2. UNDER ARMOUR - Agenda
1.Introduction: Outline of the history and background to Under Armour,
identifying the main markets where it operates, the main products/services
and technologies that are used in their business.
2.The Performance Apparel Industry: Brief overview of the industry and its
competitive forces.
3.Under Armour Value Chain: Analysis of how Under Armour is positioned in
the value chain identifying which parts of the main value chain are
performed within the firm, and which operations are subcontracted or
outsourced.
4.Under Armour Business Model: Examination of Under Armour’s current
business model identifying its strengths and weakness.
5.Sustainable Competitive Advantage: Is Under Armour building a
sustainable competitive advantage?
4. “TO MAKE ALL ATHLETES BETTER THROUGH PASSION, DESIGN AND THE
RELENTLESS PURSUIT OF INNOVATION”
• Entrepreneurial sport venture founded in Baltimore by Kevin Plank (ex-American
Footballer); generated $17,000 by word of mouth
• Originator of Performance Apparel, characterised by continued innovation
• $100,000 turnover
• First made profit in 1998
• Featured in the movie “Any Given Sunday”
• Established licensing arrangement with Dome in Japan
• Publicly Traded & first entered European Market (UK)
• Introduced footwear
• First full price physical store (Maryland)
• Passed the $1bn revenue mark
• 3,300 employees worldwide
1996 1997 1998 1999 2003 2005 2006 2007 2010 2012
31 May, 2012 Sources: Funding Universe (2003), Phung (2006), Salter (2007), Under Armour (2011).
Under Armour Inc. 4
5. UNDER ARMOUR: LEADING DEVELOPER, MARKETER AND DISTRIBUTOR OF
BRANDED PERFORMANCE PRODUCTS
UNDER ARMOUR STRATEGY IS BASED UPON:
• Powerful Brand Identity
• Focus on Product Performance
• Simple Merchandising Story
• Word of mouth endorsement
IT HAS ACHIEVED THIS BY:
• Designing products which serve un-met needs (niche strategy)
• i.e. technologically advanced products designed to wick perspiration away from
the skin, regulate body temperature, enhance comfort and mobility and improve
performance regardless of the weather condition.
• Securing team and athlete endorsement and focusing attention on 8 to 12 year old
consumers to build loyalty early.
Sources: Gaebler (2010), Kraft & Lee (2009), Miloch et al (2012), Palmisano (2009), Parrish et al (2006), Under Armour (2011)
31 May, 2012 Under Armour Inc. 5
6. Net Revenues NET REVENUES BY PRODUCT CATEGORY
Thousands, Year 2006 - 2010
2010
$1,063,927
4.1% 3.7%
$856,411 12.0% Apparel
$725,244
$606,561 Footwear
$430,689
80.2% Acessories
Licensing
2006
Revenues
2006 2007 2008 2009 2010
Nike Revenue Distribution
13%
Other
Business 34%
U.S.A
2010
53%
Int'nal
31 May, 2012 Sources: Nike (2011), Roberts (2011), RobinsonArmour Inc.Under Armour (2011)
Under (2012), 6
7. UA's % Revenue Growth Compared To % Growth in
Global Market
60 • UnderArmour has shown
50 substantial year on year
% Growth/Reduction
40 growth in
30 UA
revenues, exceeding the
20 Global growth in the global
10
apparel market
0
-10
2005 2006 2007 2008 2009 2010 • UnderArmour has also
taken market share in the
sportswear industry from
Nike and Adidas
31 May, 2012
Sources: Daniel (2011), Under Armour (2011) Armour Inc.
Under 7
9. THE PERFORMANCE APPAREL INDUSTRY
Performance Apparel: garments that perform or function for a defined purpose
• Growth industry: Global market ~
US$6.40bn, (19.4% growth in four
years), predicted to grow to
US$7.6bn by 2014 (18.75%).
• Historically multi-domestic industry
but now increasingly global with
competition across borders
• Subset of the Active and Sportswear
Industry
• Nike & Adidas dominate overall
Sportswear Industry but UA is leader
in the Performance Apparel Industry. Distribution of global growth
• Growth fueled by increased participation in sport (33%), and technology developments
• Market trends driven by seasonal cycles and continuous innovation
Sources: Aarkstore Enterprise (2008), Plunkett Research (2011), Robinson (2012), Textile Exchange (2010), Textile Intelligence (2011).
31 May, 2012 Under Armour Inc. 9
10. PERFORMANCE APPAREL
The Industry Life Cycle
Strategic Positioning
Performance
Sportswear
Apparel
Industry
Industry
Source: Hambrick et al: 1982
11. Political:
PORTER’S FIVE FORCES
Analysis of the performance apparel industry
HIGH
Threat of new entrants
Ease of setting up new
clothing companies (limited
regulation, cheap raw
materials, & manufacture
clusters)
MEDIUM Buyer power
MEDIUM Supplier power HIGH/INTENSE Plenty of choice overall for end
Rivalry amongst firms user from low price to highly
Lots of suppliers (clusters) = low differentiated
prices and easy for business to Main competitors have deep
switch pockets, economies of scale &
strong influence over retailers *Retail buyers bargaining power
Higher quality suppliers have
more leverage lessened by antitrust laws.
HIGH
Starter (1971 – 2004)
Threat of substitute Russell Athletic (1973 – 2006)
products LA Gear (1979-1998)
Particularly from dominant
players. Manufacturers working Examples of companies that
to multiple contracts either failed or were acquired.
11
31 May, 2012 Under Armour Inc.
Sources: Gillispie, (2011), Porter (1985),SGMA (2011), Textile Magazine (2010) 11
13. Political: VALUE CHAIN
GLOBAL
Value Chain of the Apparel Industry
Performance Apparel Industry
The Global Apparel Value Chain: What Prospects for Upgrading by Developing Countries?
Figure 1. The apparel value chain
Textile companies Apparel manufacturers Retail outlets
North America
All retail outlets
US garment factories
Department stores
(designing, cutting,
sewing, buttonholing,
ironing)
Fabric Brand-named
Yarn (weaving, apparel
Natural Cotton, wool, (spinning) Specialty stores
fibres silk, etc knitting, companies
finishing)
Domestic and
Mexican/Caribbean
Basin subcontractors
Mass merchandise
chains
Asia
Synthetic Asian garment Overseas
Synthetic
Oil, natural gas Petrochemicals fibres contractors buying offices Discount chains
fibres
Domestic and All retail Off-price, factory
overseas Trading companies outlet, mail order,
outlets
subcontractors others
Raw material networks Component networks Production networks Export networks Marketing networks
Sources: Appelbaum & Gereffi (1994), Cammett (2006), Industry Canada (2008)
Source: Appelbaum and Gereffi (1994), p. 46.
31 May, 2012 Under Armour Inc. 13
14. VALUE CHAIN
Under Armour
Global
Sourcing
Securing
Design And Marketing Distributing Servicing
Manufacturing Clients
Main focus of Outsourced to Conducted in Conducted in- Hybrid of in- Hybrid of
UA & 3rd parties in House in House in house and outsourcing
conducted in- Asia (60%) and Baltimore Baltimore outsourcing (3rd and in-house
house in Latin America party outbound depending on
Baltimore (35%). logistics) retail route.
Infrastructure: US and European Headquarters
Human Resources: KP Leadership, Ultimate Intern Recruitment (Creative applications to identify (fit”)
Technology Development: In partnership with specialist organisations (e.g. P&G, Agion)
Procurement: Raw materials
31 May, 2012 14
Sources: Cole (2009), Cole, (2010), Under Armour (2011)
16. Business Model
Key Partners
INNOVATION BRAND LOYALTY
SUPPLIERS
PRODUCT INTERNET
ATHLETES
DESIGN FOR ATHLETES
3rdParty
WHO SEEK COMBINE PROGRAM
Suppliers and (PRO/AMATEUR)
GREAT
Manufacturers MARKETING PERFORMANCE DIRECT MARKETING
(MALE/FEMALE/
YOUTH)
THROUGH
PASSION, SCIEN
RETAILERS
CE, AND THE
RELENTLESS
MILITARY
EMPLOYEES PURSUIT OF UNDER ARMOUR
INNOVATION. STORES
INTELLECTUAL
PROPERTY SELECTED
RETAIL STORES
UNDERARMOUR.
COM
EMPLOYEES
PRODUCT SALES
MANUFACTURING & LOGISTICS
LICENSING
FIXED PRICES
MARKETING, SALES, DISTRIBUTION
31 May, 2012 Source: Business Model Generation.com Under Armour Inc. 16
17. Strengths of Business Model Product Performance
Key Partners
INNOVATION BRAND LOYALTY
SUPPLIERS
PRODUCT Design/style is
INTERNET
ATHLETES
DESIGN FOR ATHLETES
differentiating factor
3rd Party
WHO SEEK COMBINE PROGRAM
Suppliers and (PRO/AMATEUR)
GREAT
Manufacturers MARKETING PERFORMANCE DIRECT MARKETING
(MALE/FEMALE/
YOUTH)
THROUGH
PASSION, SCIEN
RETAILERS
CE, AND THE
RELENTLESS
Superior MILITARY
EMPLOYEES PURSUIT OF UNDER ARMOUR
technologies
INNOVATION. Increase in
STORES
Powerful brand – INTELLECTUAL
3D design factory stores
“buzz” PROPERTY Rapid prototype SELECTED from 54 to 80 in
Biometric designs RETAIL STORES
2011 reduces
Material price for
engineering discretionary
UNDERARMOUR.
COM spend consumer
(which has
reduced by 6%
EMPLOYEES in economic
Management Team PRODUCT SALES downturn)
and culture of
MANUFACTURING & LOGISTICS innovation &
LICENSING
FIXED PRICES commitment
MARKETING, SALES, DISTRIBUTION
Source: Cole (2009), Daniel (2011), Duffield & Portus (2007), Marketwatch (2012), Monroe (2008), UnderArmour (2011)
31 May, 2012 Under Armour Inc. 17
18. Weaknesses of Business Model
No long-term contracts with suppliers or manufacturing
sources, and compete with other companies for fabrics, raw
Key Partners materials, production and import quota capacity.
INNOVATION BRAND LOYALTY
SUPPLIERS
PRODUCT INTERNET
ATHLETES
DESIGN FOR ATHLETESOnly just creating a
3rd Party
WHO SEEK strong differentiatedPROGRAM
COMBINE
Suppliers and (PRO/AMATEUR)
GREAT women’s
Manufacturers MARKETING PERFORMANCE range, footwear MARKETING
DIRECT
(MALE/FEMALE/
YOUTH)
THROUGH range not taken off
PASSION, SCIEN
(%revenue stalled at
RETAILERS
CE, AND THE 12%), and not seen
Endorsements and RELENTLESS growth outside of
MILITARY
designations as an EMPLOYEES PURSUIT OF USA (%revenue from
UNDER ARMOUR
official supplier INNOVATION. overseas market
STORES
may become more INTELLECTUAL dropped by 0.1% in
1/3 of sales
expensive and this PROPERTY SELECTED
2011).
via two
could impact the RETAIL STORES
distributors
value of the brand
image.
UNDERARMOUR.
COM
Fabrics and
manufacturing technology
EMPLOYEES are not patented or
copyrighted and can be PRODUCT SALES Kevin Plank Legacy
imitated by competitors.
MANUFACTURING & LOGISTICS Lack of female and International
LICENSING
FIXED PRICES presence in Senior Management
MARKETING, SALES, DISTRIBUTION and strategic positions.
31 May, 2012 Under Armour Inc.
Sources: Joly (2011), Berdine et al (2008), Salter (2007), Under Armour (2011), 18
20. Under Armour in summary:
• Entrepreneurial company operating in highly competitive but growth
industry
• Operates the industry norm value chain, keeping its core competencies of
design and marketing in house.
• Weaknesses: Limited IP protection, supplier contracts, and distributors;
reliance on KP leadership, and limited expertise to diversify into footwear
and female markets or to develop overseas markets
• Strengths: Brand, culture, superior product performance, innovation
and design (leading to greater customer satisfaction)
21. Conclusions – Sustainable Competitive Advantage?
Strong brand loyalty will Requires continued
lead to sustainable innovation to serve un-met
advantage. Success of Superior brand (for needs and maintain
“tweenies” campaign will be
niche segments) technology edge – part of
key. Need to stick to core UA’s core competence.
brand values
Superior
Unique innovation &
culture design
Very valuable (close to
Superior product
consumer needs) and performance Independent
hard to research has proved
replicate, but…limits effectiveness but
growth in certain lack of IP protection
markets e.g. women. = not sustainable
31 May, 2012 Adapted from Hill and Jones (2001) 21
22. Conclusions: sustainable competitive advantage for
growth?
Market penetration – UA already
maximise their penetration by
bringing out updated ranges on short
cycles but products become obsolete
quickly so MUST continue to
innovate new ones
Product development – this has led to
early growth of company but heavy
competition in US market
Diversification – UA have tried this with
limited success and risk damaging
core strengths of brand and niche …Currently UnderArmour has
problem solver
limited expertise and capability
Market development – UA need to grow to serve these markets,
their Overseas, & Female particularly when Nike, Adidas
markets, and extend the number of
and other competitors are
sports they serve BUT….
already established.
Sources: Underarmour (2010)
23. Conclusions – What next, Our view:
UnderArmour is unlikely to be able to sustain growth trajectory with existing
competences, value chain, and business model.
UA needs to develop new markets:
• Overseas, Women, and new sports
Need to acquire capabilities to successfully operate in these
markets, How?
• Merger with other “small” players
• Acquisition by bigger firm
• Licensing (but major quality/brand risk associated with this)
• BUT need to maintain brand and cultural congruence
Most likely outcome: acquisition by Nike, Adidas or similar
• Acquirer gets manufacturing synergies and removal of competition
• Acquirer uses infrastructure and money to expand UA in
Europe, Asia…
Sources: Rubin (20120), Sun (2011), Underarmour (2010)
31 May, 2012 23
25. References
Aarkstore Enterprise, 2008. Global Market Review of Performance Apparel - Forecasts To 2014.
[online] Available at: http://www.prlog.org/10138929-global-market-review-of-performance-apparel-
forecasts-to-2014.html [Accessed 26 February 2012]
Appelbaum, R., and Gereffi, G., 1994. Power and Profit in the Apparel Commodity Chain in Edna
Bonacich et al. Global Production : the Apparel Industry in the Pacific Rim. PA: University Press
Berdine, M.; Parrish E.; Cassill, N.L.; and Oxenham, W., 2008. Measuring the Competitive Advantage
of the US Textile and Apparel Industry, [online] Available at: http://web.mit.edu/is08/pdf/Parrish.pdf.
[Accessed 7 February 2012]
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Cammett, M., 2006. Development and the Changing Dynamics of Global Production: Global Value
Chains and Local Clusters in Apparel Manufacturing, Competition & Change, 10 (1), pp 23-48
Cole, M.D., 2009. Under Armour Protects Its Distribution House, [online] Available at:
http://apparel.edgl.com/case-studies/Under-Armour-Protects-Its-Distribution-House64358 [Accessed
2nd February 2012]
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2012]
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Concepts, Pearson: London
31 May, 2012 Under Armour Inc. 25
26. References
Duffield R., and Portus, M., 2007. Comparison of three types of full-body compression garments on
throwing and repeat-sprint performance in cricket players, British Journal of Sports Medicine, l (41) pp
409-414
Daniel, R., 2011. UnderArmour Gets Serious, Fortune, 164 (7), pp.152-162
Funding Universe, 2003. Under Armour Performance Apparel Company Profile, [online]
Available at: http://www.fundinguniverse.com/company-histories/Under-Armour-Performance-Apparel-
company-History.html [Accessed 10 February 2012]
Gaebler , 2010. Competing in Established and Competitive Markets, [online]
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[Accessed 10 February 2012]
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Academic
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31 May, 2012 Under Armour Inc. 26
27. References
Joly, B., 2011. Under Armour declares European ambitions, [online] Available at:
http://uk.fashionmag.com/news-157167-Under-Armour-declares-European-ambitions [Accessed 10
January 2011]
Kraft, P., and Lee, J.W., 2009. Protecting the house of Under Armour, Sports Marketing Quarterly, Vol.
18 pp 112-116
Lusbec, K., 2010. UnderArmour International Marketing Director Interview, 25th March 2010, [online]
Available at: http://karllusbec.wordpress.com/2010/03/25/under-armour-international-marketing-
director-interview/ [Accessed 1 February 2012]
MarketWatch, 2012. Agion Active Creates Advanced Odour Removal Technology for Under Armour
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advanced-odor-removal-technology-for-under-armour-hunting-collection-2012-01-17 [Accessed 18
March 2012]
Miloch, K.S., Lee, J., Kraft, P.M., and Ratten, V., 2012. Click Clack: Examining the strategic and
entrepreneurial brand vision of Under Armour, International Journal of Entrepreneurial Venturing, 14 (1)
pp 42 – 57
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31 May, 2012 Under Armour Inc. 27
28. References
Parrish, E.D., Cassill, N.L., and Oxenham, W., 2006. Niche Market Strategy in the textile and apparel
industry, Journal of Fashion Marketing and Management, 10 (4) pp 420 -432
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at: http://sportsillustrated.cnn.com/2009/more/04/09/under.armour/index.html#ixzz1qFLf9aGM
[Accessed 10 February 2012]
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[Accessed 15 February 2012]
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2012]
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http://seekingalpha.com/article/462711-under-armour-the-nike-look-through?source=forbes [Accessed
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March Under Armour Inc. 28
29. References
SGMA, 2011.Topline Participation Report , 2011. ,[online] Available at: http://www.sgma.com [Accessed 5
January 2012]
Salter, C., 2007. Protect this House, Fastcompany.com, [online] Available at:
http://www.fastcompany.com/magazine/97/under-armour.html [Accessed 6 February 2012]
Sun, L., 2011. Nike (NKE) Rumoured to Consider Acquiring Under Armour (UA), [online]
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ua/ [Accessed 18 March 2012]
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[Accessed 15 February 2012]
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31 May, 2012 Under Armour Inc. 29
Hinweis der Redaktion
So over to X….
So what does the performance apparel industry look like…
Biggest influencers on the industry are technology which is driving new product development (and enabling more environmentally sensitive manufacturing practices) and the economic down turn which is reducing the discretionary spend available and PA is very much a discretionary spend market. http://www.plunkettresearch.com/sports-recreation-leisure-market-research/industry-and-business-dataTradingeconomics.comhttp://www.oup.com/uk/orc/bin/9780199296378/01student/additional/page_12.htmClik clack paper references growth in market as consequence of both increased participation in sport, and also increased purchasing of performance apparel by non athletes.Athletic and outdoor products are mostly non-durable goods, with a lifetime measured in months or a few years. So far, we’ve looked at the company largely in isolation, but how is it’s position affected by the macro environment? Things changing all the time but UA is a dynamic company that finds opportunity in new technologies etc but it’s biggest external influence at the moment is the economic context – in the US and further afield less discretionary spend available, exacerbated by exchange rate fluctuations.
So in sum, the industry is dynamic and growing but there is huge rivalry and competition to stay in the industry. So how do companies in this industry set up their value chain?
So we’ve established in the main functions of the value chain, UA is very much in sync with its competitors... So what about their business model.
Big players like Nike, Adidas & Columbia involved but also lots of new entrants e.g. Skins, Saucony etcBut, need to own a specific category within the market to establish a strong, defendable competitive advantage and charge a premium price“as competition intensifies a shake out may take place leaving only the strongest. A niche player can survive this if truly niche. “