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Final Project.pptx
1. The Sportswear Industry
& Under Armour
Benjamin Ajodan, Brendan Flynn,
Maria Gorskikh, Justin Nardella, Adam Zhou
Boston University Consulting Guild
INTRO INDUSTRY
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Under Armour is the Fourth Largest company in Athletic Apparel industry
● Average ROE of 5.15%
● Market share of 4.1%
2
Under Armour is an American sports equipment company that manufactures
footwear, sports and casual apparel
Under Armour’s Key Technology:
○ HeatGear/ ColdGear: Clothing that is specifically designed to more breathable or more
insulating depending on the weather.
○ Hydrafuse: Clothing that makes post-workout dry skin less likely to occur. It also helps
sweat evaporates it better.
○ Isocool: Clothing that helps excel heat leaving the body.
Under Armour is a differentiator in that their prices are higher than some competitors, and utilize
a narrow strategy because they are mainly concerned with athletes, as opposed to some
competitors in the industry that have ventured into lifestyle branding and have adopted more of a
broad strategy.
3. We performed an in-depth analysis of why Under Armour is underperforming in a profitable
Sports Apparel industry, which is described below and further in this presentation:
Due to the firm’s competitive positioning, costs, and activities, Under Armour
underperforms its rivals by 8.5%
Based on financial reports and Five Forces Analysis, we concluded that the
Sports Apparel Industry is favorable
Under Armour uses ineffective CSR
initiatives and other non-market strategies,
which attributes to its underperformance
Under Armour made mistakes on a vertical scope in the past, which hurt the firm’s
profitability and reputation, but it showed an effective use of horizontal expansion
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3
Industry Analysis
Firm Analysis
Corporate Strategy
Analysis
Non-market Strategy
Analysis
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Sports Apparel Industry’s Supply Chain consists of Product Development,
Manufacturing, Distribution, Retailers, and Consumers
● The sportswear industry is best described as a hybrid; one that intersects gym attire with casual clothing and footwear
● Some of the key players include Nike, Adidas, and Under Armour
● Industry Buyers: Young adults, athletes, health-conscious individuals, large retail chains, mom & pop stores,
organizations
● Industry Suppliers: Primarily overseas (Pou Chen, PT Pan Brothers, Fulgent Sun International, Delta Galil, and Eagle
Nice)
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Industry-level trends and changes lower industry profits and make it harder for firms
to gain market share
Increased Demand for Sustainably
Sourced Apparel increases buyer
bargaining power
6
Supply chain issues:
- Costly air freight
- Port congestion
More Interest in Fair Labor Promotion
- Unions increase suppliers power
- Child Labor Issues influence public opinion
against the companies in the industry
With COVID-19, we will continue to see disruptions on
both the demand and supply side for the next three to five
years
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Historical Sports Apparel industry average profits are higher than the US average
profits by 3.75% indicating that firms in the industry have favorable conditions
Year Firm 1:
Nike
Firm 2:
Adidas
Firm 3:
Puma
Firm 4:
Under
Armour
Firm 5:
ASICS
Average
2019 50.03% 28.47% 14.7% 4.38% 4.5% 20.42%
2018 23.10% 26.27% 11.3% -2.36% -11.1% 9.44%
2017 31.64% 17.26% 8.2% -2.35% 6.5% 12.25%
2016 31.70% 16.85% 3.8% 10.55% 7.8% 14.14%
2015 28.19% 10.89% 2.3% 15.52% 5.7% 12.52%
Average 32.93% 19.95% 8.06% 5.15% 2.68% 13.75%
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Firms in the Sports Apparel Industry tend to benefit from using various non-market
strategies
Introducing sustainability
initiatives in their product lines
and facilities
- They try to balance
between satisfying
consumers and maximizing
profits
- The issue of greenwashing
is present in many
company in the industry
Lobbying to ease regulations on
Forced Labor
- Major companies like Nike
have been pressing
Congress to alter legislation
cracking down on imports
of goods made with forced
labor
One of the market
inefficiencies includes
Pollution
Factories use pesticides and
herbicides
There is a textile pollution
after useful life caused by
excessive use of polymers in
products
These initiatives are used
to increase industry
profits
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Five Forces analysis shows that Sports Apparel Industry is Favorable
Threat of Entry - Low
Ø Equinox, Peloton, Lululemon, Athleta
• High capital requirements make it
extremely difficult for small companies to
gain any substantial market share
(advertising, R&D, sponsorships);
however, established companies such as
the ones I listed above could enter with
more ease. ↑and ↓
• Economies of scale allows companies in
the industry to order goods in massive
quantities, giving them a lower cost per
unit. New companies will not be able to
afford this strategy. ↓
• Strong brand identities in the industry
captured customer loyalty and discourage
customers from switching to a new
alternative. ↓
Power of Suppliers - Medium
Ø Pou Chen, PT Pan Brothers, Fulgent Sun
International, Delta Galil, and Eagle Nice
• Under Armour provides many jobs to countries that
they are in direct relation with, which limits supplier
bargaining power because many of these employees
come from low-income backgrounds and need the
money/employment. ↓
• The human rights movement encourages suppliers
to speak out against mistreatment in the workplace,
putting pressure on Under Armour to either make
improvements or relocate. ↑
Power of Buyers - Medium
Ø Young adults, athletes, health-conscious
individuals, large retail chains, mom & pop stores,
organizations
• Consumers like to compare alternatives. Due to the
recent saturation of the athletic wear market, they
have the ability to choose which product is best for
them. ↑
Threat of Substitutes - Low
Ø New fashion trends, behavioral shifts in wellness
• Clothing is a staple item that is always in demand.
↓
• A worldwide interest in sportswear and wellness
continues to rise. ↓
•Overall, the threat of substitutes is extremely low
due to the inevitable demand for clothing.
Extent of Rivalry - high
Ø Adidas, Puma, Nike, ASICS
• Under Armour has a plethora of direct competitors
with substantial market share and international
presence; therefore, they must continue to innovate
or else they will lose their competitive position. ↑
• Having many rivals makes it difficult to achieve
product differentiation and a unique selling
proposition to consumers. ↑
• Due to the rapid growth of the industry, consumers
are more price sensitive ever. Companies can no
longer rely on athlete partnerships and other
traditional marketing tactics to remain profitable. ↑
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Strategic Activity Maps for Nike and Under Armour show the difference in values
and tactics of the two firms
Nike Under Armour
Product
mix
diversity
Focus on
performance
Focus on
innovation
Athletes
collaborations
Inclusion
initiatives
Global
marketing
appealing to
a broad
population
Efficiency in
supply chain
and
production
Focus on
technology
and app
development
Focus on
innovation
Focus
on
design
Investing
in its own
stores
Digitization
to directly
reach
customers
App
development
Buying
tech
start-ups
Investing
into RD
Selling
inventory
at full price
Emotional
branding
Direct to
consumers
model
Nike
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Under Armour pursues differentiation strategy on a narrow market because of its
focus on professional athletes and charging premium prices for its products
Cost Leadership Differentiation
Broad Market
Narrow Market
Under Armour Positioning
Narrow Market: Under Armour
targets professional athletes who
prioritize performance and quality
over design and style
Differentiation: On average, Under
Armour charges $15 more than
industry average for a pair of sneakers
Nike Positioning
Broad Market: Nike targets athletes
and average population of people who
enjoy exercising “in style”
Differentiation: On average, Nike
charges $40 more than average for a
pair of sneakers
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Under Armour has higher costs and lower prices than Nike, which explains why its
profit is lower than the industry average and Nike’s
Under Armour spends more than Nike on
manufacturing and supply chain, while
charging less for the product, which
lowers its profits
Example of a product: Running Sneakers
UA price: $85
UA cost: $40
Nike price: $110
Nike cost: $28
Average price: $70
Average cost: $25
Under Armour
Nike
Manufacturing
and supply chain
Design
Performance
Marketing
Π
Manufacturing
and
supply chain
Design
Performance and
Innovation
Marketing
Π
Costs
($25)
Price
($70)
Manufacturing and
supply chain
Design
Performance
and innovation
Marketing
Π
Average
15. Under Armour’s corporate strategy is consistent with its decisions about vertical
and horizontal expansion
Under Armour’s business model is to assist clients reach their fitness objectives. It
mixes physical and digital goods. Under Armour began as a wholesale clothes
company and is now evolving into a digital company that utilizes data to assist clients
in achieving their fitness objectives, vertically and horizontally integrating as needed.
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16. Expanding vertically was a mistake for Under Armour and made it rethink its
corporate strategy
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Does expanding vertically make sense?
Better Off Test
➢ In terms of digital fitness, at the time, working with
myfitnesspal and Endomondo both made sense as
these two health tech companies would add a new
product element consumers could pair well with the
rest of Under Armour’s product mix.
Ownership Test
➢ Owning these companies allowed Under Armour to
Create an ecosystem that encapsulated not only the
consumer and other products, but also the digital
technology and data that came with the new
purchases. At the time in 2015, this made a lot of
sense and passed the ownership test.
In 2015 Under Armour wanted to
merge physical and digital fitness
(spent 700 million in buying new
apps) and invested in buying
myfitnesspal and endomondo.
However, they ended up selling it
in 2020 for a loss.
17. With regard to horizontal scope, Under Armour prefers to partner with and
sponsor many organizations, instead of expanding through M&A
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Does expanding horizontally make sense?
Better Off Test
➢ Partnering with numerous division one colleges striking
sponsorship deals is a great move for Under Armour, and is
definitely better off working with these schools. They are able
to sell product in bulk as well as have their logo displayed at
thousands of sporting events, creating notoriety for their
brand as well.
Ownership test
➢ Under Armour doesn’t pass the ownership test since the
value in the athlete sponsorships and partnership is way
greater than the value of acquiring such organizations,
specifically with Stephen Curry. The deal is worth $20 million
dollars a year, while Curry and his shoe has brought in $299
million in revenue alone in Q3 of 2020.
Under Armour is heavily involved in all
aspects of sport and sport performance
including apparel, equipment, accessories,
footwear, as well as uniforms.
The company focuses on college sponsorships
(UCLA, UC Berkeley, Cincinnati) as sole
provider and distributor of gear, as well as
sponsorship of athletes and specific apparel
lines for these athletes (Stephen Curry shoes)
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Under Armour attempts to increase firm profits by influencing public opinion on
the topic of forced labor
Interests Targets Tools
Opportunities
Improve
Firm 𝚷
And
Lower suppliers
power
Diffuse reputation
that UA uses forced
labor, which other
industry players are
lambasted for
Public Opinion
Investors
Human Rights
Organizations
Other Concerned
Stakeholders
Issuance of Public Statements
& Memos to Portray Concern
Over and Intention to Prevent
Forced Labor in Their Supply
Chain
Collaboration
With Fair Labor Association
(FLA) to Consult on Promoting
Ethical Labor in Their Supply
Chain
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Under Armour’s use of global strategy contributes to its successful expansion
UA marketing and sales strategies/distribution vary in global markets, but their
product lines are either very similar or identical globally. Certain markets may or
may not have access to certain products as per Under Armour’s adaptive strategy .
Under Armour leans into manufacturing in countries with lower costs of labor
and production to maximize profits. The company uses the same/very similar
labor forces and supply chain structures across its product lines in global
markets.
By aggregating the production portion of the supply chain across global markets,
Under Armour is able to maintain operational effectiveness through supply chain
efficiency.
20
Arbitrage
Adaptation
Aggregation
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Under Armour continually updates their product lines with fresh designs and
material innovations to remain competitive; this is sustained innovation
Time
Product/UA
Performance
Updated Product(s)
Under Armour constantly
releases new products across
multiple genres of
sports/activities; product
updates are usually
sustaintained, rather than
disruptive innovations, that use
new designs and/or materials.
These constant product updates
help Under Armour to maintain
its competitive advantage over
rivals who also share a similar
strategy of incremental design
and material improvements.
Updated Product(s)
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Under Armour deploys lacklustre CSR initiatives, as do many competing firms
Despite consulting with the Fair Labor
Association, Sustainable Apparel Coalition,
and Environmental Defense Fund Climate
Corps*, the company fails to meet its
promises. Under Armour continues to
transgress against ethical labor practices
while also continuing to produce clothing
made of unsustainable, non-compostable
polymers with high environmental impact
both during and after production.
For example, Under Armour has issued
a statement to investors that they are
exploring the use of bio-polymers in
their products, but they have not
effectively produced such products.
*firms consult with Under Armour to help the
company ensure ethical labor in its supply chain,
minimization of environmental impact, and
sustainability/energy efficiency, respectively
23. Under Armour, “Icing on the Cake” Greenwashing and Imbalanced Priority to
Stakeholders
Under Armour’s current strategic behavior is in line with both Friedman’s
principles of CSR and Freeman’s principles of CSR. Note that behaving within
the definitions of these two CSR frameworks does not necessarily mean that
CSR is optimal.
Looking at Friedman’s CSR framework, Under Armour certainly works to
prioritize its profits within legal limits (limits that are sometimes a grey area).
The company has employed unethical (forced) labor in the past, and it is
unclear whether the company still utilizes unethical labor, regardless of any
claims UA makes against it. Of course, the suffering induced by
forced/unethical labor is a negative externality that happens to result from
driving Under Armour’s profit..
As for Freeman’s stakeholder view framework, Under Armour certainly
operates at the center of its shareholders and stakeholders, but it does not
allocate its priorities to each group equally. For example, the company places
certain suppliers/communities up the supply chain below other
stakeholders/shareholders by supporting forced labor and its devastating
consequences. The use of unsustainable materials also places certain
stakeholders below others, such as in communities that are particularly
impacted by textile waste.
Under Armour doesn’t operate within
the recommendations of Marques and
Mintzberg in mind:
- Use of unethical labor and unsustainable
materials are legal but harm society
- “Greenwashing” of these issues without
any genuine action against them is a poor
CSR practice
- Through the lens of Freeman’s
stakeholder view, Under Armour wrongly
prioritizes certain stakeholders over
others
- Under Armour does have limited
corporate lobbying, which is a good CSR
practice
- The company is not notably resistant to
government regulations that may hurt
profit
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We identified three main issues that prevent Under Armour from achieving
above industry average profits: High Costs, Competitive Advantage, and CSR
Costs that Under Armour allocates on general
marketing and design bring down company’s
profit and don’t increase WTP since the
company focuses on a narrow segment of
professional athletes
01
● It chooses to perform activities targeting the general
public and not its target segment
● Marketing and design costs are bringing down the
profits instead of increasing WTP
25
Under Armour tries to move into the
broad market by marketing their
products towards the general public
instead of gaining market share in the
narrow differentiation market
02
● Broad market is already saturated
● Too many established players like Nike
● Under Armour should focus on targeting a narrow
population segment of professional athletes
● Under Armour and rivals’ supply chain has involved use of
forced labor – rivals use lobbying to block legislation that
would limit access to forced labor
● Under Armour and many rival firms demonstrate limited
use of sustainable materials and commitment to CSR
03
Under Armour’s own CSR goals emphasize the
company’s mitigation/elimination attempts
with forced labor, the use of more sustainable
materials, and more, yet the company never
truly acts on its promises
26. We suggest Under Armour to adopt the following tactics to achieve competitive
advantage, increase profitability, and gain market share
Rather than adopt hollow CSR initiatives and non-market strategies used by
rivals, Under Armour should be a first-mover and disrupt the industry
By foregoing lobbying and forced labor altogether, along with implementing sustainable materials,
Under Armour can disrupt the sportswear industry and force rivals to respond accordingly to remain
competitive. First-mover advantage would be in UA’s favor.
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Emphasize athletic performance DNA of the Under Armour brand and cut
costs on general marketing and design that is aimed at broad appeal
Under Armour should focus on targeting professional athletes and people who appreciate
performance over comfort or style, therefore should increase costs of performance and quality
control and decrease marketing and design costs.
Focus on narrow market differentiation strategy to gain market share
Narrow market in Sports Apparel Industry is not as saturated as broad market and Under Armour
has already established its presence there, so it should focus on gaining market share there, rather
than expanding to already very saturated broad market
1
2
3
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The profit graph for Under Armour’s CSR strategy shows how Under Armour would
be able to establish itself as a leader in CSR and gain market share
RECS.
Introducing the CSR
initiative
CSR initiatives catches
attention of the public
Rivals see the success of
the initiative
Rivals start to imitate the
CSR strategy
Under Armour establishes
itself as a leader and retains
new market share
Under
Armour’s
Firm
Profitability
Under Armour’s profits
go down because of the
increase in costs
Under Armour’s profits
go up because of the
increase in revenue
Under Armour continues to
gain market share because
of the public approval
Under Armour’s growth
in market share slows
down, profits stabilize
In the long term, Under Armour
keeps its market share and
popularity as the leader in CSR
01 02 03 04 05
Initial state Long term profitability
1
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This graph shows how industry and rivals will react to the changes in Under
Armour’s strategy
RECS.
Introducing the CSR
initiative
CSR initiatives catches
attention of the public
Rivals see the success of
the initiative
Rivals start to imitate the
CSR strategy
Under Armour establishes
itself as a leader and retains
new market share
Average
Industry
Profitability
Industry Profits go
down a little because of
Under Armour’s profits
going down
Industry Profits go
down because rivals
start losing money to
Under Armour
Industry Profits stabilize
Industry Profits go
down because rivals
start losing profit
because of the increase
in costs
In the long term, Industry
profitability grows, but not to its
initial stage because the supplier
power and cost in the industry now
is higher due to the new CSR
standards
01 02 03 04 05
Initial state
Long term profitability
1
29. Under Armour should emphasize athletic performance DNA of the Under
Armour brand and cut costs on general marketing and design that is aimed at
broad appeal
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Under Armour
Nike
Manufacturing
and supply chain
Design
Performance
Marketing
Π
Manufacturing and
supply chain
Design
Performance and
Innovation
Marketing
Costs
($25)
Price
($70)
Manufacturing and
supply chain
Design
Performance
and innovation
Marketing
Π
Average
Π
By bringing down marketing, design
(style) and manufacturing costs,
Under Armour would be able to
achieve industry average costs.
By increasing performance and
innovation costs Under Armour
would be able to bring up WTP and
charge higher prices.
Therefore, Under Armour’s profit
would significantly increase.
2
30. Under Armour should focus on narrow market differentiation strategy in order
to gain market share
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3
Cost Leadership Differentiation
Broad Market
Narrow Market
Focusing on the narrow market will
allow Under Armour to gain the
market share there and establish
itself as the dominant brand for
professional athletes who seek
performance over design and style.
Under Armour would have to
sacrifice the profits it would have
made from the products that focus
on general public in return of
establishing itself as as the best
brand for professional athletes and
raising its WTP
31. Thank You
-
Q&A Begins
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32. Bibliography
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https://www.mckinsey.com/industries/retail/our-insights/sporting-goods-2022-the-new-normal-is-here.
2. “Under Armour Industry Report .” Ferrero Opens Online Shop, https://reports.mintel.com/sinatra/oxygen/display/id=1125465.
3. Tighe, D. “Sports Apparel Market Share 2018.” Statista, 26 July 2021, https://www.statista.com/statistics/896595/sports-apparel-market-share-by-
company-us/ https://www.underarmour.com/en-us/c/technology/.
4. “Under Armour Warns of Material Impacts Supply Constraints.” Bloomberg.com, Bloomberg, https://www.bloomberg.com/news/articles/2022-02-
11/under-armour-warns-of-material-impacts-from-supply-constraints.
5. “The Strategies of the Sportswear Industry.” GRIN, https://www.grin.com/document/429698.
6. Unglesbee, Ben. “'This Is the Time Where Supply Chain Comes to the Fore': Under Armour's COO on 20 Months of Tumult.” Retail Dive, 6 Dec. 2021,
https://www.retaildive.com/news/this-is-the-time-where-supply-chain-comes-to-the-fore-under-armours-coo/610787/.
7. Spooner, Jonathan P. L. “Under Armour's Vertical Integration Strategy vs Nike +.” LinkedIn, LinkedIn, 9 Aug. 2018,
https://www.linkedin.com/pulse/under-armours-vertical-integration-strategy-vs-nike-spooner/.
8. Etherington, Darrell. “Under Armour to Sell Myfitnesspal for $345 Million, after Acquiring It in 2015 for $475 Million.” TechCrunch, TechCrunch, 30 Oct.
2020, https://techcrunch.com/2020/10/30/under-armour-to-sell-myfitnesspal-for-345-million-after-acquiring-it-in-2015-for-475-million
33. Bibliography (cont.)
9. “How Ethical Is under Armour?” Good On You, 11 Feb. 2022, https://goodonyou.eco/how-ethical-is-under-armour/.
10. Creswell, Julie, and Kevin Draper. “How under Armour Lost Its Edge.” The New York Times, The New York Times, 26 Jan. 2020,
https://www.nytimes.com/2020/01/26/business/under-armour-struggles.html.
11. “Under Armour Sells off MyFitnessPal for $345M, Will Shut down Endomondo by 2021.” MobiHealthNews, 3 Nov. 2020,
https://www.mobihealthnews.com/news/under-armour-sells-myfitnesspal-345m-will-shut-down-endomondo-2021.
12. Forbes, Forbes Magazine, https://www.forbes.com/sites/andriacheng/2019/02/20/under-armours-new-battleground-against-nike-adidas-goes-beyond-the-
u-s/?sh=3aee2d3c73ed
13. “Under Armour Low Priced Running Shoes .” Bizjournals.com, https://www.bizjournals.com/baltimore/news/2014/06/09/under-armours-low-priced-
running-shoes-drive-sales.html.
14. McLoughlin, Danny. “The Average Price of Nike Shoes.” Athletic Shoe Reviews, 7 Nov. 1970, https://runrepeat.com/average-price-nike-shoes.
15. Says:, Goozpah, et al. “Cost Breakdown of a $100 Nike Shoe.” WearTesters, 10 Feb. 2022, https://weartesters.com/cost-breakdown-100-nike-sneaker/.
16. Linchpin, Author: Team, et al. “Trends Shaping the Athletic Apparel Industry Outlook for 2022 by Linchpin Seo.” Linchpin SEO, 13 Jan. 2022,
https://linchpinseo.com/trends-athletic-apparel-industry/.
17. Fox, Stone, “Curry Brand Will Lead Under Armour Higher”, Seeking Alpha, 12 Jan. 2021, https://seekingalpha.com/article/4398594-curry-brand-will-lead-
under-armour-higher
18. Smith, Diana, “Casualization of Fashion: incl impact on COVID 19”, Mintel, November 2020, https://reports-mintel-
com.ezproxy.bu.edu/display/1058027/?fromSearch=%3Ffreetext%3Dsportswear%2520industry%2520report&resultPosition=1
34. Bibliography (cont.)
19. Spooner, Jonathan, “Under Armor’s Vertical Integration Strategy vs. Nike+”, LinkedIn, 11 June 2015, https://www.linkedin.com/pulse/under-armours-vertical-integration-strategy-
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20. Wilen, Holden, “How Under Armour is using technology to help consumers through the pandemic”, Bizjournals, 25 September 2020,
https://www.bizjournals.com/baltimore/news/2020/09/25/how-under-armour-used-technology-to-help-consumers.html
21. Becker, Sabine, “Sporting Goods 2022: The New Normal is here”, Mckinsey, 24 January 2022, https://www.mckinsey.com/industries/retail/our-insights/sporting-goods-2022-the-
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22. Larkin, Catherine, “Under Armour Slides as Supply Issues Need Months to Resolve”, Bloomberg, 11 February 2022, https://www.bloomberg.com/news/articles/2022-02-11/under-
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strategy/
Hinweis der Redaktion
This analysis of Under Armour is to help future investors understand the strengths and weaknesses of this firm in the athletic apparel industry and provide a recommendation for strategy improvement.
Under Armour is the third largest athletic apparel company in the industry.
Average ROE of 16.57%
Under Armour is a differentiator in that their prices are higher than some competitors, and utilize a narrow strategy because they are mainly concerned with athletes, as opposed to some competitors in the industry that have ventured into lifestyle branding and have adopted more of a broad strategy.
Under Armour’s Key Technology:
HeatGear/ ColdGear: Clothing that is specifically designed to more breathable or more insulating depending on the weather.
Hydrafuse: Clothing that makes post-workout dry skin less likely to occur. It also helps sweat evaporates it better.
Isocool: Clothing that helps excel heat leaving the body.
These are SUSTAINING innovations in materials/design. Add some examples of new materials/designs with pics, text, etc.
https://about.underarmour.com/community/sustainability
Suggesting they are “looking into” using bio-polymers: http://investor.underarmour.com/static-files/ec55b9c6-e773-415c-b487-b7de38531361
https://www.nytimes.com/2020/01/26/business/under-armour-struggles.html
https://www.mobihealthnews.com/news/under-armour-sells-myfitnesspal-345m-will-shut-down-endomondo-2021
https://www.forbes.com/sites/andriacheng/2019/02/20/under-armours-new-battleground-against-nike-adidas-goes-beyond-the-u-s/?sh=3aee2d3c73ed
Decision-making skills were based on instinct rather than consumer analysis of the market.
After the Curry 1 shoes were sold out, Under Armour doubled production of the Curry 2. Top executives forecasted that this would cause a glut in their inventory, but the chief executive Mr. Miller continued with the doubled production.
As forecasted, most of these shoes ended up on sales racks (didn’t sell)
As seen in the exhibit on the right, the value captured by the buyer was significantly higher with the Curry 2 than the Curry 1. The value captured by the seller is smaller with the Curry 2 because the price of this shoe had to be cut in order to get rid of their back-up of this product. The value created by the seller with the Curry 2 is significantly smaller than the Curry 1.
Other examples of poor decision-making skills include the slip-on woman’s shoe “DJ” and expansion into an unfamiliar NCAA atmosphere.