UA Case Study

Case study
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MANAGEMENT STRATEGY rs e
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JAWAD IQBAL
BAKER COLLEGE | ALLEN PARK CAMPUS
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1.What is your assessment of the Under Armour’s performance downturn in North America that
first appeared in the fourth quarter of 2016? Causes? Reasons?
Under Armour’s report of its 2016 fourth quarter and full-year results in January 2017 rang alarm
bells. Total fourth-quarter revenues rose 11.7 percent; revenues in North America were up only 5.9
percent; income from operations dropped 6.1 percent com-panywide and 15.0 percent in North
America. To make matters worse, the company’s outlook for full-year 2017 was gloomy—expected
revenue growth of 11 to 12 percent (the lowest annual growth rate since the company became a “C”
corporation in 2002) and a decline in operating income to approximately $320 million, partly because
of “strategic invest-ments in the company’s fastest growing businesses.”2Nonetheless, Kevin Plank
believed the company’s resources and capabilities would enable it to cope with the challenges ahead
2.What financial performance issues do you see at Under Armour based on the data in case
Exhibits 1, 2.
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3. What is your assessment of the strength of the competitive rivalry among the leading participants
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in the North American market for performance sports apparel headed into 2018?
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The Rivalry among competing sellers of sporting goods such as Under Armour, Nike, and Adidas-Reebok
is strong and likely to intensify. The rivalry among sporting good sellers of energy will keep growing and
will become stronger in coming years. Under Armour. Nike, and Adidas-Reebok have similar or
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competing product offerings and that is why competition among them is so high. If these companies want
to stay in business they need to come up with different strategies that will set them apart from the
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opposition. Competition is intense and revolves around performance
A newcomer is going to have to build its way up the same way all the famous sporting goods brands have
done it. Under Armour, Nike and Adidas/Reebok are aware of the possibility of new entrants in the
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market and that is why they keep advertising, establishing distribution channels, making marketing
agreements, and keeping up brand loyalty in their customers.
4 How strong are the other four competitive forces confronting Under Armour, Nike, and The
adidas Group as of 2018? Do a five-forces analysis to support your answer.
There are several examples of how Porter's Five Forces can be applied to various industries online.
Competitive rivalry: Under Armour faces intense competition from Nike, Adidas and newer players. Nike
and Adidas, which have considerably larger resources at their disposal, are making a play within the
performance apparel market to gain market share in this up-and-coming product category. Under Armour
does not hold any fabric or process patents, hence its product portfolio could be copied in the future.
Bargaining power of suppliers: A diverse supplier base limits the company's bargaining power. Under
Armour's products are produced by dozens of manufacturers based in multiple countries.
Bargaining power of customers: Under Armour's customers include both wholesale customers as well as
end customers. Wholesale customers, like Dick's Sporting Goods and the Sports Authority, hold a certain
degree of bargaining leverage, as they could substitute Under Armour's products with those of UA's
competitors to gain higher margins. The bargaining power of end customers is lower as UA enjoys strong
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brand recognition.
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Threat of new entrants: Large capital costs are required for branding, advertising and creating product
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demand, and hence limits the entry of newer players in the sports apparel market. However, existing
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companies in the sports apparel industry could enter the performance apparel market in the future.
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Threat of substitute products: The demand for performance apparel, sports footwear and accessories is
expected to continue, and hence this force does not threaten Under Armour in the foreseeable future.
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5-Does Under Armour have any core competencies and, if so, what are they?
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Designing innovative performance sports apparel

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Capabilities in using the endorsement of prominent sports teams and p the sponsorship of sports events to
build growing awareness of the Unde
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Under Armour is succeeding in building a growing portfolio of celebri contracting with growing numbers
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of prominent sports teams to wear its help build strong brand awareness and a more potent/authentic
brand ima elements of’s UAstrategy.
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UA is also building brand awareness and a stronger brand image with i growing numbers of sports events.
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It is fair to say that UA has built a potent and authentic brand imag relatively short time
5. Does Under Armour have any resource strengths or competitive capabilities that qualify as a
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distinctive
competence?
UA, originally operated as KP sports was founded by. K, Being a football sports player and with his own
experiences of discomfort with existing range of apparel. He opted moisture wicking fabric and products.
With his network, he managed to make his first product, and he teamed up with KP.
The competitive capabilities that qualify as a distinctive competence a
Multi-purpose products
The products designed or manufactured are developed in view of satisfyi and it would meet the needs and
preferences of all the levels of the cu
Climate adaptability:
The products manufacturing would be accustomed to the climatic changes, addition and gives a unique
experience unlike regular products availabl
Comfortable wear:
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The ease and flexibility in the use of the products and its comfort and ability to stretch as per the needs.
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Vivid range of sports products:
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The products manufactured are of multi-variety and would meet the needs the sporting needs. It would
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also act as a motivating factor.
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6. What does a SWOT analysis reveal about the overall attractiveness of Under Armour’s situation
headed into 2018?
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Under Armour’s Resource Strengths and Competitive Assets

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A growing lineup of product offerings—the company has a growing array of moisture-wicking apparel
items in many designs and styles for wear in nearly every type of climatic conditions. Indeed, Under
Armour’s diverse product offerings in 2012 consisted of apparel, footwear, and accessories (gloves,
socks, headwear, bags, knee-pads, custom-molded mouth guards, and eyewear) for men, women, and
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youths marketed at multiple price levels in a variety of styles and fts intended to regulate body
temperature and enhance comfort, mobility, and performance regardless of weather conditions.
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UA’s growing market share is adding to its competitive strength—UA’s market share has grown from 0.6
percent in 2003 to an estimated 2.8 percent in 2011, which compared quite favorably with Nike’s
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industry-leading market share of 7.0 percent and the 5.4 percent share of second- ranked adidas. Clearly
UA is becoming a more formidable contender.
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UA had built growing and competitively strong distribution capabilities in multiple distribution channels,
specifically store retailers, catalog retailers, UA factory outlet and specialty stores, and sales at the
company’s website.
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Growing global awareness of the Under Armour brand name combined with growing appeal of Under
Armour products worldwide.
Growing skills and capabilities in promoting the sales and use of UA-branded products to high-
performing athletes and teams on the high school, collegiate, and professional levels. In 2012 UA was the
“offcial supplier of performance apparel” to increasing numbers of sports teams. Management believed
that having audiences see Under Armour products (with the interlocking UA logo prominently displayed)
being worn by athletes on the playing field helped the company establish on-field authenticity of the
Under Armour brand with consumers.
Growing, albeit still limited, distribution capabilities outside the U.S. Under Armour’s Resource
Weaknesses and Competitive Liabilities
Weaker brand name recognition and reputation than key competitors—Nike and The adidas Group
UA/s product line breadth is less than Nike’s and The adidas Group
Limited distribution outside North America (although UA’s global distribution capabilities are growing/
improving)
A smaller portfolio of celebrity endorsements than Nike Under Armour’s Market Opportunities
Under Armour has signifcant opportunities to expand the company’s still relatively limited product lineup
and brand name appeal into product categories where it currently had little or no market presence—there
is ample market opportunity for UA to broaden its product offerings to men, women, and youths for wear
in a widening variety of sports and recreational activities
Under Armour has very signifcant opportunities to expand outside of the United States—it is still in the
early stages of establishing its brand and penetrating markets outside the U.S. and North America
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7. What are the key elements of Under Armour’s strategy?
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Broaden the company’s product offerings to men, women, and youths for wear in a widening variety of
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sports and recreational activities.
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Market the company’s ever-expanding lineup of performance products to additional consumer segments.
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Secure additional distribution of Under Armour products in the retail marketplace in North America via
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not only store retailers and catalog retailers but also through Under Armour factory outlet and specialty
stores and sales at the company’s website.
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Also, use licensing arrangements to manufacture and distribute Under Armour branded products. In 2012,
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Under Armour had relationships with several licensees for team uniforms, eyewear, and custom-molded
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mouth guards, as well as the distribution of Under Armour products to college bookstores and golf pro
shops. Under Armour had a relationship with a Japanese licensee, Dome Corporation, that had the
exclusive rights to distribute Under Armour products in Japan.
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Expand the sale of Under Armour products in foreign countries and becoming a global competitor in the
world market for sports apparel and performance products.
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Grow global awareness of the Under Armour brand name and strengthening the appeal of Under Armour
products worldwide.
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Utilize endorsements and advertising to drive consumer demand for its products and build awareness of
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Under Armour as a leading performance athletic brand.
Advertise in a variety of national digital, broadcast, and print media outlets and initiate advertising
campaigns having a variety of lengths and formats
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Grow the company’s “fan base” via social sites like Facebook and Twitter
Promote the sales and use of its products to high-performing athletes and teams on the high school,
collegiate, and professional levels. This includes:
Entering into outftting agreements with a variety of collegiate and professional sports teams
Sponsoring an assortment of collegiate and professional sports events
Selling Under Armour products directly to team equipment managers and to individual athletes
Increase the floor space exclusively dedicated to Under Armour products in the stores of its major retail
accounts Design and fund Under Armour “concept shops”—including flooring, in-store fxtures, product
displays, life-size athlete mannequins, and lighting—within the stores of its major retail customers
In stores that did not have Under Armour concept shops, work with retailers to establish optimal
placement of UA products
Use high-tech fabrics produced by third parties (fabric manufacturers) that were developed in
collaboration with the company’s product development team.
Under Armour favored the use of superior, technically advanced fabrics, produced to its specifications.
9. Which one of the five generic competitive strategies discussed in Chapter 5 most closely
approximates the competitive approach that Under Armour is employing?
Under Armour’s main strategic initiatives include:
Broadening the company’s offerings to all genders and ages for wear in a widening variety of sports.
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Targeting additional consumer segments.
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Increasing its penetration of the market for athletic footwear.
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Expansion of sale in foreign countries.
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Its innovative product lines help in attracting customers from different sports backgrounds. Thus, Under
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Armour’s competitive approach closely approximates a Broad Differentiation Strategy with the primary
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goal of gaining a significant share in the market and improving its profitability rates.
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10. As of 2018, how does Under Armour’s competitive strength in the global market for sports
apparel andathletic footwear compare against that of Nike and The adidas Group? Do a weighted
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competitive strength assessment using the methodology presented in Table 4.4 in Chapter 4 to
support your answer. Based onyour assessment and calculations, does Under Armour have a net
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competitive advantage or disadvantage incompeting globally against Nike and The adidas Group?
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A representative competitive strength analysis of Under Armour, Nike, and The adidas Group is depicted
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below
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The competitive strength ratings in Table above indicate that Nike has the greatest competitive strength of
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the 3 companies—in our view, it is clearly a formidable competitor on every one of the strength measures
(hence the rating scores of 9 or 10 on each measure). We also see The adidas Group as being quite strong
(first or second strongest) on each one of the competitive strength measures. Under Armour, though up-
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and-coming, stills trails the other two rivals, although it has closed the gap signifcantly in the past five
years—and seems likely to close the gap even further in the next five years.
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Student competitive strength ratings can, of course, differ from those in the table above because there is
room for different judgments both as to the importance weights and the strength ratings. However, we
think that the total rating/score should nonetheless be highest for Nike, second highest for The adidas
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Group, and third highest for under Armour. Class members can thus make a convincing case that Nike
currently enjoys a net competitive edge over both The adidas Group and Under Armour. The adidas
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Group seems at a slight net competitive disadvantage vis-à-vis Nike and at a currently sizable net
competitive advantage over Under Armour. Yet, Under Armour is far from being so weak that it is unable
to compete effectively with its two larger rivals. UA is gaining market share. Consumer awareness of the
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Under Armour brand is growing and the

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11. What financial performance issues do you see at Under Armour based on the data in case
Exhibits 1, 2, and 3?
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Under Armour’s report of its 2016 fourth quarter and full-year results in January 2017 rang alarm
bells. Total fourth-quarter revenues rose 11.7 percent; rev-enues in North America were up only
5.9 percent; income from operations dropped 6.1 percent com-panywide and 15.0 percent in North
America. To make matters worse, the company’s outlook for full-year 2017 was gloomy—expected
revenue growth of 11 to 12 percent (the lowest annual growth rate since the company became a “C”
corporation in 2002) and a decline in operating income to approximately $320 million, partly because
of “strategic invest-ments in the company’s fastest growing businesses.”2Nonetheless, Kevin Plank
believed the company’s resources and capabilities would enable it to cope with the challenges ahead
2017 Turned Out to Be a Terrible Year for Under Armour Overall, Under Armour’s performance in
2017 turned out to be worse than management’s earlier expectations. In its core North American
market, Under Armour found itself on the defensive throughout 2017. A year after growing North
American sales from almost $1.0 billion in 2012 to $4.0 billion in 2016 (a com-pound growth rate
of 41.4 percent), Under Armour’s 2017 sales in North America dropped $200 million (5.1 percent)
to $3.8 billion. Total revenues worldwide were up a meager 3.1 percent—from $4.83 billion to $4.98
billion, after growing at a compound rate of 27.3 percent from 2012 to 2016. Operating income
dropped from $417.5 million in 2016 to $27.8 million in 2017. Net income fell from a record high of
$257.0 million to a net loss of $48.3 million.
The prices of the company’s Class A shares and Class C shares which began 2017 trading at $29.34
and $25.49, respectively, closed at $14.43 and $13.32 on the last trading day of December 2017. These
declines in Under Armour’s stock prices were all the more disheartening to the company’s shareholders
because the value of stocks listed on the NYSE and Nasdaq stock exchanges had climbed by more
than $7 trillion in the 16 months since the 2016 presidential election.
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The big drops in Under Armour’s operating income and the net loss of $48.3 million were partially due
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to management’s announcement in August 2017 that it would pursue a $140 to $150 million
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restructuring plan to address operating inefficiencies, transition to a product category management
structure, and reengineer the company’s go-to-market process (product innovation and design,
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vendor relationships, delivery times of seasonal products, inventory management, profit margin
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control, and speed of response to shifting consumer preferences and market conditions); in addition,
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the plan called for a global workforce reduction of about 300 people, inventory reductions and write-
downs, and charges for asset impairments, facility and lease terminations, and contract terminations.
These restructuring efforts resulted in $39 million in cash-related charges and $90 million in non-cash
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related charges against full-year 2017 results.

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12. What recommendations and suggestions for improvement would you make to Kevin Plank
regarding the turnaround strategy put in place at Under Armour?
The top priorities that Kevin Plank and Under Armour management need to address are global strategy,
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distribution issues, and advertising. The very first issue that Under Armour should address is there global
strategy. Global Strategy is important issue because it can help the company expand on its revenues in
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foreign countries. According to exhibit 2, Under Armours net revenues from foreign countries only
account for 6.1% or $89.3 million compared to Nike that has roughly $7 billion in foreign countries.
Under Armour should look into how other companies expand into foreign markets and start from there. In
order for Under Armour to increase their market share they have to try and start manufacturing and
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focusing on foreign countries. Unlike Under Armour, Nike has over 250 stores in foreign countries.
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Another key issue is distribution. Under Armour has to try and focus a little more on their Footwear to
come close to competing
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Case study

opposition. Competition is intense and revolves around performance

Designing innovative performance sports apparel

The competitive capabilities that qualify as a distinctive competence a

Under Armour’s Resource Strengths and Competitive Assets

Under Armour as a leading performance athletic brand.

Under Armour’s main strategic initiatives include:

Under Armour brand is growing and the

related charges against full-year 2017 results.

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