CASE STUDY ;
VISION
ATHL AT HL ETES EVERYW
MISSION THROUGH PA P A SSION, SSION, DESIGN DESIGN AND RELENTL ESS PURSUIT OF I
Since creating his company from one shirt in 1996 1996,, Kevin Plank has expanded Under Armour into footwear, women’s apparel, and even hunting and fishing wear. At left: the original compression T-shirt Plank to NFL equipment managers.
HOT TO COLD. COLD. The original shirt kept players cool as they sweated; in 1997 UA came out with ColdGear, made to do the opposite: insulate in the cold.
HELLO, LADIES In 2005, UA launched women’s apparel. Items like Duplicity
SHOES. SHOES. In 2007 2007,, UA entered footwear, a notoriously competitive market. It began with football cleats like the Click Clack, but now makes everything to high-tops.
SUPER BOWL. BOWL. In 2008,, UA had its first 2008 Super Bowl commercial featuring almost every athlete on the UA roster. roster.
ON THE HUNT. HUNT. Also in 2007,, Under Armour put 2007 out a hunting and fishing line, including camo gear, hunting gloves, and leggings. This Ridge Reaper jacket is from the 2011 2011 line.
Sales Chart 800 700 600 ) s n o i l l i m n i ( s e l a S
500 400 300 200 100 0 2004
2005
2006 Year
2007
2008
Net Sales by Region
700 600 ) n o i l l i M n i ( s e l a S t e N
500 Other
400
Canada
300
US
200 100 0 2005
2006 Year
2007
Net Sales by Region
OBSERVATION
100% 98% 96%
Other Canada
94%
US
92% 90% 88% 2005
2006
2007
Net Sales to other countries increases for an average of 94% per year
Sales by Product Category Year 2007
License Rev. 57%
5% 7% 4%
Footwear Accessories
84%
Men's 8% 19%
Women's Youth
Apparel Net Sales
OBSERVATION
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
Net Sales of women’s
Youth Women Men
2005
2006 Year
2007
apparel increases for an average of 47.7% per year.
Sales Chart 900 800 700 ) s n o i l l i m n i ( s e l a S
600 500 400 300 200 100 0 2004
2005
2006 Year
2007
2008
2009
High Price
Low Quality High Quality
2008
The previously mentioned financial ratios show that Under Armour is in a good financial position to pursue International Expansion. Currently:
UNDER ARMOUR
INDUSTRY
Gross Profit Margin
50.10%
37.50%
Return on Equity (ROE)
18.18%
10.3%
Return on Assets (ROA)
13.47%
3.8%
0.03
0.41
Total Debt/Equity
Not highly financed through debt Company is able to pay short-term liabilities as determined by their positive working capital
Highly efficient production processes
Highly profitable company
Efficient use of assets by management to generate earnings as shown by ROA
Organizational Structure CEO Kevin Plank
CFO Brad Dickerson
Director Douglas Coltharp
COO Kip Fulks
Director Harvey Sanders
Supply Chain James H. Hardy, Hardy, Jr. Jr.
Director Byron Adams
President, International Karl-Heinz Maurath
Director Anthony Deering
Regional Operations Head
Executive VP- Global marketing
Matthew C. Mirchin
Marketing Manager
Lead Director A. Krongard
Senior VP- Sales, NM Adam Peake
HR Manager
Director Bill McDermott
President, North America Henry B. Stafford
Financial Manager
Director Thomas Sippel
Sales manager
Elements
Inbound Logistics
Strength
MODERATE
Activities
Third Party
Manufactu ring
MODERATE
Third Party
Outbound Logistics
MODERATE
Third Party
Marketing & Sales
MODERATE
Currently, UA has many sponsorships and endorsements
After-sale Services
STRONG
UA has great reputation for customer service and after-sale service
Strong Firm Infrastructure
Support Activities
Very Creative Engineering
Limited Number of Highly Trained Employees
IFE MATRIX Strength
Rating
Weight
Weighted Weight ed score
Good leadership
4
.08
.32
SAP system
3
.05
.15
Core competence in Innovation
4
.06
.24
High Quality Apparel
4
.07
.28
Increase in Sales Every Year
4
.07
.28
Brand Loyalty
4
.05
.20
Wide Range of Apparel
3
.05
.15
Athlete and Team Sponsorships and Endorsements
3
.05
.15
Very Intelligent and Efficient R&D Team
3
.06
.18
Brand Equity
4
.06
.24
Rating
Weight
Weighted score
Small Total Sales and Net Income compared to Nike/ Nike/Adidas Adidas
2
.06
.12
Heavily Dependent on Domestic Market
1
.07
.07
High Prices
2
.05
.10
Not a Synergistic Marketing Campaign
2
.05
.10
Heavily Dependent on PA for Sales (80%+)
1
.07
.07
Target Male Market more than Female Market
2
.05
.10
Weakness
EFE MATRIX Opportunity
Rating
Weight
Weighted
Potential market for basketball shoes
2
.04
.08
Increase in Retail Sales
2
.08
.16
Growth of PA Industry (Domestic and International)
3
.06
.18
Female Market
3
.08
.24
Consumers focus on Quality, not Price
4
.07
.28
Corporate Social Responsibility
3
.06
.18
Economic recovery
2
.06
.12
Consumers becoming more health conscious
4
.05
.20
Sport participation is a key aspect of U.S. culture
3
.05
.15
Increase in sports participation in emerging markets
3
.06
.18
E-commerce and media
3
.05
.15
Threat
Rating
Weight
Weighted
Too much dependence on few third-party suppliers
1
.07
.07
Lack of Proprietary Product Rights
2
.08
.16
Increase in cost of raw materials and resources; shipping costs i.e. cotton, all man made fibers, and the big one being OIL/GAS
1
.06
.06
Inflation in China Increasing
1
.04
.04
How will Under Armour stay on top of its game?
SWOT analysis Opportunities 1. 2. 3. 4. 5. 6. 7. 8. 9.
Potential Market for Basketball shoes Increase in Retail Sales Growth of PA Industry (Domestic and International) Female Market Consumers focus on Quality, not Price Economic Recovery Corporate Corporate Social Responsibility Consumers becoming more health conscious Sport participation in U.S. culture
Strengths 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
Good Leadership SAP system Core competence in Innovation High Quality Apparel Increase in Sales every Year Brand Loyalty Wide Range of Apparel Athletes and Team Sponsorships Intelligent and Efficient R&D Team Brand Equity
Strategy Recommendations 1.
2. 3.
Continue Developing Innovative Products to existing and emerging markets(S3,010,08) Sponsorship as a form of advertisement and promotion. (S8,01,09) Increase advertising using social networking networking and infomercials (S8,01,011)
Weaknesses
SWO SW OT analysis
1. 2. 3. 4. 5. 6. 7.
Opportunities 1. 2. 3. 4. 5. 6. 7. 8.
Potential market for basketball shoes Increase in Retail Sales Growth of PA Industry (Domestic and International) Female Market Consumers focus on Quality, not Price Economic Recovery Corporate Corporate Social Responsibility Consumers becoming more health conscious
Small Total Sales and Net Income compared to rivals Dependent on domestic market market High prices Not a Synthetic Marketing Campaign Heavily Dependent on PA for Sales (80%+) Target Male Market more than Female Market 27% of Sales come from 2 Distributors; Dick’s Dick’s and The Sporting Authority
Strategy Recommendations 1. Expand into International Market (W2,02,010) 2. Establish larger female market (W6,04) 3. Focus on basketball foot wear to increase sales on shoes ( W5,01)
SWOT analysis Threats 1. Too much dependence on few third-party suppliers 2. Lack of Proprietary Product Rights 3. Increase in cost of raw materials and resources; resources; shipping costs 4. Inflation in China Increasing 5. Chinese Labor Costs Increasing 6. Obesity Rates in U.S.
Strengths 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
Good Leadership SAP system Core competence in Innovation I nnovation High Quality Apparel Increase in Sales every Year Year Brand Loyalty Wide Range of Apparel Athletes and Team Sponsorships Intelligent and Efficient R&D Team Brand Equity
Strategy Recommendations 1. Continue on establishing premium branding image. (s3,s4,s6,t3) 2. If possible, avoid product innovation requiring much labor intensive production and high material costs than the current production system. (s3, s9, t4, t5) 3. Seek for other trusted suppliers offering standard quality to strengthen the firms
SWOT analysis Threats 1. 2. 3. 4. 5. 6.
Too much dependence on few thirdparty suppliers Lack of Proprietary Product Rights Increase in cost of raw materials and resources; shipping costs Inflation in China Increasing Chinese Labor Costs Increasing Obesity Rates in U.S.
Weaknesses 1. 2. 3. 4. 5. 6. 7.
Small Total Sales and Net Income compared to rivals Dependent on domestic market High prices Not a Synthetic Marketing Campaign Heavily Dependent on PA for Sales (80%+) Target Male Market more than Female Market 27% of Sales come from 2 Distributors; Distributors; Dick’s and The Sporting Authority
Strategy Recommendations 1.
2.
3.
Expand product line and further diversify to be distributed into wide range of possible target markets to spread fixed component of labor costs. (w1,w2,w5,w6, w7 & t3, t4, t5) Maintain high product quality to compensate high selling price and at least maintain or increase sales. (w1, w3, t2,t3,t4) Consider marketing marketing on fitness activities involving women rather than focusing on athletic activities alone. (w4, w6, t6)
Product BCG Matrix High
Market Share
Low
Performance Apparel Footwear High
Accessories
Star
Market Growth
Low
Question Mark
Grand Strategy MATRIX Rapid Market Growth
Market development Market penetration Product development Forward integration
Weak Competitive Position
Strong Competitive Position
Slow Market
1.
Lack of Proprietary Product Rights
2.
Concentration to Domestic Sales
3.
Too much Dependence on third-party suppliers
Problem
Lack of Proprietary Product Rights
Pros Gives the legal right to stop others using your invention Maintain an innovative brand image The patent holder can license the patent to others for use and earn income
Cons Takes time and money to establish No assurance of greater economic return High chances in getting into patent infringement
Problem
Lack of Proprietary Product Rights
Recommendations:
Due to constraints, the company would be in a difficult situation in obtaining proprietary property rights. Instead, they should establish a secured relationship with its suppliers and producers to whom the quality of final product depends. This involves constant monitoring, evaluation and upkeep of security among their products.
Problem
Recommendations:
Increase Efforts Toward International Markets Establish retail outlets to Other Foreign Countries Sponsorship to international sports’ teams Increase international advertising Partner with international companies in the same industry
Establish Retail Outlets to Foreign markets Observing Trends: Apparel Sales
Establish Retail Outlets to Foreign markets Observing Trends:
Establish Retail Outlets to Foreign markets Observing Trends:
Establish Retail Outlets to Foreign markets Observing Trends:
Establish Retail Outlets to Foreign markets Implementation Establish Long-Term Expansion Program regarding Latin America & Asia Expansion 2009 Open-up Retail outlets in China Open-up Retail outlets in Malaysia/India/Singapore Sponsorship to China Football League
Establish Apparel Production Facilities (India/China)
Establish Retail outlets in Brazil Sponsorship to Brazilian National Sports Teams Put-up Asian corporate headquarter
2010
2011
2012
2013 2013
2014
Increase international advertising Implementation:
“INFOMERCIALS”
Partner with international companies & Third-Party Distributors
Implementation:
Problem
Too much Dependence on few third-party suppliers Recommendations:
With existing suppliers: Maintain good relationship Establish long-term contracts With new efforts: Find potential and reliable supplier
Find potential and reliable supplier
Implementation: Allow suppliers to participate in the company's corporate social responsibilities’ responsibilities’ activities Establish close communication with firm's suppliers s uppliers
Seek new potential suppliers and evaluate the quality of products that they supply. If possible, research on the most feasible f easible suppliers in terms of its geographic location
Other Strategic Recommendations:
Consider increased marketing efforts for women's product category Increase Footwear Sales by giving more focus toward the Basketball-oriented market Host more local marathons
Projected Gross Profit 1400000
2005 2006
1200000 1000000 800000 600000 400000 200000 0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Gross Profit Analysis 1400000 1200000 1000000 800000 600000
Gross Profit Operating Expense
400000 200000 0
References: http://investor.underarmour.com/annuals.cfm https://www.facebook.com/underarmour http://www.uabiz.com/company/managementTeam.cfm http://blog.euromonitor.com/2013/03/new-apparel-research-part-1-a focus-on-geographies.html focus-on-geographies.html http://www.atkearney.com/consumer-products-retail/global-retaildevelopment-index/full-report/ /asset_publisher/oPFrGkbIk /asset_publisher/oPFrGkbIkz0Q/content/201 z0Q/content/2013-global-ret 3-global-retail-developmentail-developmentindex/10192 http://shrinkthatfoo http://shrinkthatfootprint.com/av tprint.com/average-electricity-pr erage-electricity-prices-kwh ices-kwh http://blog.euromonitor.com/2013/03/new-apparel-research-part-1-afocus-on-geographies.html
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