BA 680 Strategic Organizational Leadership

Strategic Analysis: Under Armour

Submitted to: Dr. John Cirone

By: Timothy Buana

April 20, 2016

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Strategic Analysis: Under Armour

1. Company Choice: Under Armour

2. Company Background

a. Company Overview

Under Armour is a company

started in 1996 and mainly sells sporting

goods ranging from but not limited to

apparel to sports equipment. Under Armour

started from the idea of Kevin Plank, current

Under Armour CEO and a former University

of Maryland football special teams’ captain, to create revolutionary sport apparel because he

is tired of having to change his cotton T-shirts that are soaked with sweat multiple times a

day because of Football practice. He got his inspiration from the compression shorts that he

wore on training and he noticed that the compression shorts did not absorb sweat and actually

was comfortable. He then got the idea of creating apparels that are designed to be the

solution of this problem, apparels that will stay cool and dry even in the heat. He continued

his research of using synthetic fabrics as the clothing material and it paid its dividend. He

named the product #0037 or the Under Armour HeatGear®, keeping its wearer comfortable

despite of the heat and sweat.1

Plank started this business in his grandmother's basement back in 1996 in the

Washington D.C. area. The first time he started this business, he uses the connections that

he had through playing sports. Having friends who were going pro to the NFL (National

Football League) surely was an advantage Plank has during his early days in the business.

The first sales he had done amounted up to $17,000 by the end of 1996, and this sale was

generated through his effort of traveling up and down the east coast to introduce his

innovative products to the potential buyers.2 In the end of 1998, the growth of the company

forced Plank to move from his grandmother’s basement to the new Under Armour

headquarter and warehouse in Baltimore, MD.

Source: http://www.UnderArmour.com

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The brand took

off when Plank decided to

take part in supplying

product needed in a movie

titled “Any Given Sunday”

in 1999. He then used the

momentum and bought a

print advertising space in

the ESPN the magazine.

This move was proven to be

successful seeing from the

$750,000 increase in sales

that year.3 Based on this

growth and positive feedbacks from the customers, Plank started to expand Under Armour

market to another level by entering the women product line in 2003, and the athletic

footwear market in 2006. The company went to public in 2005 and became the first U.S.

based company in the past 5 years that saw at least 100% rise during the first day of the

IPO.4 Under Armour stocks at one point was traded at $31, more than double of its offering

price at $13. Under Armour generated $3.963 billion in revenue in 2015, seeing a 28.6% of

increase from the previous year.5 Under Armour is now trying to generate more revenue

outside of the U.S., just like what its biggest competitor, Nike, is doing.

b. Company Foundations

Vision: “EMPOWER ATHLETES EVERYWHERE”6

Mission: “MAKE ALL ATHLETES BETTER THROUGH PASSION, DESIGN,

AND THE RELENTLESS PURSUIT OF INNOVATION”7

Values: In order to fulfill the vision and mission that the Under Armour has as a great

company, Under Armour creates 4 values that it expects its employee to hold dearly.

The 4 values are:

o “Makes Great Product

Kevin Plank, CEO and Founder of Under Armour

Source: http://www.UnderArmour.com

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o Tell a Great Story

o Provide Great Service

o Build a Great Team”8

Basing on the values that Under Armour holds, the company created an “I Will”

campaign that empowers its employees to pursue the company’s goals. The “I Will”

campaign consists of these 4 wills:

o “Act Like a Global Citizen

Cross timezones, and encourage the diverse multi-cultural energy and global

ambition of Our Brand. Regardless of where you work or how much you travel,

take action with an international mindset and a passion for bringing our

message to all athletes everywhere.

o Think Like an Entrepreneur

You’re an OWNER of this Brand. Be accountable. We’re the underdog whose

successes and failures rest fully on our own shoulders and are not separated

by organizational charts or office locations. Nothing’s done until its DONE,

DONE, DONE. And always, always, always be Humble & Stay Hungry.

o Create Like an Innovator

Taking risks and failing is a part of striving for greatness and will truly lead us to

making our defining product one day. But at every level and across every

business, be ready to adjust and drive change, while maintaining the core

attributes that define our Brand’s Culture.

o Perform Like a Teammate

UA is special…which means it’s not for everyone. The fast pace of the Brand

demands our respect, integrity, and transparency. And our ambitious goals

require that we empower, support, challenge, and inspire our Teammates to be

great.”9

Current Goals or Objectives

o Under Armour plans to double its 2014 fiscal year revenue by 2018

according to Kevin Plank in Investor Day 2015.10

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o Improving international sales in the long run. In 2013 fiscal year, only 6% of

Under Armour’s revenue is generated from outside the U.S., which is

nothing compared to Nike’s 56%.11

o Helping athletes to reach new level in sports by using technology to get data

that were not be able to be measured before. Kevin Plank spent $1 billion on

fitness to expand Under Armour business.12

o After being founded as a brand that is associated with men’s sports apparel,

Under Armour has been trying to find itself some share in women market.

Kevin Plank believes that women’s business will be the key of company’s

growth in the future.13

Strategies

o Signing Influential Athletes and Models

Signing influential people as spokespersons is an important move in this

business. Having many public figure that wear the brand’s merchandises will

drastically increase the brand recognition to

the public. During these past years, Under

Armour has successfully signed several

athletes with amazing achievements. One of

the example is Jordan Spieth. Under

Armour signed Spieth in 2013, not long

after he turned pro, and now Under Armour

just extend his contract for another 10 years

in 2015.14 Spieth won the Masters in 2015,

making him the second youngest ever to

win it. The Masters is 1 of the 4 major golf

championships that which title is prestigious

in professional golf. With Spieth’s

name getting bigger and more famous, Under Armour is able to establish its

position in golf industry and help it to gain more revenue from it.

Jordan Spieth, Second Youngest to Win the Master

Source: www.UnderArmour.com

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While Spieth help

Under Armour to gain a footing

ground in the golf market, there

is another Under Armour

signee that makes a significant

impact to Under Armour

footwear industry. That person

is Stephen Curry. Curry is an

exceptional Basketball player

that brought his team, Golden

State Warriors, to be NBA

champion in 2015. He also won

NBA MVP (Most Valuable

Player) award in the same year. Curry brings humongous impact to Under

Armour’s basketball footwear industry. Because of his popularity, Under Armour

saw an 350% increase in basketball shoes sales since its inception.15 Because of

the impact that Curry has made, Under Armour is predicted to be valued at $14.1

billion in normal case and $28.2 billion in bullish scenario.16 Under Armour goal

of doubling its revenue by 2018 is not impossible if they are supported by superb

performance and the rise of its athletes’ popularity both on and off the court.

Besides using athletes

to endorse its product, Under

Armour also signed some

public figures such as women

supermodels to endorse its

products. One of the

supermodels that Under

Armour signed is Gisele

Bündchen. Bündchen is a

fashion model from Brazil and also a wife of Tom Brady, a professional

American football playing for New England Patriots of NFL. This move is done

Stephen Curry, 2015 NBA MVP and NBA Champion

Source: http://www.slamonlineph.com/

Gisele Bündchen is posing for Under Armour

Source: Gisele Bündchen’s Instagram account

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by Under Armour in order to penetrate women’s market. Being in women’s sports

apparel market is essential for Under Armour because of its huge share of the

overall sporting apparel market. Signing influential people as spokespersons for

the company is proven to be effective throughout the year as we can see

o Increasing Presence in International Market

Under Armour has been trying to increase their presence in the international

market by building more and more brand awareness in the markets outside of the

U.S. Under Armour international revenue has been increasing steadily throughout

the year, starting from 6% of total revenue in 2013, to 9% of total revenue in

2014 and now at 11% of total revenue in the second quarter of 2015.17 In order to

improve the brand recognition to the international market, Under Armour has

started to sign international professional sports club in order to increase its

presence. In 2011, Under Armour sign a deal with Tottenham Hotspur, an

English professional soccer club playing in the Premier League, for a 5 year deal

from 2012 – 2017.18 This is a good move by Under Armour as the company tries

to introduce people to its brand which is relatively new to the international

market. The company targeted to open 100 Brand House stores internationally

with most stores opened mainly in Latin America and Asia.19 These effort will

help Under Armour to compete with Nike, Luluemon, Athletica, and VF

Tottenham Hotspurs 2015/2016 Home Jersey

Source: www.tottenhamhotspurs.com

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Corporation in the term of international sales as Under Armour is lagging behind

these 3 American companies.

o Having a Research and Development Division Focusing on Improving

Sports Technology

Kevin Plank has envisioned Under Armour as one of the leader in the sports

technology with the development of wearable technology. In order to be ahead in

the competition Plank made big purchases of technology companies to keep up

with the latest technology. Based on his belief and the company’s mission which

is to make athletes to perform better through technology and innovation, Plank

aggressively pursues this idea. In these past few years, Under Armour has spent

almost $1 billion to make this vision happen. The $1 billion spent includes the

acquisition of 3 major fitness applications that have tons of users helping Under

Armour with the transition. The 3 major fitness apps are:

MapMyFitness – Acquired for $150 million

“MapMyFitness is the leader in Connected Fitness – building the

world’s largest digital fitness community by providing interactive

tools to make fitness social, simple and rewarding. The flagship

consumer brands – MapMyRun, MapMyRide, and MapMyWalk –

are among the most popular apps on iOS and Android and the

cloud-based platform has been supporting millions of users

since it launched in 2007. MapMyFitness is an open platform,

seamlessly integrating with more than 400 fitness tracking

devices, sensors and wearables. Headquartered in Austin, Texas,

MapMyFitness has over 100 employees and offers integrated

marketing and advertising solutions, premium consumer

subscription products, and a SaaS platform that helps partners

of any size tap into advanced fitness tracking technology,

workout database, nutritional data, calorie calculators, and 160+

million of the best running, cycling and walking routes around

the world.”20

MyFitnessPal – Acquired for $475 million

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“With over 80 million users, MyFitnessPal has helped millions of

people achieve and maintain a healthier and happier lifestyle.

With a database of over 5 million foods and hundreds of

exercises, top fitness technology partners and community

insights, MyFitnessPal is the leading free resource for achieving

and maintaining health goals. MyFitnessPal is headquartered in

San Francisco, CA.

Endomondo – Acquired for $85 million

Founded in 2007, Endomondo's social fitness network and

popular Endomondo Sports Tracker mobile app help turn a

smartphone into a personal trainer and social motivator. Now

with 20 million registered users around the globe, Endomondo

lets people track workouts, analyze performance, and support

each other so people become and stay active.”21

With these 3 acquisitions, Under Armour is trying to catch up with its

current greatest competitor, Nike. This move are questioned by many economic

analysts because they are not sure whether this technology will revolutionize the

sports apparel industry. Plank did this simply to work on the vision of the

company which is to improve the performance of the athletes. Plank once said “It

is absurd that you know more about your car than you know about your body.”22

This statement fuels Plank to bet in this venture even though the future of this

industry cannot still be predicted.

o Creating a Campaign to Inspire People in Multiple Different Fields

Under Armour created a campaign called “Rule Yourself” which

advertisements show how hard professional athletes work to reach the level where

they are now. Besides promoting the brand, the advertisements are also used to

urge people to work hard to reach their goals and dreams. The advertisements

feature many different popular and successful athletes such as but not limited to

Michael Phelps (U.S. national swimmer who won the most medals in the

Olympics), Stephen Curry (A NBA champion and NBA MVP), Misty

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Copeland (A famous ballet dancer), and Jordan Spieth (The Masters golf

Championships winner).

According to Under Armour executive vice president of global marketing,

Adam Peake, says that the purpose of this ad is to show that training is the only

way for athletes to get better. The other thing that Adam Peake says is, “Under

Armour provides the footwear, apparel and equipment the athlete needs to push

through a tough workout. But we also want to give them that extra inspiration to

improve every day, to keep building their inner army, and to stay focused on

success even when the going gets tough.”23 Even though it is hard to measure the

effectiveness of the campaign to the change of the revenue, this campaign totally

will bring Under Armour closer to the heart of potential customers. This

advertisement generally received positive reviews from the viewers which is good

for the future expansion of the brand. Having potential customers remembering

the brand will affect them when they are making purchase decisions on sports

apparel which eventually will lead to the increase sales in the future.

o Increasing Women’s Brand Recognition

Kevin Plank has seen the importance of women market for the development

of the Under Armour Brand. Currently, the sales generated from selling women’s

Stephen Curry in the Rule Yourself Ad

Source: http://static.businessinsider.com/image/55daf684bd86ef14008b54ba/image.jpg

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sportswear makes up to 30% of the total revenue of the company in 2015, up from

just 20% in 2005.24 Under Armour has been pushing campaigns that would boost

the way women see the brand. Under Armour has been too long to be seen as

sports brand for men. The campaign that involves popular women figures such as

Lindsey Vonn (Olympic Skier), Misty Copeland (A famous ballet dancer), and

Kelley O’Hara (USA national soccer team player) are deemed to be successful to

expose the brand to the potential customers. “I Will What I Want” is the title of

the campaign that Under Armour use to encourage women to give it their all to

reach their dreams. The other campaign that Under Armour did is the campaign

using Gisele Bündchen that showed how she fought the haters who keep insulting

her in social media. The Gisele’s campaign was considered successful according

to Droga5, the advertising agency Under Armour used to conduct its campaigns.

Droga5 said that, “the Gisele campaign led to 1.5 billion media impressions, $15

million in earned media, an average of four minutes spent on the site at the

campaign's peak, a 42 percent increase in visits to UA.com and a 28 percent sales

increase for the brand.”25 These efforts are the evidence that Under Armour is

seriously want to improve its women’s market which will be vital to the

company’s wellbeing in the future.

c. Statement of Problem / Opportunity

Under Armour has been under a lot of problem lately in the women’s market after

trying to compete against Nike and Luluemon in the field. Seeing all the competition that

Under Armour is facing shows that Under Armour has a lot of room to grow. Under

Armour stocks has been under fire lately after a Morgan Stanley analyst wrote “We think

UA products for women are lacking the fashion component today's consumer is

demanding and can now easily get from the multitude of new brands that have emerged

as legitimate competition. UA is attempting to fix this issue, but it is unclear if it will

work. If it does not, we think it will be hard for UA to replace the growth it is expecting

in this category.”26 This is a big problem for Under Armour to fix because just after that

comment, the stock went down almost 6% just after that statement was released. 27 This

problem needs to be fixed in the near future to avoid future setbacks to the brand. The

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other problem to this brand is the competitors that are anticipating Under Armour and its

moves. Nike is unquestionably still out of Under Armour reach, but Nike is anticipating

Under Armour invasion to its market share because of the good performances that Under

Armour has done since its inception. Under Armour has to be extra innovative in order to

stay strong in the competition

Besides the big problems the company is dealing with, there are good

opportunities where the company can grow to another level. With the connected fitness

app, Under Armour is trying to lure in new customers to the brand. Under Armour has

160 million users who are using the apps regularly and it has more users than any of its

competitors.28 In order to stay ahead of the game, Under Armour has made a deal with

IBM to have the service of Watson, IBM most famous artificial intelligence, to bring

virtual coaching to its users using the users’ data. This move certainly will bring Under

Armour big opportunities to compete in this field. The other opportunity that Under

Armour has is the international market. Under Armour still leaves a plenty room to grow

in the international market and footwear market. The data shows it that Under Armour

only generates about 12% of its total revenue from outside the U.S. which clearly lags

behind its competitors. If Under Armour takes a bold move that will revolutionize its

international sales then the company will have a great opportunity to expand its market

share. In the footwear market, Under Armour has enjoyed continuous growth over the

year. Under Armour footwear revenue in 2015 is at $678 million which is almost 4 times

bigger compared to the footwear revenue in 2012 with $182 million.29 With this kind of

growth, Under Armour can dominate the footwear industry in the future.

3. Situational Analysis

a. Environmental Scanning

i. Demographic

Age / Population

Under Armour mainly targets people who are into sports, ranging from

recreational to competitive purposes. In the latest advertising campaign, Under

Armour is targeting women with the age of 18-34 which generates the largest

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sales.30 I would say that the age range for the men segment in the company will be

relatively close to that range. As people grow older they are less likely to exercise

and care about their appearance. Seeing that many Under Armour clothing is

made to fit and tight fitting, people who are out of shape are less likely to wear it

since it does not look that good on them.

Sex

Under Armour was founded as a brand that solely served men in competitive

sports. It was not until 2003 that Under Armour started the marketing line for

women’s products in the brand and now the women’s line generates around 30%

of the company’s total revenue.31 Under Armour has been since trying to push

more women’s products to the market through various marketing campaigns that

mostly target women.

Geographic Distribution

In the end of 2015, Under

Armour reportedly has 30

Brand House stores and 161

retail stores.32 Under Armour

stores are located across the

globe in order to anticipate

increasing demand in the

market. Brand House stores

has a purpose which is to show the customers the power of the brand itself with

having a full control of displaying what the company wants. Brand House stores

will also display the latest technology available by the company. Brand House

stores carry the best items available with a full price tag and on the other hand, the

retail stores feature more items with more affordable price to customers.

Income

Under Armour product prices are relatively expensive in the sports apparel

departments. We can see that Under Armour targeted a niche market where

Under Armour Newly Opened Brand House Stores in Chicago, IL

Source: http://www.activatethespace.com/UA-Chicago.html

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people really intend to use its product to improve their performance. Many of

Under Armour customers must be well off to be able to afford expensive gears for

sports. Sports can be a luxury for some people because they cannot afford to use

their time to exercise. According to the U.S. Census bureau, a typical American

family earns $53,657 in 2014.33 I would say that Under Armour customers’

income should range around that amount or higher because people who are well

off will have extra money to spend for sports.

ii. Economic

Many economic factors can affect customers whether they want to spend money

to luxury items such as sporting goods and hobby items. According to the data

from St. Louis fed, in 2015 the retail sales for sporting goods, hobby items, books,

and music stores reaches $7.374 billion.34 From the graph that we see in graph 1,

we can see that the sales of is trending up in the past 5 years. We learn that

customers are willing to spend more on this category. This is a good sign for

Under Armour business since they know that the demand of their product is

trending up in the future.

Graph 1: Sales of Sporting Goods, Hobby, Book, and Music Stores

Source: https://research.stlouisfed.org/fred2/series/RSSGHBMS

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iii. Political / Legal

OSHA (Occupation Safety and Health Administration)

OSHA is one of the agencies under the U.S. Department of Labor that regulates

employers to provide a safe and healthy working conditions for employee. OSHA

is enacted on 1970 by President Richard M. Nixon.35 Through OSHA regulations,

companies need to provide their employees with good working conditions that are

safe and healthy as a part of the employees’ right.

FTC (Federal Trade Commission)

FTC regulates companies to comply with rules regarding the market in order to

protect consumers and also the competition in the market.36 FTC usually will act

if there is a violation to the rules enforced by FTC. FTC will make sure that

companies have a healthy competition in the market.

USPTO (United States Patent and Trademark Office)

Companies that involves with technology and design like Under Armour needs to

protect its intellectual properties through creating a trademark and a patent.

USPTO is a federal agency that helps company to register a trademark and accept

patent.37 By registering trademarks and patents, companies are at ease in case of

their intellectual properties are stolen. On the other hand companies also need to

be careful not to infringe any patent and trademark which may cause punishment

by the law.

EEOC (Equal Employment Opportunity Commission)

EEOC is a government agency that regulates against discrimination to job

applicants or employee. EEOC regulates companies to treat people with

difference race, color, sex, national origin, age, disability or genetic information

equally. EEOC also has the power to do an investigation if any violation occur.

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iv. Sociocultural

Workforce

Many companies located in the U.S. who needs labors to produce their goods

are often forced to outsource the job to other countries because of the lower

cost of labor than in the U.S. and lower cost of production helps the

companies to achieve higher profit. Many of the countries picked by the

companies have different standard of living than the U.S. The largest highlight

of the inappropriate labor lately is child labor. Many of the companies do not

run a thorough check to their suppliers which in some case many suppliers

violate human rights. Here is the quote from ILO regarding child labor:

“The ILO estimates that 170 million are engaged in child

labour, with many making textiles and garments to satisfy

the demand of consumers in Europe, the US, and

beyond”38

This has become more and more serious problem each and many human

rights activists are fighting against. Under Armour clearly states its position

regarding these social issues. In their corporate social responsibility

statement, Under Armour states that the company are against child labor and

forced labor by not purchasing the supplies from the company that are doing

Countries with the Highest Child Labor Index

Source: www.cnn.com

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those illegal practices. Discrimination, harassment, etc. that will violate

social ethics and norm also will not be tolerated.

Diversity

Companies are starting to look for more diversity in the workforce.

According to a study done in Harvard Business Review, the author says that

generally companies who have diversity in the workforce tend to innovate

more and perform better than the ones who are less diverse.39 Focusing on

the results, many companies are striving for a more diverse workplace.

Norms

According to the Oxford dictionary, the definition of norms is: “A standard or

pattern, especially of social behavior, that is typical or expected of a group”40

Targeting market globally, many companies need to see the norms and culture

of the targeted country. As we know that many eastern countries in the Asia

have a totally different culture than the countries in Europe and America.

Companies that fail to take account of norms will have a hard time to survive

globally. Under Armour tight-fitting clothes that will show body shape might

be inappropriate for some countries in the Asia and Middle East that are

The Benefit of Diversity in the Workplace

Source: http://www.forbes.com/sites/ruchikatulshyan/2015/01/30/racially-diverse-companies-

outperform-industry-norms-by-30/#7f95e6635742

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culturally more reserved and against revealing clothing. Under Armour needs

to take the difference in the cultures seriously in order to excel in other

countries globally.

Increase of Health Awareness

Nowadays companies are pushing their customers to live a healthier lifestyle.

We can see a lot of items in the grocery stores that are promoting a healthy

lifestyle such as organic produce. Younger people are getting more conscious

in the food choice that they eat (41% of the participants who are under 20 are

willing to spend more money in order to eat healthy) than the older

generations, according to the survey that Nielsen's Global Health and

Wellness Survey conducted to about 30,000 customers in 60 countries.41

When people start getting more conscious about their health, companies in

sports industries like Under Armour, are exposed to potentially significant

growth in the near future since health does not consist of diet alone but also

exercising enough.

v. Technological

Technology has developed a lot since the invention of computer. Companies are

racing against each other in order to be ahead in technology department that will

bring more innovation to the companies. As for sporting goods companies, here

are the hottest technologies available in the market:

Wearable Tech

Sports companies are pushing wearable technologies to customers. Wearable

techs’ main purpose in sports is to collect fitness data from its users. The users

can use the technology to measure their heart rate and approximately calories

burn when they are exercising. Combined with smartphone technology and

mobile broadband Internet, wearable techs can give you decently accurate

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numbers with the help of the server

through the Internet. Under Armour

is partnering with HTC to release its

wearable technologies called UA

HealthBox™. The UA HealthBox™

consists of a wristband, a heart rate

monitor, and a scale that can be

connected to a smartphone to track

and analyze the data from all those

devices. Under Armour is really

focusing in this market in near future, seen from Kevin Plank move to spend

around $1 billion in this area. When introducing this product Under Armour’s

VP Creative Design and Brand, Brian Boring, says “In 1996 we changed the

way athletes dress. In 2016 we will change the way athletes live.”42

3D Printing

The invention of 3D printers

change the way people design

things which are usually

limited through 2 dimensional

printing. The 3D printing that

are getting popular lately

revolutionize many industries

in the term of designs. Only

imagination that limits the

usage of 3D printers. In one instance, there is a student from Israel’s Shenkar

art and design school named Nina Peleg who did a project on 3D printed

clothing. She says that the project took around 220 hours to print and about 2

pounds of materials.43 Under Armour became the first company ever to sell a

3D-printed athletic shoes to the public in which the shoes are limited to 96

UA HealthBox™ are released with $400 price tag

Source: money.cnn.com

UA Architech, 3D-printed shoes by Under Arnour

Source: www.underarmour.com

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pairs and are sold at $300 each.44 This innovation by Under Armour surely

will revolutionize the footwear industry in the future.

vi. Global

Under Armour’s majority of sales is still generated in the U.S. and the company

has been trying to expand overseas since then. Under Armour is targeting to have

800 stores open internationally in 40 countries by 2018.45

vii. Physical

Companies are getting more conscious regarding the environment. Under Armour

clearly states in its code of conduct that “Under Armour suppliers and their

subcontractors will comply with all environmental rules, regulations and

standards applicable to their operations.”46 Under Armour has some products that

are made from recycled materials which is friendly to the environment.

b. Stakeholder Analysis

The Stakeholders of Under Armour are:

Primary Stakeholders

Shareholders

Shareholders are an important part of Under Armour since the company went to

public back in 2005. Shareholders have been enjoying Under Armour’s

spectacular growth in its first decade after the company went public. Shareholders

need to be informed about the latest decisions that decide the future of the

company because technically they are the ones who own the company.

Employees

Employees’ role are irreplaceable for companies. Under Armour currently

employs 13,400 in 2015.47 As a highly innovative company Under Armour relies

heavily on its employees to perform well and being creative. According to Under

Armour websites, employees receive benefits in health, wellness, insurance

protection, financial health, life, work and family.48 Keeping employees satisfied

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with their job is important to keep the employees performance at the workplace.

Employees need to know changes that are happening in the company so that they

have the ownership feeling that will help them to be more responsible to the

company.

Executives

Executives are one of the most important stakeholder of a company since they are

the ones who are entrusted to make critical decisions that will decide the future of

the company. Their interest of the well-being of the company are high and they

have to always be in the loop regarding things that are happening in the company.

Consumers

Under Armour customers are mainly athletes who strive to perform better in the

field. Without the supports from the consumers, Under Armour will not be able to

grow as big as it is now. Consumers do not need to be informed with every

decision that the company takes. Consumers should be informed if there are

exciting changes that are happening and will benefit them in the future.

Secondary Stakeholder

Communities

Under Armour are committed to give back to the community as stated in its

website. Under Armour considers that communities are the ones who inspire them

to do better.49 There are 3 causes that Under Armour is currently participating in 3

causes:

UA Power in Pink®

"Our Mission: UA Power In Pink® celebrates the many women

who use fitness and exercise to stay healthy, and serves as a

platform to help raise awareness about breast health.

#UAPowerinPink

UA Win Global

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UA WIN Global is our commitment to empowering athletes of

the Next generation by providing youth access to sport. #UAWIN

UA Freedom

UA Freedom is our way of making sure our heroes get the

support they deserve. #UAFreedom”50

4. Industry / Competitor Analysis

a. Industry Definition

NAICS code: 339920

Definition: Sporting and Athletic Goods Manufacturing

b. Competitive Structure

Monopolistic Competition / Oligopoly

Under Armour falls under a mix of monopolistic competitions and oligopoly because

of the characteristics of the monopolistic competition are mixed with the high barrier

of entry in oligopoly scheme. Some of the characteristics are:

There are no perfect substitutes

In this kind of market, firms offer products that have the same utility but at

different style / characteristics making it impossible to find a perfect

substitutes. For example, every clothing companies will have different

technologies that constructs its products. One company will not offer the

same design or technology that the other companies offer causing the

customers to pick a certain company in order to get the design or the

technology that they want.

Entry Barrier

In the case of regular apparel industry, the entry of barrier would be low

because of the availability of garment companies who would do the

production orders for newcomers allowing them to operate. There is barely

anything that would differentiate the new entrants and the current players

22

beside the brand. The thing with diversified athletic goods, the entry barrier

would be high and nothing like the ones in monopolistic competition because

of the high cost of research and development for the latest sport technology

in order for the company to relevant in the industry. Not every company can

make sports apparel with a unique technology of that certain brand.

Demands are elastic

A change in the product prices may make customers to rethink their decisions

and switch to other brand that offers relatively same items with lower prices.

Even though brand loyalty does affect the customers, a change in price can

easily affect the customers in making the decision because of the vast

availability of substitutes that have the same utility. Under Armour cannot set

its price freely considering that Under Armour has many competitions from

companies such as Adidas, Nike and Luluemon.

Product differentiation exists

This market emphasizes product differentiation because companies needs to

present a different way seeing similar products offered by the competitors.

We can see a heavy dose of advertisements are done by the companies that

are participating in this monopolistic competitions in order to show

customers the advantage of the goods sold by the companies. Under Armour

spent $15 million in its last marketing ad campaign (the biggest one so far

for Under Armour) which targeted women in order to increase the brand

exposure to women’s market.51

c. Industry Life Cycle

Having been in the industry for 20 years, Under Armour has passed the introduction

phase and is now in the growth phase. Indications that Under Armour is still in the

growth phase are:

Fast and high growth

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As we can see in Table 1, we can see that Under Armour has been enjoying

at least 24% revenue growth for the past 6 years. Even though it might not be

sustainable through the end of the industry life, now is the time that Under

Armour should accommodate the growth with appropriate innovation and

expansion.

Under Armour Revenue Growth Year by Year

Year 2009 2010 2011 2012 2013 2014 2015

Revenue (In million US$) 856.41 1,064 1,473 1,835 2,332 3,084 3,963

Growth N/A 24.24% 38.44% 24.58% 27.08% 32.25% 28.50%

Table 1: Under Armour Revenue Growth

Source: investor.underarmour.com/income.cfm

Expanding fast to accommodate growth

As we read from the earlier section of this paper, we see that Under Armour

has been striving to expand globally targeting to open a lot of stores as a

direct channel to customers in years to come. After increasing the presence of

the brand through advertising and signing foreign sports teams / athletes,

Under Armour needs to provide a channel where customers can get access to

the merchandise.

High rate of innovation

Under Armour has been innovating non-stop in these past years. The latest

technologies Under Armour is working on are the connected fitness app and

3D printed shoes. Under Armour is trying hard to be the pioneer of

innovation in its industry to stay ahead of the competition.

Advertising’s main purpose is still to increase brand awareness

Under Armour spend more and more money for advertising as the revenue

grows. Under Armour spent $330 million in 2014, up 34% from 2013 and

$125 million more than the marketing budget in 2012.52 Under Armour

needs to spend a lot of money to market the brand because they are always

being overshadowed by its arch-nemesis in the industry, Nike.

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d. Porter's Five Forces Model

i. New Entrants – Moderate Threat

In the industry that Under Armour is in, the possibility of a new entrant to

enter the industry is moderate. The amount of capital needed in order to enter

this specialized athletic apparel industry is high because of the research that

needs to be done to come up with great technologies while making them

affordable. On the other hand, there are a lot of third party manufacturer that

are independent and can produce goods on demand which can be utilized by

new entrants. Even though it is relatively easy for new entrants to enter the

industry, new entrants need to be able to create a disruption in the industry if

they want to be recognized. The loyalty that the customers have toward some

brands can make new entrants having a hard time to establish their position

in the market.

The rise of technology could bring a new threat to this industry. Seeing that a

lot of technologies start to be wearable, technology companies can have a

competitive advantage against the current players in this industry.

ii. Bargaining Power of Suppliers – Weak Power

The supplier of Under Armour has weak bargaining power toward the

company because of the high availability of the main material of the apparel

such as cotton, rubber, cloth, and fabric blends. Many of Under Armour

suppliers are located outside the U.S. mainly in the U.S. and Latin America.53

Under Armour checks each one of every supplier to comply with the

regulations and to avoid bad PR and legal challenges in the future. The other

thing that we need to know in this segment is that the competition of the

suppliers will help the industry to keep the supply cost low. The availability

of the suppliers gives power to the company to be able to switch suppliers

easily. The existence of Under Armour is vital to the suppliers especially

given the fact that Under Armour is growing at a great rate.

iii. Bargaining Power of Buyers – Moderate Power

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In this industry, buyers will have a decent bargaining power of buying. In the

industry of diversified sports apparel the product differentiation is apparent.

If the price are deemed too expensive for the customers, they can easily

switch to the other brand that offer relatively same goods with the same

utility. Companies pay big bucks for endorsement because research shows

that the way customers see the brand is important.54 Understanding this

matter, Under Armour tries to create better product with affordable price and

also tries to build its brand name through signing big names in sports and

fashion.

iv. Threat of Substitute Products – Moderate Threat

In the industry of athletic apparel, substitutes product pose a moderate threat

to Under Armour specially designed apparel. People with low budget can

substitute premium Under Armour clothing product to cheaper clothing

products from private labels that can be bought from low cost retail stores

such as Walmart and Target. Since Under Armour possesses a special

technology that are not available in some other brand the threat of substitute

products can be managed. People with low budget eventually will buy Under

Armour products if they really need to utilize the product technology that is

only available in Under Armour brand.

v. Intensity of Rivalry Among Competitors – High Threat

The threat from the old players in industry such as Nike and Adidas is high.

They have been around long enough to control majority of the market share.

A mediocre effort will not be enough to shake the competition. This is the

reason Under Armour has been innovating non-stop. Under Armour’s sales

still lags behind Nike and Adidas, but the growth of Under Armour is way

higher than those 2 companies. This shows how receptive the market has

been to Under Armour products.

Beside from those 2 major competitor, Under Armour is facing competition

indirectly from retail stores such as Walmart and Target which sells sports

26

apparel at a low price and sometimes at an acceptable quality. Since Under

Armour is developing toward a fitness technology company, Under Armour

is facing competition from the technology companies that are also expanding

toward fitness area.

e. Perceptual Map

Price and quality are important factors in this industry because athletes have a need of

apparels that will help them to perform at their maximum capability. We can see that

Under Armour main competitors are Nike, Adidas, Luluemon, Columbia, and Adidas.

Under Armour

Nike

Adidas

Reebok

Columbia

Skechers

Luluemon

Under Armour Nike Adidas Reebok Columbia Skechers Luluemon

27

f. Competitive Intelligence Matrix

Under Armour Nike Adidas

Critical Success Factor Weight Rating Score Rating Score Rating Score

Product Line Variation 0.20 5.00 1.00 5.00 1.00 5.00 1.00

Technology 0.16 5.00 0.80 4.00 0.64 3.00 0.48

Revenue 0.15 1.00 0.15 5.00 0.75 3.00 0.45

Brand Reputation 0.10 4.00 0.40 4.00 0.40 4.00 0.40

Celebrity Factor 0.15 4.00 0.60 5.00 0.75 4.50 0.68

P/E Ratio 0.06 5.00 0.30 2.00 0.12 3.00 0.18

Growth Rate 0.08 5.00 0.40 2.50 0.20 2.00 0.16

Retail Presence 0.10 3.00 0.30 5.00 0.50 4.00 0.40

Total 1.00 3.95 4.36 3.75

Rating Scale: 1 – Poor, 2 – Fair, 3 – Average, 4 – Good, 5 – Excellent

Product Line

Under Armour, Nike, and Adidas all have 3 main product lines which are

footwear, apparel, equipment. These 3 main lines are necessary in order to

serve athletes that plays various sports.

Technology

Technology is one important aspect that companies cannot overlook. The fast

development of technology causes sport companies the urgency to adapt so

that they will not miss a beat and help athletes to perform better. Under

Armour recently crawled up in this category by acquired 3 fitness technology

companies that will enhance the performance of Under Armour fitness

technology.55

Revenue

Revenue is one of the best indicator to measure the size of a company in the

industry. Under Armour revenue is relatively small compared to Adidas and

Nike because Under Armour is the new comer in the industry. In 2015 the

revenue for the respective companies are:

Under Armour – $3.96 Billion56

28

Nike - $30.6 Billion57

Adidas - $18.4 Billion58

Brand Reputation

Brand reputation is an important factor in this industry. Brand reputation can

bring a lot of impact to the company ranging from profitability to

sustainability. Company with good reputation tends to be able to retain their

employees and generate more profit and growth.59 In some occasion, the

company has little control to the brand reputation caused by external factors;

for example, some third party suppliers and manufacturers violate the

regulations through the use of child and forced labor. That kind of problem

will hurt companies’ image to the public and fixing bad reputation is not an

easy task to do.

Celebrity Factor

All three companies have their own celebrity ambassadors to promote their

brand to the public. These sports companies are using not only professional

athletes as their brand ambassadors, but also media celebrities such as movie

actors, singers, television personalities and etc. This move is done to reach

non-athlete customers in the market. The goal is nothing but to make people

purchase their product because of the publicity that the products get from the

celebrities.60

P/E Ratio

P/E ratio is one of the indicators that many investors use to see the

expectations that are laid to the respective companies. The P/E ratio of these

3 companies in 2015 are:

Under Armour: 80.5261

Nike: 32.1662

Adidas: 33.563

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Revenue Growth Rate

Growth is one of the goals that people are targeting in business. Higher

growth rate meaning that the company is getting bigger. Since Adidas and

Nike have been around in the industry long enough they do not enjoy

significant growth like what Under Armour is having right now. The revenue

growth in 2015 for the respective companies are:

Under Armour: 28%64

Nike: 10%65

Adidas: 11%66

Retail Presence

Retail presence is an important aspect for apparel companies to reach their

customers. According to the research done by PriceWaterhouseCooper, many

customers still prefer to shop in physical stores than to shop online.67 There

are many things customers can do when they are buying products through

physical stores such that can affect their decision to buy the products. These

3 companies have retail stores spread all over the place globally. However,

Under Armour lags behind in the term of store numbers outside the U.S. and

it impacts its ability in generating additional sales. In 2015, Nike has more

than 930 retail stores worldwide68, Adidas has 490 stores globally69, and

Under Armour operates 144 stores globally70

g. Best Practice Benchmarking

Building Brand Loyalty

Brand is a crucial aspect of any company because it represent the company to

the customers. Bad image will ruin companies’ reputation hence making them

to avoid to be associated with the companies’ brand. Nike has done a

tremendous job in building its brand image over the year. A catchy slogan

combined with a simple memorable logo has been a strong point for Nike.

Nike has been successfully built a brand loyalty among its customers that help

30

it to dominate the market. Brand Loyalty makes customers to be less affected

by price and will be receptive to the promotions done by the company.71 Nike

generates majority of its revenue from the sales of footwear (57.8% from total

revenue) and currently it commands the world’s athletic footwear market

share with 33.6%.72 Generating over $30 billion sales in 2015, Nike’s position

as a leader in the sports apparel industry is untouchable and it is all thanks to

the strong brand image in the eyes of the customers.

Creating Limited Edition Products

Creating limited edition products has been a strategy that many companies do

in order to create hype towards their products and bring publicity to their

brand. By limiting availability of a product, the sense of scarcity will make the

owner of the product feel special owning it.73 As an example, Adidas released

a limited edition shoes designed by Kanye West, a famous rapper, and the

shoes sold out in just one hour of its release online.74 People were also spotted

queuing in front of Adidas store in Newcastle 3 days before the release to buy

the shoes.75 From this evidence, we see that the sense of exclusivity can create

hype among the customers.

Trainer fans queue outside the End store in Newcastle

Source: http://www.theguardian.com/music/2015/nov/12/kanye-west-fans-queue-adidas-yeezy-350-

boost

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Sponsoring Big World Events

The FIFA World Cup and Olympics Games are some of the biggest sporting

event in the world generating billions of views during the event. Around 3.2

billion people watched 2014 FIFA World Cup76 and 4.7 billion people

watched 2008 Beijing Olympics games.77 Just imagine the possibility of

publicity gained by companies who sponsor that event. In the World Cup

event, the most prominent sporting apparel that are worn by the teams are

Nike and Adidas. In that event, the market share of those 2 companies

combined is 70%.78 Since the publicity of these 2 brands have been built

overtime, its popularity are top notch. Basically by sponsoring teams / athletes

that participate in the big sports event, the companies will benefit from the

exposure of the brand to the public.

Customization of Products

Customization of products can give customers a more personal feeling to the

products they bought. In 2005, Nike released Nike iD product line which

allows customers to order a customized shoes based on the customers’ design.

The product had a good reception having generated $100 million in sales not

long after the product was released.79 Customization adds product

differentiation to the customers making the brand standing out compared to

others.

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5. Internal Assessment

a. SWOT Analysis

Strengths Weaknesses

1. Never stop innovating 1. Retail presence

2. Visionary leadership 2. Third Party manufacturer

3. High Growth Rate Dependency

3. Decline in women’s apparel

Opportunities Threats

1. Global athletic market positive growth 1. Financial analyst bad reviews

2. Increasing International market share 2. Under Armour Athletes' performance

3. Growth in footwear division

Strengths

i. Never Stop Innovating

What makes Under Armour different from many other sport companies is their

urge of being the leader in technology innovation. Starting from the beginning

of the company, Kevin Plank designed and sold T-shirts with new

revolutionary technology that makes athletes feel dry and comfort through

strenuous practice sessions. Since his products were different than others,

business started to come in. Nowadays, Under Armour tries to be steps ahead

in the competition through technology advancement. Believing that connected

fitness app will be the future of the industry, Under Armour makes its moves

by buying technology companies and creating R&D division concentrating on

the fitness app.

ii. Visionary Leadership

Under Armour is blessed with such leadership found in Kevin Plank. Through

his vision, Under Armour enjoys continuous growth over the years. Vision is a

really important thing that companies need to have in order to be successful.

Without a vision, companies would not know in which direction the companies

33

should gos. In one interview Kevin Plank said, “My vision in 1996 wasn’t

saying, ‘I’m going to build this great big, huge global brand.’ My vision was,

‘I’m going to build the greatest T-shirt in the world, and athletes are going to

love it. Men, women, Americans, anybody from other countries, anywhere, are

going to love this product.’80 Through that interview we learn what fuels Under

Armour to be a better company.

iii. High Growth Rate

Having still in growth stage of the life cycle, Under Armour has a high growth

rate compared to its competitors. As we can see from the previous explanation

regarding Under Armour growth rate in 2015, the revenue growth rate for the

company is at 28%, more than twice as much to its competitors Nike and

Adidas with 10% and 11% revenue growth respectively. The high P/E ratio of

the company shows that the investors are expecting big things from the

company in the future.

Weaknesses

i. Retail Presence

Under Armour is lacking of retail presence in order to present the company

better and interact with the customers. Since Under Armour has been trying to

improve its international sales, Under Armour needs to establish its brand

outside the U.S. Under Armour has built some brand houses outside the U.S.

but it is still not enough stores available to accommodate customers outside the

U.S. As mentioned before, Under Armour only has 144 stores compared to

Adidas’ 490 and Nike’s 930.

ii. Third Party Manufacturers Dependency

Under Armour manufactures its products with the service of third party

manufacturers. According to the SEC fillings filed by Under Armour, “In

2015, our products were manufactured by 44 primary manufacturers, operating

in 16 countries, with approximately 63% of our products manufactured in

China, Jordan, Vietnam and Indonesia. Of our 44 primary manufacturing

34

partners, 10 produced approximately 45% of our products.”81 Having

depended so much to the third party manufacturers is a bad thing for a

company as big as Under Armour. By not having its own factory, the overhead

cost can be reduced but the risk of not producing enough merchandise is higher

and Under Armour has low control in those manufacturers. Nike was notorious

of having child labor and forced labor through its unaffiliated manufacturers in

which Nike had almost no control in that manufacturers’ activity.82

iii. Decline in women’s apparel

Even though Under Armour has been enjoying a good rate of growth overall,

the women’s apparel is suffering a setback. According to Morgan Stanley

report, “Under Armour (UA) saw a 7% decline in women's apparel in the first

quarter, following a 6% decline in the previous quarter.”83 This is a big

problem for Under Armour to figure since women’s line is one of the area that

has a potential to grow.

Opportunities

i. Global Athletic Market Positive Growth

Global athletic market has a promising future seeing from the past sales data

and trend. According to Morgan Stanley Research, the sales of sports apparel

and footwear have increased 42% to 420 billion from the year 2008-2014 and

this industry could have another 30+% growth by 2020.84 This statistics is

encouraging to know because we know that Under Armour will have more

opportunity to gain more customers.

ii. Increasing International Market Share

Having several years of slump in the international market, Under Armour

improved a lot in the past 2 year in this division by almost doubling its

international revenue percentage from its total revenue according to the data

from the fillings.85 This shows that Under Armour is gaining more and more

interest in the global sports apparel market.

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iii. Growth in Footwear Division

Through the success of Stephen Curry in the NBA, Under Armour’s footwear

division has been enjoying huge increase in its footwear sales. Footwear

division revenue made 17% of total revenue in the past year with a growth of

95%.86 The growth of footwear revenue allows Under Armour to expose

customers with its various lines of Under Armour shoes.

Threats

i. Financial Analysts’ Bad Reviews

Morgan Stanley recently set Under Armour stock to a “sell” rating having

changed the price target from $64 to $32.87 This bad rating about Under

Armour will decrease investors’ confidence towards this brand. Even though

Under Armour is having a good revenue growth rate, Under Armour is facing

problem with the wholesale apparel which declines 2% in sales last quarter.88

Under Armour Year to Year International Revenue % growth

Source: http://www.fool.com/investing/general/2016/02/18/the-3-most-important-growth-drivers-for-

under-armo.aspx

36

Any further declines and bad reviews from financial analyst could bring this

brand in jeopardy.

ii. Under Armour Athletes’ Performance

Under Armour’s professional sports athletes are one of the reason why this

brand is growing. However, having instant significant growth from its athletes

popularity can be a double-edged sword to Under Armour. The popularity of

the brand will be sustainable if the athletes keep their optimal performance on

the court. Under Armour seems to rely too much on its athletes’ performance

that if they ever fail to perform well, the brand will see a significant drop of

popularity.

b. Company / Product Portfolio (BCG)

i. Star

Under Armour’s footwear division is the current cash cows for the company.

This division grows from $182 million of sales in 2012 to $678 million in

2015 (About 350% growth)89. Helped by the popularity of the athletes, the

sales of the footwear skyrocket each year. With that kind of growth this

division is the star in this company. If the growth is sustainable in the long

future, this division will become cash cows for the company.

ii. Cash Cow

The cash cow in Under Armour is the apparel line. The total revenue of Under

Armour are mostly made up from the sales of apparel. In 2015, Under Armour

generate $2.8 billion from the apparel sales which makes it around 71% from

the total revenue of $3.96 billion.90 With less maintenance, this division

generates most money in the company since its inception.

iii. Question Mark

Under Armour’s newest product line, which is the connected fitness app, is the

question mark in this portfolio because the industry itself is relatively new. So

far in early 2016, this new fitness app has over 160 million users.91 Under

37

Armour has made a move to make this app interesting to its users by pairing

the app with IBM Watson, an AI that analyzes the data from the users. Watson

then will give the users an insight for their activities and give some suggestions

about their activities. This product line will need some time and development

before we are able to tell whether this line is a star or a dog.

iv. Dog

Under Armour is a company specialized in sports apparel, but the company has

been trying to make some equipment. Some sports equipment are the dogs in

this company. When people think of Under Armour the image of apparel will

come into their mind, not a basketball or a soccer ball. Although information

regarding equipment sales cannot be found anywhere, I am pretty sure Under

Armour will not be successful just like Spalding with its basketballs or Adidas

with its soccer balls hence the company need to rethink about its decision to

make sports equipment.

c. Competitive Advantage Continuum

Under Armour has competitive advantages to its competitors that help Under Armour

to stay strong in the midst of a though competition in the market. The tangible

resource that Under Armour has is the technology. The company’s revolutionary

technology makes its apparel different from the other company. The reason why

Under Armour apparel products are appealing because it was designed carefully with

the perfect blend of material to improve the performance of its wearers just like what

Kevin Plank envisions. The intangible resource that it has is the young leadership of

the company. Kevin Plank turns 44 this year which is considered young for his

achievement in the industry. In the other hand, Nike’s founder is turning 78 this year.

Having a young leader help the company to stick to its vision and to come up with

more creative ideas compared to the companies that have older leaders. The

leadership in a company is important to set the course of the company in the future.

The core competency has been achieved in Under Armour by providing a cutting

edge technology in its apparel. Combining high technology with a visionary leader

38

will help the company to strive in the future. Leadership and technology are hard to

imitate hence they give Under Armour a competitive advantage compared to the other

competitors.

Under Armour use a differentiation strategy by utilizing its marketing campaign

advertisement. Under Armour tries to implant its image to the mind of the customers

and make them to realize what sets Under Armour apart from its competitors.

d. Balanced Scorecard

Financial Perspective92

Revenue: In 2015 fiscal year, Under Armour generated $3.96 billion in total

revenue which grew from $3.08 billion last year.

Net Income: Under Armour revenue for 2015 fiscal year is $232.57, which

only grow around 15% from the previous fiscal year. Under Armour pay a lot

of tax percentage compared to Nike and Adidas because majority of Under

Armour sales are from the U.S.

Cash Flow: Under Armour has a negative cash flow in 2015 because of the

acquisition of fitness app companies such as Endomondo and MyFitnessPal

which cost Under Armour around $500 million. Buying property, plant and

equipment also reduce the net cash that Under Armour has hence the company

issued a $650 million debt in 2015.

Customer Perspective

Under Armour is built as a customer oriented company. Looking at its vision

which is to “Empower Athletes Everywhere”, Under Armour set its goal to

provide the best quality products for the customers to improve their ability in

sports.

To improve the brand strength, Under Armour did marketing campaigns that

encourage athletes to keep giving their best in their practice so that they can

reap all the hard work that they have done. The marketing was so well done

that you will feel goosebumps when you watch it. The campaign features the

39

best athletes in sports such as Jordan Spieth, Michael Phelps, Stephen Curry,

and Misty Copeland.

Internal Process Perspective

Even though Under Armour products are produced by third party

manufacturers, Under Armour strictly controls its quality from the inside of

the company. In the corporate responsibility section in the website, Under

Armour state “By the terms of its Code of Conduct and its agreements with its

third party suppliers and licensees, Under Armour reserves the right to take

appropriate action against entities that fail to meet their legal or contractual

responsibilities or to take adequate action to address reported issues”93 to

show that they take internal quality control seriously. Under Armour takes

corporate responsibility seriously because the company wants to maintain or

even improve the strength and reputation of the brand. The brand reputation

can get tainted if the company fails to deliver its best performance to the

customers hence failing customers’ expectation.

Learning / Growth Perspective

Besides keeping the quality in production side, Under Armour maintains the

culture of the company for the employees so that they can perform well.

Under Armour’s culture in the company encourage the employee to follow the

4 pillar of greatness that can be seen in the company’s website.

Kevin Plank has the right idea to keep the employee engaged in company’s

decision. By keeping the employees in the part of the process, employees will

feel appreciated and needed hence they will be less likely to leave the

company.94 The turnover rate will be minimalized if this effort is done by the

company.

e. Organizational Structure

i. Organizational Chart

40

Under Armour does not specify publicly the organizational chart within the

company. The company only shows the corporate executive officers as

follows:

Kevin Plank – Chief Executive Officer and Chairman of the Board

Kerry D. Chandler – Chief Human Resources Officer

Paul Fipps – Chief Information Officer

James H. Hardy, Jr. – Executive Vice President, Global Operations

Karl-Heinz (Charlie) Maurath – Chief Revenue Officer

Matthew C. Mirchin – President of North America

Lawrence (Chip) Molloy – Chief Financial Officer

Henry B. Stafford – Chief Merchandising Officer

Robin Thurston – Chieft Digital Officer

From the look of it, the company uses the flat hierarchy because of the numbers of

chief officers stated in the company, meaning that one of them will be a head of

their own department.

ii. Departmentalization

The firm should be organized based on the products that the company has

hence it will be simpler to manage. The main product lines that the company

offers are: Apparel, Footwear, Accessories and Equipment, and Connected

Fitness App.

Under

Armour

Apparel

Footwear

Fitness App

Equipment and

Accessories

41

iii. Decision Making

On the corporate level, the board of directors is the ultimate decision-making

body according to what is stated in the Under Armour’s website under the

governance guidelines.95

iv. Organizational Culture

Looking from the way things get organized, Under Armour falls into a formal

company where everything has to be in order. According to Kevin Plank,

Under Armour is built on a culture that is built on people.96 What Kevin Plank

says is consistent with what Under Armour is trying to build in the company as

stated in the values statement in the website.

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SUMMARY

This information below are the summary of what has been written and are deemed

important to highlight

Under Armour’s vision statement (“Empower Athletes Everywhere”) and mission

statement (“Make All Athletes Better through Passion, Design, and the Relentless Pursuit of

Innovation”) help to guide the company to walk in the path throughout the 20 years since it was

started back in 1996.

Under Armour currently striving to fulfill their current goal which is to double its 2014

fiscal year revenue by the year 2018. Under Armour are created to fulfill the need of athletes

who want to perform better in sports. The target market of Under Armour is people in their teen

through mid-thirties whose economic condition is above average.

Technology is one of the main forte in Under Armour and the company is preparing for

the future of the fitness through its connected fitness app that are created to gain more customers

in the market. The future of sports apparel industry is bright since more and more people are

aware of the importance of being healthy.

Under Armour is growing at a magnificent growth rate seeing from the past revenue

growth rates. Under Armour has been enjoying at least 20% growth for the past 5 years. In order

to accommodate the growth Under Armour is expanding internationally and inside the U.S.

Under Armour uses advertising campaign to lure more and more people to its brand.

Under Armour is facing a lot of competition from the older players in the industry such as

Nike and Adidas. Under Armour is at lose in the term of revenue but since Under Armour is still

in growth stage of its industry life cycle, Under Armour’s revenue rate growth more than

doubled compared to its competitors. This causes Under Armour to have a high P/E Ratio which

will hurt the company’s stock price in the long run.

Under Armour’s women line is experiencing some decline the recent years which

becomes a concern to financial analysts. Bad reviews from financial analysts damaged Under

Armour’s stock rating. Under Armour is working on the way to fix the problem in the women’s

product line.

43

Apparel line is the Under Armour main weapon to compete in the sporting goods

industry. Being a large proportion of Under Armour’s revenue, the clothing line is the cash cow

for this company. The other product line selection that is popular right now is the footwear

division. Having signed 2015 NBA MVP and Champion Stephen Curry, Under Armour was able

to increase its footwear division revenue by 350% from 2012.

RECOMMENDATION

There are some recommendations that Under Armour may consider that can help the company to

perform excellently through a strategy plan that can be implemented in the next 3-5 years. These

recommendations are made based on the problems and the opportunities that the company has.

The problems need to be handled very soon because they will damage the company even more if

left untreated. The recommendations are listed here below:

The first recommendation is to fix the problem with the women’s product line. The women line

has so much potential to be the source of revenue of the company. As what Morgan Stanley

points out, the Under Armour’s women line lacks of fashion aspect which is a really important

part of women’s decision making in buying apparel. We learn that the sports apparel industry

will keep looking bullish for the next 5 years, so this opportunity is important for Under Armour

to regain the lost glory of the women’s line market.

The way we can fix women’s clothing line:

Partnering with women’s named brand designers to create a fashionable sports

clothing that carries that characteristics of both brand. Good design will make Under

Armour’s women clothing line look far away from the boys club feeling in their clothing

line.

Create a campaign to empower women using regular people so that people can

really relate to the people modeling for the campaign. Often times, companies use

famous people to promote their brand but some customers find them not relatable to the

customers’ condition. Having real people who are now actively exercising but used to

have struggles with weight loss, staying in shape, and being fit as the brand advertising

44

models will help target audiences who watch the advertisement to feel relatable with the

condition.

Creating free fitness programs that will motivate women to work out and eventually

will increase the publicity of the brand through the programs.

Hopefully through these alternatives, women will be more receptive to the brand and will

remember Under Armour when they are shopping for sports apparel.

The second recommendation is to find more hidden gems just like when the company

signed Stephen Curry and Jordan Spieth. Under Armour find rare persona in Stephen Curry

and Jordan Spieth when the company signed them contracts. Nobody sees Stephen Curry to

be a phenomenal player that would win NBA MVP and NBA championship. Same case with

Jordan Spieth who became the second youngest to win the Masters tournament. Under

Armour almost lose bid of Curry to Nike, but luckily through Nike’s half-hearted effort in

pitching Curry, he picked to be with Under Armour instead. The presence of Curry totally

change the future of the brand. Curry’s existence to Under Armour is being valued at $14

billion as mention previously in the analysis. If Under Armour can find professional athletes

who bring a big impact to the company like them, Under Armour will do well in the market

in spite of the tough competition in the market.

Here are some recommendations on how to select potential pro athletes:

Look for the one that has the heart for what they do

When people are doing everything wholeheartedly, the result will be significant and

satisfying knowing that they have done the best that they can. Athletes with good

work ethic will excel in the sport and are a good choice to be selected as brand

ambassadors.

A good character is more important than just mere achievements

Athletes that only have talents but not a good character will not bring a big impact to

the companies. There are tons and tons of talented and popular athletes who have a

bad character and image in the public. Companies who sponsor them are at risk when

these athletes do stupid things that violates the law and regulations which will bring

bad PR to the company as well.

45

Start scouting before potential athletes turn pro

Starting to scout early never hurts the company. Having being introduced to the brand

since young age will help Under Armour to pitch them later on when they are

successful.

The last recommendation is to create limited edition items that are produced in a little quantity

to create a sense of rarity. Under Armour has to learn from Nike and Adidas in creating exclusive

items that are limited in availability. Exclusive and rare items will bring hype toward the brand

and will bring a promotion to the brand through the word of mouth.

IMPLEMENTATION

First Recommendation:

Timeframe: As soon as possible to prevent further damage to the women product line.

Under Armour should start finding options of companies to partner with in order to get back to

the business quickly. We can allocate some small percentage from the apparel revenue in order

to develop these products to even better products

Second Recommendation:

Timeframe: As soon as possible

Under Armour should find athletes that will help the company in the case of losing current

athletes to injury or other reasons. We can create a specialized team with good sports scout that

will help the company to recruit only the best people with a good character both on and off the

court. Allocating around 5% of marketing revenue will help this division to operate freely.

Third Recommendation:

Timeframe: After releasing a well-received product

After we establish the market in the footwear and clothing industry we can start by releasing a

high-quality premium priced product. If the response of the customers toward that product is

good, we can then start to make a special limited edition. We can use our popular brand

ambassador like Stephen Curry to endorse the product and make the product exclusively

46

represent him to improve the acceptance of the product. Keep track of the sales closely and see if

this alternative works out. If it does not then it’s better to stop before it is too late.

47

NOTES

1. Under Armour, “Under Armour: Company History”,

http://www.uabiz.com/company/history.cfm. (Accessed March 25, 2016)

2. Ibid.

3. Ibid.

4. Steve Gelsi, “Under Armour’s IPO doubles”, http://www.marketwatch.com/story/under-

armour-up-100-in-biggest-us-open-since-2000. (Accessed March 26, 2016)

5. Nasdaq, “Under Armour, Inc. Revenue & Earnings Per Share (EPS)”,

http://www.nasdaq.com/symbol/ua/revenue-eps.

6. Under Armour, http://www.underarmour.jobs/why-choose-us/mission-values/. “Under

Armour: Mission and Values”. (Accessed March 25, 2016)

7. Ibid.

8. Ibid.

9. Ibid.

10. Steve Symington, “The Surprising Way Under Armour Plans to Double Revenue by

2018”.,http://www.fool.com/investing/general/2015/10/17/the-surprising-way-under-

armour-plans-to-double-re.aspx (Accessed March 20, 2016)

11. Andrew Marder, “The Future of Under Armour “,

http://www.fool.com/investing/general/2013/03/14/the-future-of-under-armour.aspx.

(Accessed March 26, 2016)

12. Tom Foster. “CAN THIS DECADE’S MOST UNLIKELY TECH STARTUP BEAT

NIKE?.”. Inc., 38 (2016): 28-35.

13. Trefis Team, ” Armoured For Growth; Potential Opportunities For Under Armour”,

http://www.forbes.com/sites/greatspeculations/2013/12/17/armoured-for-growth-

potential-opportunities-for-under-armour/#1d799de6d730. (Accessed March 19, 2016)

14. Alex Myers, “Jordan Spieth will be an old golfer by the time his new Under Armour deal

runs out “, http://www.golfdigest.com/story/jordan-spieth-signs-big-under-armour-deal.

(Accessed March 20, 2016)

15. Luke Kawa, “Morgan Stanley: Stephen Curry Is the Key Risk to Our Bearish Call on Under

Armour”, http://www.bloomberg.com/news/articles/2016-03-03/morgan-stanley-stephen-

curry-is-the-key-risk-to-our-bearish-call-on-under-armour. (Accessed March 20, 2016)

48

16. Bob Bryan, “MORGAN STANLEY: Stephen Curry could be worth $14 billion to Under

Armour”, http://www.businessinsider.com/steph-curry-worth-14-billion-to-under-

armour-2016-3. (Accessed March 18, 2016)

17. Investor’s Business Daily, “Under Armour Eyes Bigger Footwear, International Sales”,

http://www.nasdaq.com/article/under-armour-eyes-bigger-footwear-international-sales-

cm371439. (Accessed March 19, 2016)

18. Sports Pro, “Tottenham sign kit deal with UA worth $16 million annual”,

http://www.sportspromedia.com/news/tottenham_sign_surprise_multi-

million_dollar_deal_with_major_american_backe. (Accessed March 25, 2016)

19. Phalguni Soni, “Under Armour Increases Presence in International Markets in 2Q15”,

http://marketrealist.com/2015/07/armour-shores-presence-international-markets/

(Accessed March 21, 2016)

20. Allison Glass, " Under Armour to Acquire MapMyFitness, One of the World’s Largest Open

Fitness Tracking Platforms”, http://about.mapmyfitness.com/2013/11/underarmour/

(Accessed March 22, 2016)

21. Under Armour, “Under Armour Acquires Endomondo and MyFitnessPal to Establish the

World's Largest Digital Health and Fitness Community”,

http://investor.underarmour.com/releasedetail.cfm?ReleaseID=894685. (Accessed March

28, 2016)

22. Tom Foster. “CAN THIS DECADE’S MOST UNLIKELY TECH STARTUP BEAT

NIKE?.”.

23. Adweek, “Ad of the Day: Under Armour Hypnotically Captures the Army of Athletes Inside

Each Star”, http://www.adweek.com/news/advertising-branding/ad-day-under-armour-

hypnotically-captures-army-athletes-inside-each-star-166511. (Accessed March 27, 2016)

24. Phalguni Soni, “Why Under Armour Is Expanding Its Digital Sphere with Wholesalers”,

http://marketrealist.com/2015/09/armour-expanding-digital-sphere-wholesalers.

(Accessed March 27, 2015)

25. Adweek, “Droga5's Gisele Campaign for Under Armour Scores the Cyber Grand Prix at

Cannes”, http://www.adweek.com/news/advertising-branding/droga5s-gisele-campaign-

under-armour-scores-cyber-grand-prix-cannes-165541. (Accessed March 29, 2016)

26. Hayley Peterson, “Morgan Stanley signaled a huge red flag for Under Armour”,

http://www.businessinsider.com/morgan-stanley-under-armour-note-2016-4. (Accessed

April 14, 2016)

27. Ibid.

49

28. Lorraine Mirabella, “Under Armour raises the bar on digital fitness”,

http://www.baltimoresun.com/business/under-armour-blog/bs-bz-under-armour-ibm-

watson-20160109-story.html. (Accessed March 23, 2016)

29. Palbir Nijar, “The 3 Most Important Growth Drivers for Under Armour Inc”,

http://www.fool.com/investing/general/2016/02/18/the-3-most-important-growth-drivers-

for-under-armo.aspx. (Accessed March 24, 2016)

30. Meghan McCorkell, “Multi-Million Dollar Under Armour Campaign Targeting Women”,

http://baltimore.cbslocal.com/2014/07/31/under-armour-launches-marketing-campaign-

targeting-female-customers. (Accessed March 30, 2016)

31. Palgub Soni, “Why Under Armour Is Expanding Its Digital Sphere with Wholesalers”

32. David L. Harris, “Under Armour has a location for its second-largest store in North

America”, http://www.bizjournals.com/washington/news/2016/04/13/under-armour-has-

a-location-for-its-second-largest.html. (Accessed April 17, 2016)

33. Tami Luhby, “Typical American family earned $53,657 last year”,

http://money.cnn.com/2015/09/16/news/economy/census-poverty-income. (Accessed

April 1, 2016)

34. St. Louis Federal Reserve Bank, “Retail Trade: Sporting Goods, Hobby, Book, and Music

Stores”, https://research.stlouisfed.org/fred2/series/RSSGHBMS (Accessed March 31,

2016)

35. U.S. Department of Labor, “The U.S. Department of Labor Timeline - Alternate version”,

http://www.dol.gov/100/timeline/alternate.version.timeline.html (Accessed April 3, 2016)

36. Federal Trade Commission, “What We Do”, https://www.ftc.gov/about-ftc/what-we-do.

(Accessed March 30, 2016)

37. U.S. Patent and Trademark Office, “About Us”, http://www.uspto.gov/about-us (Accessed

April 6, 2016)

38. Josephine, Moulds, “Child labour in the fashion supply chain”,

https://labs.theguardian.com/unicef-child-labour. (Accessed April 4, 2016)

39. Kim Abreu, “The Myriad Benefits of Diversity in the Workplace”,

https://www.entrepreneur.com/article/240550 (Accessed April 3, 2016)

40. Oxford Dictionaries, “Norm Definition in English”,

http://www.oxforddictionaries.com/us/definition/american_english/norm (Accessed April

4, 2016)

41. Bruce Horovitz, “Younger folks want healthier food - and will pay for it”

http://www.usatoday.com/story/money/2015/01/19/healthy-food-nielsen-global-health--

wellness-study/22000167/ (Accessed April 4, 2016)

50

42. Zach Epstein, “Under Armour showed me the future of fitness tech”,

http://bgr.com/2016/01/05/under-armour-healthbox-release-date-price-announced

(Accessed April 5, 2016)

43. Hannah Marriot, “Are we ready to 3D print our own clothes?”,

http://www.theguardian.com/fashion/2015/jul/28/are-we-ready-to-print-our-own-3d-

clothes. (Accessed April 5, 2016)

44. Beth McKenna, “3D-Printed Shoe Race: Under Armour: 1; Nike, Adidas, and New Balance:

0”, http://www.fool.com/investing/general/2016/03/21/3d-printed-shoe-race-under-

armour-1-nike-adidas-an.aspx (Accessed April 4, 2016)

45. Phalguni Soni, “Why Under Armour Unveiled a Blueprint for International Expansion”,

http://marketrealist.com/2015/09/armour-unveils-blueprint-international-expansion

(Accessed April 6, 2016)

46. Under Armour, “Corporate Responsibility”,

http://www.uabiz.com/company/corpResponsibility.cfm (Accessed April 7, 2016)

47. Under Armour, “SEC Fillings”,

http://investor.underarmour.com/secfiling.cfm?filingID=1336917-16-64&CIK=1336917

(Accessed April 17, 2016)

48. Under Armour, “Why Choose Us?”, http://www.underarmour.jobs/why-choose-us/benefits

(Accessed April 8, 2016)

49. Under Armour, “Give Back”, https://www.underarmour.com/en-us/give-back (Accessed

April 6, 2016)

50. Ibid.

51. Meghan McCorkell, “Multi-Million Dollar Under Armour Campaign Targeting Women”

52. Natalie Zmuda, “Under Armour Adds Millions to Marketing Budget”,

http://adage.com/article/cmo-strategy/armour-adds-millions-marketing-budget/292854

(Accessed April 7, 2016)

53. Phalguni Soni, “The Cogs In The Under Armour Supply Chain”,

http://marketrealist.com/2014/12/cogs-armour-supply-chain (Accessed April 7, 2016)

54. Jeremiah Strider, “Analyzing Porter's Five Forces on Under Armour (UA)”,

http://www.investopedia.com/articles/markets/020316/analyzing-porters-five-forces-

under-armour-ua.asp (Accessed April 8, 2016)

55. Parmy Olson, “Silicon Valley's Latest Threat: Under Armour”,

http://www.forbes.com/sites/parmyolson/2015/09/30/kevin-plank-under-armour-apps-

technology/#2f22cb294b25 (Accessed April 8, 2016)

51

56. Under Armour, “Financial History”, http://investor.underarmour.com/income.cfm (Accessed

April 7, 2016)

57. Nike, “Nike, Inc. Reports Fiscal 2015 Fourth Quarter and Full Year Results”,

http://news.nike.com/news/nike-inc-reports-fiscal-2015-fourth-quarter-and-full-year-

results (Accessed April 9, 2016)

58. Yahoo Finance, “Adidas Income Statement”,

https://finance.yahoo.com/q/is?s=ADDYY&annual (Accessed April 9, 2016)

59. Alexander F. Brigham, and Stefan Linssen, “Your Brand Reputational Value Is Irreplaceable.

Protect It!”, http://www.forbes.com/2010/02/01/brand-reputation-value-leadership-

managing-ethisphere.html (Accessed April 11, 2016)

60. John Kell, “Why Nike, Adidas Are Turning to Celebrities in 2016”,

http://fortune.com/2016/03/19/nike-adidas-kevin-hart-kanye/ (Accessed April 11, 2016)

61. Nasdaq, “Under Armour P/E Ratio”, http://www.nasdaq.com/symbol/ua/pe-ratio (Accessed

April 11, 2016)

62. Nasdaq, “Nike P/E Ratio”, http://www.nasdaq.com/symbol/nke/pe-ratio (Accessed April 11,

2016)

63. Amigo Bulls, “Adidas Income Statement”, http://amigobulls.com/stocks/ADDYY/income-

statement/annual (Accessed April 11, 2016)

64. Under Armour, “Under Armour Reports Fourth Quarter Net Revenues Growth Of 31% And

Full Year Net Revenues Growth Of 28%”,

http://www.uabiz.com/releasedetail.cfm?ReleaseID=952146 (Accessed April 11, 2016)

65. Nike, “Nike, Inc. Reports Fiscal 2015 Fourth Quarter and Full Year Results”

66. Adidas Group, “Adidas Group Full Year 2014 Results”, http://www.adidas-

group.com/en/media/news-archive/press-releases/2015/adidas-group-full-year-2014-

results (Accessed April 12, 2016)

67. PwC, “Physical Store Beats Online as Preferred Purchase Destination for U.S. Shoppers,

According to PwC”, http://www.pwc.com/us/en/press-releases/2015/2015-us-total-retail-

press-release.html (Accessed April 12, 2016)

68. Vault, “Nike Retail Services, Inc.”, http://www.vault.com/company-profiles/retail/nike-

retail-services,-inc/company-overview.aspx (Accessed April 12, 2016)

69. Jessica Golden and Sara Eisen, “Can Adidas be 'cool' again? One exec thinks so”,

http://www.cnbc.com/2015/03/27/adidas-executive-mark-king-explains-how-shoe-

maker-will-turn-itself-around-in-north-america.html (Accessed April 12, 2016)

52

70. Brian Sozzi, “Under Armour Moves to Control Own Future by Opening 200 New Stores in

2016”, http://www.thestreet.com/story/13435993/1/under-armour-moves-to-control-own-

future-by-opening-200-new-stores-in-2016.html (Accessed April 12, 2016)

71. Pankaj Kumar Singh and J.K. Pattanayak. “The Impact of Brand Loyalty on Consumers'

Sportswear Brand Purchase.” IUP Journal of Brand Management 11 (2014): 40-52

72. Phalguni Soni, “Market Share Gain Spurs NIKE’s North American Footwear Revenues”,

http://marketrealist.com/2014/12/market-share-gain-spurs-nikes-north-american-

footwear-revenues/ (Accessed April 14, 2016)

73. Subramanian Balachander and Axel Stock. “Limited Edition Products: When and When Not

to Offer Them.” Marketing Science 28 (2009): 336-355

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http://espn.go.com/olympics/news/story?id=3571042 (Accessed April 15, 2016)

78. Chris Katje, “Adidas Looks to Beat Nike for Soccer Dominance in 2014 World Cup”,

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dominance-in-2014-world-cup.html (Accessed April 15, 2016)

79. Scott Gendrowski, “Nike's new marketing mojo”, http://fortune.com/2012/02/13/nikes-new-

marketing-mojo/ (Accessed April 15, 2016)

80. Dan Mills, “Under Armour CEO: Vision is a CEO’s most important job”,

http://www.smartceo.com/under-armour-ceo-vision/ (Accessed April 15, 2016)

81. Under Armour, “SEC Fillings”

82. Shelly Banjo, “Inside Nike's Struggle to Balance Cost and Worker Safety in Bangladesh”

http://www.wsj.com/articles/SB10001424052702303873604579493502231397942

(Accessed April 15, 2016)

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53

84. Morgan Stanley Research, “Athletic Lifestyles Keep Apparel Sales Healthy”,

http://www.morganstanley.com/ideas/global-athletic-wear-geared-for-growth (Accessed

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85. Under Armour, “SEC Fillings”

86. Jonathan Chew, “This Is How Much Stephen Curry Is Worth to Under Armour”,

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87. Pippa Stevens, “Morgan Stanley: Sell Under Armour”,

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April 16, 2016)

88. Hayley Peterson, “Morgan Stanley signaled a huge red flag for Under Armour”

89. Palbir Nijar, “The 3 Most Important Growth Drivers for Under Armour Inc”

90. Under Armour, “Under Armour Reports Fourth Quarter Net Revenues Growth Of 31% And

Full Year Net Revenues Growth Of 28%”

91. Lorraine Mirabella, “Under Armour raises the bar on digital fitness”

92. Under Armour, “Financial History”

93. Under Armour, “Corporate Responsibility”

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95. Under Armour, “Governance Guidelines”,

http://www.uabiz.com/documentdisplay.cfm?DocumentID=1007 (Accessed April 18,

2016)

96. Dan Mills, “Under Armour CEO: Vision is a CEO’s most important job”

54

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