‘THE PERFORMANCE APPAREL INDUSTRY Performance Apparel: garments that perform or function for a defined purpose Growth industry: Global market ~ Us$6.40bn, (19.4% growth in four years), predicted to grow to Uss7.6bn by 2014 (18.75%). Historically multi-domestic industry but now increasingly global with competition across borders Subset of the Active and Sportswear Industry Nike & Adidas dominate overall Sportswear Industry but UA is leader inthe Performance Apparel Industry. Daten of gel gone Growth fueled by increased participation in sport (33%), and technology developments ‘Market trends driven by seasonal cycles and continuous innovationPERFORMANCE APPAREL, The Industry Life Cycle Few | Growing nopter: | Cownpalatvy | Seucetonotes | Depot wma | valet tlt | olga | } lnvoge bons | tary | procter | | Repeat purchoe | wots ' {ama tl | eneyoteomeetian | Meybemany | Rehttomintin | et ofsome Fear | tptto action | Ue cecating | SE | epee compa | compet val | forme | pitiatiei 1 Seete ‘ondivers Fatt torshae Sakectoteake | APNG Hare | Arbon pNemoetion | Emphaison | poaconncs | | ettdengiowetPORTER'S FIVE FORCES. ‘Analysis of the performance apparel industry HGH ‘Theeat of new entrants ase of setting up new othing compares (ited regulation, chet raw materials, @ manufacture clusters) MEDIUM Buyer power Plenty of choice overall or end er from tow price to highly, ‘ierentisted “Retail buyers barging power lessened by antitrust ws, MEDIUM Supplier power ot of spss =o cs ey ae ane qty sgpers have leer HIGH Threat of substitute products Particularly trom dominant ianufactrers working to multple contracts zon, Pour 185 SomaGLOBAL VALUE CHAIN Performance Apparel Industry‘VALUE CHAIN Under Armour Global ar Gi, CB Ura oT PeedBusiness Modet Toren amen germ (| oem) | soution No | Sito Lome ames Prooucr rouse | "008" eras eet tanores §C2| rumor greet amoun SJ] mY hen ne ‘ewnovers MARKETING, SALES, DISTRIBUTIONSUPPLIERS Spe and RETAILERS cenono ar Restos ‘EMPLOYEES [MANUFACTURING & LOGiST} MARKETING, SALES, DISTR “ro Coe Dane 27 Due ote 0T Narain 1 Monon HE rowan BOT)toyPanes SUPPLIERS RETAILERS [EMPLOYEES MANUFACTURING 6 Lo MARKETING, SALES, DISTRIBUTIONUnder Armour in summary: + Entrepreneurial company operating in highly competitive but growth industry + Operates the industry norm value chain, Keeping its core competencies of ‘design and marketing in house. + Weaknesses: Limited IP protection, supplier contracts, and distributors; reliance on KP leadership, and limited expertise to diversify into footwear and female markets or to develop overseas markets + Strengths: Brand, culture, superior product performance, innovation and design (leading to greater customer satisfaction)Conclusions - Sustainable Competitive Advantage? ‘Strong brand loyalty will Requires continued lead to sustainable ‘innovation to serve un-met advantage. Success of needs and maintain “teenies” campaign will be key. Need to stick to core tecnology edge part of tiv cot compen Sandee WV eon ey re coset Very valuable (close to ‘consumer needs) and Independent hard to research has proved replicate, but.timits effectiveness but ‘growth in certain lack of I protection markets e.g. wom = not sustainableConclusions: sustainable competitive advantage for growth? Market penetration - UA already [ecting Producte Now Producte ‘maximise their penetration by bringing out updated ranges on short i cycles but products become obsolete ) ‘quickly so MUST continue to £ y Innovate new ones trea ree att cvgoocoeybateny f iuatnceme I > Overtones = vmncd accent an cote strength of brand and niche ..Currently UnderArmour has problem solver limited expertise and capability Market development - UAneed to sro" to serve these markets, their Overseas, & Female , particularly when Nike, Adidas market, and extend the number of ang other competitors are Sports they = already established. jaar wiConclusions - What next, Our view: UnderArmour is unlikely to be able to sustain growth trajectory with existing competences, value chain, and business model. UA needs to develop new markets: + Overseas, Women, and new sports Need to acquire capabilities to successfully operate in these markets, How? - + Merger with other “small” players rt + Acquisition by bigger firm ~ + Licensing (but major quality/brand risk associated with this) + BUT need to maintain brand and cultural congruence ot thal cutcome acquisn by Nhe Adasen + Acquirer gets manufacturing synergies and removal of competition + Acquirer uses infrastructure and money to expand UA in Europe, Asi wo