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Under Armour uses ineffective CSR initiatives and non-market strategies that contribute to its underperformance compared to industry rivals. While the sports apparel industry is generally profitable, Under Armour has higher costs and lower prices than competitors like Nike. Under Armour has made mistakes with vertical expansion in the past but has effectively used horizontal expansion through partnerships and sponsorships.

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The Sportswear Industry & Under Armour Benjamin Ajodan, Brendan Flynn, Maria Gorskikh, Justin Nardella, Adam Zhou Boston University Consulting Guild INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM
1 of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM Under Armour is the Fourth Largest company in Athletic Apparel industry ● Average ROE of 5.15% ● Market share of 4.1% 2 Under Armour is an American sports equipment company that manufactures footwear, sports and casual apparel Under Armour’s Key Technology: ○ HeatGear/ ColdGear: Clothing that is specifically designed to more breathable or more insulating depending on the weather. ○ Hydrafuse: Clothing that makes post-workout dry skin less likely to occur. It also helps sweat evaporates it better. ○ Isocool: Clothing that helps excel heat leaving the body. Under Armour is a differentiator in that their prices are higher than some competitors, and utilize a narrow strategy because they are mainly concerned with athletes, as opposed to some competitors in the industry that have ventured into lifestyle branding and have adopted more of a broad strategy.
We performed an in-depth analysis of why Under Armour is underperforming in a profitable Sports Apparel industry, which is described below and further in this presentation: Due to the firm’s competitive positioning, costs, and activities, Under Armour underperforms its rivals by 8.5% Based on financial reports and Five Forces Analysis, we concluded that the Sports Apparel Industry is favorable Under Armour uses ineffective CSR initiatives and other non-market strategies, which attributes to its underperformance Under Armour made mistakes on a vertical scope in the past, which hurt the firm’s profitability and reputation, but it showed an effective use of horizontal expansion 2 of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM 3 Industry Analysis Firm Analysis Corporate Strategy Analysis Non-market Strategy Analysis
Industry Analysis INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM
3 of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM Sports Apparel Industry’s Supply Chain consists of Product Development, Manufacturing, Distribution, Retailers, and Consumers ● The sportswear industry is best described as a hybrid; one that intersects gym attire with casual clothing and footwear ● Some of the key players include Nike, Adidas, and Under Armour ● Industry Buyers: Young adults, athletes, health-conscious individuals, large retail chains, mom & pop stores, organizations ● Industry Suppliers: Primarily overseas (Pou Chen, PT Pan Brothers, Fulgent Sun International, Delta Galil, and Eagle Nice)
4 of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM Industry-level trends and changes lower industry profits and make it harder for firms to gain market share Increased Demand for Sustainably Sourced Apparel increases buyer bargaining power 6 Supply chain issues: - Costly air freight - Port congestion More Interest in Fair Labor Promotion - Unions increase suppliers power - Child Labor Issues influence public opinion against the companies in the industry With COVID-19, we will continue to see disruptions on both the demand and supply side for the next three to five years
5 of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM Historical Sports Apparel industry average profits are higher than the US average profits by 3.75% indicating that firms in the industry have favorable conditions Year Firm 1: Nike Firm 2: Adidas Firm 3: Puma Firm 4: Under Armour Firm 5: ASICS Average 2019 50.03% 28.47% 14.7% 4.38% 4.5% 20.42% 2018 23.10% 26.27% 11.3% -2.36% -11.1% 9.44% 2017 31.64% 17.26% 8.2% -2.35% 6.5% 12.25% 2016 31.70% 16.85% 3.8% 10.55% 7.8% 14.14% 2015 28.19% 10.89% 2.3% 15.52% 5.7% 12.52% Average 32.93% 19.95% 8.06% 5.15% 2.68% 13.75%
6 of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM Firms in the Sports Apparel Industry tend to benefit from using various non-market strategies Introducing sustainability initiatives in their product lines and facilities - They try to balance between satisfying consumers and maximizing profits - The issue of greenwashing is present in many company in the industry Lobbying to ease regulations on Forced Labor - Major companies like Nike have been pressing Congress to alter legislation cracking down on imports of goods made with forced labor One of the market inefficiencies includes Pollution Factories use pesticides and herbicides There is a textile pollution after useful life caused by excessive use of polymers in products These initiatives are used to increase industry profits
7 of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM Five Forces analysis shows that Sports Apparel Industry is Favorable Threat of Entry - Low Ø Equinox, Peloton, Lululemon, Athleta • High capital requirements make it extremely difficult for small companies to gain any substantial market share (advertising, R&D, sponsorships); however, established companies such as the ones I listed above could enter with more ease. ↑and ↓ • Economies of scale allows companies in the industry to order goods in massive quantities, giving them a lower cost per unit. New companies will not be able to afford this strategy. ↓ • Strong brand identities in the industry captured customer loyalty and discourage customers from switching to a new alternative. ↓ Power of Suppliers - Medium Ø Pou Chen, PT Pan Brothers, Fulgent Sun International, Delta Galil, and Eagle Nice • Under Armour provides many jobs to countries that they are in direct relation with, which limits supplier bargaining power because many of these employees come from low-income backgrounds and need the money/employment. ↓ • The human rights movement encourages suppliers to speak out against mistreatment in the workplace, putting pressure on Under Armour to either make improvements or relocate. ↑ Power of Buyers - Medium Ø Young adults, athletes, health-conscious individuals, large retail chains, mom & pop stores, organizations • Consumers like to compare alternatives. Due to the recent saturation of the athletic wear market, they have the ability to choose which product is best for them. ↑ Threat of Substitutes - Low Ø New fashion trends, behavioral shifts in wellness • Clothing is a staple item that is always in demand. ↓ • A worldwide interest in sportswear and wellness continues to rise. ↓ •Overall, the threat of substitutes is extremely low due to the inevitable demand for clothing. Extent of Rivalry - high Ø Adidas, Puma, Nike, ASICS • Under Armour has a plethora of direct competitors with substantial market share and international presence; therefore, they must continue to innovate or else they will lose their competitive position. ↑ • Having many rivals makes it difficult to achieve product differentiation and a unique selling proposition to consumers. ↑ • Due to the rapid growth of the industry, consumers are more price sensitive ever. Companies can no longer rely on athlete partnerships and other traditional marketing tactics to remain profitable. ↑
Firm Performance Analysis INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM
8 of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM Strategic Activity Maps for Nike and Under Armour show the difference in values and tactics of the two firms Nike Under Armour Product mix diversity Focus on performance Focus on innovation Athletes collaborations Inclusion initiatives Global marketing appealing to a broad population Efficiency in supply chain and production Focus on technology and app development Focus on innovation Focus on design Investing in its own stores Digitization to directly reach customers App development Buying tech start-ups Investing into RD Selling inventory at full price Emotional branding Direct to consumers model Nike
9 of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM Under Armour pursues differentiation strategy on a narrow market because of its focus on professional athletes and charging premium prices for its products Cost Leadership Differentiation Broad Market Narrow Market Under Armour Positioning Narrow Market: Under Armour targets professional athletes who prioritize performance and quality over design and style Differentiation: On average, Under Armour charges $15 more than industry average for a pair of sneakers Nike Positioning Broad Market: Nike targets athletes and average population of people who enjoy exercising “in style” Differentiation: On average, Nike charges $40 more than average for a pair of sneakers
10 of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM Under Armour has higher costs and lower prices than Nike, which explains why its profit is lower than the industry average and Nike’s Under Armour spends more than Nike on manufacturing and supply chain, while charging less for the product, which lowers its profits Example of a product: Running Sneakers UA price: $85 UA cost: $40 Nike price: $110 Nike cost: $28 Average price: $70 Average cost: $25 Under Armour Nike Manufacturing and supply chain Design Performance Marketing Π Manufacturing and supply chain Design Performance and Innovation Marketing Π Costs ($25) Price ($70) Manufacturing and supply chain Design Performance and innovation Marketing Π Average
Corporate Strategy INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM
Under Armour’s corporate strategy is consistent with its decisions about vertical and horizontal expansion Under Armour’s business model is to assist clients reach their fitness objectives. It mixes physical and digital goods. Under Armour began as a wholesale clothes company and is now evolving into a digital company that utilizes data to assist clients in achieving their fitness objectives, vertically and horizontally integrating as needed. 11 of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM
Expanding vertically was a mistake for Under Armour and made it rethink its corporate strategy 12 of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM Does expanding vertically make sense? Better Off Test ➢ In terms of digital fitness, at the time, working with myfitnesspal and Endomondo both made sense as these two health tech companies would add a new product element consumers could pair well with the rest of Under Armour’s product mix. Ownership Test ➢ Owning these companies allowed Under Armour to Create an ecosystem that encapsulated not only the consumer and other products, but also the digital technology and data that came with the new purchases. At the time in 2015, this made a lot of sense and passed the ownership test. In 2015 Under Armour wanted to merge physical and digital fitness (spent 700 million in buying new apps) and invested in buying myfitnesspal and endomondo. However, they ended up selling it in 2020 for a loss.
With regard to horizontal scope, Under Armour prefers to partner with and sponsor many organizations, instead of expanding through M&A 13 of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM Does expanding horizontally make sense? Better Off Test ➢ Partnering with numerous division one colleges striking sponsorship deals is a great move for Under Armour, and is definitely better off working with these schools. They are able to sell product in bulk as well as have their logo displayed at thousands of sporting events, creating notoriety for their brand as well. Ownership test ➢ Under Armour doesn’t pass the ownership test since the value in the athlete sponsorships and partnership is way greater than the value of acquiring such organizations, specifically with Stephen Curry. The deal is worth $20 million dollars a year, while Curry and his shoe has brought in $299 million in revenue alone in Q3 of 2020. Under Armour is heavily involved in all aspects of sport and sport performance including apparel, equipment, accessories, footwear, as well as uniforms. The company focuses on college sponsorships (UCLA, UC Berkeley, Cincinnati) as sole provider and distributor of gear, as well as sponsorship of athletes and specific apparel lines for these athletes (Stephen Curry shoes)
Advanced Strategy INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM
14 of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM Under Armour attempts to increase firm profits by influencing public opinion on the topic of forced labor Interests Targets Tools Opportunities Improve Firm 𝚷 And Lower suppliers power Diffuse reputation that UA uses forced labor, which other industry players are lambasted for Public Opinion Investors Human Rights Organizations Other Concerned Stakeholders Issuance of Public Statements & Memos to Portray Concern Over and Intention to Prevent Forced Labor in Their Supply Chain Collaboration With Fair Labor Association (FLA) to Consult on Promoting Ethical Labor in Their Supply Chain
15 of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM Under Armour’s use of global strategy contributes to its successful expansion UA marketing and sales strategies/distribution vary in global markets, but their product lines are either very similar or identical globally. Certain markets may or may not have access to certain products as per Under Armour’s adaptive strategy . Under Armour leans into manufacturing in countries with lower costs of labor and production to maximize profits. The company uses the same/very similar labor forces and supply chain structures across its product lines in global markets. By aggregating the production portion of the supply chain across global markets, Under Armour is able to maintain operational effectiveness through supply chain efficiency. 20 Arbitrage Adaptation Aggregation
16 of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM Under Armour continually updates their product lines with fresh designs and material innovations to remain competitive; this is sustained innovation Time Product/UA Performance Updated Product(s) Under Armour constantly releases new products across multiple genres of sports/activities; product updates are usually sustaintained, rather than disruptive innovations, that use new designs and/or materials. These constant product updates help Under Armour to maintain its competitive advantage over rivals who also share a similar strategy of incremental design and material improvements. Updated Product(s)
17 of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM Under Armour deploys lacklustre CSR initiatives, as do many competing firms Despite consulting with the Fair Labor Association, Sustainable Apparel Coalition, and Environmental Defense Fund Climate Corps*, the company fails to meet its promises. Under Armour continues to transgress against ethical labor practices while also continuing to produce clothing made of unsustainable, non-compostable polymers with high environmental impact both during and after production. For example, Under Armour has issued a statement to investors that they are exploring the use of bio-polymers in their products, but they have not effectively produced such products. *firms consult with Under Armour to help the company ensure ethical labor in its supply chain, minimization of environmental impact, and sustainability/energy efficiency, respectively
Under Armour, “Icing on the Cake” Greenwashing and Imbalanced Priority to Stakeholders Under Armour’s current strategic behavior is in line with both Friedman’s principles of CSR and Freeman’s principles of CSR. Note that behaving within the definitions of these two CSR frameworks does not necessarily mean that CSR is optimal. Looking at Friedman’s CSR framework, Under Armour certainly works to prioritize its profits within legal limits (limits that are sometimes a grey area). The company has employed unethical (forced) labor in the past, and it is unclear whether the company still utilizes unethical labor, regardless of any claims UA makes against it. Of course, the suffering induced by forced/unethical labor is a negative externality that happens to result from driving Under Armour’s profit.. As for Freeman’s stakeholder view framework, Under Armour certainly operates at the center of its shareholders and stakeholders, but it does not allocate its priorities to each group equally. For example, the company places certain suppliers/communities up the supply chain below other stakeholders/shareholders by supporting forced labor and its devastating consequences. The use of unsustainable materials also places certain stakeholders below others, such as in communities that are particularly impacted by textile waste. Under Armour doesn’t operate within the recommendations of Marques and Mintzberg in mind: - Use of unethical labor and unsustainable materials are legal but harm society - “Greenwashing” of these issues without any genuine action against them is a poor CSR practice - Through the lens of Freeman’s stakeholder view, Under Armour wrongly prioritizes certain stakeholders over others - Under Armour does have limited corporate lobbying, which is a good CSR practice - The company is not notably resistant to government regulations that may hurt profit 18 of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM
Issues and Recommendations INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM
#19 of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM We identified three main issues that prevent Under Armour from achieving above industry average profits: High Costs, Competitive Advantage, and CSR Costs that Under Armour allocates on general marketing and design bring down company’s profit and don’t increase WTP since the company focuses on a narrow segment of professional athletes 01 ● It chooses to perform activities targeting the general public and not its target segment ● Marketing and design costs are bringing down the profits instead of increasing WTP 25 Under Armour tries to move into the broad market by marketing their products towards the general public instead of gaining market share in the narrow differentiation market 02 ● Broad market is already saturated ● Too many established players like Nike ● Under Armour should focus on targeting a narrow population segment of professional athletes ● Under Armour and rivals’ supply chain has involved use of forced labor – rivals use lobbying to block legislation that would limit access to forced labor ● Under Armour and many rival firms demonstrate limited use of sustainable materials and commitment to CSR 03 Under Armour’s own CSR goals emphasize the company’s mitigation/elimination attempts with forced labor, the use of more sustainable materials, and more, yet the company never truly acts on its promises
We suggest Under Armour to adopt the following tactics to achieve competitive advantage, increase profitability, and gain market share Rather than adopt hollow CSR initiatives and non-market strategies used by rivals, Under Armour should be a first-mover and disrupt the industry By foregoing lobbying and forced labor altogether, along with implementing sustainable materials, Under Armour can disrupt the sportswear industry and force rivals to respond accordingly to remain competitive. First-mover advantage would be in UA’s favor. 20 of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES IMPLEMENT FIRM RECS. Emphasize athletic performance DNA of the Under Armour brand and cut costs on general marketing and design that is aimed at broad appeal Under Armour should focus on targeting professional athletes and people who appreciate performance over comfort or style, therefore should increase costs of performance and quality control and decrease marketing and design costs. Focus on narrow market differentiation strategy to gain market share Narrow market in Sports Apparel Industry is not as saturated as broad market and Under Armour has already established its presence there, so it should focus on gaining market share there, rather than expanding to already very saturated broad market 1 2 3
21 of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES IMPLEMENT FIRM The profit graph for Under Armour’s CSR strategy shows how Under Armour would be able to establish itself as a leader in CSR and gain market share RECS. Introducing the CSR initiative CSR initiatives catches attention of the public Rivals see the success of the initiative Rivals start to imitate the CSR strategy Under Armour establishes itself as a leader and retains new market share Under Armour’s Firm Profitability Under Armour’s profits go down because of the increase in costs Under Armour’s profits go up because of the increase in revenue Under Armour continues to gain market share because of the public approval Under Armour’s growth in market share slows down, profits stabilize In the long term, Under Armour keeps its market share and popularity as the leader in CSR 01 02 03 04 05 Initial state Long term profitability 1
22 of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES IMPLEMENT FIRM This graph shows how industry and rivals will react to the changes in Under Armour’s strategy RECS. Introducing the CSR initiative CSR initiatives catches attention of the public Rivals see the success of the initiative Rivals start to imitate the CSR strategy Under Armour establishes itself as a leader and retains new market share Average Industry Profitability Industry Profits go down a little because of Under Armour’s profits going down Industry Profits go down because rivals start losing money to Under Armour Industry Profits stabilize Industry Profits go down because rivals start losing profit because of the increase in costs In the long term, Industry profitability grows, but not to its initial stage because the supplier power and cost in the industry now is higher due to the new CSR standards 01 02 03 04 05 Initial state Long term profitability 1
Under Armour should emphasize athletic performance DNA of the Under Armour brand and cut costs on general marketing and design that is aimed at broad appeal 23 of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES IMPLEMENT FIRM RECS. Under Armour Nike Manufacturing and supply chain Design Performance Marketing Π Manufacturing and supply chain Design Performance and Innovation Marketing Costs ($25) Price ($70) Manufacturing and supply chain Design Performance and innovation Marketing Π Average Π By bringing down marketing, design (style) and manufacturing costs, Under Armour would be able to achieve industry average costs. By increasing performance and innovation costs Under Armour would be able to bring up WTP and charge higher prices. Therefore, Under Armour’s profit would significantly increase. 2
Under Armour should focus on narrow market differentiation strategy in order to gain market share 24 of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES IMPLEMENT FIRM RECS. 3 Cost Leadership Differentiation Broad Market Narrow Market Focusing on the narrow market will allow Under Armour to gain the market share there and establish itself as the dominant brand for professional athletes who seek performance over design and style. Under Armour would have to sacrifice the profits it would have made from the products that focus on general public in return of establishing itself as as the best brand for professional athletes and raising its WTP
Thank You - Q&A Begins 25 of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM
Bibliography 1. Becker, Sabine, et al. “Sporting Goods 2022: The New Normal Is Here.” McKinsey & Company, McKinsey & Company, 26 Jan. 2022, https://www.mckinsey.com/industries/retail/our-insights/sporting-goods-2022-the-new-normal-is-here. 2. “Under Armour Industry Report .” Ferrero Opens Online Shop, https://reports.mintel.com/sinatra/oxygen/display/id=1125465. 3. Tighe, D. “Sports Apparel Market Share 2018.” Statista, 26 July 2021, https://www.statista.com/statistics/896595/sports-apparel-market-share-by- company-us/ https://www.underarmour.com/en-us/c/technology/. 4. “Under Armour Warns of Material Impacts Supply Constraints.” Bloomberg.com, Bloomberg, https://www.bloomberg.com/news/articles/2022-02- 11/under-armour-warns-of-material-impacts-from-supply-constraints. 5. “The Strategies of the Sportswear Industry.” GRIN, https://www.grin.com/document/429698. 6. Unglesbee, Ben. “'This Is the Time Where Supply Chain Comes to the Fore': Under Armour's COO on 20 Months of Tumult.” Retail Dive, 6 Dec. 2021, https://www.retaildive.com/news/this-is-the-time-where-supply-chain-comes-to-the-fore-under-armours-coo/610787/. 7. Spooner, Jonathan P. L. “Under Armour's Vertical Integration Strategy vs Nike +.” LinkedIn, LinkedIn, 9 Aug. 2018, https://www.linkedin.com/pulse/under-armours-vertical-integration-strategy-vs-nike-spooner/. 8. Etherington, Darrell. “Under Armour to Sell Myfitnesspal for $345 Million, after Acquiring It in 2015 for $475 Million.” TechCrunch, TechCrunch, 30 Oct. 2020, https://techcrunch.com/2020/10/30/under-armour-to-sell-myfitnesspal-for-345-million-after-acquiring-it-in-2015-for-475-million
Bibliography (cont.) 9. “How Ethical Is under Armour?” Good On You, 11 Feb. 2022, https://goodonyou.eco/how-ethical-is-under-armour/. 10. Creswell, Julie, and Kevin Draper. “How under Armour Lost Its Edge.” The New York Times, The New York Times, 26 Jan. 2020, https://www.nytimes.com/2020/01/26/business/under-armour-struggles.html. 11. “Under Armour Sells off MyFitnessPal for $345M, Will Shut down Endomondo by 2021.” MobiHealthNews, 3 Nov. 2020, https://www.mobihealthnews.com/news/under-armour-sells-myfitnesspal-345m-will-shut-down-endomondo-2021. 12. Forbes, Forbes Magazine, https://www.forbes.com/sites/andriacheng/2019/02/20/under-armours-new-battleground-against-nike-adidas-goes-beyond-the- u-s/?sh=3aee2d3c73ed 13. “Under Armour Low Priced Running Shoes .” Bizjournals.com, https://www.bizjournals.com/baltimore/news/2014/06/09/under-armours-low-priced- running-shoes-drive-sales.html. 14. McLoughlin, Danny. “The Average Price of Nike Shoes.” Athletic Shoe Reviews, 7 Nov. 1970, https://runrepeat.com/average-price-nike-shoes. 15. Says:, Goozpah, et al. “Cost Breakdown of a $100 Nike Shoe.” WearTesters, 10 Feb. 2022, https://weartesters.com/cost-breakdown-100-nike-sneaker/. 16. Linchpin, Author: Team, et al. “Trends Shaping the Athletic Apparel Industry Outlook for 2022 by Linchpin Seo.” Linchpin SEO, 13 Jan. 2022, https://linchpinseo.com/trends-athletic-apparel-industry/. 17. Fox, Stone, “Curry Brand Will Lead Under Armour Higher”, Seeking Alpha, 12 Jan. 2021, https://seekingalpha.com/article/4398594-curry-brand-will-lead- under-armour-higher 18. Smith, Diana, “Casualization of Fashion: incl impact on COVID 19”, Mintel, November 2020, https://reports-mintel- com.ezproxy.bu.edu/display/1058027/?fromSearch=%3Ffreetext%3Dsportswear%2520industry%2520report&resultPosition=1
Bibliography (cont.) 19. Spooner, Jonathan, “Under Armor’s Vertical Integration Strategy vs. Nike+”, LinkedIn, 11 June 2015, https://www.linkedin.com/pulse/under-armours-vertical-integration-strategy- vs-nike-spooner/ 20. Wilen, Holden, “How Under Armour is using technology to help consumers through the pandemic”, Bizjournals, 25 September 2020, https://www.bizjournals.com/baltimore/news/2020/09/25/how-under-armour-used-technology-to-help-consumers.html 21. Becker, Sabine, “Sporting Goods 2022: The New Normal is here”, Mckinsey, 24 January 2022, https://www.mckinsey.com/industries/retail/our-insights/sporting-goods-2022-the- new-normal-is-here 22. Larkin, Catherine, “Under Armour Slides as Supply Issues Need Months to Resolve”, Bloomberg, 11 February 2022, https://www.bloomberg.com/news/articles/2022-02-11/under- armour-warns-of-material-impacts-from-supply-constraints 23. O’Conner, Daniel. “Under the Armor”, TCT Magazine, 3 August 2016, https://www.tctmagazine.com/additive-manufacturing-3d-printing-news/under-the-armour/ 24. Pub, Pam, “What is Under Armour’s Corporate Strategy”, FintechAsia. 15 February 2022, https://fintechasia.net/2022/02/15/what-is-under-armours-corporate-strategy/ 25. BusinessEssay. (2021, January 27). Under Armour Company's Market Expansion Strategy. Retrieved from https://business-essay.com/under-armour-companys-market-expansion- strategy/

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Final Project.pptx

  • 1.
    The Sportswear Industry &Under Armour Benjamin Ajodan, Brendan Flynn, Maria Gorskikh, Justin Nardella, Adam Zhou Boston University Consulting Guild INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM
  • 2.
    1 of 25 INTROINDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM Under Armour is the Fourth Largest company in Athletic Apparel industry ● Average ROE of 5.15% ● Market share of 4.1% 2 Under Armour is an American sports equipment company that manufactures footwear, sports and casual apparel Under Armour’s Key Technology: ○ HeatGear/ ColdGear: Clothing that is specifically designed to more breathable or more insulating depending on the weather. ○ Hydrafuse: Clothing that makes post-workout dry skin less likely to occur. It also helps sweat evaporates it better. ○ Isocool: Clothing that helps excel heat leaving the body. Under Armour is a differentiator in that their prices are higher than some competitors, and utilize a narrow strategy because they are mainly concerned with athletes, as opposed to some competitors in the industry that have ventured into lifestyle branding and have adopted more of a broad strategy.
  • 3.
    We performed anin-depth analysis of why Under Armour is underperforming in a profitable Sports Apparel industry, which is described below and further in this presentation: Due to the firm’s competitive positioning, costs, and activities, Under Armour underperforms its rivals by 8.5% Based on financial reports and Five Forces Analysis, we concluded that the Sports Apparel Industry is favorable Under Armour uses ineffective CSR initiatives and other non-market strategies, which attributes to its underperformance Under Armour made mistakes on a vertical scope in the past, which hurt the firm’s profitability and reputation, but it showed an effective use of horizontal expansion 2 of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM 3 Industry Analysis Firm Analysis Corporate Strategy Analysis Non-market Strategy Analysis
  • 4.
  • 5.
    3 of 25 INTROINDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM Sports Apparel Industry’s Supply Chain consists of Product Development, Manufacturing, Distribution, Retailers, and Consumers ● The sportswear industry is best described as a hybrid; one that intersects gym attire with casual clothing and footwear ● Some of the key players include Nike, Adidas, and Under Armour ● Industry Buyers: Young adults, athletes, health-conscious individuals, large retail chains, mom & pop stores, organizations ● Industry Suppliers: Primarily overseas (Pou Chen, PT Pan Brothers, Fulgent Sun International, Delta Galil, and Eagle Nice)
  • 6.
    4 of 25 INTROINDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM Industry-level trends and changes lower industry profits and make it harder for firms to gain market share Increased Demand for Sustainably Sourced Apparel increases buyer bargaining power 6 Supply chain issues: - Costly air freight - Port congestion More Interest in Fair Labor Promotion - Unions increase suppliers power - Child Labor Issues influence public opinion against the companies in the industry With COVID-19, we will continue to see disruptions on both the demand and supply side for the next three to five years
  • 7.
    5 of 25 INTROINDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM Historical Sports Apparel industry average profits are higher than the US average profits by 3.75% indicating that firms in the industry have favorable conditions Year Firm 1: Nike Firm 2: Adidas Firm 3: Puma Firm 4: Under Armour Firm 5: ASICS Average 2019 50.03% 28.47% 14.7% 4.38% 4.5% 20.42% 2018 23.10% 26.27% 11.3% -2.36% -11.1% 9.44% 2017 31.64% 17.26% 8.2% -2.35% 6.5% 12.25% 2016 31.70% 16.85% 3.8% 10.55% 7.8% 14.14% 2015 28.19% 10.89% 2.3% 15.52% 5.7% 12.52% Average 32.93% 19.95% 8.06% 5.15% 2.68% 13.75%
  • 8.
    6 of 25 INTROINDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM Firms in the Sports Apparel Industry tend to benefit from using various non-market strategies Introducing sustainability initiatives in their product lines and facilities - They try to balance between satisfying consumers and maximizing profits - The issue of greenwashing is present in many company in the industry Lobbying to ease regulations on Forced Labor - Major companies like Nike have been pressing Congress to alter legislation cracking down on imports of goods made with forced labor One of the market inefficiencies includes Pollution Factories use pesticides and herbicides There is a textile pollution after useful life caused by excessive use of polymers in products These initiatives are used to increase industry profits
  • 9.
    7 of 25 INTROINDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM Five Forces analysis shows that Sports Apparel Industry is Favorable Threat of Entry - Low Ø Equinox, Peloton, Lululemon, Athleta • High capital requirements make it extremely difficult for small companies to gain any substantial market share (advertising, R&D, sponsorships); however, established companies such as the ones I listed above could enter with more ease. ↑and ↓ • Economies of scale allows companies in the industry to order goods in massive quantities, giving them a lower cost per unit. New companies will not be able to afford this strategy. ↓ • Strong brand identities in the industry captured customer loyalty and discourage customers from switching to a new alternative. ↓ Power of Suppliers - Medium Ø Pou Chen, PT Pan Brothers, Fulgent Sun International, Delta Galil, and Eagle Nice • Under Armour provides many jobs to countries that they are in direct relation with, which limits supplier bargaining power because many of these employees come from low-income backgrounds and need the money/employment. ↓ • The human rights movement encourages suppliers to speak out against mistreatment in the workplace, putting pressure on Under Armour to either make improvements or relocate. ↑ Power of Buyers - Medium Ø Young adults, athletes, health-conscious individuals, large retail chains, mom & pop stores, organizations • Consumers like to compare alternatives. Due to the recent saturation of the athletic wear market, they have the ability to choose which product is best for them. ↑ Threat of Substitutes - Low Ø New fashion trends, behavioral shifts in wellness • Clothing is a staple item that is always in demand. ↓ • A worldwide interest in sportswear and wellness continues to rise. ↓ •Overall, the threat of substitutes is extremely low due to the inevitable demand for clothing. Extent of Rivalry - high Ø Adidas, Puma, Nike, ASICS • Under Armour has a plethora of direct competitors with substantial market share and international presence; therefore, they must continue to innovate or else they will lose their competitive position. ↑ • Having many rivals makes it difficult to achieve product differentiation and a unique selling proposition to consumers. ↑ • Due to the rapid growth of the industry, consumers are more price sensitive ever. Companies can no longer rely on athlete partnerships and other traditional marketing tactics to remain profitable. ↑
  • 10.
    Firm Performance Analysis INTROINDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM
  • 11.
    8 of 25 INTROINDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM Strategic Activity Maps for Nike and Under Armour show the difference in values and tactics of the two firms Nike Under Armour Product mix diversity Focus on performance Focus on innovation Athletes collaborations Inclusion initiatives Global marketing appealing to a broad population Efficiency in supply chain and production Focus on technology and app development Focus on innovation Focus on design Investing in its own stores Digitization to directly reach customers App development Buying tech start-ups Investing into RD Selling inventory at full price Emotional branding Direct to consumers model Nike
  • 12.
    9 of 25 INTROINDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM Under Armour pursues differentiation strategy on a narrow market because of its focus on professional athletes and charging premium prices for its products Cost Leadership Differentiation Broad Market Narrow Market Under Armour Positioning Narrow Market: Under Armour targets professional athletes who prioritize performance and quality over design and style Differentiation: On average, Under Armour charges $15 more than industry average for a pair of sneakers Nike Positioning Broad Market: Nike targets athletes and average population of people who enjoy exercising “in style” Differentiation: On average, Nike charges $40 more than average for a pair of sneakers
  • 13.
    10 of 25 INTROINDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM Under Armour has higher costs and lower prices than Nike, which explains why its profit is lower than the industry average and Nike’s Under Armour spends more than Nike on manufacturing and supply chain, while charging less for the product, which lowers its profits Example of a product: Running Sneakers UA price: $85 UA cost: $40 Nike price: $110 Nike cost: $28 Average price: $70 Average cost: $25 Under Armour Nike Manufacturing and supply chain Design Performance Marketing Π Manufacturing and supply chain Design Performance and Innovation Marketing Π Costs ($25) Price ($70) Manufacturing and supply chain Design Performance and innovation Marketing Π Average
  • 14.
  • 15.
    Under Armour’s corporatestrategy is consistent with its decisions about vertical and horizontal expansion Under Armour’s business model is to assist clients reach their fitness objectives. It mixes physical and digital goods. Under Armour began as a wholesale clothes company and is now evolving into a digital company that utilizes data to assist clients in achieving their fitness objectives, vertically and horizontally integrating as needed. 11 of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM
  • 16.
    Expanding vertically wasa mistake for Under Armour and made it rethink its corporate strategy 12 of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM Does expanding vertically make sense? Better Off Test ➢ In terms of digital fitness, at the time, working with myfitnesspal and Endomondo both made sense as these two health tech companies would add a new product element consumers could pair well with the rest of Under Armour’s product mix. Ownership Test ➢ Owning these companies allowed Under Armour to Create an ecosystem that encapsulated not only the consumer and other products, but also the digital technology and data that came with the new purchases. At the time in 2015, this made a lot of sense and passed the ownership test. In 2015 Under Armour wanted to merge physical and digital fitness (spent 700 million in buying new apps) and invested in buying myfitnesspal and endomondo. However, they ended up selling it in 2020 for a loss.
  • 17.
    With regard tohorizontal scope, Under Armour prefers to partner with and sponsor many organizations, instead of expanding through M&A 13 of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM Does expanding horizontally make sense? Better Off Test ➢ Partnering with numerous division one colleges striking sponsorship deals is a great move for Under Armour, and is definitely better off working with these schools. They are able to sell product in bulk as well as have their logo displayed at thousands of sporting events, creating notoriety for their brand as well. Ownership test ➢ Under Armour doesn’t pass the ownership test since the value in the athlete sponsorships and partnership is way greater than the value of acquiring such organizations, specifically with Stephen Curry. The deal is worth $20 million dollars a year, while Curry and his shoe has brought in $299 million in revenue alone in Q3 of 2020. Under Armour is heavily involved in all aspects of sport and sport performance including apparel, equipment, accessories, footwear, as well as uniforms. The company focuses on college sponsorships (UCLA, UC Berkeley, Cincinnati) as sole provider and distributor of gear, as well as sponsorship of athletes and specific apparel lines for these athletes (Stephen Curry shoes)
  • 18.
  • 19.
    14 of 25 INTROINDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM Under Armour attempts to increase firm profits by influencing public opinion on the topic of forced labor Interests Targets Tools Opportunities Improve Firm 𝚷 And Lower suppliers power Diffuse reputation that UA uses forced labor, which other industry players are lambasted for Public Opinion Investors Human Rights Organizations Other Concerned Stakeholders Issuance of Public Statements & Memos to Portray Concern Over and Intention to Prevent Forced Labor in Their Supply Chain Collaboration With Fair Labor Association (FLA) to Consult on Promoting Ethical Labor in Their Supply Chain
  • 20.
    15 of 25 INTROINDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM Under Armour’s use of global strategy contributes to its successful expansion UA marketing and sales strategies/distribution vary in global markets, but their product lines are either very similar or identical globally. Certain markets may or may not have access to certain products as per Under Armour’s adaptive strategy . Under Armour leans into manufacturing in countries with lower costs of labor and production to maximize profits. The company uses the same/very similar labor forces and supply chain structures across its product lines in global markets. By aggregating the production portion of the supply chain across global markets, Under Armour is able to maintain operational effectiveness through supply chain efficiency. 20 Arbitrage Adaptation Aggregation
  • 21.
    16 of 25 INTROINDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM Under Armour continually updates their product lines with fresh designs and material innovations to remain competitive; this is sustained innovation Time Product/UA Performance Updated Product(s) Under Armour constantly releases new products across multiple genres of sports/activities; product updates are usually sustaintained, rather than disruptive innovations, that use new designs and/or materials. These constant product updates help Under Armour to maintain its competitive advantage over rivals who also share a similar strategy of incremental design and material improvements. Updated Product(s)
  • 22.
    17 of 25 INTROINDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM Under Armour deploys lacklustre CSR initiatives, as do many competing firms Despite consulting with the Fair Labor Association, Sustainable Apparel Coalition, and Environmental Defense Fund Climate Corps*, the company fails to meet its promises. Under Armour continues to transgress against ethical labor practices while also continuing to produce clothing made of unsustainable, non-compostable polymers with high environmental impact both during and after production. For example, Under Armour has issued a statement to investors that they are exploring the use of bio-polymers in their products, but they have not effectively produced such products. *firms consult with Under Armour to help the company ensure ethical labor in its supply chain, minimization of environmental impact, and sustainability/energy efficiency, respectively
  • 23.
    Under Armour, “Icingon the Cake” Greenwashing and Imbalanced Priority to Stakeholders Under Armour’s current strategic behavior is in line with both Friedman’s principles of CSR and Freeman’s principles of CSR. Note that behaving within the definitions of these two CSR frameworks does not necessarily mean that CSR is optimal. Looking at Friedman’s CSR framework, Under Armour certainly works to prioritize its profits within legal limits (limits that are sometimes a grey area). The company has employed unethical (forced) labor in the past, and it is unclear whether the company still utilizes unethical labor, regardless of any claims UA makes against it. Of course, the suffering induced by forced/unethical labor is a negative externality that happens to result from driving Under Armour’s profit.. As for Freeman’s stakeholder view framework, Under Armour certainly operates at the center of its shareholders and stakeholders, but it does not allocate its priorities to each group equally. For example, the company places certain suppliers/communities up the supply chain below other stakeholders/shareholders by supporting forced labor and its devastating consequences. The use of unsustainable materials also places certain stakeholders below others, such as in communities that are particularly impacted by textile waste. Under Armour doesn’t operate within the recommendations of Marques and Mintzberg in mind: - Use of unethical labor and unsustainable materials are legal but harm society - “Greenwashing” of these issues without any genuine action against them is a poor CSR practice - Through the lens of Freeman’s stakeholder view, Under Armour wrongly prioritizes certain stakeholders over others - Under Armour does have limited corporate lobbying, which is a good CSR practice - The company is not notably resistant to government regulations that may hurt profit 18 of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM
  • 24.
    Issues and Recommendations INTROINDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM
  • 25.
    #19 of 25 INTROINDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM We identified three main issues that prevent Under Armour from achieving above industry average profits: High Costs, Competitive Advantage, and CSR Costs that Under Armour allocates on general marketing and design bring down company’s profit and don’t increase WTP since the company focuses on a narrow segment of professional athletes 01 ● It chooses to perform activities targeting the general public and not its target segment ● Marketing and design costs are bringing down the profits instead of increasing WTP 25 Under Armour tries to move into the broad market by marketing their products towards the general public instead of gaining market share in the narrow differentiation market 02 ● Broad market is already saturated ● Too many established players like Nike ● Under Armour should focus on targeting a narrow population segment of professional athletes ● Under Armour and rivals’ supply chain has involved use of forced labor – rivals use lobbying to block legislation that would limit access to forced labor ● Under Armour and many rival firms demonstrate limited use of sustainable materials and commitment to CSR 03 Under Armour’s own CSR goals emphasize the company’s mitigation/elimination attempts with forced labor, the use of more sustainable materials, and more, yet the company never truly acts on its promises
  • 26.
    We suggest UnderArmour to adopt the following tactics to achieve competitive advantage, increase profitability, and gain market share Rather than adopt hollow CSR initiatives and non-market strategies used by rivals, Under Armour should be a first-mover and disrupt the industry By foregoing lobbying and forced labor altogether, along with implementing sustainable materials, Under Armour can disrupt the sportswear industry and force rivals to respond accordingly to remain competitive. First-mover advantage would be in UA’s favor. 20 of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES IMPLEMENT FIRM RECS. Emphasize athletic performance DNA of the Under Armour brand and cut costs on general marketing and design that is aimed at broad appeal Under Armour should focus on targeting professional athletes and people who appreciate performance over comfort or style, therefore should increase costs of performance and quality control and decrease marketing and design costs. Focus on narrow market differentiation strategy to gain market share Narrow market in Sports Apparel Industry is not as saturated as broad market and Under Armour has already established its presence there, so it should focus on gaining market share there, rather than expanding to already very saturated broad market 1 2 3
  • 27.
    21 of 25 INTROINDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES IMPLEMENT FIRM The profit graph for Under Armour’s CSR strategy shows how Under Armour would be able to establish itself as a leader in CSR and gain market share RECS. Introducing the CSR initiative CSR initiatives catches attention of the public Rivals see the success of the initiative Rivals start to imitate the CSR strategy Under Armour establishes itself as a leader and retains new market share Under Armour’s Firm Profitability Under Armour’s profits go down because of the increase in costs Under Armour’s profits go up because of the increase in revenue Under Armour continues to gain market share because of the public approval Under Armour’s growth in market share slows down, profits stabilize In the long term, Under Armour keeps its market share and popularity as the leader in CSR 01 02 03 04 05 Initial state Long term profitability 1
  • 28.
    22 of 25 INTROINDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES IMPLEMENT FIRM This graph shows how industry and rivals will react to the changes in Under Armour’s strategy RECS. Introducing the CSR initiative CSR initiatives catches attention of the public Rivals see the success of the initiative Rivals start to imitate the CSR strategy Under Armour establishes itself as a leader and retains new market share Average Industry Profitability Industry Profits go down a little because of Under Armour’s profits going down Industry Profits go down because rivals start losing money to Under Armour Industry Profits stabilize Industry Profits go down because rivals start losing profit because of the increase in costs In the long term, Industry profitability grows, but not to its initial stage because the supplier power and cost in the industry now is higher due to the new CSR standards 01 02 03 04 05 Initial state Long term profitability 1
  • 29.
    Under Armour shouldemphasize athletic performance DNA of the Under Armour brand and cut costs on general marketing and design that is aimed at broad appeal 23 of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES IMPLEMENT FIRM RECS. Under Armour Nike Manufacturing and supply chain Design Performance Marketing Π Manufacturing and supply chain Design Performance and Innovation Marketing Costs ($25) Price ($70) Manufacturing and supply chain Design Performance and innovation Marketing Π Average Π By bringing down marketing, design (style) and manufacturing costs, Under Armour would be able to achieve industry average costs. By increasing performance and innovation costs Under Armour would be able to bring up WTP and charge higher prices. Therefore, Under Armour’s profit would significantly increase. 2
  • 30.
    Under Armour shouldfocus on narrow market differentiation strategy in order to gain market share 24 of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES IMPLEMENT FIRM RECS. 3 Cost Leadership Differentiation Broad Market Narrow Market Focusing on the narrow market will allow Under Armour to gain the market share there and establish itself as the dominant brand for professional athletes who seek performance over design and style. Under Armour would have to sacrifice the profits it would have made from the products that focus on general public in return of establishing itself as as the best brand for professional athletes and raising its WTP
  • 31.
    Thank You - Q&A Begins 25of 25 INTRO INDUSTRY CORPORATE STRATEGY ADVANCED STRATEGY ISSUES RECS. IMPLEMENT FIRM
  • 32.
    Bibliography 1. Becker, Sabine,et al. “Sporting Goods 2022: The New Normal Is Here.” McKinsey & Company, McKinsey & Company, 26 Jan. 2022, https://www.mckinsey.com/industries/retail/our-insights/sporting-goods-2022-the-new-normal-is-here. 2. “Under Armour Industry Report .” Ferrero Opens Online Shop, https://reports.mintel.com/sinatra/oxygen/display/id=1125465. 3. Tighe, D. “Sports Apparel Market Share 2018.” Statista, 26 July 2021, https://www.statista.com/statistics/896595/sports-apparel-market-share-by- company-us/ https://www.underarmour.com/en-us/c/technology/. 4. “Under Armour Warns of Material Impacts Supply Constraints.” Bloomberg.com, Bloomberg, https://www.bloomberg.com/news/articles/2022-02- 11/under-armour-warns-of-material-impacts-from-supply-constraints. 5. “The Strategies of the Sportswear Industry.” GRIN, https://www.grin.com/document/429698. 6. Unglesbee, Ben. “'This Is the Time Where Supply Chain Comes to the Fore': Under Armour's COO on 20 Months of Tumult.” Retail Dive, 6 Dec. 2021, https://www.retaildive.com/news/this-is-the-time-where-supply-chain-comes-to-the-fore-under-armours-coo/610787/. 7. Spooner, Jonathan P. L. “Under Armour's Vertical Integration Strategy vs Nike +.” LinkedIn, LinkedIn, 9 Aug. 2018, https://www.linkedin.com/pulse/under-armours-vertical-integration-strategy-vs-nike-spooner/. 8. Etherington, Darrell. “Under Armour to Sell Myfitnesspal for $345 Million, after Acquiring It in 2015 for $475 Million.” TechCrunch, TechCrunch, 30 Oct. 2020, https://techcrunch.com/2020/10/30/under-armour-to-sell-myfitnesspal-for-345-million-after-acquiring-it-in-2015-for-475-million
  • 33.
    Bibliography (cont.) 9. “HowEthical Is under Armour?” Good On You, 11 Feb. 2022, https://goodonyou.eco/how-ethical-is-under-armour/. 10. Creswell, Julie, and Kevin Draper. “How under Armour Lost Its Edge.” The New York Times, The New York Times, 26 Jan. 2020, https://www.nytimes.com/2020/01/26/business/under-armour-struggles.html. 11. “Under Armour Sells off MyFitnessPal for $345M, Will Shut down Endomondo by 2021.” MobiHealthNews, 3 Nov. 2020, https://www.mobihealthnews.com/news/under-armour-sells-myfitnesspal-345m-will-shut-down-endomondo-2021. 12. Forbes, Forbes Magazine, https://www.forbes.com/sites/andriacheng/2019/02/20/under-armours-new-battleground-against-nike-adidas-goes-beyond-the- u-s/?sh=3aee2d3c73ed 13. “Under Armour Low Priced Running Shoes .” Bizjournals.com, https://www.bizjournals.com/baltimore/news/2014/06/09/under-armours-low-priced- running-shoes-drive-sales.html. 14. McLoughlin, Danny. “The Average Price of Nike Shoes.” Athletic Shoe Reviews, 7 Nov. 1970, https://runrepeat.com/average-price-nike-shoes. 15. Says:, Goozpah, et al. “Cost Breakdown of a $100 Nike Shoe.” WearTesters, 10 Feb. 2022, https://weartesters.com/cost-breakdown-100-nike-sneaker/. 16. Linchpin, Author: Team, et al. “Trends Shaping the Athletic Apparel Industry Outlook for 2022 by Linchpin Seo.” Linchpin SEO, 13 Jan. 2022, https://linchpinseo.com/trends-athletic-apparel-industry/. 17. Fox, Stone, “Curry Brand Will Lead Under Armour Higher”, Seeking Alpha, 12 Jan. 2021, https://seekingalpha.com/article/4398594-curry-brand-will-lead- under-armour-higher 18. Smith, Diana, “Casualization of Fashion: incl impact on COVID 19”, Mintel, November 2020, https://reports-mintel- com.ezproxy.bu.edu/display/1058027/?fromSearch=%3Ffreetext%3Dsportswear%2520industry%2520report&resultPosition=1
  • 34.
    Bibliography (cont.) 19. Spooner,Jonathan, “Under Armor’s Vertical Integration Strategy vs. Nike+”, LinkedIn, 11 June 2015, https://www.linkedin.com/pulse/under-armours-vertical-integration-strategy- vs-nike-spooner/ 20. Wilen, Holden, “How Under Armour is using technology to help consumers through the pandemic”, Bizjournals, 25 September 2020, https://www.bizjournals.com/baltimore/news/2020/09/25/how-under-armour-used-technology-to-help-consumers.html 21. Becker, Sabine, “Sporting Goods 2022: The New Normal is here”, Mckinsey, 24 January 2022, https://www.mckinsey.com/industries/retail/our-insights/sporting-goods-2022-the- new-normal-is-here 22. Larkin, Catherine, “Under Armour Slides as Supply Issues Need Months to Resolve”, Bloomberg, 11 February 2022, https://www.bloomberg.com/news/articles/2022-02-11/under- armour-warns-of-material-impacts-from-supply-constraints 23. O’Conner, Daniel. “Under the Armor”, TCT Magazine, 3 August 2016, https://www.tctmagazine.com/additive-manufacturing-3d-printing-news/under-the-armour/ 24. Pub, Pam, “What is Under Armour’s Corporate Strategy”, FintechAsia. 15 February 2022, https://fintechasia.net/2022/02/15/what-is-under-armours-corporate-strategy/ 25. BusinessEssay. (2021, January 27). Under Armour Company's Market Expansion Strategy. Retrieved from https://business-essay.com/under-armour-companys-market-expansion- strategy/

Editor's Notes

  • #3 This analysis of Under Armour is to help future investors understand the strengths and weaknesses of this firm in the athletic apparel industry and provide a recommendation for strategy improvement. Under Armour is the third largest athletic apparel company in the industry. Average ROE of 16.57% Under Armour is a differentiator in that their prices are higher than some competitors, and utilize a narrow strategy because they are mainly concerned with athletes, as opposed to some competitors in the industry that have ventured into lifestyle branding and have adopted more of a broad strategy. Under Armour’s Key Technology: HeatGear/ ColdGear: Clothing that is specifically designed to more breathable or more insulating depending on the weather. Hydrafuse: Clothing that makes post-workout dry skin less likely to occur. It also helps sweat evaporates it better. Isocool: Clothing that helps excel heat leaving the body.
  • #7 https://linchpinseo.com/trends-athletic-apparel-industry/ https://www.mckinsey.com/industries/retail/our-insights/sporting-goods-2022-the-new-normal-is-here https://www.bloomberg.com/news/articles/2022-02-11/under-armour-warns-of-material-impacts-from-supply-constraints
  • #9 https://www.grin.com/document/429698
  • #13 https://www.bizjournals.com/baltimore/news/2014/06/09/under-armours-low-priced-running-shoes-drive-sales.html https://runrepeat.com/average-price-nike-shoes https://weartesters.com/cost-breakdown-100-nike-sneaker/
  • #14 2 lines - cost and price explain activities , description of activities, replacing the graph on the right
  • #17 https://www.linkedin.com/pulse/under-armours-vertical-integration-strategy-vs-nike-spooner/ https://fintechasia.net/2022/02/15/what-is-under-armours-corporate-strategy/ https://business-essay.com/under-armour-companys-market-expansion-strategy/
  • #20 https://about.underarmour.com/news/2020/08/under-armour-statement-on-xinjiang https://about.underarmour.com/community/sustainability
  • #21 https://english.sakshi.com/news/business/underdog-athletics-announces-exclusive-distribution-and-licensing-rights-under-armour
  • #22 These are SUSTAINING innovations in materials/design. Add some examples of new materials/designs with pics, text, etc.
  • #23 https://about.underarmour.com/community/sustainability Suggesting they are “looking into” using bio-polymers: http://investor.underarmour.com/static-files/ec55b9c6-e773-415c-b487-b7de38531361
  • #24 https://www.reuters.com/article/us-usa-china-rights/white-house-watching-china-closely-on-forced-labor-after-u-s-firms-pressured-idUSKBN2BI2OL
  • #26 https://www.nytimes.com/2020/01/26/business/under-armour-struggles.html https://www.mobihealthnews.com/news/under-armour-sells-myfitnesspal-345m-will-shut-down-endomondo-2021 https://www.forbes.com/sites/andriacheng/2019/02/20/under-armours-new-battleground-against-nike-adidas-goes-beyond-the-u-s/?sh=3aee2d3c73ed Decision-making skills were based on instinct rather than consumer analysis of the market. After the Curry 1 shoes were sold out, Under Armour doubled production of the Curry 2. Top executives forecasted that this would cause a glut in their inventory, but the chief executive Mr. Miller continued with the doubled production. As forecasted, most of these shoes ended up on sales racks (didn’t sell) As seen in the exhibit on the right, the value captured by the buyer was significantly higher with the Curry 2 than the Curry 1. The value captured by the seller is smaller with the Curry 2 because the price of this shoe had to be cut in order to get rid of their back-up of this product. The value created by the seller with the Curry 2 is significantly smaller than the Curry 1. Other examples of poor decision-making skills include the slip-on woman’s shoe “DJ” and expansion into an unfamiliar NCAA atmosphere.
  • #27 https://www.investopedia.com/articles/markets/012616/adidas-vs-nike-vs-under-armour-which-2016-nkeua.asp
  • #30 https://www.investopedia.com/articles/markets/012616/adidas-vs-nike-vs-under-armour-which-2016-nkeua.asp
  • #31 https://www.investopedia.com/articles/markets/012616/adidas-vs-nike-vs-under-armour-which-2016-nkeua.asp