Under Armour Inc.

55 Pages·2015·0.98 MB·English

Anglo-American University Graduation Thesis by Otar Bedoshvili

Mentor: Simon Gordon-Smith, MBA

Under Armour Inc.

A thesis submitted to the Anglo-American University for the degree of Bachelor of Business
Administration
Spring 2011

OTAR BEDOSHVILI

SCHOOL OF BUSINESS ADMINISTRATION

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Anglo-American University Graduation Thesis by Otar Bedoshvili

Mentor: Simon Gordon-Smith, MBA
DECLARATION

No portion of the work referred to in this thesis has been submitted in support of an
application for another degree or qualification of this or any other university or other institute
of learning.

I hereby also declare that this thesis is my independent work. All sources and literature are
cited and included.

*Please sign here

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Anglo-American University Graduation Thesis by Otar Bedoshvili

Mentor: Simon Gordon-Smith, MBA
Table of Contents
1. Abstract ............................................................................................................................................... 4
2. Introduction ......................................................................................................................................... 6
3. Product Lines ....................................................................................................................................... 7
4. General Current Strategy .................................................................................................................... 7
4.1 Growth Strategy ............................................................................................................................ 8
4.2 Differentiation Strategy ................................................................................................................. 8
4.3 Innovation Strategy ....................................................................................................................... 9
4.4 Corporate Strategy ........................................................................................................................ 9
4.5 Product Positioning ..................................................................................................................... 10
5. External Analysis ................................................................................................................................ 11
5.1 The Athletic Apparel and Footwear Industry Review .................................................................. 11
5.2 Porter’s Five Forces ..................................................................................................................... 13
5.3 PESTEL Analysis ............................................................................................................................ 25
5.3.1 Political Analysis ................................................................................................................... 25
5.3.2 Economic Analysis ................................................................................................................ 27
5.3.3 Social Analysis ....................................................................................................................... 28
5.3.4 Technological Analysis .......................................................................................................... 30
5.3.5 Environmental Analysis ........................................................................................................ 31
5.3.6 Legal Analysis ........................................................................................................................ 33
6. Financial Analysis ............................................................................................................................... 34
7. Internal Analysis ................................................................................................................................ 38
7.1 Competencies .............................................................................................................................. 38
7.2 Value Chain .................................................................................................................................. 39
8. SWOT Analysis ................................................................................................................................... 46
Strengths ........................................................................................................................................... 46
Weaknesses ....................................................................................................................................... 46
Opportunities .................................................................................................................................... 46
Threats ............................................................................................................................................... 46
9. Recommendations ............................................................................................................................. 50
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Anglo-American University Graduation Thesis by Otar Bedoshvili

Mentor: Simon Gordon-Smith, MBA

1. Abstract
This thesis is about a relatively new company operating in the athletic apparel and footwear
business. The company is registered and branded by the name Under Armour ® (UA). The
mission statement says that the company serves “to make all athletes better through science,
passion and the relentless pursuit of innovation.” The analysis of its strategic, external,
internal and financial standings is aimed to discover in how successfully is Under Armour
serving its mission statement, followed by recommendations for improvement.
By using the Porter’s Five Analysis and Pestle Analysis tools, the thesis examines all external
factors that affect the company’s performance. The Porter’s five is aimed at discovering the
forces that pressure and drive Under Armours business and how the latter chooses to interact
with them. The Pestle analysis shows what global factors, independent from the company
itself, have affect on its progress. All operating enterprises need to deal with the external
environment. The analysis offers the way UA’s management handles it.
The financial analysis goes through Under Armours Financial statements of the recent years
to discover the company’s standing. Covering a number of important financial ratios, the
analysis illustrates that Under Armours success has shown itself in its financial condition.
The internal analysis covers the core competencies and the value chain of Under Armour. It’s
aimed to find out what contributes to the company’s recent success and whether they’ll be
able to continue on with it. The value chain analysis covers the nine sections that create the
value of the product Under Armour sells.
After the internal analysis, the company’s strengths, weaknesses, opportunities and threats are
evaluated using the well-known SWOT analysis tool. This is aimed for deeper evaluation and
making obvious what foundation Under Armour has and where it can go with it, also what
needs improvement and caution. The SWOT shows that the company is in a promising
condition today, with its innovative products and well planned marketing, but further
expansion is vital to sustain the progress. The thesis recommends UA to cover more markets
geographically and be more aggressive in marketing; also, to look out for the aggressive rivals
like Nike and Adidas, who won’t make Under Armours global struggle easy.
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Anglo-American University Graduation Thesis by Otar Bedoshvili

Mentor: Simon Gordon-Smith, MBA
The last part of the thesis is a number of recommendations suggested for the continuance of
the success and the achievement of global success in the industry. After the investigation of
its external, internal and financial stances, some areas have been found where improvement
and changes are necessary for the enterprise if the management is looking forward to continue
business in the industry and achieve global success.

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Anglo-American University Graduation Thesis by Otar Bedoshvili

Mentor: Simon Gordon-Smith, MBA
2. Introduction
The world today has established itself as a complex place full of various kinds of people,
living in various kinds of ways; they all have different needs and wants. A concept that was
shaped a while ago to satisfy and benefit these needs exists and it’s called business.
According to the Bible, after Adam and Eve sinned they found out what “shame” was and
were filled with the need to cover their bodies. One way or another, clothing has been one of
the demanded needs by most of the societies and communities we find in today’s world; as
these societies developed and diversified, tastes and trends in clothing went along. Today,
many companies provide clothing for these diversified sectors, one of these sectors is athletic
sportswear. This thesis is about a company named “Under Armour” – an enterprise that
produces and markets athletic apparel and footwear.
According to their official website, “Under Armour” was founded by Kevin A. Plank on
January 29, 1996, with a simple goal – to create “A shirt that provided compression and
wicked perspiration off your skin rather than absorb it; a shirt that worked with your body to
regulate temperature and enhance performance” (Kevin A. Plank, 1996). The headquarters of
the company is situated in Baltimore, Maryland and the quantity of overall employees it has is
about 2200 (by the year 2008). As time went on and the company expanded, this simple goal
diversified and today the company develops and markets branded performance clothes for
men, women and kids; but, the primary and unique goal of the product is still sustained.
In 2005 November 18, “UA” went public and since then is sold on the New York stock
exchange under the code UA. Share prices have been as low as 12$ in 2009, but since then the
prices have been increasing and haven’t fallen under 50$ since the beginning of year 2011.
“Under Armour” products are worn by men, women and youth ranging from professionals on
the field to people who love sports and live an active life. It uses innovative technology to
create apparel focused on whisking away moisture, regulating body temperature, and
improving comfort. The company has four main trademarks – UNDER ARMOUR,
HEATGEAR, COLDGEAR and ALLSEASONGEAR, and also the “Under Armour” UA
Logo.
Since 2008, the brand started offering footwear to its consumers and 2 years later it made a
bold move, entered a market already dominated by its rivals, and offered its first line-up of
basketball shoes. “Under Armour” products are available for sale online and in over 20,000
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Anglo-American University Graduation Thesis by Otar Bedoshvili

Mentor: Simon Gordon-Smith, MBA
retail locations all over the world. It has only several stores itself, which were opened in 2007-
2008 years in North America, and only one outside the continent in Edinburgh, Scotland.
3. Product Lines
As mentioned in the introduction, “Under Armour” has four main trademarks under which it
markets the product. This section will briefly describe the main product lines which the
company offers.
HEATGEAR ® – Products under this category are made from the original fabric, microfiber,
for hot weather; helps the body breathe and get rid of moisture swiftly, keeping the athlete dry
and light. This product was also used by US Army forces operating in Iraq and Afghanistan.
COLDGEAR® – Made for cold weather, this is the most expensive product line offered by
“Under Armour”. It also uses the microfiber that HEATGEAR® does, keeping the body dry,
however its unique characteristic is that it’s designed to keep the body warmth trapped. The
introduction of COLDGEAR® dramatically increased revenues for the company.
ALLSEASONGEAR® – This product line is made from different material, it does not use
microfiber at all, and it uses various technical materials suitable for all kinds of weather.
Recovery Gear® – In mid 2009, the company introduced the “Recharge compression suit”. It
was designed to be worn after physical activity, helping the body to recover, decreasing
soreness time and relieving pain and aches after workout. Gear with similar goals and
construction are lined up in the Recovery Gear®.
Catalyst ® - Recently, UA started a new product line that is made only by recycled plastic.
The line is marketed under the slogan “Green + Performance = The UA Catalyst T” and holds
a very small portion in the business today.
Under Armour also sells products in various other categories but the above mentioned five are
the main lines that contribute to the popularity and sales of the company.

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Anglo-American University Graduation Thesis by Otar Bedoshvili

Mentor: Simon Gordon-Smith, MBA
4. General Current Strategy
4.1 Growth Strategy
Currently, “Under Armour” has to deal with its competitor giants such as “Nike”, “Adidas”,
“Puma”, etc. The strategy they’re implementing is primarily derived from this factor;
expansion and growth is their main goal. They are a relatively small enterprise compared to
the listed rivals, and if they don’t show constant growth, chances of survival are low. “Nike”
already tried to buy the company in 2008, but the offer was refused; if things don’t keep on
progressing, they might have to surrender next time. The presented rivals operate worldwide;
however “Under Armour”-s main revenue stream is from North America. They began the
expansion on other continents a few years ago and still continue investing in that direction.
For example since 2002, a license agreement has been made with Dome Corporation in Japan,
which produces, markets and sells UA branded products in the area.
4.2 Differentiation Strategy
Since 2005, when the company went public, they’ve been concentrating their investments on
five main areas: Men’s & Women’s Apparel, Footwear, International and Direct-to-Consumer
(Annual Report 2009, Section: “To Our Shareholders”). Year 2009 showed that their
investments have not been in vain; net revenues have grown 18% and net profit has grown
22%. This is partly due to the fact that the company started to differentiate its product line
since 2008, introducing basketball shoes, mountain gear, etc. The main revenue stream does
come from Men’s and Women’s Apparel, but Footwear also holds a significant 12% in
overall.
Net Revenue by Product Category
4% 4%
Apparel
12%
Footwear
Accessories
80% License Revenue

(Scoreboard in Annual Reports 2010, page 5)
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Anglo-American University Graduation Thesis by Otar Bedoshvili

Mentor: Simon Gordon-Smith, MBA
4.3 Innovation Strategy
Another key component in “Under Armour”-s strategy is innovation. As Kevin A. Plank,
Chairman and CEO of the company, says “Cotton is the Enemy”
(http://www.cnbc.com/id/25191727/). The company offers the market products that are “best
in class”; the main focus is on uniqueness of the material used in production. The goal is to
create apparel that will make the athletes better and to deliver the product in such fashion that
makes the benefits more visible to the consumer. The primary innovation of the company is
PolyArmour, a combination of polyester and elastane, which benefits the athletes in many
ways. Throughout its existence, the company continues to offer new cutting edge technology
products to its wide range of consumers. The product development group functions with the
following motto: “We design products with “visible technology”, utilizing color, texture and
fabrication to enhance our customers’ perception and understanding of product use and
benefits” (Annual Reports 2009, Product design and development, page 14)
Innovation is the key to the company’s success; otherwise the rivals would easily drive it out
of business, due to their advantage in size.

4.4 Corporate Strategy
Starting from the beginning, “Under Armour” was established to serve athletes. The company
considers signing contracts with the teams these athletes represent in many different sports as
its strategic goal. In different sports “Under Armour” goes for different kinds of contracts.
On their own continent they dominate the market in some sports, and share the plots with their
competitors in others. In College Football league, they sign contracts as there outfitters with
many teams, like the Auburn University, Texas Tech University, the University of Maryland,
Boston College, etc. They also signed a deal with NFL to be the official supplier of footwear,
creating a good basis for sales revenue and also marketing to consumers outside the athletic
community.
Another approach demonstrated by “Under Armour” is signing individual athletes. The
mostly try to find the stars of the next generation and sign contracts with them, like
Milwaukee Bucks rookie Brandon Jennings, U.S. professional skier and Olympic gold medal
winner Lindsey Vonn, first round NFL draft prospect Dez Bryant, etc.
The company has increased international activity through the past years. The approach is
similar to the domestic market one. They sell their products to Rugby and Soccer teams, such
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Anglo-American University Graduation Thesis by Otar Bedoshvili

Mentor: Simon Gordon-Smith, MBA
as Hannover 96 football club and Welsh Rugby Union. They recently signed a contract with
the English Premier League team Tottenham Hotspurs as their official playing kit producer,
replacing a rival brand “Puma”; this multi-million pound deal is the biggest in Europe for a
US based company.

4.5 Product Positioning
Product positioning

High Prices
2
NIKE
Low Innovation and advancement High Innovation and

3 Advancement
1
Adidas Under Armour

Low Prices

What the graph above shows is that currently “Under Armour” keeps average prices and high
innovation in products. The market leader “Nike” keeps a more expensive profile and prices
its products higher. So, in terms of product positioning, “Under Armour” keeps a profile of a
brand affordable for many classes and offering a large range of innovative products.
The products are priced form the least 15-20$ items, such as T-shirts and go up to 250$, coats
and full body outfits. 250$ isn’t exactly a low price for a coat, but with the quality and
features provided by “UA”, the product is certainly not overpriced; it also has a relatively
lower price compared to some of its rivals similar products.

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