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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 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 • 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 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.
• 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 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.) •The growth of the performance apparel industry is the greatest opportunity. •More Consumers = More Revenues
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 • Increase in e-commerce • Increase in m-commerce (trend is to always have digital connection)
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 • 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 • 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 • The bargaining power of buyers depends on the consumer’s skill level and the level of the team.
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 • 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 Innovation Differentiation Niche R&D Enhance Performance
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 Brian Teufel MGT 490-004 Assignment #2 Professor McDermott March 17, 2011
Competitive Advantage Generic Strategy Low Cost Differentiation Broad Target Competitive Scope Narrow Target
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 • -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 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 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.
Performance Apparel Growth Rates 9% 22% 15% 2% 4% 7%
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.
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 Brian Teufel MGT 490-004 Assignment #3 Professor McDermott March 17, 2011
Under Armour’s Performance • Under Armour’s PA sales and net income have increased every year since 2006.
Under Armour’s Performance • On average, around 80% of Under Armour’s net income comes from PA.
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 • 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 # 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.
