Under Armour Strategic Analysis

It will be concluded with strategies of success of the company as well as alternative strategies. Demographics In the terms of the overall athletic market, Under Armour claims 31% of the market share, Nike 36%, and Adidas and other athletic companies claiming the remainder. In their specific products, Under Armour claims 75% of performance apparel market share, with Nike and Adidas struggling to catch up. The company targets consumers of all ages and all demographics.

Their consumers include men, women, and children; athletes, coaches, fans, active people, athletic staff, and anyone who lives an active life style.

Their consumers can attain their products through their website, 15,000 retail stores across the country, regional retail chains like Academy and Dick’s sporting goods, and as of 2007, 17 retail outlet stores. Approximately 94% of Under Armour’ sales in 2010 were in North America, with the remaining 6% split in international markets that included Latin America, Europe, the Middle East, Africa and Asia. Under Armour’s products appeal to people of all ages and areas and priding themselves on performing apparel that can be used in multiple sports, climates, fits and any life style.

The price of Under Armour products are considered to be premium quality with premium performance and consumers with considerable disposable income continue to purchase premium prices for their products. Economics The U. S. economy has not had a trade surplus since 1975 but has recorded in April 2012 that the goods deficit decreased $2. 7 billion from March to $64. 8 billion. Retailers are poised to boost prices on athletic footwear, apparel and sports equipment as they join other industries in passing along rising costs for commodities, foreign labor and freight.

A certain consistent message has emerged from vendors and retailers that cotton, fuel and wage costs are starting to go up, and they’re slowly going to come through on the retail side, certainly in 2012. Prices manufacturers paid for imported sporting goods grew 3. 3 percent in 2008 and retail price tags increased 3 percent, according to data from the Bureau of Labor Statistics. The U. S. budget deficit in March totaled $198. 2 billion, a record for that month which left the gap through the first half of 2012 at $779 billion, down 6. 1 percent from a year ago.

The U. S. athletic apparel market grew an estimated 8. % from 2003 to 2008, from $13. 0 billion to $14. 1 billion, and is projected to grow another 8. 5% by 2014, to $15. 3 billion. Over 2/3 of U. S. consumer’s exercise at least once a week, and consumers also appreciate the versatility of athletic apparel, wearing it for non-athletic purposes as well. Studies show that U. S. consumers are willing to pay full price for its functionality and found that athletic apparel was significantly less likely to be offered “on sale” than non-athletic clothing. Political/Legal The political and legal environment of the athletic apparel is greatly dependent and influenced by the United States.

In the most recent years there has been an increasing push for state legislators to pass laws concerning the physical education, health, and breakfast/lunch consumption among students in elementaries, middle schools, and high schools across the nation. Laws have been enforced with required state legislation in regards to PE times that could be a crucial tool to ensure that children meet the daily recommendations of physical activity. With the increase of physical education across campuses across the United States, large athletic apparel companies have been known to support teams, players, and coaches.

Recently there has been an increase in awareness regarding the companies paying college athletes for wearing their brands, and could lead to them being classified as employees and capable of collective bargaining. In colleges across the U. S. , it is against university policy for players to accept or receive endorsements or be paid by companies while still participating in college athletics. There have been numerous cases where players have been suspended, along with their coaches and anyone with known information, because of brand companies supplying specifically targeted players with oney, cars and clothes to market their products.

Sociocultural The socialcultural effects that athletic apparel has had on cultures across the world have had a large impact and continue to grow. Athletes of all sports, all ages, professional and not have placed a large influence on consumers across the world. The athletic apparel being worn by people all over the world provide a label of what that person is and how their life style may be. Health has been an increased implication on many societies and apparel has been a way to show how “healthy” a person would consider themselves.

Today consumers of all ages are able to view products through television, commercial, and the radio, as well as watch all types of sporting event including professional and the Olympics. The products appeal to the society when people of their country are seen wearing them during an event or in everyday life. With increase in athletic activity, many companies have expanded on their women’s and children’s lines, providing performance products to children and women all over the world. With athletics bringing countries together more than every four years, cultures have been able to adopt the styles and products of both U. S. and international athletes.

The NFL and NBA have been a way to reach consumers on a large scale, including across nations, providing consumers with a view of how they can dress, compete, and live healthy like professional players they look up to. Technological Athletic apparel companies pride themselves on the performance and quality of their products. Technologies continue to increase when producing products that athletes can use while living an active life style. Most recently debuted is the new technology that will be applied to polyester material that can suck, swell and expel as an athlete sweats.

The recent technologies have been adapted for athletes to continue their regimen in whatever climate, and companies continue to produce products that their consumers ask for. With the combination between companies and athletes, professional and collegiate, players have been able to provide companies with ideas on products that they would find useful and helpful as they compete. Players such as NBA Lebron James and basketball shoes, University of Oregon track star Jim Hill and climate controlling clothing, as well as Olympic gold edalist Jenny Finch and her batting gloves, have all been technologies introduced by players that would help companies share with their consumers.

The current business model for athletic apparel such as Nike, Under Armour, Adidas, and Reebok is television commercials that play constantly through shows and professional games. In addition to the rise of technology in television, the companies also run online ads through search engines, social networking sites, and email provider websites like yahoo and msn. Global The world sports apparel industry is expected to exceed $126 billion by 2015, according to Global Industry Analysts.

The market is driven by a trend toward healthier, more active lifestyles, with older demographics and women becoming more active. The US sports and fitness clothing market is the largest in the world, according to research from Global Industry Analysts. The EU and Asia-Pacific are far behind the US in terms of regional market share. The three combined dominate the global sports apparel industry. Asia-Pacific has vast potential for expansion, driven by rising demand from various countries including China, Australia, Hong Kong and India.

Asia-Pacific is expected to record annual growth of more than 4% through 2015. The athletic apparel companies provide products to countries all over the world, and have to fit into the different types of cultures countries may possess. Some sports apparel companies are joining up with fashion designers to produce new clothing styles and widen their product lines. Consumption will continue to be driven by a trend toward less formal dress in the workplace and demand from specific demographics such as teenagers and baby boomers.

Physical An increasing concern with companies around the world is the responsibility of the environment and the people who continue to live and grow in it. Some of the top athletic apparel companies are ranked based on responsibilities of the environment, human rights, labor, ethics and governance and health and safety. Many products produced in these overseas athletic apparel factories have been found to contain toxic chemicals, such as TBT, which have been linked to birth defects, sterility and respiratory problems.

There have been recent highlights in the progress companies have made in reducing its environmental footprint and the ways in which its climate change strategy is evolving, including its decision to abandon carbon offsets and renewable energy certificates as means of achieving carbon neutrality. Reebok strives to reduce their environmental impacts through their design process, day-to-day operations and their supply chains. Multiple athletic apparel companies have found themselves to be responsible for their environment, donating cash and products to the American Red Cross.

One company in particular donated a total of $4 million in cash and products to support Hurricane Katrina relief efforts across Mississippi and Louisiana. Porters 5 Forces: Barriers to Entry (High) Under Armour operates in a highly competitive industry with dominant players, making it difficult for any new company to find an entry point. The main competitors have had many years to advertise their brands and establish distribution channels, marketing agreements and recognition. Under Amour products are sold worldwide and the company has a recorded operating income of $112 million in 2010.

The company successfully penetrated the sports apparel market by using image and influence of domestic and international professional teams, collegiate teams, Olympians and individuals. They reached markets of regular athletes, active outdoor enthusiasts, elite tactical professionals, and active lifestyle consumers. Under Armour claims 31% of market share of the athletic industry with the leading competitor Nike taking 36% of the market share. Supplier Power (Moderate) Under Armour has a very weak position relative to its suppliers.

Between 70% and 75% of the fabrics used in their multiple products come from only 8 suppliers. Some of the supplies used are commodities and are subject to price fluctuations. Their petroleum based products have experienced swings in price and relative availability in most recent years. Buyer Power (Moderate) 94% of Under Armour sales come from the U. S. with the remaining 6% split among international markets. In 2010, 82% of net revenues came from apparel with the remainder coming from footwear, accessories, and licensing revenues.

Products produced from Under Armour are differentiated in some ategories, including climate control products. They pride themselves on having products that can be used when it’s hot, cold, and all season between extremes. Threat of Substitutes (Low) Buyers face switching costs when choosing a substitute, though sometimes they might even save money on substitute products when not paying premium price of Under Armour products. The products provided by substitutes like Nike and Reebok, are not to be considered of as much quality as Under Armour, though they have produced similar products at competitive prices.

Under Armour produced differentiated industry products based on climate control, and are supported by professional and collegiate athletes by volunteer. They are supported by professional, collegiate and Olympic teams, as well as providing expos for potential professional players. Competitor Rivalry Intensity (Moderate) Currently there are few rivals, including Nike, Adidas, Reebok, and Columbia Sports Wear. Switching costs are close to nothing, but brand identity plays a large role. The athletic apparel industry continues to grow and some consumers consider the high ranking companies to be equally balanced.

Under Armour continues to innovate and produce products with new technologies and purposes, making it difficult for other companies to be comparable in product use and quality. Under Armour continuously seeks to differentiate itself from their competitors stating their mission to make all athletes better through passions, science and the relentless pursuit of innovation. Industry Analysis Under Armour CEO announced that his job is to make a great product, tell a great story about the product, service the business, and build a great team, indicating that following those policies will continue the company’s mission.

The company’s products have been so effective that professional athletes choose to wear them, and they have become the master of product placement in movies, TV shows, and video games. The company believes in every product they produce, providing technology, design, and features that satisfy what an athlete needs. Under Armour’s model is getting to the athletes and supplying them with great products that help them perform better.

Their key driver is to offer products that are better than what is currently in the market, and make it the best in its class, continually centering everything the company does on performance. Competitor Analysis Under Armour’s biggest competitors are Nike and Reebok, the top leaders in the athletic apparel business. Their business models are essentially the same- reach athletes through television, web, and teams and provide them with award winning athletic apparel- Nike and Reebok choose to endorse certain key players in the NBA and NFL to separate themselves from their competitors.

Nike continuously endorsees NBA players, releasing multiple types of basketball shoes named after players or shoes in colored coordinated with professional teams. They continue to endorse athletes in boxing, NHL, NFL, NBA, BMX, and the MLB. Nike’s strategy is very apparent: to diversify its business model so it’s not entirely dependent on revenues generated from a certain type of apparel, but all the products the company provides. Strategies for Success Over 80% of Under Armour’s net revenues come from apparel, with close to 94% of its sales coming from North America.

The business is relying solely on the production and revenues of apparel, and continuously proves to other business that it is not a sustainable business model. Like Nike and Reebok, Under Armour has diversified its products sales, providing innovation and technology to other segments of distribution. Eventually the North American market will stabilize, and in order to continue business growth, they must consider expanding outside the North American boundaries to expand their target market.

Alternative Strategies Under Armour can continually concentrate on the growth in North American market, and continuously provide the market with new innovations and technology as a locally owned business. They can use the advantage of their climate fluctuating products, to market in areas of North America that have not been infiltrated, but risk having competitors with more market share provide areas across the world with products that have never been introduced.

Under Armour risks losing out to many potential markets in areas that would find their products of high quality and highly useful. Considering that health and exercise is on the rise, and Under Armour has such a wide ranch of demographics, the potential for Under Armour is endless to expand. They cannot rely solely on the business market in North America; it will not be successful for forever.