></ul></ul><ul><ul><ul><ul><li>- Matt Mirchin, Senior VP of Sports Marketing </li></ul></ul></ul></ul>
  23. 23. <ul><ul><li>Tottenham Hotspur Partnership </li></ul></ul><ul><ul><ul><li>Increase presence in Europe </li></ul></ul></ul><ul><ul><ul><li>Futbol fans extremely loyal </li></ul></ul></ul><ul><ul><li>Footwear Industry </li></ul></ul><ul><ul><ul><li>3rd quarter footwear net revs grew 97%, from $26.5 million in the prior year’s period to $52 million. </li></ul></ul></ul><ul><ul><ul><li>$19 billion footwear market </li></ul></ul></ul>
  24. 24. <ul><ul><li>Focus on Female Market </li></ul></ul><ul><ul><ul><li>Represents only 25% of UA’s $800 million revenue </li></ul></ul></ul><ul><ul><ul><li>“ It is the only sports apparel sector where sales are forecast to grow” – Analyst for NPD Group </li></ul></ul></ul><ul><ul><li>Sponsorship with next generation of athletes </li></ul></ul><ul><ul><ul><li>Brand grows with athlete </li></ul></ul></ul><ul><ul><ul><li>Keeps sponsorship dollars down </li></ul></ul></ul><ul><ul><ul><li>NBA lockout </li></ul></ul></ul>
  25. 25. <ul><li>Expansion in Global Markets   </li></ul><ul><ul><li>Greater than 90% of sales come from within North America </li></ul></ul><ul><ul><li>Limited distribution channels abroad </li></ul></ul><ul><ul><ul><li>Nike & Adidas already have well-established distribution channels across the globe </li></ul></ul></ul><ul><ul><li>Much of brand strength and knowledge in US is connected with football </li></ul></ul><ul><ul><li>  </li></ul></ul><ul><li>Establishing Larger Market Share in Female Market   </li></ul><ul><ul><li>Under Armour perceived as a male-oriented brand </li></ul></ul><ul><ul><ul><li>Comes from start in football </li></ul></ul></ul><ul><ul><ul><li>Ad campaigns' very aggressive tone </li></ul></ul></ul><ul><ul><li>“ Women’s apparel some day will be larger than our men’s apparel business, which is our goal” -Kevin Plank </li></ul></ul>
  26. 26. <ul><li>Getting into Soccer </li></ul><ul><ul><li>Many of the larger clubs and national teams are already signed onto long-term deals with giants like Nike, Adidas, Puma and other established football brands  </li></ul></ul><ul><ul><li>Relatively unknown in the football world </li></ul></ul><ul><ul><ul><li>has kit sponsorships in only 4 leagues throughout the world (Greek Superleague, Japanese J-League, Mexico's Primera Division & EPL/BPL) </li></ul></ul></ul><ul><li>Footwear Product Line Expansion (Basketball) </li></ul><ul><ul><li>Nike - a top competitor, controls around 95 percent of the $2.4 billion U.S. basketball shoe market between its signature Jordan Brand line and Converse. (Sept. 2011) </li></ul></ul><ul><ul><li>Lack of experience and advertising/marketing in basketball division </li></ul></ul>
  27. 27. <ul><li>Keeping Organized & Successful with Accelerated Growth </li></ul><ul><ul><li>Net revenues reached over $1 billion in 2010 from just 430.7 million in 2006 </li></ul></ul><ul><ul><li>Must be able to anticipate and respond to changing consumer preferences </li></ul></ul>
  28. 28. <ul><li>Increase Efforts Toward Global Markets </li></ul><ul><ul><li>Focus efforts on establishing distribution channels through Europe </li></ul></ul><ul><ul><ul><li>Consider acquisition of established company in Europe </li></ul></ul></ul><ul><ul><ul><ul><li>e.g. Joma Sports in Spain </li></ul></ul></ul></ul><ul><ul><li>Re-brand UA abroad as a futbol company, not a football company </li></ul></ul><ul><ul><ul><li>Already sponsoring Tottenham Hotspur in EPL </li></ul></ul></ul><ul><ul><ul><ul><li>Sign more teams </li></ul></ul></ul></ul><ul><ul><ul><li>Sign at least one national team to have a presence in upcoming 2014 World Cup </li></ul></ul></ul>
  29. 29. <ul><ul><li>“ Intelligent Assistant” Customer Service </li></ul></ul><ul><ul><li>Valuable for consumers with inadequate knowledge of Under Armour products and high-performance apparel </li></ul></ul><ul><ul><ul><li>Parents purchasing for their athletes </li></ul></ul></ul><ul><ul><ul><li>24/7 availability </li></ul></ul></ul><ul><ul><ul><li>First to act advantage </li></ul></ul></ul>
  30. 30. <ul><li>Establishing Larger Share in Female Market    </li></ul><ul><li>  </li></ul><ul><ul><li>“ Women’s apparel some day will be larger than our men’s apparel business, which is our goal” </li></ul></ul><ul><ul><li>- Kevin Plank </li></ul></ul><ul><ul><li>Women account for 80% of buying decisions, which includes shopping for family members, as well as purchasing for own use </li></ul></ul><ul><ul><ul><li>Further use of &quot;Intelligent Assistant&quot; </li></ul></ul></ul><ul><ul><li>Women athletes are much more particular about what they wear for working out </li></ul></ul><ul><ul><ul><li>Don't just make decisions based on what looks good, rather the functionality of the item </li></ul></ul></ul>
  31. 31. <ul><li>Open More &quot;Factory House&quot; Locations </li></ul><ul><li>  </li></ul><ul><ul><li>Outlet style stores  </li></ul></ul><ul><ul><li>Less than 100 total locations in 34 states  </li></ul></ul><ul><ul><li>Expansion builds distribution channels without having to compete for shelf space at retail stores  </li></ul></ul><ul><li>  </li></ul><ul><li>Attempt to Become Official Apparel Company for Professional Leagues </li></ul><ul><li>  </li></ul><ul><ul><li>&quot;Official&quot; gear has higher margins </li></ul></ul><ul><ul><li>Penetrates a market held by competitors </li></ul></ul><ul><ul><li>Important marketing tool </li></ul></ul>
  32. 32. <ul><ul><li>Focus on basketball footwear to grow shoe sales </li></ul></ul><ul><ul><li>Run more ad campaigns focused on basketball footwear to educate consumers </li></ul></ul><ul><ul><ul><li>Hired CP&B to oversee basketball advertising; shift from in-house control </li></ul></ul></ul><ul><ul><li>Continue to gradually introduce footwear to generate hype </li></ul></ul><ul><ul><li>Continue to sign young elite athletes as endorsers </li></ul></ul><ul><ul><ul><li>Brand can grow as the athlete grows and becomes more successful </li></ul></ul></ul>
  33. 33. <ul><li>Implement Critical Sales Events (CSE) </li></ul><ul><li>Customer loyalty </li></ul><ul><li>Lower cost through customer retention </li></ul><ul><li>Positive word of mouth </li></ul><ul><li>Develop deeper positive relationships and continue relationship life cycle. </li></ul>
  34. 34. <ul><ul><li>Companies take after the personality of their leaders </li></ul></ul><ul><ul><ul><li>Kevin Plank's years of hard work has instilled a culture of &quot;never letting up&quot; </li></ul></ul></ul><ul><ul><li>By sticking to core competencies you can still grow in a weak economy </li></ul></ul><ul><ul><li>It's not impossible to compete with the Nikes and Adidas of the world </li></ul></ul>
  35. 35. <ul><li>2010 Under Armour Annual Report. (2010) Under Armour, Inc. Annual Report Retrieved from http:// 05677x0x452384C8786075-4201- </li></ul><ul><li>4DF1-9FC8D9740F8D59AA/2010_Annual_Report.pdf </li></ul><ul><li>Brennan, B. (2009). Why she buys, the new strategy for reaching the world's most powerful consumers .  </li></ul><ul><li>Crown Business. </li></ul><ul><li>Burke, M. (2011, January 27). Under Armour's About-Face Page 2 of 2 - Information for the             World's Business Leaders - . Retrieved November 16, 2011, from http:// /forbes/2011/0214/focus-kevin-plank-under-armour-clothing-about-face_2.html </li></ul><ul><li>Dickens, C. (2011, March 8). “Tottenham sign kit deal with UA worth $16 million annually.” SportsPro. Retrieved from million_dollar_deal_with_major_american_backe/ </li></ul><ul><li>Olson, Elizabeth. &quot;Under Armour Aims at Athletic Young Women -; The New York Times -  </li></ul><ul><li>Breaking News, World News & Multimedia . 31 Aug. 2010. Web. 16 Nov. 2011.                      </li></ul><ul><li><>.    </li></ul><ul><li> - Under Armour, Inc. - Code of Ethics and Business Conduct. (n.d.). - Under               Armour, Inc. - . Retrieved November 16, 2011, from </li></ul><ul><li>Walker, A. (2011, July 25). “Under Armour's rookie strategy for endorsement deals.” The Baltimore Sun. Web. Retrieved from endorsement-20110725,0,4089835.story?page=1 </li></ul><ul><li>  </li></ul>
  36. 36. <ul><li>Ben Leigh - Manager of Grassroots & Collegiate Marketing </li></ul><ul><li>  </li></ul><ul><li> </li></ul><ul><li>    UMass Sport Management '04 </li></ul><ul><li>Michael Cutting - Brand Manager </li></ul><ul><li>    [email_address] </li></ul><ul><li>    UMass Sport Management '01 </li></ul>
  37. 37. Questions??? QUESTIONS?