General Environment Facing Under Armour Marketing Essay

Target in men, women and youth. (Under Armour’s diverse product line for men, women, and youth is complex, but the message is simple: wear HeatGear when it’s hot, ColdGear when it’s cold, and AllSeasonGear between the extremes.)

Cultural differences. (Product transcends cultural differences and it is appealing to many athletes, regardless of nationality; Under Armour is puisuing a worldwide scope via regionalization.)

Economic

Increase economic condition by improving the sales balance and reducing the seasonal variability in sales, inventory efforts and distribution.

Economic risk. (The degree of economic risk associated with the premium pricing and Under Armour is feeling the effects of the current declining retail consumer market that is affecting the broader economy.)

Current economic downturn challenges Under Armour to compete against major rivals.

Political/ Legal

The company works with multiple licensees directly throughout the product development process to ensure that the products are aligned with its brand and quality expectations.

Under Armour does not have a patent on any of the materials use in its products. Therefore, it needs to be cautious in its licensing agreements so companies do not steal its know-how and introduce their own versions.

Under Armour signed a five- year partnership agreement in April 2009 with Cal Ripken, Jr.

The intellectual property rights laws and regulations of countries in the global market vary dramatically.

Sociocultural

Under Armour mission’s is to enhance the experience for all athletes by applying passion, science, and the relentless pursuit of innovation to create clothing with temperature control, comfort, and flexibility. Under Armour has reached regular athletes, active outdoor enthusiasts, elite tactical professionals, and active lifestyle consumers.

Plank’s shirt truly did regulate athletes’ body temperatures, lending to improved performance.

Under Armour had five lines of clothing made for every climate.

Footwear product line designed for high performance through a highly breathable and lightweight design.

Global

Under Armour is able to successfully penetrate the sports apparel market by using the image and influence of: domestic and international professional teams, collegiate teams, Olympians, and individuals.

Under Armour’s products are sold worldwide, with the company’s headquarters located in the United States and support offices in Hong Kong and Guangzhou, China.

Under Armour sells products in 13 countries, including in-house distribution in the United Kingdom, Germany, and France. Sales in other Western European and Asian countries are done through partnerships and third-party distributors.

Under Armour do not have to contend with the challenges associated with establishing manufacturing plants in foreign countries.

Technology

Plank created a synthetic shirt made of high-tech material that had a snug fit designed to feel like a second skin.

Products are offered through the company website.

For the first ten years of its existence, the company was able to sustain operations by using “off the shelf” software programs.

Under Armour invested in a new SAP system. This system is a key to the company’s ability to add products to list of offerings, as it allows Under Armour to manage a more diverse inventory and to ship directly to distributors.

Physical Environment

When Plank was a football player he grew tired of having to change his damp, heavy t-shirt under his jersey, so he set out to create a unique product that would meet the needs of all athletes.

Though the materials and technology used to create its products are not exclusive, by implementing an effective corporate strategy Under Armour has been able to fashion itself as a profitable business and remain a key player among competitors.

Use Porter’s Five Forces Model to analyze the apparel, footwear, and equipment industry in the US. Given this analysis, is the industry attractive or unattractive?

Porter’s Five Forces Model

Medium threat to new entry

Under Armour operates in a highly competitive industry where the dominant competitors have significant breadth of market coverage that is difficult to find an entry point. The main competitors have been advertising and establishing distribution channels, marketing agreements, and recognition for many years.

High threats of substitute products

Under Armour’s major competitors are Nike and Adidas with similar or competing product offerings.

Under Armour does not have a patent on any of the materials used in its products.

High intensity of rivalry among competitors

There is stiff competition in the athletic apparel industry with companies of various sizes employing different strategies in order to attract consumers to their product and brand. The larger companies continuously increase competition by spending large amounts of money on product innovations, advertising, and sponsorship.

High bargaining power of suppliers

Under Armour’s customers is willing to pay the price for its products because their products have value in it.

Some of it suppliers are commodities and thus are subject to price fluctuations; for example, petroleum-based materials are used in Under Armou’s products and the petroleum industry has experienced significant swings in price and relative availability in recent months and years.

Under Armour relies heavily on suppliers and manufacturers outside of the United States. Seventy to 75 percent of the fabric used in its products comes from only six suppliers, lending to Under Armour’s weak position relative to its suppliers.

Low bargaining power of buyers

Under Armour has developed unique products that consumers value.

The customer is willing to pay the price because the Under Armour product has value in it.

Who are Under Armour’s main competitors? How do they measure up against these competitors? Classify the competition under the 3 I’s framework – immediate competition, impending competition, invisible competition.

Competitor analysis

Competitors

Nike.

Adidas combined with Reebok.

Columbia Sportwear.

SportHill.

Immediate competition

The immediate competitor is Nike. Nike is the leader in athletic shoes and captured half of the athletic shoe market. Footwear is new product line that was launched by Under Armour in fourth quarter of 2006. Under Armour is likely to introduce other athletic shoe like basketball shoe in future. It is a challenge of Under Armour to drive into athletic shoe market because Nike has already captured most of the market share in footwear.

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Another immediate competitor is Adidas. Adidas, who is the second largest athletic apparel manufacturer in the world after merging with Reebok. The apparel is major revenue of Under Armour. In year 2007, the apparel dominated 84% total sales of Under Armour. Reebok second largest manufactured in athletic apparel manufactured, so the merger between Adidas and Reebok become the immediate competitors for Under Armour.

Impending competition

The impending competitor of Under Armour is SportHill. SportHill utilizes the expertise of elite athletes to perfect its design and innovative new products. It is well known for quality, comfort and reliability. Their clothing can be found globally in most major retailer stores and can be purchased online. Therefore SportHill poses a threat to Under Armour.

Invisible competition

The invisible competitor of Under Armour is its suppliers. The intellectual property rights in technology, fabrics and processes used to manufacturer Under Armour products are generally owned by their suppliers and not unique to Under Armour.

The lack of proprietary product rights, intellectual property rights in foreign countries, and a heavy reliance on relatively few third-party suppliers and manufacturers could adversely affect the long-term sustainability of the firm.

Conduct a SWOT analysis to understand Under Armour’s strengths and weaknesses. Using the table below, conduct a SWOT analysis identifying the firm’s strengths, weaknesses, opportunities and threats in the table below.

SWOT Analysis

Strengths

Employees work as one team. Plank manages his company with a unique team-driven style. “Under Armour is one team and my job is to help ensure we operate and execute as one team.”

Strong leadership. Plank’s drive to keep trying even during difficult times when it seemed the company might never flourish is what made it possible. He knows every aspect of it because at one time he actually did the work himself.

Under Armour sells products in 13 countries, including in-house distribution in the United Kingdom, Germany, and France.

Under Armour’s accessories category is developed and managed directly by Under Armour.

Under Armour possesses an efficient operations and distribution network. SAP system has the ability to add products to its list of offerings, as it allows Under Armour to manage a more diverse inventory and to ship directly to distributors.

Weaknesses

Low level diversification. 84% of its revenue comes from athletic apparel and gear.

Highly dependent upon premium priced products that are closely related.

Opportunities

Utilizing broad-based, frequently free endorsements and well-received publicity, Under Armour has also reached regular athletes, active outdoor enthusiasts, elite tactical professionals, and active lifestyle consumers.

Success was initially slow in coming, but once Plank made his first big sale to Georgia Tech University, Under Armour grew rapidly.

During 2007, Under Armour increased its marketing initiatives by opening self-owned retail and outlet stores.

By leveraging its licensing partners (JR286, Inc. and USG), Under Armour can provide a wider range of branded products to its customers.

Under Armour signed a five-year partnership agreement in April 2009 with Cal Ripken, Jr., a retired professional baseball player, to be their official uniform representative. Under Armour feels this is a great opportunity because Ripken previously was partnered with Nike.

Threats

The main competitors have been advertising and establishing distribution channels, marketing agreements, and recognition for many years.

There is stiff competition in the athletic apparel industry with companies of various sizes employing different strategies in order to attract consumers to their product and brand. The larger companies continuously increase competition by spending large amounts of money on product innovations, advertising, and sponsorship.

Under Armour faces several issues and challenges. These challenges include the current economic downturn, competing against major rivals such as Nike and Adidas/Reebok, and maintaining a positive brand image despite setbacks, such as the recent recall of its men’s protective athletic gear.

The lack of proprietary product rights, intellectual property rights in foreign countries.

A heavy reliance on relatively few third-party suppliers and manufacturers. Under Armour relies heavily on suppliers and manufacturers outside of the United States. 75% of the fabric used in its products comes from only six suppliers.

Conduct a Value Chain analysis to identify value-creating activities.

Value Chain Analysis

Firm infrastructure

The company’s operations from Plank’s grandmother’s basement moved out into a manufacturing warehouse in Maryland.

Human resource management

Having been part of a sports team, Plank manages his company with a unique team-driven style. “Under Armour is one team and my job is to help ensure we operate and execute as one team.”

Many of his first employees were his college classmates and teammates. Most of them are still with Under Armour and play important roles in management.

In order to facilitate its international expansion, Under Armour hired several new executives with experience in international business, most notably Peter Mahrer.

Technology development

At the end of Under Armour first year of operations, Under Armour had five lines of clothing made for every climate, and the company’s operations were moved out of Plank’s grandmother’s basement into a manufacturing warehouse in Maryland.

After Under Armour went public in 2006, Under Armour invested in a new SAP system. This system is the key to the company’s ability to add products to its list of offerings, as it allows Under Armour to manage a more diverse inventory and to ship directly to distributors.

Procurement

Under Armour relies heavily on suppliers and manufacturers outside of the United States. 75% of the fabric used in its products comes from only six suppliers.

Inbound logistics

For the first ten years of its existence, the company was able to sustain operations by using “off the shelf” software programs.

Operations

Under Armour licenses its brand name to independent manufacturers for other miscellaneous products such as bags, socks, headwear, eyewear and watches. The company works with multiple licenses directly throughout the product development process to ensure that the products are aligned with its brand and quality expectations.

Outbound logistics

After Under Armour went public in 2006, Under Armour invested in a new SAP system. This system is a key to the company’s ability to add products to its list of offerings, as it allows Under Armour to manage a more diverse inventory and to ship directly to distributors.

Products are offered through the company website and retailers, and the company stores in the United States, Europe, Japan, Canada, South Africa, Australia and New Zealand.

Marketing and sales

Products are offered through the company website and retailers, and company stores in the United States, Europe, Japan, Canada, South Africa, Australia and New Zealand.

Service

When customers would request products that Plank had not created, he would respond, “Of course we make that!” and then immediately go to work with suppliers and contractors to deliver on his promise.

What is Under Armour’s business-level strategy? Is the strategy appropriate to offset the forces in the industry? Conduct an analysis of Under Armour’s business strategy by using the 4 P’s Framework. The 4 P’s Framework is used to understand a company’s strategy based on its:

Position (Mission, Values, and Vision)

Priorities (what is important to the firm in the short and long terms)

Payments (what it will spend its money on to reach those priorities)

Performance (how it will measure success)

Position

The task at hand was to simply make a superior T-shirt and nothing more.

Under Armour’s mission is to enhance the experience for all athletes by applying passion, science and the relentless pursuit of innovation to create clothing with temperature control, comfort and flexibility.

Under Armour’s stated goal is to be “a leading developer, marketer, and distributor of branded performance products”.

Ever since its inception in 1996, Under Armour’s leaders have strived to achieve the company’s vision of becoming the world’s leading performance athletic apparel brand by employing a differentiation strategy through innovation.

Priorities

For short term, there appears to be a trend that sales are higher in the third and fourth quarters of each year, aligning with the football and basketball seasons and the traditional holiday gift-giving season in the United States.

For long term, Under Armour has been able to quickly earn loyalty after a customer has had one or two good experiences with their purchase.

Payments

For short term, Under Armour has contemplated putting more emphasis on its baseball product line to improve the sales balance and reduce the seasonal variability in sales, inventory efforts and distribution.

For long term, they have the technology in the fabric and the design and the features satisfy what the athlete needs. Their model is getting to the athletes-supplying them with great product that helps them perform better.

Performance

This is further evidenced by a 133 percent compound annual growth rate and an equally enormous increase in operating income from $5.7 million to $52.5 million between the years 2003 and 2007. As of 2007, Under Armour had $606 million in sales revenue, far surpassing its first year’s revenue in 1996 of $17 thousand.

Do you recommend any changes to its strategy and/or foresee any challenges?

Dependability on suppliers. Under Armour relies heavily on few third-party suppliers and manufacturers. Under Armour should try to find more suppliers for their fabric. Even if the price of fabric rises or suppliers stop supplying the company, Under Armour still has other suppliers to carry on its business.

Strategies for competition. There is a stiff competition in the athletic apparel industry. Under Armour should do more advertising to bring awareness to people about the company’s brand. This way, Under Armour could have more competitive advantages in the market.

Lack of patents. Under Armour should apply for patents for its products innovations to prevent other competitors from duplicating its products.