Under Armour Case Analysis Essay Sample

Under Armour is a athleticss dress. footwear. and accoutrements company that is rapidly going a planetary force to be reckoned with. The company is viing in a concentrated market and has maintained the ability to turn. Analysis of the company shows that it should: look for alternate beginnings of stuffs and providers ; go on a selling run utilizing athlete indorsements ; and. theoretical account enlargement into new foreign states after the successful entrywaies into countries such as Europe. Reasoning behind these recommendations is shown in the analysis below. Background

Under Armour was established in 1996 by Kevin Plank. a former football participant with the University of Maryland. Plank saw the potency for the demand of comfy and lightweight exercise cogwheel to be produced. The company was originally named KP Sports. after Plank. When the company went public in 2005 the name was changed to Under Armour. Under Armour is considered a innovator of public presentation dress created from complex man-made stuffs. Their cogwheel is designed to maintain jocks cool and dry throughout the class of a game. pattern or exercise in assorted conditions. The apparel merchandise line for Under Armour consists of HeatGear. ColdGear. and AllSeasonGear. Since the debut of this type of athleticss dress cloth. the construct has been widely copied by all the major athletic wear trade names. Scheme

Under Armour sections different schemes for growing. merchandise lines. selling and distribution. The growing scheme of the company has the focal point of go oning to broaden the company’s merchandise offerings. aim extra consumer sections. and unafraid extra distribution of Under Armour merchandises. The merchandise line scheme consists of making a diverse merchandise line to make multiple market sections. This carries into their selling scheme of seting Under Armour merchandises in places to be seen by the populace. To make this Under Armour enters into understandings with a assortment of collegiate and professional athleticss squads. patrons both collegiate and professional athletics related events. and sells Under Armour merchandises to both squads and to single jocks. To market in the retail sector Under Armour works to give floor infinite entirely to their merchandises in the shops of its major retail clients every bit good as presenting Under Armour shops. Under Armour has besides worked to keep and increase gross revenues in the United States every bit good as expand into foreign markets of different Asiatic states. Five Forces

Porter’s Five Forces Model can be used to analyse the athleticss dress industry. The competition among established companies is high. The athleticss dress industry is really competitory for multiple grounds. There are a big figure of companies and a high volume of demand. both factors increases competition. Low shift costs for clients besides increases the competition. Under Armour’s chief rivals have big degrees of capital at their disposal. Key participants in the industry include Nike. Adidas and Reebok. Generally lower degrees of merchandise distinction besides increase the competition between these companies. The menace of new possible entrants is reasonably high. The athleticss dress market has been capable to uninterrupted alterations of tendencies that have increased its popularity. These tendencies include: a rise in concern for healthier life. and higher engagement in athleticss. . Any effort at a new entrant would hold to set out a batch of capital on selling and advertisement to turn out as competition for these companies. The menace of replacement merchandises is high.

The market for athleticss dress. athletic footwear. and athleticss accoutrements is big and fragmented with more than 25 companies. Nike. who is an industry leader. merely has approximately 4 % of the market portion of athleticss dress and 17 % of the footwear market. These Numberss support the grounds that deriving market portion is highly hard. The dickering power of purchasers is high. Price sensitive clients have a batch of power as the costs to exchange between trade names are highly low or nonexistent and clients have multiple merchandise options when buying. In this market. purchasers are divided and no single purchaser has the ability to act upon a merchandise or monetary value. nevertheless overall disloyalty to a trade name can give sections of consumers degrees of power. The dickering power of providers is moderate. In the athleticss dress industry there is a big sum of providers that companies can take between to fabricate their merchandises. However. for Under Armour specifically. the company relies on a little figure of providers to bring forth about half of their fabric offerings. Decision

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The analysis of this market indicates that the market is favourable for bing rivals and those who are able to distinguish their merchandises. While Under Armour does non hold to be excessively concerned with the menace of new entrants. they must go on to publicize their merchandises to distinguish themselves from other rivals. Under Armour must besides concentrate on go oning selling attempts to retain and assist turn their market portion against the industry leaders. PESTLE Analysis

Foreign direct investing policies of some states. such as countries of China. can forbid trade names to hold 100 % ownership of their shops in their states if they feel it poses a menace. As most of the complex compaction stuffs come from crude oil based synthetics and others from cotton blends the company is capable to any restricts and political policies placed on these stuffs. Economic

Economic recovery of the United States has resulted in a immense growing of the athletics dress industry and was a $ 60 billion dollar industry with over 25 companies in 2011 and has continued to turn which benefits Under Armour as it expands. The past few old ages have seen an addition in costs of natural stuffs and resources that Under Armour uses to bring forth its merchandises. This is in concurrence with the monetary value fluctuations due by political ordinances environing crude oil and cotton every bit good as addition rising prices rates as the economic system recovers. Sociocultural

In the athletics dress industry monetary value is non a immense differentiating factor between the chief rivals so the scheme of merchandise distinction and supplying quality merchandises are of import to derive and keep clients. By taking the industry with new compaction merchandises and continuously updated their multiple merchandise lines. Under Armour can utilize this sociocultural tendency to their advantage. Consumers are going more wellness witting as an overall tendency despite the fact that fleshiness rates are higher than of all time. This
tendency towards the mundane individual has benefited Under Armour by leting them to spread out merchandise lines from squads and jocks to persons interested in taking an active life style. Young persons are going more and more active in athleticss and Under Armour reflects this increased engagement in the sponsorship of assorted young person football and athlete plans. When parents buy Under Armour for their kids it may take to additions in grownup purchases. Technology

As consumers’ usage of engineering continues to turn it will go progressively of import for Under Armour to hold a strong presence on its planetary online shop. Legal Under Armour owns the rights to its merchandise blends and requires its contracted makers to guarantee that all employees work within specific ethical and operational norms of concerns in the United States. Environmental

The crude oil footing for some of Under Armour’s merchandises has the potency for jobs in both the political and economic kingdom every bit good as the environmental kingdom. Consumers are traveling towards eco-friendly stuffs to reflect the tendency toward eco-friendly life styles. The usage of crude oil based cloths can go both more dearly-won towards to company in capital and in trade name image if the green tendency continues to turn and beginnings of stuffs become a deciding factor of buying. Decision

The macro environments in which Under Armour operates all play a portion in how the company performs or will execute in the hereafter. The market is in a period of growing and provides the chance for Under Armour to turn every bit long as the company keeps the above possible forces and scenarios in head when seting their scheme. Swot

Under Armour was established with invention at its head when it created the compaction jersey. Under Armour has continuously focused on the altering demands of the athleticss industry. and run intoing these demands with new designs. This focal point is demonstrated by its broad merchandise mix. continuously updated merchandise offerings. and entryway into assorted markets such as the athleticss accoutrement and dress markets. Broad Product Portfolio

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Under Armour has a big scope of merchandises that include assorted athleticss dress lines. an accoutrements line and a footwear line. When the company began it had a chief focal point on football but has expanded to include merchandises athleticss from hoops to swimming to UFC combat. Financial Stability

Under Armour has had a compound one-year growing rate of 19. 3 % for the five old ages between 2006 and 2011. The net grosss about tripled during this clip and the net income merely more than doubled. Failings

Outsource of Manufacturing
Most of the natural stuffs used to bring forth Under Armour merchandises are created and manufactured by 3rd parties. and about half came from merely six different providers in 2011. This poses a hazard to the company as it gives give the providers high bargaining power in add-on to doing the company topic to the political and economic factors that may impact the cost of these crude oil based merchandises. Limited Geographically

Under Armour has made attempts to travel into foreign states such as Canada. Japan and the United Kingdom. However. grosss from the United States accounted for about 94 % of Under Armour sums in 2011. By go oning growing to football nines and rugger nines throughout Europe. every bit good as other athleticss in China and other Asiatic states Under Armour can go on to spread out and leverage its market portion against Nike and Adidas. Opportunities

Direct-to-consumer gross revenues have been a profitable country for Under Armour but many of their rivals have expanded this beginning of gross to include on-line gross revenues to clients. Since young person engagement in athleticss is on the rise athletics dress companies can go on to anticipate growing with a coevals connected to their nomadic devices and can enrich these relationships with promotions like nomadic applications. Menaces

Due to the fact that a bulk of Under Armour’s cloths include crude oil as a merchandise stuff the company is capable to political. economic. and environmental forces as seen in the PESTLE analysis ; because the cost of crude oil can be really unstable and affected by the macro environment Decision

Under Armour has successfully expanded and gained market portion in the athleticss dress market through leveraging its engineering and fiscal stableness. Traveling frontward the company has the possible to derive a larger consumer base in the technological and on-line sector of consumer shopping but must extenuate the hazards ensuing from the usage of peculiar natural stuffs and limited providers. Key Success Factors

Research & A ; Development
Successful athleticss dress companies most continuously better upon their existing merchandises to keep fight and must demo this to consumers with these new merchandises. The athleticss dress market is saturated with rivals. companies who fail to keep the production of new merchandises will non prolong market portion. Sports Marketing

Under Armour’s chief rivals of Nike and Adidas use big sums of capital for marketing runs every twelvemonth. Nike spent over $ 2. 4 billion on selling and advertisement in 2011. During the same twelvemonth Under Amour spent merely under $ 168 million. over 30 % more than the company had spent the old twelvemonth. By providing merchandises to official athleticss squads. in add-on to popular squads. Under Armour is placed in forepart of big market sections and additions gross revenues to fans. As athleticss become capable to the tendency of globalisation. companies must orient their selling runs towards the countries of popular athleticss around the universe. Under Armour has strived to go known in hockey in Canada. and rugger and association football in Europe. Fundss

After successfully traveling public and steady public presentation Under Armour stocks fell somewhat in 2008 with the recession but have been steadily increasing through 2012. The company’s Class A Common Stock has systematically performed good on the New York Stock Exchange. Under Armour had a return on assets from 9. 06 % in 2009 to 12. 37 % in 2012 in add-on to an increasing return on equity. Under Armour has experienced growing in all of their merchandise sections from 2010 to 2012. This growing was supplemented by the debut of merchandises such as Charged Cotton® taking to a 31. 5 % addition cyberspace grosss of dress and a 42. 9 % addition in footwear net grosss.

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Under Armour began to bring forth some chapeaus and accoutrements itself alternatively of outsourcing and this ensuing in immense growings in grosss. this alteration besides resulted in a 7. 1 % loss in gross from alterations in licensing. In the 2010-2012 period the cost of goods sold rose due to increasing costs of fabrication and natural stuffs. Under Armour has worked to countervail these costs by diminishing administrative disbursals. Under Armour typically experiences higher grosss during the winter. in portion from higher net income borders with the ColdGear line. Fourth one-fourth gross revenues in 2011 were lower than norm and left Under Armour with big sums of stock list. The company decided to reassess its full stock list procedure after this to forestall this state of affairs in the hereafter. Recommendations

Traveling frontward Under Armour has countries with the potency for growing or where failings can be mitigated to keep its competitory stance and go on to turn. Suppliers Under Armour should concentrate Research and Development attempts on keeping a strong presence in ecommerce. Under Armour should besides set Research and Development into attempts to get down researching engineering to let the production of its complex cloths without utilizing petroleum-based stuffs. As shown in SWOT and PESTLE the inclusion of these stuffs poses a hazard to Under Armour as the company becomes susceptible to political. economic. and environmental forces. Under Armour has the capital to put in looking for alternate substances and is non presently enduring greatly from the usage of crude oil. presenting the company clip to get down research and remain at the head of invention.

In add-on to traveling off from crude oil based merchandises the company should look toward traveling more production in house and/or increasing the figure of providers it uses to take down the bargaining power of the providers and extenuate the economic hazards of trusting on little Numberss. By trusting on this little figure of providers the company puts itself at hazard during times of economic recession. such as in 2008-2009. The company has seen success from traveling some of the production of its footwear and accoutrements to within the company and can take this as a signal to go on traveling some merchandises into this class as economically prudent. Selling Attempts

Under Armour should go on to increase attempts in market runs. Its chief rivals have big selling runs backed by multiple athlete indorsement trades. Under Armour should sporadically re-evaluate their trades and perchance look to performance-based contracts to assist extenuate costs associated with these trades while go oning to scan for energetic jocks every bit good as revolving well-known jocks to maintain forcing the trade name in forepart of fans. The usage of popular societal media sites such as Facebook and Twitter are inexpensive ways to increase the company’s trade name consciousness in concurrence with its other selling attempts. Expansion

Under Armour should besides go on geographic expedition into foreign markets. The company has experienced success in the Canadian and European markets every bit good as enlargement into China and Japan. The debut of shops into China and Japan can be modeled to the entryway into Canada. Under Armour should look toward endorsing a well-known athleticss squad or franchise. like Hockey Canada. to increase trade name consciousness of the company before traveling big Numberss of shops into the state. Under Armour should go on this enlargement and market scanning of other states to increase its planetary presence against its rivals.