CASE STUDY

Nonesa, Quennie Sandra L.;

Lasmarias, Mylene P.

Paracuelles, Jay Mark T.

Sayson, Caesar Neil B.

VISIONTO EMPOWERATHLETES EVERYWHERE.

TO MAKE ALL ATHLETES BETTERTHROUGH PASSION, DESIGN AND RELENTLESS PURSUIT OF INNOVATION.

MISSION

ON THE HUNT. Also in 2007, Under Armour put out a hunting and fishing line, including camo gear, hunting gloves, and leggings. This Ridge Reaper jacket is from the 2011 line.

IT ALL STARTED WITH A T-SHIRT Since creating his

company from one shirt in 1996, Kevin Plank has expanded Under Armour into footwear, women’s apparel, and even hunting and fishing wear. At left: the original compression T-shirt Plank to NFL equipment managers.

HOT TO COLD. The original shirt kept players cool as they sweated; in 1997 UA came out with ColdGear, made to do the opposite: insulate in the cold.

HELLO, LADIESIn 2005, UA launched women’s apparel. Items like Duplicity Bra were meant to conform well to the female body

SHOES. In 2007, UA entered footwear, a notoriously competitive market. It began with football cleats like the Click Clack, but now makes everything to high-tops.

SUPER BOWL. In 2008, UA had its first Super Bowl commercial featuring almost every athlete on the UA roster.

Sales Chart

20042005

20062007

2008

0

100

200

300

400

500

600

700

800

Year

Sale

s (i

n m

illio

ns)

2005 2006 20070

100

200

300

400

500

600

700

OtherCanadaUS

Net Sales by RegionN

et

Sale

s (i

n M

illio

n)

Year

2005 2006 20070%

10%20%30%40%50%60%70%80%90%

100%

OtherCanadaUS

Net Sales by Region

OBSERVATION

Net Sales to other countries increases for an average of 94% per year

4%7%

5%

57%

19%

8%

License Rev.FootwearAccessoriesMen'sWomen'sYouthLicense Rev.FootwearAccessories

Sales by Product CategoryYear 2007

2005 2006 20070%

10%20%30%40%50%60%70%80%90%

100%

YouthWomenMen

Apparel Net Sales

Year

OBSERVATION

Net Sales of women’s apparel increases for an average of 47.7% per year.

Sales Chart

2004 2005 2006 2007 2008 2009

0

100

200

300

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900

Year

Sale

s (i

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Product Positioning Map

High Price

Low Quality

High Quality

Low Price

UNDER ARMOUR INDUSTRY

Gross Profit Margin 50.10% 37.50%

Return on Equity (ROE) 18.18% 10.3%

Return on Assets (ROA) 13.47% 3.8%

Total Debt/Equity 0.03 0.41

Financial Ratios

The previously mentioned financial ratios show that Under Armour is in a good financial position to pursue International Expansion. Currently:

Not highly financed through debt

Company is able to pay short-term liabilities as determined by their positive working capital

Highly efficient production processes

Highly profitable company

Efficient use of assets by management to generate earnings as shown by ROA

Interpretation2008

Organizational Structure

CEO Kevin Plank

DirectorDouglas Coltharp

DirectorHarvey Sanders

DirectorByron Adams

DirectorAnthony Deering

DirectorBill McDermott

DirectorThomas Sippel

Lead DirectorA. Krongard

CFOBrad Dickerson

COOKip Fulks

Supply ChainJames H. Hardy, Jr.

President, InternationalKarl-Heinz Maurath

Executive VP- Global marketingMatthew C. Mirchin

Senior VP- Sales, NMAdam Peake

President, North AmericaHenry B. Stafford

Marketing Manager

HR Manager

Financial Manager

Sales manager

Production Manager

Regional Operations Head

Inbound Logistics

Manufacturing

Outbound Logistics

Marketing & Sales

After-sale Services

Value-Chain Analysis

MODERATE MODERATE MODERATE MODERATE STRONG

Third Party Third PartyThird Party

Currently, UA has many sponsorships and endorsements

UA has great reputation for customer service and after-sale service

Strength

Elements

Activities

Support Activities

Strong Firm Infrastructure

Limited Number of Highly Trained Employees

Very Creative Engineering

IFE MATRIXStrength Rating Weight Weighted score

Good leadership 4 .08 .32

SAP system 3 .05 .15

Core competence in Innovation 4 .06 .24

High Quality Apparel 4 .07 .28

Increase in Sales Every Year 4 .07 .28

Brand Loyalty 4 .05 .20

Wide Range of Apparel 3 .05 .15

Athlete and Team Sponsorships and Endorsements 3 .05 .15

Very Intelligent and Efficient R&D Team 3 .06 .18

Brand Equity 4 .06 .24Weakness Rating Weight Weighted scoreSmall Total Sales and Net Income compared to Nike/Adidas 2 .06 .12

Heavily Dependent on Domestic Market 1 .07 .07

High Prices 2 .05 .10

Not a Synergistic Marketing Campaign 2 .05 .10

Heavily Dependent on PA for Sales (80%+) 1 .07 .07

Target Male Market more than Female Market 2 .05 .1027% of Sales come from 2 Distributors; Dick’s and The Sporting Authority 1 .05 .05

Total = 2.80

EFE MATRIXOpportunity Rating Weight Weighted

Potential market for basketball shoes 2 .04 .08

Increase in Retail Sales 2 .08 .16

Growth of PA Industry (Domestic and International) 3 .06 .18

Female Market 3 .08 .24

Consumers focus on Quality, not Price 4 .07 .28

Corporate Social Responsibility 3 .06 .18

Economic recovery 2 .06 .12

Consumers becoming more health conscious 4 .05 .20

Sport participation is a key aspect of U.S. culture 3 .05 .15

Increase in sports participation in emerging markets 3 .06 .18

E-commerce and media 3 .05 .15

Threat Rating Weight Weighted

Too much dependence on few third-party suppliers 1 .07 .07

Lack of Proprietary Product Rights 2 .08 .16

Increase in cost of raw materials and resources; shipping costsi.e. cotton, all man made fibers, and the big one being OIL/GAS 1 .06 .06

Inflation in China Increasing 1 .04 .04

Chinese Labor Costs Increasing 1 .04 .04

Obesity Rates in U.S. 1 .05 .05

Total = 2.34

?How will Under Armour stay on top of its game?

Strengths1. Good Leadership2. SAP system3. Core competence in Innovation4. High Quality Apparel5. Increase in Sales every Year6. Brand Loyalty7. Wide Range of Apparel8. Athletes and Team Sponsorships9. Intelligent and Efficient R&D Team10. Brand Equity

Opportunities1. Potential Market for Basketball shoes2. Increase in Retail Sales3. Growth of PA Industry (Domestic and International)4. Female Market5. Consumers focus on Quality, not Price6. Economic Recovery7. Corporate Social Responsibility8. Consumers becoming more health conscious9. Sport participation in U.S. culture10. Increase in sports participation in emerging markets11. E-commerce and media

Strategy Recommendations

1. Continue Developing Innovative Products to existing and emerging markets(S3,010,08)

2. Sponsorship as a form of advertisement and promotion. (S8,01,09)

3. Increase advertising using social networking and infomercials (S8,01,011)

SWOTanalysi

s

Weaknesses1. Small Total Sales and Net Income

compared to rivals2. Dependent on domestic market3. High prices4. Not a Synthetic Marketing Campaign5. Heavily Dependent on PA for Sales (80%

+)6. Target Male Market more than Female

Market7. 27% of Sales come from 2 Distributors;

Dick’s and The Sporting Authority

Opportunities1. Potential market for basketball shoes2. Increase in Retail Sales3. Growth of PA Industry (Domestic and International)4. Female Market5. Consumers focus on Quality, not Price6. Economic Recovery7. Corporate Social Responsibility8. Consumers becoming more health conscious9. Sport participation is a key aspect of U.S. culture10. Increase in sports participation in emerging markets11. E-commerce and media

Strategy Recommendations

1. Expand into International Market (W2,02,010)

2. Establish larger female market (W6,04)

3. Focus on basketball foot wear to increase sales on shoes ( W5,01)

SWOTanalysi

s

Strengths1. Good Leadership2. SAP system3. Core competence in Innovation4. High Quality Apparel5. Increase in Sales every Year6. Brand Loyalty7. Wide Range of Apparel8. Athletes and Team Sponsorships9. Intelligent and Efficient R&D Team10. Brand Equity

Threats

1. Too much dependence on few third-party suppliers

2. Lack of Proprietary Product Rights3. Increase in cost of raw materials and

resources; shipping costs4. Inflation in China Increasing5. Chinese Labor Costs Increasing6. Obesity Rates in U.S.

Strategy Recommendations

1. Continue on establishing premium branding image. (s3,s4,s6,t3)

2. If possible, avoid product innovation requiring much labor intensive production and high material costs than the current production system. (s3, s9, t4, t5)

3. Seek for other trusted suppliers offering standard quality to strengthen the firms supply chain and achieve greater production. (t1, t2, s7, s5)

SWOTanalysi

s

Weaknesses1. Small Total Sales and Net Income compared to

rivals2. Dependent on domestic market3. High prices4. Not a Synthetic Marketing Campaign5. Heavily Dependent on PA for Sales (80%+)6. Target Male Market more than Female Market7. 27% of Sales come from 2 Distributors; Dick’s

and The Sporting Authority

Threats1. Too much dependence on few third-

party suppliers2. Lack of Proprietary Product Rights3. Increase in cost of raw materials and

resources; shipping costs4. Inflation in China Increasing5. Chinese Labor Costs Increasing6. Obesity Rates in U.S.

Strategy Recommendations

1. Expand product line and further diversify to be distributed into wide range of possible target markets to spread fixed component of labor costs. (w1,w2,w5,w6, w7 & t3, t4, t5)

2. Maintain high product quality to compensate high selling price and at least maintain or increase sales. (w1, w3, t2,t3,t4)

3. Consider marketing on fitness activities involving women rather than focusing on athletic activities alone. (w4, w6, t6)

SWOTanalysi

s

Product BCG Matrix

Market ShareHigh Low

Market Growth

High

Low

Star ?Cash Cow Dog

Performance Apparel

Footwear

Accessories

Question Mark

Strong Competitive

Position

Weak Competitive

Position

SlowMarketGrowth

RapidMarketGrowth

Grand Strategy MATRIX

Market development Market penetration

Product developmentForward integration

!Major Problems:

1. Lack of Proprietary Product Rights

2. Concentration to Domestic Sales

3. Too much Dependence on third-party suppliers

Lack of Proprietary Product Rights

Problem:

Pros

 Gives the legal right to stop others  using your invention Maintain an innovative brand image The patent holder can license the patent to others for use and earn income

Takes time and money to establishNo assurance of greater economic returnHigh chances in getting into patent infringement

Cons

Due to constraints, the company would be in a difficult situation in obtaining proprietary property rights. Instead, they should establish a secured relationship with its suppliers and producers to whom the quality of final product depends.

This involves constant monitoring, evaluation and upkeep of security among their products.

Lack of Proprietary Product Rights

Problem:

Recommendations:

Increase Efforts Toward International Markets

Establish retail outlets to Other Foreign CountriesSponsorship to international sports’ teamsIncrease international advertisingPartner with international companies in the same industry

Problem:Concentration to Domestic

Sales

Recommendations:

Observing Trends:Establish Retail Outlets to Foreign markets

Apparel Sales

Observing Trends:Establish Retail Outlets to Foreign markets

Observing Trends:Establish Retail Outlets to Foreign markets

Observing Trends:Establish Retail Outlets to Foreign markets

Implementation

Establish Long-Term Expansion Program regarding Latin America & Asia Expansion

Open-up Retail outlets in China

Open-up Retail outlets in Malaysia/India/Singapore

Establish Retail outlets in Brazil

Establish Apparel Production Facilities(India/China)

Sponsorship to China Football League

2009 2010 2011 2012 2013 2014

Sponsorship to Brazilian National Sports Teams

Put-up Asian corporate headquarter

Establish Retail Outlets to Foreign markets

Increase international advertising

“INFOMERCIALS”

Implementation:

Partner with international companies & Third-Party Distributors

Implementation:

Too much Dependence on few third-party suppliers

With existing suppliers:Maintain good relationshipEstablish long-term contracts

With new efforts:Find potential and reliable supplier

Problem:

Recommendations:

Find potential and reliable supplier

Allow suppliers to participate in the company's corporate social responsibilities’ activitiesEstablish close communication with firm's suppliers

Seek new potential suppliers and evaluate the quality of products that they supply.If possible, research on the most feasible suppliers in terms of its geographic location

Implementation:

Other Strategic Recommendations:

Consider increased marketing efforts for women's product category Increase Footwear Sales by giving more focus toward the Basketball-oriented market Host more local marathons

Projected Gross Profit

20052006

20072008

20092010

20112012

20132014

20152016

0

200000

400000

600000

800000

1000000

1200000

1400000

Series 1

20052006

20072008

20092010

20112012

20132014

0

200000

400000

600000

800000

1000000

1200000

1400000

Gross ProfitOperating Expense

Gross Profit Analysis

http://investor.underarmour.com/annuals.cfmhttps://www.facebook.com/underarmourhttp://www.uabiz.com/company/managementTeam.cfmhttp://blog.euromonitor.com/2013/03/new-apparel-research-part-1-a-focus-on-geographies.htmlhttp://www.atkearney.com/consumer-products-retail/global-retail-development-index/full-report/-/asset_publisher/oPFrGkbIkz0Q/content/2013-global-retail-development-index/10192http://shrinkthatfootprint.com/average-electricity-prices-kwhhttp://blog.euromonitor.com/2013/03/new-apparel-research-part-1-a-focus-on-geographies.html

References:

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