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Under Armour: PEST and Industry Analysis. Brian Teufel MGT 490-004 Assignment #2 Professor McDermott March 17, 2011. Under Armour Snapshot. Kevin Plank, the CEO of Under Armour developed a blue ocean strategy

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under armour pest and industry analysis

Under Armour:PEST and Industry Analysis

Brian Teufel

MGT 490-004

Assignment #2

Professor McDermott

March 17, 2011

under armour snapshot
Under Armour Snapshot
  • Kevin Plank, the CEO of Under Armour developed a blue ocean strategy
  • Created Performance Apparel market – enhances consumers performance while offering greater comfort
  • Total sales over $1.0 billion in 2010
  • First-mover advantage has allowed UA to gain 70% of the U.S. market and about 15% of the global market
  • Performance Apparel has evolved from niche to mainstream in terms of target market and competition (Nike and Adidas)
under armour snapshot cont
Under Armour Snapshot (cont.)
  • Under Armour owns branded retail stores in 28 U.S. states (30+ stores) and 23 other countries (25+ stores).

- First UA branded retail store opened on November 1, 2007.

pest analysis

• Opportunities and Threats are ranked in terms of

importance separately; top five of each are ranked accordingly.

(1 = extremely important, 5 = Not very important.

Pest Analysis
political factor
Political Factor

Economic Factors

  • FDI Policies- Some foreign countries have policies in place that prohibit 100% ownership of retail stores which poses threat to internationalization
  • Chinese Labor Costs Increasing
    • Costs of international labor is on the rise.
    • Hourly compensation costs of manufacturing employees in China from 2002-2008 is shown below.
economic factors cont
Economic Factors (cont.)

•The growth of the performance apparel industry

is the greatest opportunity.

•More Consumers = More Revenues

social factors
Social Factors
  • Obesity rates in U.S. show people not physically active
  • Consumers focus on quality more than price
  • Increase in physically active women
  • Increase in health conscious consumers = more exercise/physical activity
  • Sport participation is a key aspect of U.S. culture
  • Aging population and increase in physically active seniors
  • Increase in sports participation in emerging markets
technological factors
Technological Factors
  • Increase in e-commerce
  • Increase in m-commerce (trend is to always have digital connection)
industry analysis overview
Industry Analysis Overview
  • Under Armour is in the extremely competitive performance apparel industry which is defined as anything that is worn which enhances the performance of the user.
  • Performance apparel global sales = $6.4 billion in 2010 and is expected to grow to $7.6 billion by 2014.
    • In 4 years, the industry is expected to grow by 15%.
threat of new entrants high
Threat of New Entrants - High
  • With the expected growth of the performance apparel industry, there will be new entrants in the industry from all over the world.
  • Most companies who enter the performance apparel industry are unable to compete due to existing brand loyalty and the high barriers to entry.
    • Examples include New Balance, Velocity, and Sugoi
threat of substitutes moderate to high
Threat of Substitutes – Moderate to High
  • Substitutes are limited to conventional apparel or no apparel at all.
  • Core athletes have a large number of substitute options to choose from.
bargaining power of buyers moderate to high
Bargaining Power of Buyers – Moderate to High
  • The bargaining power of buyers depends on the consumer’s skill level and the level of the team.
bargaining power of suppliers moderate
Bargaining Power of Suppliers - Moderate
  • The use of third party suppliers allows performance apparel companies to chose their suppliers based on highest quality and lowest production cost.
  • Third party suppliers have high bargaining power by being able to choose the companies that they want to supply for.
    • The best third party suppliers can select the company orcompanies that treat them the best and provide the best compensation.
    • There are thousands of third party suppliers all over the world.
rivalry intensity high
Rivalry Intensity - High
  • Currently, the performance apparel industry is growing rapidly at 15%; this allows rivalry to grow rapidly as well.
  • There is a high # of competitors but UA, Nike, and Adidas make up the majority of the industry due to a quality advantage over other competitors.
blue ocean strategy
Blue Ocean Strategy

Innovation

Differentiation

Niche

R&D

Enhance

Performance

conclusions
Conclusions
  • The opportunities for the performance apparel industry outweigh the threats.
    • Labor and gas costs are increasing but opportunities such as the global growth of the PA industry, global increase in sport participation, and increase in both e-commerce and m-commerce outweigh the threats.
  • Rivalry is extremely high in the performance apparel industry.
    • The competition between Nike, Adidas, and Under Armour is fierce and it continues to heat up.
  • Participants in the performance apparel industry must always be aware of new entrants because the industry is on the rise.
    • Create high barriers to entry.
  • Blue Ocean Strategy was the basis for Under Armour and it allowed them to achieve success in the PA industry.
    • Innovation, Differentiation, R&D, Creating Niche of performance apparel that enhances performance while allowing comfort.
under armour competitor and market analysis

Under Armour:Competitor and Market Analysis

Brian Teufel

MGT 490-004

Assignment #2

Professor McDermott

March 17, 2011

generic strategy

Competitive

Advantage

Generic Strategy

Low Cost

Differentiation

Broad

Target

Competitive

Scope

Narrow

Target

price quality comparison

Price

Price/QualityComparison

Low

High

•New Balance

Low

•Champion

•PUMA

Quality

•Columbia

Sportswear

Company

•Quiksilver

•The North Face

High

•Adidas

•Nike

•Under Armour

performance apparel geographic growth rates by company
Performance Apparel Geographic Growth Rates by Company
  • -UA = 4%
  • -Nike = (-6%)
  • Adidas = 7%
  • Col. Sportswear = 13%
  • Quiksilver = (-8%)
  • PUMA = (-3%)
  • -UA =5%
  • -Nike = 0%
  • Adidas = 2%
  • Col. Sportswear = 30%
  • Quiksilver = 4%
  • PUMA = (-2&)
  • -UA = 23.5%
  • -Nike = 8%
  • Adidas = 7%
  • Col. Sportswear = 22%
  • Quiksilver = (-9%)
  • PUMA = 22%
  • -UA = 0%
  • -Nike = 20%
  • Adidas = 16%
  • Col. Sportswear = 13%
  • Quiksilver = N/A
  • PUMA = -3%
  • -UA = 0%
  • -Nike = 20%
  • Adidas = 14%
  • Col. Sportswear = 10%
  • Quiksilver = (-9%)
  • PUMA = 22%
performance apparel industry defined
Performance Apparel Industry Defined
  • Performance Apparel is defined as anything that is worn which enhances the performance of the user.
  • New and existing companies are attempting to break into the PA industry every day due to the rapid growth.
  • The top three companies in the global PA industry include Nike, Adidas, and Under Armour
  • Gross sales come from company owned stores and third party retailers.
  • Sell products of quality which enhance performance while providing comfort to the user.
market analysis
Market Analysis

52% Inc.

15% Inc.

• The Performance Apparel industry has grown

rapidly in the past four years and it is expected

to continue to grow rapidly the next four years.

social media importance
Social Media Importance
  • Social media has impacted the PA industry positively, increase in sales due to easier communication between consumers.
  • Consumers can give feedback (+ and -) in a relaxed environment.
  • Consumers can also socialize with other consumers to discuss PA products.
  • Marketing has been most effected by social media with sites such as Facebook, Twitter, Foursquare, and LinkedIn.
    • PA companies can market to larger groups of consumers at a much cheaper cost.
conclusions1
Conclusions
  • Nike and Adidas are Under Armour’s primary competition in the performance apparel industry.
  • Nike and Adidas have jumped UA in total PA sales even though PA accounts for only 7% of Nike’s and 9% of Adidas’s total turnover.
  • Under Armour would be the global leader in performance apparel sales if they were as successful internationally as they currently are in the U.S.
  • Asia and North America are fueling growth in the performance apparel industry with Europe also growing.
  • The performance apparel market is growing at a rate of higher than 15% and it is expected to continue to increase for the for seeable future.
under armour internal analysis swot analysis competitive position and conclusions recommendations

Under Armour:Internal Analysis, SWOT Analysis, Competitive Position, and Conclusions/Recommendations

Brian Teufel

MGT 490-004

Assignment #3

Professor McDermott

March 17, 2011

under armour s performance
Under Armour’s Performance

• Under Armour’s PA sales and net income have increased every year since 2006.

under armour s performance1
Under Armour’s Performance

• On average, around 80% of Under Armour’s net income comes from PA.

change in sales by product
Change in Sales by Product

• All $ amounts are in millions

• Footwear sales increased every year from 2006-2009 but decreased by 7% in 2010.

• PA and accessories sales have increased every year; PA had a huge increase of 24%

from 2009 to 2010.

change in distribution of sales by region
Change in Distribution of Sales by Region

• International sales have increased every year since 2008 but UA is still heavily

reliable on North America for about 90% of their total sales.

employee distribution
Employee Distribution

# of Employees, % of Total Employees

• Under Armour has a total of 3,900 employees.

• Factory House and Specialty Stores employees are increasing rapidly because UA is opening more branded stores.

• Almost ¼ of UA’s employees are devoted to research and development.

generic strategy1

Competitive

Advantage

Generic Strategy

Low Cost

Differentiation

Broad

Target

Competitive

Scope

Narrow

Target

• UA is moving from niche to mainstream

in an attempt to compete with Nike and

Adidas on other product lines (footwear and

accessories) other than performance apparel.

product bcg matrix

Market Share

Product BCG Matrix

High

Low

•Performance

Apparel

•Footwear

High

•Accessories

Market

Growth

Low

value chain
Value Chain

• UA creates value for the consumers and gains its competitive advantage

against the competition primarily through technology development.

• Innovation is what made UA what it is today, and Innovation is the

key for future success.

ansoff s matrix cont
Ansoff’s Matrix (cont.)

1 = Lowest Level of Effort

4 = Highest Level of Effort

Market Penetration

Product Development

Market Development

Diversification

• UA is focused on all of these strategies but they

must prioritize according to what will achieve them

the greatest amount of success and what will put them

in the best position to grow in the future.

sponsorships endorsements
Sponsorships/Endorsements
  • Domestic Sponsorships/Endorsements
  • International Sponsorships/Endorsements
conclusions2
Conclusions
  • PA sales and overall sales have increased every year since Under Armour has been founded.
  • PA sales account for more than 80% of total sales.
  • International sales account for less than 10% of sales but they have been increasing slightly since 2008.
  • Under Armour is attempting to make a push into international and emerging markets.
  • The two main strengths for Under Armour are its core competence in innovation and its brand equity.
  • UA is moving from niche to mainstream in an attempt to compete with Nike and Adidas on other product lines (footwear and accessories) other than performance apparel.
recommendations
Recommendations
  • Under Armour’s primary focus should be to increase their U.S. market share in other products such as footwear and accessories while maintaining market leadership in PA.
  • Under Armour should move into international and emerging markets with caution to assure they do not expand too quickly.
  • Under Armour needs to continue to provide value to consumers through innovation and research and development.
  • Under Armour needs to integrate their marketing plan and make sure than all sponsorships and endorsements contribute to the value of the brand.