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Under Armour Danny Fields. PEST/Industry Analysis.

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Presentation on theme: "Under Armour Danny Fields. PEST/Industry Analysis."— Presentation transcript:

1 Under Armour Danny Fields

2 PEST/Industry Analysis

3 Snapshot Headquartered in Baltimore, MD Employ approximately 2200 people Under Armour has built a leading brand name in hi-tech athletic gear – which is broken down into HeatGear, ColdGear, AllSeasonGear Expanded into wider range of sportswear, casual apparel, and footwear

4 Snapshot Under Armour is the clear leader in the athletic apparel market in the U.S. (75% market share, $30 billion industry) They have 31% market share of the overall U.S. athletic market (Nike leader at 36%) 2010 net income of $68 million ($46 million – 2009) Company2010 Net Income Under Armour$68 million Nike$1.9 billion Adidas$800 million

5 Snapshot Under Armour depends heavily on the U.S. Market CountryPercentage of Sales (2008) United States91% Canada4.4% Other4.6%

6 PEST- Political Some leagues and organizations across the U.S. have banned certain accessories that can be worn during games – Could reduce the number of potential customers in certain regions of the country The U.S. Government has put pressure on performance apparel companies to reduce their carbon footprints – Under Armour has started producing apparel that is made with “green” technology, leaving less of a carbon footprint Unrest in countries where manufacturing takes place – Approximately half of Under Armour’s products are manufactured in Central America and Mexico, relatively unstable regions with some political violence – This could possibly lead to factories being shut down, shipments being delayed

7 PEST- Economic The economic recession that started in 2008/2009 that led to a significant increase in unemployment – Under Armour’s products tend to be more expensive than their competitors and that could lead to people looking for cheaper alternatives Exchange rate fluctuations – Under Armour has used foreign currency forward contracts to reduce some of the risk of exchange rate fluctuations Increase in raw material prices – This has increased the cost to produce Under Armour products

8 PEST- Social The marketplace is becoming more eco-conscious – More pressure from performance apparel companies to reduce their carbon footprint and create eco-friendly products Consumer trends in the performance apparel industry: – Compression (clothing that fits closely to the body, increases circulation and can increase strength, stamina, endurance, and recovery time) – Moisture wicking synthetics (takes moisture away from the body and is hydrophobic, meaning that it won’t become wet and heavy like cotton) – Antimicrobial fabrics (prohibits growth of bacteria) – Lifestyle integration (performing outside of fitness club, use in everyday life) – Fashionable (looks attractive to wear)

9 PEST- Social Dominance of soccer in foreign countries – Getting involved with soccer in these countries could help increase market share and awareness overseas

10 PEST- Technological E-Commerce – Websites allow for customers to purchase apparel over the internet without having to go through retailers Social Networking – This allows for companies to interact with their consumers and increase interest in their products

11 PEST- Summary FactorTrendEvaluationImpact (1=low 5=high) Rank in terms of importance PoliticalLeague bans Carbon footprint Unrest in manufacturing countries Threat Opportunity Threat EconomicRecession Exchange rate fluctuations Increase in raw material prices Threat SocialEco-Conscious market Performance apparel trends International Sports (soccer) Opportunity TechnologicalE-Commerce Social Networking Opportunity

12 Defining the Industry The performance apparel industry has been growing significantly over the past few years Performance apparel accounts for over 10% of the sportswear market Forecast to be worth $4.29 billion in 2012 Sold to the individual consumer at retail prices and business- to-business at wholesale prices The competition is global with the major players (Under Armour, Nike Adidas) selling products worldwide

13 Industry Analysis - Buyers Retailers are the major buyer in this industry – Including: Dick’s Sporting Goods, Modell’s, The Sports Authority, Footlocker, Finish Line, etc – In 2010, 73% of Under Armour’s net revenue came from wholesale distribution Individual consumers are another buyer – Through factory house stores, website, catalog, specialty stores, etc – In 2010, 23% of Under Armour’s net revenue were from direct sales to consumers (through e-commerce and factory stores)

14 Industry Analysis - Suppliers Under Armour products are supplied from manufacturers all over the world The suppliers have low power since Under Armour has many suppliers and they could easily switch to suppliers in other countries. Country/RegionUnits produced Asia53% Central America25% Mexico19%

15 Industry Analysis – Intensity of Rivalry The intensity of rivalry is high in the performance apparel industry The industry has continued to grow – The market is estimated at $6.40 billion, up 19.4% over the past 4 years – Expected to grow another 18.75% by 2014 Many competitors – Nike, Adidas, Columbia, Champion, Russell, etc.

16 Industry Analysis – Threat of Substitute Products Substitute products for this industry could include: – Brands like Polo or Tommy Hilfiger – Consumers opting to dress more casual or professional, instead of going with the sports apparel look

17 Industry Analysis – Threat of New Entrants The threat of new entrants into the performance apparel market is relatively high Even though there are well-known established brands in the industry (Nike, Adidas) the barriers to entry are relatively low – Low switching costs, access to distribution channels, low government restrictions Under Armour is an example of a new entrant to come into the industry and have success using innovation and a differentiation strategy

18 Industry Analysis Summary FactorEvaluation Buyer PowerStrong Force (UA relies too heavily on few number of distributors. They rely on good faith policy and do not enter into any long-term customer contracts.) Supplier PowerBenign (UA has many suppliers and it would be easy to switch) Intensity of RivalryStrong (Due to the fact that the industry has been growing continually and the number of competitors in the industry) Threat of Substitute ProductsBenign (The possible substitutes don’t seem like they will have a likely impact on the industry) Threat of New EntrantsStrong Force (Low switching costs, access to distribution, and low government restriction)

19 Industry Analysis – Suggestions Under Armour relies too heavily on a limited number of distributors – 31% of their 2008 sales came from two retailers (Dick’s Sporting Goods and The Sports Authority) Under Armour needs to work harder on direct customer sales – If they increase their direct sales through their website, factory stores, or specialty stores, then they would lower their dependency on retailers They could also look into forward integration and buying retail space to sell their products

20 Conclusion Performance apparel is a growing industry – Market is up 19.4% over the past 4 years The recession and increase in raw material prices are major threats to companies in the industry The biggest opportunities come from the trend of more active lifestyles, e-commerce, and international sports Overall the economic factor is the most important to companies in the performance apparel industry

21 Competitor/ Market Analysis

22 Key Competitors CompanyHeadquartersBrandsSales (2009) NikeBeaverton, ORUmbro, Converse, Hurley, Jordan $5.24 billion (apparel only) AdidasHerzogenaurach, GermanyReebok, Ashworth, Rockport $14.6 billion (total) ColumbiaPortland, ORSorel Corporation, Mountain Hardwear, Pacific Trail, Montrail $1.24 billion Russell Corporation (subsidiary of Berkshire Hathaway) Bowling Green, KYSpalding, Huffy, Brooks N/A Champion (subsidiary of HanesBrands) Winston-Salem, NCN/A Under ArmourBaltimore, MD$606 million

23 Strategic Grouping CompanyProduct DiversityGeographic Coverage Marketing Effort NikePerformance apparel, casual apparel, jerseys, footwear, equipment GlobalStrong brand identity, well known logo and slogan, athlete sponsorships AdidasFootwear, performance apparel, casual apparel, jerseys, soccer kits, equipment GlobalFocus on promoting running and soccer products, international sports and events sponsorships ColumbiaOuterwear, footwear, headgear, camping equipment, accessories, skiwear GlobalFocus on outdoors activities (skiing, hiking, camping) RussellFootwear, apparel, sports equipment, uniforms GlobalLower cost clothing, provides uniforms for some high schools and colleges ChampionSportswear (Hoodies, t-shirts, mesh clothing)GlobalLower cost clothing, urban fashion Under ArmourPerformance apparel (Heatgear, Coldgear, AllSeasongear), footwear GlobalHigh quality products, international sponsorships to increase global reach

24 Strategic Grouping Because of the similar products and geographic coverage, Nike, Adidas, Russell, and Champion are the main competitors to Under Armour in performance apparel

25 How they compete Strong marketing campaigns – Nike, Adidas, Under Armour are well known for their marketing campaigns – Adidas was sponsor for the FIFA World Cup but Nike is better known for their commercial using popular players like Ronaldo, Rooney, Ronaldinho, Landon Donovan, etc – UA used “Click-Clack” and “We must protect this house” slogans Low cost outsourcing for manufacturing Innovation Distribution – Through retailers and factory stores Endorsements – Nike – Michael Jordan, Tiger Woods, Lance Armstrong, Ronaldinho, LeBron James, etc – Adidas – David Beckham, Lionel Messi, etc – UA – Michael Phelps, Ray Lewis, Lindsey Vonn, etc

26 Product Scope The products are all sports related in some fashion – Performance apparel that is used for a sport activity – Licensed apparel that is worn casually – Footwear that can be used for both sport and everyday life – Uniforms provided to leagues, teams, and schools

27 Geographic Scope CompanyRegionsPercentage of Sales (2009) NikeUnited States Europe Middle East and Africa Asia Pacific/Latin America 34.1% 28.7% 17.3% 20% AdidasNorth America Asia/Latin America 22.9% 34.8% Under ArmourUnited States/Canada Rest of the world 91% (2008) 4.6% (2008) Nike and Adidas have a much bigger global reach than Under Armour. All 3 have sponsorship deals with international sports teams and events to help increase exposure and awareness

28 Core Competencies CompanyCore Competencies NikeInnovative products, marketing, globalization, teamwork, competitiveness AdidasBrand identity with running and soccer ColumbiaBrand association with outdoor activities ChampionStaple in hip-hop and urban fashion Under ArmourHigh quality, innovative products that increase athlete performance

29 Market Size Performance sportswear global market is estimated at $6.40 billion Risen 19.4% over the past 4 years Forecasted to rise to $7.6 billion by 2014

30 Key trends Consumers are becoming more eco-conscious – Impacts the type of technology that will be used in performance apparel Performance apparel being worn in everyday life – This makes style and fashion more important in product design People are more conscious about their health – An increase in active lifestyles will increase the demand for performance apparel products

31 Market/Product Growth Performance apparel is a fast growing retail segment in Asia – Average sales of $3 billion annually – 2008 Beijing Olympics helped increase exposure of performance apparel Competitors are also looking to other emerging markets like Turkey, Russia, and Brazil for growth opportunities – Sales for competitors have increased over the years in these countries

32 Target Market CompanyTarget Consumer NikeActive people who want high quality sporting goods AdidasAthletes mainly involved in running and soccer ColumbiaPeople who enjoy the outdoors (hiking, skiing, camping) RussellPeople looking for low cost alternatives to Nike, UA, Adidas ChampionLow cost alternative to Nike, UA, Adidas. As well as people living in urban areas Under ArmourAthletes who are serious about increasing performance in their respective sport

33 BCG Matrix

34 Social Media Social Media allows companies to reach consumers directly and receive feedback – Under Armour ran a social media advertising campaign to try to engage hard-to-reach females – Nike’s Jordan brand uses social media to increase brand loyalty – During the 2009 NBA All-Star Game, Adidas allowed fans of their facebook page to follow Dwight Howard throughout the All-Star Game with videos and photos from him

35 Conclusion The main competitors to Under Armour are Nike, Adidas, Russell, and Champion due to their similar product categories – Nike and Adidas compete on a differentiation strategy with Under Armour, while Champion and Russell compete on a low cost strategy They compete using effective marketing campaigns – Well known logos and slogans Nike and Adidas have large geographical coverage – Which lowers the dependency on their home country for sales: Nike (U.S.), Adidas (Germany)

36 Conclusion The performance apparel market continues to increase – 19.4% rise in worth over the past 4 years People are having more active lifestyles – Increased demand for performance apparel Emerging markets will be important for future growth – Competitors have seen an increase in sales in China, Turkey, Russia and Brazil

37 Internal Analysis/SWOT/Strategy

38 Business Model Under Armour develops innovative products They outsource their production to low cost subcontractors They distribute to large retail stores (Dick’s, Sports Authority) and have their own retail stores Secure endorsements with high-profile athletes and sponsorships with teams and events Develop a strong brand

39 Performance YearSalesNet Income 2010$1.06 billion$68.5 million 2009$856.4 million$46.8 million 2008$725.2 million$38.2 million 2007$606.6 million$52.6 million 2006$430.7 million$39 million

40 Performance Increased performance was a result of higher revenue margins in their Direct-to-Consumer channel – Expansion of factory house stores – Less reliant on retailers (Dick’s, Sports Authority)

41 Product Performance % Change Apparel$853,493$651, Footwear$127,175$136,224(6.6) Accessories$43,882$35, Total Net Sales$1,024,550$823, Licensing Revenues$39,377$33, Total Net Revenues$1,063,927$856,

42 BCG Matrix Performance Apparel Footwear Accessories

43 Value Chain Analysis Primary Activity Inbound LogisticsManufacturers receive raw materials OperationsRaw materials used to create UA products Outbound LogisticsFinished products are sent to retailers and UA owned stores Marketing and SalesUA has well recognized athletes to endorse their products and sponsorships deals with many teams around the world ServiceWebsites and social media allow for interaction with customers

44 SWOT StrengthsWeaknessesOpportunitiesThreats Brand Equity Innovation Quality of Products Lack of international sales Prices Relies heavily on distributors Emerging Markets Performance apparel industry is growing Consumers are more health conscious Increase in active lifestyles E-Commerce Increasing cost of raw materials Rules and Regulations for performance apparel Economic Recession Exchange rate fluctuations

45 Generic Strategy

46 UA has always used a differentiation strategy Originally, they just sold performance apparel but now that are broadening their scope by adding footwear, accessories and more casual apparel

47 Grand Strategy InnovationContinue to create innovative products to stay ahead of competitors (Nike, Adidas) Market DevelopmentThey need to work on getting their existing products into new markets. UA relies too heavily on North America Market PenetrationThey are very successful with performance apparel in the NA market but they need to work on other product categories that are not as successful (footwear, accessories) Product DevelopmentThey have also been successful at developing new products in their existing NA market

48 Ansoff Matrix They are very successful in their market (90% of sales) They should focus on developing new markets If they can successfully get their existing products into those new markets, then they can move towards diversification

49 International Performance UA is highly dependent on North America for sales – Around 90% of sales comes from North America – About 4% from Europe UA is using sponsorships and licensing to increase international exposure – French rugby club ASM Clermont– French champions last year – Wales national rugby team – Tottenham Hotspur (EPL)– Champions League Quarter-finalists – Other teams in Mexico, Greece, Germany

50 Conclusions UA has seen an increase in sales over the past 5 years They have increased their revenue in the Direct-to-Consumer channel – Expanded factory house stores – Lowered reliance on retailers Strengths include innovation and brand equity (North America) Biggest weakness is international sales – About 10% of sales from outside North America Competes using a differentiation strategy and moving towards a broad scope

51 Recommendations Find recognizable international athletes to endorse UA products – They have endorsers that are well recognized world-wide but are U.S. based (Michael Phelps, Tom Brady) Continue to expand on factory house stores (locally and globally) – Lowers dependence on retailers – Will increase their profit margin Remain innovative to differentiate from competitors (Nike, Adidas)


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