Under armour research project

Feinstein Graduate School

UNDER ARMOUR RESEARCH PROJECT

Presented to Dr. Ronald A. DiBattista

By Xiaoya Song, Ashish Bhandari, Narayan P. Dhakal, Xiangle Jiang, Philip Paul November 9, 2015 TABLE OF CONTENTS EXECUTIVE SUMMARY………………………………………………………...………….1 INTRODUCTION………………………………………………………………...……..…….3 EXTERNAL ANALYSIS……………………………………………………………….…...00 General Environment……………………………………………………….………..….00 Industry Environment……….……………………………………………….....……..…00 Competitors Environment……………………………………………………..…...……00 Driving Forces……..…………………………………………………………..………...00

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Key Success Factors……………………………………………………………..……....00 Strategic Group Map...…………………………………………………………...…...… 00 INTERNAL ANALYSIS……..…………………………………………………….…...……00 Resources…………………………………………………………………………….…00 Capabilities……………….…………………………………………………………..…00 Core Competencies……………………………………………………......……….…...00 Competitive Advantages………………………………………………………………..00 Supply Chain…………..…………………………………………………………….….00 Weighted Competitive Strength Assessment……………………………………………00 Financial Analysis………………………………………………………………………00 Pro Forma………………………………………………………………......……….……00 SWOT………………………………………………………………………………..…00 FINAL REPORT ANALYSIS…………………………...…………………………………...00 Key Result Areas………………………………………………………………………..00 Strategies………………………………….…………………………………….............00 Decision Criteria……………………………………………………..………………....00 Balanced Scorecard…………………………………………………………..................00 CONCLUSIONS………………………...…………………………...…………….…….…..00 RECOMMENDATIONS….…..……………………………………………...……………....00 REFERENCES……..………………………………………………………………...………00 APPENDICES………………………………………………………………………..………00 A. Team Member’s Assignments…………………….……………………………..……00 B. Financial Statements……………………………..………………..………………….00 C. Visual Slides……………………………………..…………………..………………100

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EXECUTIVE SUMMARY The purpose of this article is to embody the external and internal analysis of Under Armour from which SWOT is drawn. Under Armour’s SWOT will be analytical framework that will help the company face challenges and finds its most promising markets. Alongside, this report will offer some recommendations and strategies based on key results areas and overall research of the corporation.

Created by Kevin Plank, a former college football player at the University of Maryland, Under Armour has experienced exponential growth since it was founded in 1996 in Baltimore.

Under Armour, Inc. is engaged in the development, marketing and distribution of branded performance apparel, footwear and accessories for men, women and youth on a global scale. The company’s moisture-wicking fabrications are engineered in a range of designs and styles for wear in nearly every climate to provide an alternative to traditional products. Athlete-driven innovation is at the core of everything the company does and that message is clearly and directly given through all levels of their development stratagem. With honorable brand image and current trend of healthy lifestyles, Under Armour is able to reach old and new targets alike but, most importantly, on a global level. The trend to outsource manufacturing is common among apparel and footwear manufacturers around the world. The moisture wicking fabric design has been a core competency that Under Armour has built their business model around which is also the driving force in the nearly 30% growth in revenue.

The report finds the prospects of the company in its current position are very positive.

The number of athletic sponsorships especially with colleges/universities has increased. From the research, it is determined that the key results areas that Under Armour needs to focus on and enhance are, product innovation, employee training and motivation, creation of various sizes of

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apparel to meet customer needs, improvement on online customer service, inventory management, revenue generation, supplier engagement and internal supply chain management control. Under Armour's success has been dependent on the ability to constantly innovate and differentiate itself from the bigger industry and its competitors. As a strategy, it should include training and development goals as part of the employee's performance review and assessment together with adapting newest trend (ecommerce). Transition into a just in time inventory strategy along with skilled workers can also facilitate client satisfaction in addition to inventory control. Under Armour should produce more options of sizes to help clients find their perfect clothes for skinny, tall, short, and oversize people. Furthermore, by introducing a favorable policy to control as well as to engage the suppliers with social responsibilities along with enhancement of supplier relationships to streamline manufacturing process will serve Under Armour to nurture exponentially. Under Armour has had female-targeted campaigns in the past that haven’t been effective and it doesn’t have a long history of successfully changing gears creatively. Recommendations comprises of being exceptional in terms of innovation as Under Armour is now and expand more on globally (Globalization), revamp of the supply chain, possibly by an acquisition and find a blue ocean strategy in fitness industry as the world is transitioning into more health and fitness industry/product line and maintain their impressive growth. One of the recent new tactical schemes that Under Armour has started is to introduce Whiskey Distillery in Baltimore. Another sector, the company can attain a great market is sports bra for women and bringing yoga outfit as a part of its new expansion (Female targeted markets).

Overwhelmingly, the firm has swiftly infiltrated the sporting goods industry and proven to have a strong financial foundation and are here to innovate, excel, and conquer the sporting apparel, footwear, and accessories realm.

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INTRODUCTION This report will analyze Under Armour’s place in the athletic apparel and footwear industry through the comparison of their main competitors. As a relative newcomer in the industry, Under Armour has used a combination of innovative products and aggressive marketing strategies to gain a respectable market share in an ultra-competitive industry where they primarily compete with apparel giants Nike Inc., Adidas Group, and Columbia Sportswear Company. To accomplish a thorough comparison and clear picture of the industry environment this report will use take a deep look into the general environment and the trends of the industry.

It will use Porter’s analysis to dive into the industry environment as a whole before focusing on the factors of the competitor environment. This report will then investigate the driving forces and key success factors of the industry before concluding with a strategic group map that aims at comparing each competitor through the use of specific data points. A thorough internal analysis of Under Armour will be also conducted. In such a competitive industry it is imperative to determine a company’s competitive advantages and core competencies in order to determine how they stand up to competition. However, despite characteristics that allow them to stand apart from competitors, no company can survive without proper internal management. Thus, an in depth analysis of Under Armour’s supply chain and financial ratios will paint a picture as to how efficiently the company is operating. The resulting data will lead to strategies and recommendations that can be made to improve Under Armour’s operating efficiency, boost sales, find new markets, and eventually become the leader in the athletic apparel industry.

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EXTERNAL ANALYSIS General Environment •

Demographic With the mission to create all athletes better through passion, design and relentless

pursuit of innovation, Under Armour has had enormous success in past few decades; it has increased its product line. The target market is men, women and youth. The company is fastgrowing and on the edge of sports technology; it is gaining more target markets as it worn by athletes at all levels, from youth to professional, on playing fields around the globe, as well as by consumers with active lifestyles. Under Armour is pursuing a worldwide scope via regionalization. The seasonality in Under Armour’s sales can be attributed to the football and basketball seasons as well as the traditional gift giving season in the US. As in the industry trend is also about reaching out to every sector of demographic regions, Under Armour is exploring more research to sustain the industry.

Under Armour primary operates in four geographic segments: (1) North America, comprising the United States and Canada (Comprised of approximately 91% of net revenues) (2) Europe, the Middle East and Africa (“EMEA”) (3) Asia-Pacific (4) Latin America.

All of these geographical divisions execute predominantly in one industry: the design, development, marketing and distribution of performance apparel, footwear and accessories (Aarkstore, 2008 & 10K Report, 2015).

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Economic Segment Even though Under Armour is performing well in the past few years, there is a

noteworthy degree of economic risk that comes from premium pricing as the brand stands for.

This is the same trend for the apparel industry, however, Under Armour is quiet ahead of the industry average. . This reason has caused an impact on retail consumer market sale. The economic downturn challenges Under Armour to compete against major rivals such as Nike, Adidas as they have higher market cap and dominance all over the world (Thompson, 2013).

Some supplies used by Under Armour are commodities, such as petroleum-based materials, and therefore are subject to potential price fluctuations and may affect the industry if there is a fuel shortage in the future. On the other hand, Under Armour has perceived the drift that a majority of net revenues and a significant portion of income rises from operations in the last two quarters of the year, driven primarily by increased sales volume of products during the fall selling season, including higher priced cold weather products, along with a larger proportion of higher margin direct to consumer sales. This is practically because of the end of summer and beginning of schools/college campuses which passes the significant consumers for the company (Aarkstore, 2008 & 10K Report, 2015). •

Sociocultural Segment Under Armour mission's is to enhance the experience for all athletes by applying passion,

science, and the relentless pursuit of innovation to create clothing with temperature control, comfort, and flexibility. The trend in apparel industry is uniquely branded by many endorsements by athletes, public figures and so is in Under Armour (Thompson, 2013). Under Armour has developed extensive sponsorships throughout the sports world to build its brand image (NFL.

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NHL, NBA). Under Armour has reached regular athletes, active outdoor enthusiasts, elite tactical professionals, and active lifestyle consumers. In terms of diversity and cultural differences, Under Armour product transcends cultural differences and it is appealing to many athletes, regardless of nationality. Under Armour had five lines of clothing made for every climate.

Footwear product line designed for high performance through a highly breathable and lightweight design (Aarkstore, 2008 & 10K Report, 2015).

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Political/ Legal Segment The company works with multiple licensees directly throughout the product development

process to ensure that the products are aligned with its brand and quality expectations. Under Armour does not have a patent on any of the materials use in its products. Therefore, it needs to be cautious in its licensing agreements so companies do not steal its know-how and introduce their own versions. The intellectual property rights laws and regulations of countries in the global market vary dramatically. As in the Apparel industry, this is very important factor, such as Nike, Adidas as their name, logo, and patents has an immense value in this industry (Thompson, 2013).

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Technology Segment Products are offered through the company website. For the first ten years of its existence,

the company was able to sustain operations by using “off the shelf” software programs. Under Armour invested in a new SAP system. This system is a key to the company's ability to add products to list of offerings, as it allows Under Armour to manage a more diverse inventory and to ship directly to distributors (Morkel, 2014 & 10K Report). In terms of industry trend, the industry is always looking for innovation and advance technology to conquer the market (Thompson, 2013).

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Global Segment Under Armour is able to successfully penetrate the sports apparel market by using the

image and influence of: domestic and international professional teams, collegiate teams, Olympians, and individuals. Under Armour's products are sold worldwide, with the company's headquarters located in the United States and support offices in Hong Kong and Guangzhou, China. Under Armour sells products in 13 countries, including in-house distribution in the United Kingdom, Germany, and France. Sales in other Western European and Asian countries are done through partnerships and third-party distributors. Under Armour do not have to contend with the challenges associated with establishing manufacturing plants in foreign countries (Riley, 2013 & 10K report, 2015). In term of industry trend, it is similar to Under Armour, as today’s business world is all about ecommerce and globalization due to great technology advancement and ease access to international markets (Thompson, 2013). •

MapMyFitness Industry Under Armour runs MapMyFitness industry, initiated in 2013 as a separate segment.

Under Armour introduced offering digital fitness subscriptions and licenses, along with digital advertising through MapMyFitness platform. MapMyFitness strategy is focused on connecting with consumers and increasing awareness and sales of existing product offerings through global wholesale and direct to consumer channels. The goal of this endorsement is to engage and grow community by developing innovative applications, services and other digital solutions to impact how athletes and fitness-minded individuals train, perform and live. The international and MapMyFitness operating segments are currently not material, because of which Under Armour

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syndicate them into other foreign countries and businesses for reporting purposes (Aarkstore, 2008 & 10K Report, 2015).

The company products are generated through brand and factory house stores, along with internet websites. As of December 31, 2014, Under Armour had 125 factory house stores in North America, of which the majority are located in outlet centers throughout the United States.

As of December 31, 2014, the company had 5 brand house stores in North America.

Additionally, the company also sell product via third party logistic providers all over the world.

The trends in past three years have showed that the company is rising pretty well in terms of market cap not only in North America but also across the globe. This is the same trend in this industry (as Nike, Adidas). The company has directed to maintain and increase sales in North America as well as to enter foreign country markets as rapidly as was economical (Aarkstore, 2008 & 10K Report, 2015).

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Industry Environment Table # 1 Porter’s Five Forces Analysis Competitive Forces

Magnitude of Force

Threat of new entrants

Weak

Bargaining power of suppliers

Moderate

Bargaining power of buyer

Moderate strong

Threat of Substitutes

Moderate strong

Rivalry among competition

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Conclusion May increase profit potential of the industry May increase profit potential of the industry May decrease profit potential of the industry May decrease profit potential

Relatively strong Rivalry among

of the industry May decrease profit potential

competition

of the industry

Threat of New Entrants No matter from the well-known brand names itself or its market share, UA has

represented the most competitiveness power brands in the sports wear industry in North American region. Combine those leader brands like Nike and Adidas, no doubt, they occupied much market share already and increase entry barriers for new entrants. In addition, with significant upfront capital investments and the largely input of manpower, UA has a famous known for their sport appeal amount all the brands in the sporting industry, it makes a high initial capital investment for new entrants. Product differentiated is another factor which could rising threat of new entrants, although UA is a sport brand just like other, but its professional performance already has proved by many customers, plus its consistent improve of innovation and its unique technology, this will be a result of adding barrier for new entrants. However, due to the reason that sporting product’s switching cost is low, and all the sport product’s pricing do

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not have a big difference, therefore, customer still can switching brand with low cost or even no cost, this factor could encourage new entrants to take part in. in addition, government policy is not a issue for most sport branding, this factor will not be a barrier to new entrant too. On the other hand, while acquire the whole North American regions, UA should have some new strategies target outside their comfort zone, such as South American regions and foreign countries to boycott the threat of new entrants. This factor could be considered a location strategy to occupy more market share and more reputation. For example, China is a great opportunity to develop new business due to its large population. If UA willing to add more directly to customer store in China, it will be achieve more.

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Bargaining power of Suppliers In the earlier 2006, Under Armour already owns their manufactured overseas in Asia,

Central and South America and Mexico (Under Armour, Inc., 2015). Until 2012, Under Armour’ products were produced by 27 manufacturers located across 14 countries, of these top 10 accounted for 49% of the products manufactured (Trefis, 2013). There is one smart choice that Under Armour’s founder made, was to almost integrate all their suppliers into one team, this not only provided more initiative of UA management level, but also decrease the power of suppliers .

In addition, the great number of suppliers shows that this company was successful avoided problems like difficult to transform suppliers due to the reason like lack of enough suppliers or transform costing is too high to do that. This integrates action limited bargaining power of supplier and makes their power consider low. The only reason makes supplier bargain power wavering are about the high challenge of product making process and its unique innovation technology requirements such as the special requirement of their clothing fabric.

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Bargaining power of Buyer

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Under Armour owns both wholesale channels and direct to customer channels most in North American region. In 2013, Under Armour reported 68% of wholesales, which include some sport chains and retailer company like Macy’s, Inc, footlocker and Nordstrom. Etc. (Soni, 2014). Though the amount of wholesale percentage will cause some influence to the bargaining power of buyer, because a higher percentage of revenue, occupied by a big wholesale company will increase its bargaining power of buyer. However, Under Armour already owns an appreciable number of wholesale buyers so they do not need to worry too much about their large percentage of revenue distribution. In addition, Under Armour’s buyer also build a strong networking with their directors to sell stores in many countries. However, Under Armour, Inc (UA) doesn’t have a significant presence outside North America yet. It is about 6% of the revenues from foreign countries in 2013 only (Soni, 2014. a). Therefore, consider both national countries which include North America countries and outside North America countries and foreign countries, it’s bargaining power of buyer will be set as moderate strong.

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Threat of Substitutes According to the substitutes definition, threat of substitutes in UA determined by how

easy it is for consumers to switch from a UA’ product to a competitor. However, due to the reason that switching cost in sportswear industry it low, therefore, customer can pick up anything they like with low cost. In addition, Under Armour’s stronger competitor Nike also known by its innovation, pretty design and many discount provided, it will be a reason why Nike is still profitable than UA. However, UA’s great marketing team give this brand a right target customer and right advertisement, so this brand is very famous in its target customers. Plus, UA’s product is unique in its technology and other sporting brand could not substitute it. For example, all its gear made from prevents sweaty materials. Focus on the industrial environment for analysis, not

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only UA is professional than other brand, but also its pricing is considered lower than other.

However, If UA product luck of technique or innovation than other horizontal competitor in the future may increase threat; also, competitor’ increase their intensity of competition such as having a lower supplier price than UA supplier may increase threat for UA. •

Rivalry among competition Current competitiveness in the department store industry is Rivalry strong among the

competition. In 2014 and 2015, UA’ direct competitor are Nike, Adidas and Columbia. Those brands all make performance athletic undies and clothing (Under Armour, Inc., 2015). It seems like that UA is smart enough to set up the US target on those fields which they are good at due to the reason that they has the excellent technology on athletic clothing material. For example, they signed deals with Fisele Bundchen and Ballerina Misty Copeland to wildly occupy their market share in global women’s market (Peterson,2014). Plus, Under Armour's sports apparel sales, which account for 14 percent of the U.S. market, expanded to more than twice those of Adidas in 2014. Poser said in a May research report that the two brands' apparel sales were continuing to dominate, with Nike capturing sales in mid-tier department stores and Under Armour seeing healthy gains in share through athletic specialty and sporting goods retailers and taking share from the larger Nike from those stores. That month alone, sales jumped 18 percent for Nike and 22 percent for Under Armour while sales declined sharply for Adidas, Russell and Champion (Mirabella, 2014. b). All in all, with the market share of 14% on sports apparel sales, UA still faces a high intensity of rivalry market.

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Competitor Environment 1.

Future Objectives Yahoo Finance (see chart # 2) shows that Under Armour’s main competitors in the

industry are Adidas AG, Nike, and Columbia Sportswear Company (“Competitor,” 2015). Under Armour’s news releases indicate that the company will continue to grow by increasing its businesses in apparel, footwear and accessories, by expanding its wholesale distribution, by direct-to-consumer sales channels and in its international markets (Under Armour, Inc., 2015). In 2014, Under Armour’s good performance stood at $3.1 billion in net revenue with a 25% annual growth rate. For 2018, the company targets $7.5 billion in net revenue as its goal (Under Armour Accelerates, 2015).

Nike is the world’s leading company in the sports goods industry. It tries to bring inspiration and innovation to global athletes (Business Overview, 2015). Nike’s CEO, Mark Parker, said that Nike will continue creating products and services to drive growth in the market, delivering pleasure purchase experiences globally and expanding the capabilities of its powerful supply chain. Parker has sets a goal to grow sales to $36 billion by 2017. The company is hoping to have $3 billion in growth and $7 billion in annual sales for women’s business (Kish, 2013).

The Adidas Group tries to be the leader in the global sporting goods industry with brands based upon clients’ passion for sports and a sporting lifestyle. Adidas has set itself the goal of increasing 45% of its revenues from controlled space initiatives by 2015 (Adidas Group, 2015).

In 2014, Columbia’s annual report states that its objective in 2015 is realignment of its merchandising and design organization to make different teams around the Columbia and SOREL brands (Columbia Sportswear Company, 2015, p. 2).

Table # 2

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Source: Under Armour, Inc. Yahoo!Finance. (Competitors, 2015) 2.

Current Strategies In its retail stores and by expanding its 24 global Brand House stores, Under Armour has

increased floor space for its products. The company is developing in many new markets, such as in the Philippines, Singapore, and Chile. Under Armour’s marketing and promotion strategy is targeted at providing and selling products to high-performing athletes and teams at the high school, collegiate and professional levels (Under Armour, Inc., 2015).

Along with developments in technology, Under Armour follows those trends that smartphones are making more popular. The company has discovered a huge market in the mobile

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consumer experience. Given this phenomenon, Under Armour created one of its own, Under Armour Record, and spent a further $710 million to purchase three fitness applications, MapMyFitness, Endomondo and MyFitnessPal (Kell, 2015). These applications can lead consumers to healthier lifestyles as they follow, analyze and share their fitness activities with the world’s largest digital health and fitness community (Under Armour Connected Fitness, 2015).

MyFirnessPal holds the number 1 ranking and MapMyFitness the number 3 in Apple’s iTunes store. The registered users for these four applications are over 120 million (Under Armour Connected Fitness, 2015). Under Armour’s strategy is to communicate with consumers and to grow brand awareness to boost its sales through these application users.

Nike’s core business growth strategy is innovation. The company is focusing on creating the world’s most innovative products for global consumers. This is also driving the company to achieve its corporate responsibility in the market (Strategy, 2015). Adidas Group’s strategies are concentrated on diverse brand portfolio, investments focused on highest-potential markets and channels, on creating a flexible supply chain, on leading through innovation, on developing a team grounded in its heritage in sport, focusing on sustainability, and on creating long-term shareholder value (Group Strategy, 2015). Columbia Sportswear’s current growth strategies involve designing innovative products; expanding direct-to-consumer business; increasing brand awareness; expanding global footwear business; and developing European business (“Strategic Growth Initiatives,” 2015).

3.

Assumptions

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Under Armour signed NBA All-Star Stephen Curry as its endorser. The company also released Curry’s first signature shoe, The Curry One (Under Armour, Inc., 2015). Curry has been this past season’s hottest player. Without a doubt, his joining the company will help improve Under Armour’s sales. But, if Curry encounters negative news or if he is injured and is sidelined for next season’s games, these events will definitely impact the sales of his signature shoes. In 2014, based on this same ploy, Nike sold LeBron James’ signature sneakers for $340 million. A popular player is supposed to be able to generate a good amount of sales for Adidas as LeBron James did for Nike. However, Derrick Rose has been the biggest and most famous basketball player for Adidas thus far; he has been injured and missed almost two full seasons in the last four. This affected Adidas whose sales of Derrick Rose shoes came to only $32 million (Roberts & Kasudia, 2015).

4.

Capabilities In 2014, Under Armour beat its second largest competitor, Adidas, and rose to the number

2 position in the U.S. sportswear market (Germano, 2015). According to Under Armour’s 2014 annual report, the company has exceeded the $3 billion landmark because of a 32% growth on total net revenues. Under Armour has been growing by 96% in international business, 44% in Footwear, 32% in Direct-to-Consumer and 30% in Apparel (Under Armour, Inc., 2015). Over the past year, Under Armour did an excellent job. The company insists that this is just the beginning.

It claims that it still possesses many capabilities and opportunities in its business. Table # 3 shows that apparel sales are a majority business for the company, which account for 74.3% of its total net revenues. Footwear sales only represent 14% of total sales which is much lower compared to apparel (Under Armour, Inc., 2015). Under Armour has huge capability to develop its Footwear business.

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According to Germano, the Wall Street Journalist, said that Under Armour had a total of $2.6 billion in U.S. in footwear and apparel sales compared to Adidas’ $1.6 billion. The latter dropped 30% in shoe sales and 20% in apparel sales. Adidas’ rank fell to the third position. As the giant competitor for Under Armour and Adidas, Nike has been in the top rank for a long time.

For the same period, its U.S. sales were $11.8 billion (Germano, 2015). In 2014, Columbia Sportswear Company’s annual report showed that the company had a great performance year. It made $2.1 billion in net sales, which is a 25 percent increase. The global Columbia brand increased $337 million in sales to $1.8 billion, which includes over 20 percent in apparel and accessories and 45 percent in footwear (Columbia Sportswear Company, 2015, p. 2).

Table # 3

Source: Under Armour 2014 Annual Report (Under Armour, Inc., 2015).

5.

Responses

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Under Armour is rapidly growing. From table # 2, the numbers show that Under Armour is doing better than Columbia Sportswear Company. But it is still far away from reaching Nike’s success. Nike is a well-developed brand compared to Under Armour and Adidas. Nike also has a much wider customer base. It also has more market share than Under Armour and Adidas.

However, due to Nike’s number 1 position, the company may find it hard to discover ways to improve and to be more successful, because it has no other model that it can study and improve on. With its second spot, Under Armour has a much brighter future. This brand is young, professional, technical, and innovative. It has older competitors from whose examples it can learn and expand leading to its further success.

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Driving Forces • Growing product demand

In the recent years, sportswear industry has been remarkably growing in the U.S. According to the Soni (2015), “since November 2012, sports apparel growth has outpaced overall retail sector growth by almost double most months”. This increasing growth is believed to benefit sportswear brands such as Nike, Under Armour, VF Corporation, and Lululemon.

Currently, Under Armour has been successful in maintaining competitive advantages by always having a top-notch products and taking on new strategies and ideas to outcome its competitors (Under Armour, Inc., 2015). The growing customers demand for its products has been a major driving force for company's growth. The under Amour brand is positioned as the highest quality and best available. In today's market, brand and quality is a key and both of these are offered by under amour. Nike, Columbia, and Adidas are some other similar companies that are Under Armour’s rival in the sportswear industry. Although Nike has been holding its top position for product demands, Under Armour has also now started attracting more customers as it has created a brand in the sportswear industry. It has been doing great and getting lots of customers demand and loyalty for it products. Even at times when economy has not been so good, customer have preferred Under Armour because of its values and better brand (Under Armour, Inc., 2015).

• Product innovation

In today's technological sportswear industry, those who do not keep the pace with the technology and innovation are at risk of becoming irrelevant. Product innovation is a key success factors any companies in sportswear industry. In this industry, companies like Nike, Under Armour, Adidas, Columbia not only make clothing look and fit better but they also help athletes

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perform better. Under Armour has taken innovation as driving force for its business, stepping up the game for athletic wear, footwear and has even recently moved into technology by creating apps that track calories and fitness (Stevenson, 2015). Under Armour believes that great innovation can come from both inside and outside the company. They have a platform where they gather great idea with real potential from general public, which goes through their innovation lab to bring it to the consumer (Horovitz, 2012). Under Armour's sucess has been dependent on the ability to constantly innovate and differentiate itself from the bigger industry and its competitors. Innovation is the ticket to profits in athletic wear. Big things tend to get even bigger in an industry in which wholesale sales of sporting goods, footwear, fitness equipment and apparel topped an eye-popping $77 billion in 2011 (Horovitz, B., 2012). Nike which is the leader in sportswear is known for its high quality innovative products that consumers wanted and are willing to pay the top price. Likewise Adidas who is another player in the sportswear industry, innovation has always been the focus, the engine that has made it going. Hence, product innovation has been a driving force in the sports wear industry. • Marketing innovation

Apart from product innovation, marketing innovation is another key driving forces for companies in sportswear industry. It has been a key to companies success. Competitors like Nike, Under Armour, Adidas, Columbia. Lululemon distinguishes itself and the its products by various marketing strategies and segments. With the innovative production of climate appropriate quality sport wears and accessories, Under Armour has created an emerging market in tactical and military customer segment and women's wear market with its innovative marketing strategies (Under Armour, Inc., 2015). Professional team and athlete endorsement is one of the key strategy of marketing. Under Armour has been partnering with top sports association like

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NBA and rising sports starts to promote and market its products (Under Armour, Inc., 2015).

After recently issuing its third profit warning in a year, Adidas said it would give marketing experts more responsibility and bring them closer to sales and product development staff.

Adidas spent 12.4 percent of its 2013 revenue of 14.5 billion euros ($19.4 billion) on sales and marketing, up from 12.1 percent in 2012 and already well above Nike, which spent 10.8 percent of sales of $27.8 billion in the year to May 31 (Thomasson, E., 2014). Nike's marketing strategies aim their immediate users, athletes and all sportsmen. These targeting techniques include product sponsorship by professional and well known athletic team, college sports team as well as celebrity athletes. (Antariksa, Y, 2013). Different companies may have their unique marketing innovation strategies which are the driving forces for their business. • Globalization of sport apparels and gears:

As people these days are encouraged to live healthy lives as possible, they have been participating in different level of physical activities and exercises. As a result, a rapid expansion of the sport apparel industry globally is seen. Meanwhile, the competitions among various Sports apparel industries such as Nike, Adidas, Under Armour, Columbia becomes a challenge in sportswear industry. Under Armour believes that the trend towards performance based apparels and gears is global, and hence expands its business not only nationwide but also at international level (Under Armour, Inc., 2015). Because of globalization, Under Armour has been focusing more on expanding in the international businesses. Under Armour's main rivals in the athletic apparel arena Nike is a global powerhouse with more than $30 billion in yearly revenue and one of the most recognizable brands on the planet. Under Armour has a long way to go to catch Nike and Adidas, another global industry powerhouse with about $17 billion in annual revenue (Business daily, 2015).

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Key Success Factors With the growth of Sport wear and Active wear industries in the recent years, there are many other similar industries that are competitors of the Under Armour. However, there are some key factors that played important roles in the success of the business Under Armour at national as well as international level. Some of those factors are discussed below.

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Origination of performance gear and Active wear Under Armour initiated its business of making simple shirts that provides compression

and wicked perspiration off the body rather than absorbing. With the mission of making all athletes better through passion, design, and the relentless pursuit of innovation, Under Armour has focused on regulating the body temperature of the athletes as well as increasing their comfort (Under Armour, Inc., 2015). The company has introduced its apparels and gears that are diverse for men, women, and youth while assuring its consumers with its quality products. Its products are designed in such a way that provides multiple benefits to the athletes by keeping their the body cool, dry, and light throughout the period of game, workout, or practice. On the other hand, Lululemon, one of the market competitors of Under Armour, differentiates themselves by offering technically advanced fabric products designed for healthy lifestyle activities and athletic pursuits such as yoga, running, general fitness and dance-inspired apparels (Lululemon Athletica, 2015). Under Armour uses moisture wicking and other innovative fabrics to create its products, which enhances athlete’s performance in weather conditions. Hence, Under Armour’s quality production and consumer’s need based innovation is one of the reasons behind the success of its business.

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Sports Marketing and business growth Under Armour has focused on major areas in order to expand its business nationwide as

well as worldwide. Those areas include good marketing strategies and promotion of its products.

Under Armour reformed its marketing strategies few years ago by planning three annual brand holidays instead of every 12 months. The main purpose of doing this is to introduce and promote new products through big campaign. The marketing team of Under Armour has done its great effort for its product promotion; Under Armour spent $18 million in 2013 as media spending (Scultz, 2014). On the other hand, Nike invested $40.8 million in TV advertising in 2013 (The Statistic Portal, 2015). Since 2009, Under Armour has been continuing its exclusive licensing arrangement with NFL Scouting Combine by providing the participants official apparel outfitter.

Similarly, this year, Under Armour became multiyear global partner with NBA, title partner of NBA Draft Combine and presenting partner of junior NBA (Under Armour, Inc., 2015). Hence, being partner with global sport businesses, Under Armour has taken every opportunity to revolutionize and expand its business with its innovative products. At international level, Under Armour sponsors and retails its products to European and Latin American Soccer and Rugby teams.

•

Product Supply System The continue production of consumer-centered sports wears and active wears is not the

only key success factor for a sports apparel industry like Under Armour. Distribution system is another key element through which the products can be reached out to the consumers. Under Armour outperforms its business by distributing its product, which are consumer’s need based, and climate appropriate through distribution channels. Under Armour distributes its products

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through three major channels: wholesale channel, direct to costumer, and licensing channels in different countries representing 67%, 30%, and 3% of net revenues respectively in 2014 (Under Armour, Inc., 2015). Market Realist Inc. (2015) compares the major channels through which the sportswear industries such as Nike, Under Armour, and Lululemon generate major portion of their net revenue and concludes that the wholesale channel is the major channel for net revenue.

Under Armor also performs extensive research on the quality of the products, and innovation of new and improved items. •

Brand Image In today’s world, brand image identity is vital in growing of the business. Brand is not

just a logo; in fact, a brand explains the thorough costumer experience with its product. It is believed that brands deliver a uniform quality, credibility and experience to its customers.

Branding creates trust on the costumers that makes the costumers strongly positive about purchasing specific brand products. In the recent years, Under Armour has gained popularity, recognition, and growth at 20% per year in the sportswear market. The increasing rate of Under Armour’s revenue every year is because of its brand popularity among costumers. However, in 2014, Nike still holds the number one position in the market with the revenue of $ 27.8 billion.

Similarly, Adidas has the revenue of $17.67 billion. Under Armour still has much smaller revenue than its competitors Nike and Adidas with the revenue of $3 billion. Likewise, Lululemon has its revenue of $1.2 billion in 2014 (The Statistics Portal, 2015). Under Armour still has been successful in maintaining its brand popularity through innovation of quality performance gear and active wears and promoting them in sports market. Hence, the brand popularity is also one of the key success factors for Under Armour.

UNDER ARMOUR •

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Market share The percentage of total market that is earned by an individual company over a specific

time period is the market share for that company. Market share helps a company to visualize their performance and competitiveness in overall market over that period of time while helping the company to analyze its marketing strategies. (Soni, 2015. b). compares the market share of active wear in first quarter of 2015. Nike was the market leader for active wear with a 13% market share. Under Armour becomes second leading sportswear company with 6% market share by overtaking Adidas which shares 3% of the market followed by Lululemon with a minimum market share (Soni, 2015.b). It clearly shows that the market share of Under Armour is another factor for its successful business.

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Strategic Group Map Table # 4

Narratives:

The strategic group map illustrates the market share among rivals in the ultra-competitive athletic apparel and equipment market. A company’s location on the map is determined by their performance in two key areas. The x-axis illustrates the size of a company’s product line ranging from few products to offering most products required by their target customers. The company’s location on the y-axis is determined by the percentage of their sales that are derived from directto-consumer methods. Furthermore, the size of the company’s circle is a representation of their international presence as a percentage of their total sales. There is not necessarily an ideal

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location for a company to find themselves on the map as each company has a different strategy in their overall business plan. The map is, however, a fantastic way to see how each of these companies that have been very successful in their own right, have been able to become so successful.

Upon looking at the map, the most blaring inconsistency is Under Armour’s size and removal from their industry peers. In the world of athletic apparel Under Armour is a relative newcomer. They are known for the synthetic material they use to construct the ideal clothing for athletes. There are also beginning to make a splash in the athletic footwear market and offer a limited line of sports equipment including footballs, cleats, etc. Under Armour has not ventured far from what has made them successful from the beginning, and with 3.08 billion dollars in net sales in 2015 they have indeed been successful (Under, 2015). However, as can be seen by their location on the map, they do not offer nearly as large of a product line as their competitors and they have yet to really make their presence felt on an international level. Of their more than $3 billion in sales a mere 9.3% was generated through sales outside of the United States. On the other hand, Under Armour happens to be the leader in direct-to-consumer sales having generated 30% of their revenue through their brand specific and factory house stores as well as ecommerce websites. As of 2015, Under Armour owns and operates 125 factory house stores in the United States and 9 overseas as well as 5 brand house stores and 8 overseas (Under, 2015).

These stores have been a fantastic revenue generator for Under Armour and perhaps more importantly provided a terrific way to manage inventory levels and unload outdated products.

Nike can most definitely be considered Under Armour’s largest competitor. They are the undisputed leader in the footwear industry and own an enormous share of the athletic apparel market. As can be seen on the map, Nike has arguably the largest line of products that they offer

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to their customers. These products include footwear and athletic apparel and extends to a very extensive and successful line of sports equipment. Nike sells footballs, baseball bats and gloves, watches, fitness trackers, sunglasses, and even have a golf division that sells very highly regarded clubs. Furthermore, Nike owns and operates several other well-known brands in the industry including Converse, Hurleys and the ever popular Air Jordan (Nike, 2015). This wide ranging line of products is a strategy that has made Nike the highest earning company among the group in question. In 2014 they made $27.8 billion in net sales, nearly double their closest competitor. Since their inception in 1964 they have also been able to market their brands on a global scale. In 2014, 54% of their revenue was generated from sales outside of the United States, hence the very large circle on the map (Nike, 2015). While Nike does lead the group in most categories they do fall in the middle of the pack when it comes to direct-to-consumer sales.

Despite operating 322 total stores in the United States, another 536 overseas, and running very user friendly e-commerce sites for their multiple brands, they only managed to generate 23.1% of their sales through these methods (Nike, 2015).

Adidas Group can be viewed as Nike’s most comparable competitor. They share very similar strategies that has resulted in them being fairly close together on the map. Like Nike, the Adidas Group has long been a fixture in the athletic apparel and footwear market. They have also absorbed other brands to expand their product offerings. The Adidas Group includes the traditional Adidas brand as well as Reebok, hockey giant Reebok CCM, and TaylorMade which is extremely popular in the golf community. Their diversification into very specific sports in addition to their traditional footwear and apparel have boosted them to second place in net sales with $14.53 billion in 2014 (Adidas, 2015). While this figure is eclipsed by Nike, the Adidas Group does find themselves higher on the map in regards to direct-to-consumer sales. They have

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been able to generate 26.4% of their sales through direct-to-consumer methods. Unfortunately, this number is not as impressive as it may seem because with 2,913 retail stores globally they own and operate more than 3 times the total number of Nike stores (Adidas, 2015). This could be a result of many things, but their overall strategy may very well not put much weight on those figures. They do, however, put significant emphasis on their international presence. In fact, in comparison to their peers, the Adidas Group is an international giant with a mere 15% of their total sales coming from all of North America. One of their largest groups of customers can be found in Western Europe which is presumably a result of the popularity of hockey in that region and the recent purchase of Reebok CCM by the Adidas Group (Adidas, 2015).

One of Under Armour’s close competitors is Columbia Sportswear. While they do fall into a different part of the spectrum of athletic equipment, they are in the same market.

Columbia is known for their outdoor gear such as coats, boots, and other essentials for the outdoor enthusiast. Due to this fairly specialized field, Columbia does find itself further from the rest of the pack when looking at their product line. They are the most comparable to Under Armour in this regard. The specialized nature of their products also contributes to Columbia having the lowest net sales among the companies being compared with $2.1 in sales in 2014.

With 57.1% of these sales coming from the United States, Columbia does have a respectable international customer base which puts them in the same ballpark as their larger competitors.

Columbia does have a direct-to-consumer strategy with 93 American retail locations and 415 more abroad as well as 5 brand specific e-commerce sites (Columbia Sportswear Company, 2015). Unfortunately, they do not break out specific direct-to-consumer sales figures so it has been conservatively assumed that they fall at the bottom of the group in that regard. Like its

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competitors, Columbia has purchased smaller competitors along the way. These include Sorel, Mountain Hardware, and most recently prAna (Columbia, 2015).

As can be seen from the prior analysis, the large competitors in the group have several things in common while Under Armour remains somewhat of an outlier. This can most likely be attributed to the years of experience that these companies have gained while competing in an industry that Under Armour only entered in 1996. They have all purchased competitors to expand their product line while Under Armour has primarily stuck to their guns and relied heavily on what has made them successful in the first place. This is a respectable strategy but presents Under Armour with significant limitations. This is not to say that Under Armour should begin to look for acquisitions but should consider broadening what they offer their customers.

They have begun to do this already by joining forces with myfitnesspal, an app aimed at aiding people in their quest for better health and fitness (Under, 2015). While this is not a product per say, it is a step in the right direction and can lead to something unique that their competitors do not offer. After all, differentiation is a key element of each of their competitor’s business strategies. Nike has focused on footwear and sports equipment while Adidas Group has taken a strong foothold in the hockey and golf worlds and focused primarily on international sales.

Columbia Sportswear on the other hand, has stuck with outdoor equipment and avoided entering the athletic apparel market. Differentiation is what allows so many companies to remain successful in an ultra-competitive industry.

Direct-to-consumer sales only account for a fraction of sales for each of these companies. While it is clear that they all make an effort to make their products available online and to open brand specific stores, this is definitely not the focus of their business. This can be attributed to the nature of the business itself and the relationship with wholesalers. The majority

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of products sold by all four companies are sold by large chains like Dick’s Sporting Goods and Sports Authority. A quick walk through any of these retailers reveals just how competitive the industry really is. Each brand has a small section of the store to itself, often times right next to their direct competitors. This allows consumers to browse all of their options before making a final decision, therefore putting an enormous amount of power in the hands of the retailer.

Product displays and locations can make a tremendous difference in sales. This is an incredible motivator for apparel companies to maintain good relationships with their wholesalers. Opening brand specific stores is a way of creating direct competition for the stores that sell the majority of your products or in other words, biting the hand that feeds you. It is apparent that the companies on the group map are aware of this and have made an effort to minimize their direct sales to consumers while still making a point to operate some brand specific stores. Many of these stores are strategically operated to allow for the sale of terminated product lines as a method of inventory control while not offering current products for less than suggested retail value. This limits competition with important wholesalers. Under Armour is no different as the majority of their retail locations are factory house stores aimed at inventory control.

The strategic group map shows a clear group of competition while Under Armour remains on the outskirts of this group. They do have a clear strategy and each year gain a larger market share. The differentiation between the companies is a direct result of the lifetime of the companies. Under Armour is still a young company that is evolving to compete with larger companies that have had years to learn the inner workings of the industry and to carve out their respective niches. Under Armour is no different and will undoubtedly find themselves among the giants sooner rather than later.

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INTERNAL ANALYSIS Resources 1. Tangible Resources •

Technological resource The founder of Under Armour doesn’t want people just simply to call them a

“sportswear” brand, instead, what he cares about is to develop high technological sports products which targeted general public but not only for professional sports athletes anymore. For this reason, many retired athletes became Under Armour direct employees and has been authorized to have direct decision making power to charging product development and its marketing. Their CEO Plank’s favorite building innovation lab is located in a high-security portion of its headquarters campus in Baltimore. A <New Yorker > reporter discovered an assortment of 3-D printers, climate-controlled chambers, motion-capture cameras, and—for old-fashioned but crucial stress tests—washing machines in the lab. “This super-secret lab is where shirts, shorts and running shoes came from.” He said (Bhasin, 2012). One of the lab’s proudest inventions is ColdGear Infrared; an insulation system could provide warmth without thickness. The technology was purportedly inspired by a “powerized ceramic” that protects military aircraft.

The secret lab shows Under Armour’s attitude toward innovation and make us understand why more and more people rely on their professional technology clothing (Sanneh, 2014).

•

Financial resource According to Under Armour’s report for the year 2015, 2014 and 2013, the company’s

main revenue was coming from North America region. Their sells products include branded apparel, accessories and footwear through wholesale, sales to distributors and sales direct to

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consumer channels. They also have sales their products in an international range include Europe, Latin America, China, Japan and Korea. Compare the total net revenue from year 2013 to 2014, it increased $752,319 million. With year 2014 to 2015 second quarter, their net revenue increased 29% to 784 million. In year 2014, its working capital increased from 702,181 to 1,127,772. From this highly increased working capital so that Under Armour can easily use those money to support its expanding business and they have an available case for its most recent purchase (Under Armour, Inc., 2015).

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Physical resources UA footwear net sale in 2014 was $430,987. It’s footwear business growth very fast by

increased 69% of net sales revenue from 2013 to 2014. It also significantly increased the UA's overall sales growth. Followed to their star representor Stephen Curry’ guidance, UA quickly won the consumers’ attention and love. Therefore, even though UA was started with sports apparel, but their footwear business is still in its infancy and the future growth will be infinite.

When it comes to sports apparel, UA still didn’t stop its ambition. According to Kevin Plank, they will launch their own Sportswear line in China, the first experience store in Asian is at Shanghai, the Jing An Kerry Centre. This is a very important plan that could make UA, a very American brand into a global one. This is a global trend especially in the China market. This aggressive plan will help UA business a lot, just like Kevin Plank told investors that his company would double its revenues by 2016, to $4 billion (Burke, 2013). Although UA overseas business growth rapidly and has defeated the Adidas in the United States market, but they still have only 11% overseas revenue showed in their 10K report in 2014. Under Armour still struggled outside the United States. However, their overseas sales at present is in the high speed growth and the

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revenue number actually doubled in 2014, therefore, not only overseas sales is a powerful force driving UA’s current business growth, but also a important future sustainable development.

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Organizational resources Under Armour, Inc begain on 1995 by its founder Kevin A.Plank. Headquarters located in

Baltimore, Maryland. Their principal business includes performance apparel, footwear and accessories for man, women and children. Under Armour’s revenues are generated mostly from national range especially North America region which include wholesales channel, direct to consumer sales channel and from product licensing. In December 2013, UA acquired MapMyFitness,Inc. In 2015, they acquired Endomondo, ApS.and MyFitnessPal. They are both digital connected fitness company and covered both Europe and other regions outside the U.S. and U.S region, which helped their company expand their connected Fitness Community to include more than 120 million registered users. (Under Armour, Inc., 2015).

2. Intangible Resources •

Human Resources With the purpose of growth, Under Armour partnered with SAP & SuccessFactors human

resources software behind the company’s bold expansion plans. Under Armour used has some problems due to the reasons that the company growth fast so they do not have an effective management system to match it, such as lack of enough professional managers to manage different segments. In the SuccessConnect 2015 event, Troy Barnett, senior director of Corporate Services Technology at Under Armour shared the most recent satisfied results of Under Armour’s HR. Overall, SuccessFactor’s helps Under Armour speedily and easily on its recruitment capabilities through network technology. (Galer, 2015).

UNDER ARMOUR •

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Branding Resources Since UA has been found, most talked about this brand is about their products strong

professional performance. The reason why UA’s gear was so famous is because its founder Plank was annoyed by his sweaty t-shirt when he was a sportsman in school, he just want to create a professional performance products to help more people who has the same feeling with him.

Same like Nike and Adidas, put together those three sporting brands then we can get a branding identified result as casual-sport, casual-sport and professional sport from left to right arranged as Nike, Adidas and Under Armour. On the other hand, UA’s advertising “I will” delivered a strong and tough feeling about this brand to their customer, combined with UA’s celebrity stores makes people more willing to trust this brand’s professional performance.

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Reputation resources In Sports products industry, UA even owns a great reputation called Nike’s enhanced

version. When people talk about sport footwear, many people want to buy a pair of Nike shoes as the goal, however, all people engaged in professional sports are eager for having an Under Armour equipment, they feel proud of it because the using of UA sports products usually means they already into a more professional field. This reputation is from UA’s direct customer. From market share prospect, UA brand’s reputation has been approved by its wholesales channel like Macy’s, footlocker and Nordstrom. In 2013, a report shows 68% of wholesale, the huge amount of percentage number occupied by those wholesales proved UA’s goodwill and reputation as well (Soni, 2014. a).

On the other hand, UA also did a good job with their social media. Social media for a company is just like using another method to do advertisement, not only raise brand awareness

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but also win customer’s loyalty by interacting with them. Except two famous social media platform, under amour’s social sites also including Pinterest, Instagram, Tumblr, google+ as well as YouTube.

They engaged UA’s fans to participate in their social media. They have an innovative program called the ‘Ultimate Intern Program,’ where they allowed thousands of high school students to submit cover letters about how they would “Ignite” the brand. The final prize for this program was pick up two winners to be Under Armour’s social media specialists for a week.

Another program established by Under Armour was called ‘Finding Undeniable’ which is a charitable act by them. UA offered $140,000 worth of brand gear to one high school in the US. Students who want to win this large amount of money need ask their friends and families to vote for their school through social media. There is no double, this action will a great media idea to build relationships with customers (Syed, 2015).

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Capabilities •

Marketing-advertisement The UA target audience is divided into two types: professional athletes and common

consumer. However, research showed that these professional athletes have always been the most loyal customers for this brand (Hoge, 2015). The main reason that they are relying on their clothing is because the quality of their clothing is the best, therefore, the most effective weapon for those athletes’ segments are not marketing strategies but the constantly improve of quality.

Hence, what the UA marketing team really wants is gather those common consumers segment.

The NO.1 question for their marketing team right now is how to attract common consumer willing to buy their professional sport products and how to effectively compete with those Gorgeous Nike clothes and well-known brand Adidas. The answer was using advertisement to communicate the spirit of diligence to each customer, make them willing to do more exercise, especially more professional sports. Because as long as people take more hours to do exercise, they need a high-performance sweaty sport clothing, and that is what UA can provide. Like UA’s new advertisement “rule yourself” is a good example to boost consumer’s Exercise consciousness (Dinsmore, 2015). In addition, With the improvement of living standards, more and more American consumers pay attention to the quality of the exercise time, that means even the amateur player also want make their exercise time more close to professional. Therefore, Under Armour using their advertisement opened a large market.

On the other hand, we all know star’s power is very important. Star marketing can produce rallying point to the customer, it will bring certain demonstration effect. Prior to the two new faces Andy Murray and Stephen Curry join with Under Armour, it’s Celebrity branding used by endorsement has been obviously appeared slightly weak. They have Washington national’s

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baseball player Bryce Harper; American football player Jermaine Jones; Michael Phelps-who always bring many negative news and the legend of the New England Patriots quarterback Tom Brady. UA finds out that lack of strong competitive star power in several sport field is an obstacle of their future business expansion. Therefore, UA waving a checkbook grabbed Murray and Curry from Nike immediately. By Signing of the top tennis star Murray, Under Armour’s intention for cross-border on tennis has been evident for their product promotion. The sport of tennis compared to other sport like basketball and football seems more "elegant", however, tennis is a sport exercise which require a high intensity of exercise and sweat. Under Armour cloth unique technology can provide better turn-back action and more flexible and powerful for tennis player. Plus, the tennis star Murray’s attraction, I believe that soon we will be able to see the tennis fans wearing UA product too (Ember, 2015).

Star marketing is a very important strategy for Under Armour, but they also have many other common spokespersons in the gym and playground. Many professional fitness coaches and athletes choose UA’s sport product due to the fact that they have an outstanding performance, as long as they wear UA’s product shows up in those places, they are advertising for UA, when another customer sees those coaches wear UA superman series tights show off their very cool body, they have a desire to buy the products too.

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Core Competencies The positioning difference between Under Armour and other sport product brand can be used "Athlete" and "Sportymen" Let each consumer to become athletes is Planck’s unique competitiveness. There is no doubt that Under Armour’s core competence were their different series of tights. Its tights are divided into three series: HeatGear, GoldGear and Combine, just through their name we can see those tights can provide their customer wear full season in cold environment and hot environment. The biggest characteristic of UA ‘s tights is its special design, this unique technology just like a people’s second skin, which can make muscle power stronger and muscle’s recover more quickly. That is the reason why UA is such so popular in the gym.

When people do a lot of exercise, a good tights often means more durable and higher quality of training time. Advertisement cannot prove everything but famous athlete Lebron James has been found that under his Nike jersey was an Under Armour’s tights in a competition, because they really need high performance tights to improve their performance in the exercise.

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Competitive Advantages Table # 5 A Four Criteria Test for Sustainable Competitive Advantages

Resource or Capability Distribution (Logistics) Brand Image

Production Innovation Reputation Marketing

Costly Valuable

Rare

to Imitate

Yes

Yes

No

Yes

Yes

Yes

Non-

Competitive

Performance

Substitutable

Consequences

Implications

No

No

Yes

No

No

No

Yes

Yes

Yes

Yes

Competitive Parity Temporary

No

Yes

No

Above-Average

Competitive

Returns to

Advantage Competitive

Average Returns Below Average

Disadvantage Sustainable

Returns

Competitive Advantage

Yes

Average Returns

Competitive Parity

Above Average Returns Average Returns

Chat interpretation •

Distribution Under Armour has four geographic segments: North America, including the United States

and Canada; Europe, the Middle East and Africa (“EMEA”); Asia-Pacific; and Latin America.

In North America, by the end of 2014, Under Armour had 125 factory house stores located in outlet centers. The company also had 5 brand house stores (Under Armour, Inc., 2015).

The factory house stores sell discontinued, excess portions and out-of-season products. Unlike

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the factory house stores, the brand house stores give consumers experience of wider and new products. Consumers can make purchases in stores, or they can buy directly from Under Armour on its e-commerce website. The companyâ&#x20AC;&#x2122;s distribution facilities are in California and Maryland; most of its products are sold to wholesale customers, to brand and to factory house stores from these two locations. Furthermore, Under Armour uses third-party logistics providers to distribute its products. These third-party logistics providers are primarily located in Canada, New Jersey and Florida (Under Armour, Inc., 2015). In addition, last October, Under Armour planned to build its third distribution center in Tennessee which would costs $100 million. The first two distribution centers are in Rialto, California and Baltimore, Maryland. The new project will bring 1,500 new job opportunities over the next few years (â&#x20AC;&#x153;Under Armour Announces,â&#x20AC;? 2014).

For EMEA (Europe, the Middle East and Africa), Under Armour uses a third-party logistics provider located in Venlo, The Netherlands, to distribute its products to its retail customers and e-commerce consumers in Europe. In certain European countries, the company sells its products through retailers, websites, and independent distributors (Under Armour, Inc., 2015). In the Asia-Pacific sector, Under Armour has seven brand house stores and two factory house stores located in China. Since Under Armour does not have direct sale operations in Australia, New Zealand, Taiwan and Hong Kong, the company also sells products to independent distributors in these locations. Under Armour has a license agreement with Dome Corporation allowing the company to sell its products in Japan and Korea. Moreover, Hong Kong is the thirdparty logistics provider in the Asia-Pacific distribution (Under Armour, Inc., 2015). In Latin America, Under Armour has two brand house stores, six factory house stores, wholesale distributors, and a website operation to sell its products in Chile, Mexico and Brazil. Under

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Armour also has independent distributors to sell products to other Latin American countries (Under Armour, Inc., 2015).

Numbers never lie. Due to the success of Under Armour’s distribution strategies, its factory house stores have increased 17% in square footage, driving sales increases by 31.5% in North America. Also, due to the increased distribution in EMEA and Latin America, there is a significant increase of 108.4% net sales in other foreign countries (Under Armour, Inc., 2015).

•

Brand Image Under Armour has a strong brand image among consumers. This is based on its quality

products, its loyal consumers, its buying powers, its social responsibility as a company, and appeal to potential consumers.

One good example of Under Armour’s team’s ability to solve problems and win brand image was provided by the company’s sponsorship of Team USA’s speed skating during the 2014 Winter Olympics in Sochi, Russia. Some of the American speed skating team players thought that the poor Under Armour’s uniforms resulted in the team’s equally poor performances. Faced with such criticism, Under Armour responded immediately to this case, defended the company and took action. Among its savvy moves, the company did put blame on Team USA at all. This attitude allowed Under Armour to change a negative into a big win, and earned it a contract with Team USA until 2022 (Saglimbeni, 2014).

Under Armour knows well how to build its brand image. Under Armour used to project a brand image to consumers that it was only for elite athletes. People described the company as dudes, sweaty, football, runners (Houser, 2015). Today, the company has a focus on women’s markets. Last May, Mirabella, a journalist for The Baltimore Sun said that Under Armour has

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created a program, called Power In Pink, and will also contribute $10 million to Johns Hopkins Hospital for a breast-health center (Mirabella, 2014. a). For Power In Pink, Under Armour further produced an apparel and accessories collection for all ages and genders. Due to the program’s success, Under Armour was able to promise that it would build the $10 million Under Armour Breast Health Innovation Center. The latter will provide advanced clinical care education, such as nutritional counseling, fitness evaluation, and survivorship services (“Power In Pink,” 2015). These services can not only help raise awareness about breast health, but also help improve Under Armour’s brand image. Power In Pink is the perfect instance that Under Armour is no longer for just for male athletes.

Many companies, such as Under Armour, sponsor the Olympics because they want to spread companies’ awareness and bring businesses to the world. Mr. Peters from Slate, a daily web magazine, said, “That’s what Under Armour was hoping to show with the ostensibly aerodynamic ‘Mach 39’ racing suit, which was tested in wind tunnels, designed with input from Lockheed Martin engineers, and advertised as the ‘the fastest speedskating suit in the world’” (Peters, 2014). Under Armour must spend a great deal of time, money, and labor to develop the fastest racing suit. Plus, speedskating is a niche sports market. It is not a common sports game.

Under Armour was only developing the suits for Team USA. They are not selling them to the public, so it is very costly. Building a brand image is not only expensive, but it is also matter of luck and opportunity. Many sports firms have money, but Team USA picked Under Armour as its sponsor for the Olympic games. There is only one Team USA, so it is a rare opportunity for a company to be chosen.

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Production All Under Armour products are made by unaffiliated manufacturers. In 2014, the

company had 29 primary manufacturers in 14 countries. Most of its products, up to 65%, are made in China, Jordan, Vietnam and Indonesia. Most fabrics used in Under Armour’s products come mainly from five suppliers; these suppliers are located in Taiwan, Singapore, Mexico and El Salvador (Under Armour, Inc., 2015).

Under Armour has a quality assurance team to evaluate all its manufacturers for their quality systems, social compliance and financial strength. The team evaluates its suppliers on a current on-going basis to make sure all products will meet requirements. The company also has many different agreements with its manufacturers to ensure that processes run smoothly, for example, non-disclosure and confidentiality agreements. Moreover, regarding quality of manufacturing and working conditions and other social concerns, Under Armour requires its manufacturers to follow a code of conduct. The company also has subsidiaries in Hong Kong, Panama, Vietnam and China to help those of its manufacturers that may need extra help (Under Armour, Inc., 2015).

Under Armour is a not non-substitutable company with its production. On the consumer side, there are many other sports apparel and footwear brands besides Under Armour. Consumers can choose whatever they like. The company should find ways to maintain and increase its loyal customers. On the manufacturer’s side, companies always select good locations for their factories to maximize their profit. The locations will change based on costs of land, labor, currency fluctuation, government regulations, taxes, materials, and many other factors. Under Armour is not the only choice of sportswear, but customers remain loyal to the brand because of the company’s high quality products and effective marketing strategies.

UNDER ARMOUR •

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Innovation Reputation Under Armour never stops innovating. In 1996, Under Armour produced its first product,

the Original #0039 Compression T-shirt. It helped athletes to compete in a comfortable, light Tshirt while keeping cool, dry, and improving muscle performance (“Product Innovation,” 2015).

In 1998, Under Armour came out with a new product, the ColdGear Mock. This product could protect and keep athletes dry, giving them help to battle the elements with an outer layer that moved heat (“Product Innovation,” 2015). In 2009, the Recharge suit was built to lessen by 50% soreness and fatigue, and for 30% more power after exercising (“Product Innovation,” 2015).

This helped users’ muscles to recover quicker than ever. In 2010, Under Armour designed a onepiece speed suit, made from the Under Armour ColdGear compression fabric, for the Olympic USA Bobsled teams. This suit had additional advantages to previous product functions, plus it supported muscles to remain highly mobile. Under Armour also produced UA Coreshorts that helped athletes’ core as well as performance. The product is still popularly used by football, baseball, basketball, soccer and hockey players all over the world (“Product Innovation,” 2015).

In 2011, Under Armour innovated a smart T-shirt called Armour39™ (E39). E39 is a compression shirt with attached electronic touchpoints. The T-shirt can collect the body’s natural biometric statistics. Then, it sends this information to a small device on the front of the T-shirt called "The Bug." People transfer the data from the Bug to a computer; then, they can see and evaluate the transmitted data, and, ultimately, use it to help them get better. Under Armour also made Charged Cotton which has the comfort of cotton to help users to dry much faster. The company made a collection, UA Charged Cotton Storm, which is water-resistant, so athletes can stay warm, dry, and do so quickly. In addition, UA uses coldblack technology which reflects very

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strong heat. This technology can help consumers black out the sun even when they are running a marathon in the desert, and still stay cool, dry and protected (“Product Innovation,” 2015).

In 2012, Under Armour produced Armour Bra™. It is a sports bra for women that female consumers can utilize to pick the perfect sports bra fit for their bodies by choosing band and cup sizes. This year, Under Amour HIGHTLIGHT Cleat came up with UA CompFit technology which is super high, super light, and super in speed (“Product Innovation”, 2015). In 2013, Under Armour used UA Spin technology to create UA Spine Venom Running Shoe which is light weight with flexible support. Another innovation is Armour39™. It is the first performance monitoring system for athletes which can measures how hard they have worked (“Product Innovation,” 2015).

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Marketing Under Armour does well marketing itself in sports marketing. The company provides

products to high performing athletes and high school teams, at the collegiate and professional levels, using these people to expose its brand to different media platforms, such as the Internet, television, sports events, etc. Under Armour is the National Football League (“NFL”) official supplier, offering footwear and gloves. The company is the official one to sell combined training apparel, too. Under Armour also is the Official Performance Footwear Supplier for Major League Baseball. Further, Under Armour partners with the National Basketball Association (“NBA”) (Under Armour, Inc., 2015).

Recently, Under Armour became the 10-year partnership with University of Wisconsin.

All 23 of the University’s athletics teams including both genders will receive Under Armour’s design which offers training footwear, apparel and accessories, and game-day uniforms (“Under Armour Takes,” 2015). Under Armour is good at using popular athletes to endorse its brand. For

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instants, Tom Brady, four-time Super Bowl Champion; Lindsey Vonn, most wins in Alpine Skiing history; Clayton Kershaw, Offical performance footwear supplier of MLB.Buster Posey, three-time World Champion; Stephen Curry, the 2015 NBA Most Valuable Player (MVP) and two-time NBA All-Star (Under Armour, Inc., 2015).

Under Armour sponsors and sells products globally to European and Latin America soccer and rugby teams. The company provides performance apparel to the Tottenham Hotspur Football Club. Under Armour become the official supplier to the Welsh Rugby Union in the United Kingdom, the Chilean football club in Chile, Cruz Azul Futbol Club in Mexico, by offering Under Armour technical kit. Moreover, Under Armour always uses sponsor events or host events to increase its brand awareness (Under Armour, Inc., 2015).

In media marketing, Under Armour is widely using different multiples channels to promote its products in national digital, broadcast, and print media outlets. Company also well follows trends and utilizes social media platforms and applications to promote its brand and products. Further, Under Armour increases floor space in main retailers as its retail marketing strategy. The company wants to create an exciting environment shopping experience for its consumers by using floor space, lighting, walls, displays and images (Under Armour, Inc., 2015).

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Supply Chain Under Armour has not underestimated the significance of a supply chain centric strategy as the foundation for accomplishing exceptional growth and profitability. One of the greatest trend that is seen in Under Armour is its unique and innovative approach to bring the harmony with success not just in North America but also across the globe. Under Armour’s athletic supply chain is a core element in driving rapid growth Under Armour’s confident, visionary, supply chain centric competitive business philosophy, based on “4D Collaboration,” which places data directly at the center of a seamlessly integrated superstructure comprising people, tools, and processes. The changes in Under Armour’s supply chain allows the company to give 12 to 18 month forecasts to third-party manufacturers who handle all of Under Armour’s production (Soni, 2015. c).

About 70 percent of its production is sourced from strategic long-term partners. The company meets with these partners once a month to go over scorecards, discuss performance and talk about Under Armour’s market performance and projected sales (Under Armour, Inc., 2015).

This synergistic 4D Collaboration depends on several forward-thinking elements, including: aggressive skill building and training, global data structure with consolidated reporting and both POS and financial integration, best-of-breed SCM tools from Logility, lean methodology built to a long-range consolidated plan (Soni, 2015. c).

In 2013, Under Armour’s, or UA’s, product manufacturers operated out of 19 countries: In Asia, Central and South America, Middle East, and Mexico. While there’s an obvious cost advantage to manufacturing overseas, the practice does leave the company vulnerable to foreign macroeconomic factors, as well as non-local supply chain disruptions (Morgan, 2015).

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Suppliers

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The suppliers of raw materials and fabrics used in production must be pre-approved by Under Armour. Suppliers are based in countries including China, Malaysia, Mexico, Taiwan, and Vietnam. Although the supplier base is small, between 50 and 55% of Under Armour’s fabric originates from six suppliers. The company is trying to strengthen the supply chain by seeking new supply sources. The firm’s manufacturing base is wider, with 65% of production coming from 14 manufacturers. Major operations include Jordan, Philippines, China, Nicaragua, Malaysia, Cambodia, Indonesia, Vietnam, Mexico, El Salvador, and Honduras. Two subsidiaries, based in Hong Kong and Guangzhou, China, provide support for the company’s manufacturing, quality assurance, and sourcing needs for apparel and footwear and accessories (Morgan, 2015).

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Distribution Under Armour’s products are sold through a combination of wholesale and retail sales.

The company leases distribution facilities in California and Maryland to channel products through its wholesale and retail networks in North America. It also distributes products through third-party distributors located in Canada, New Jersey, and Florida. Outside North America, the company distributes products mostly through third-party logistics providers and independent distributors. The company has recently begun selling directly in certain international markets including Mexico (Bursa, 2014).

Under Armour manufactures virtually nothing in-house. Production is outsourced to third-party manufacturers overseas which is a very common practice in the apparel industry. The following chart summarizes Under Armour’s value chain analysis. The table condenses the primary as well as supporting activities along with the market strength/power of Under Armour.

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Value Chain Analysis

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Table # 6

Support Activities

Weak/Moderate

Firm Infrastructure

/Strong Strong

Human Resources Management

Moderate

Technology Development, Engineering Procurement

Very Strong

Under Armour Existence of structured and great corporate culture Presence of limited employees/resources but great training strategies Existence of innovation and production advanced

Moderate

technological products through quality fabrics.

Third Party

Primary Activities

Weak/Moderate /Strong

Under Armour

Inbound Logistics

Moderate

Third Party

Operations/Manufacturing

Moderate

Third Party

Outbound Logistics

Moderate

Third Party Existence of sponsorships and

Marketing & Sales

endorsements present but no Moderate

synergy in marketing plan. E.g.

University of Notre Dame endorsement Presence of respected reputation for

After Sale Service

Strong

customer service and after sale service.

Table # 7

The sportswear goods industry is highly competitive and fragmented with many players.

The Under Armour brand is positioned as the highest quality and best available. Under Armour is advertised as higher quality and can enjoy the advantage of higher price points.

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As the table states, inbound/outbound logistics and manufacturing and Sales are moderate because the influence of suppliers in the industry is critical, as most products aren’t manufactured by the firms themselves. These are outsourced to third-party producers in foreign countries. So, ensuring good relations with suppliers and eliminating bottlenecks in the supply chain are critical factors for all players.

Marketing and Sales are moderate as well because it has strong competitors like Nike, Adidas (big market cap) in terms of finance, endorsements. Under Armour, having a small market cap compare to Nike and Adidas, possesses the risk of high buyer power, extraordinary prices with intense competition. Under Armour’s sports marketing strategy includes entering into outfitting agreements with a variety of collegiate and professional sports teams, sponsoring an assortment of collegiate and professional sports events, and selling Under Armour products directly to team equipment managers and to individual athletes.

The after sale service is strong in Under Armour due to its promising customer’s oriented strategy. When customers would request products that Under Armour does not have, the company tries to bring the product next time, to make the customer satisfied and loyal to the company by working with suppliers and contractors to deliver on customer’s request.

On the other hand, in terms of other activities, firm infrastructure and technology development, Engineering are very strong in Under Armour due to existence of innovation and production advanced technological products through quality fabrics and structured and great corporate culture. However, Human Resources Management and Procurement are moderate because of third party involvement and limited financial/physical resources. Additionally, labor cost differences among countries and geographic regions can motivate firms to focus their production activities in low-wage areas in efforts to gain cost and competitive advantages.

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Conclusively, Under Armour has proven to have a strong financial foundation, by continuing to increase their revenue and gross profit, and it doesn't seem they will slow down anytime soon.

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Weighted Competitive Strength Assessment Table # 8

Key Success Factors

Importance Weight

Under Armour

Nike

Adidas

Lululemon

SR

S

SR

S

SR

S

SR

S

High Quality Innovation

25%

8

2

9

2.25

7

1.75

6

1.5

Sports marketing

20%

9

1.8

10

2

8

1.6

7

1.4

Product distribution system

10%

7

0.7

9

0.9

8

0.8

6

0.6

Brand Reputation

30%

8

2.4

10

3

9

2.7

7

2.1

Market Share

15%

7

1.05

10

1.5

6

0.9

5

0.75

Weighted overall strength rating

100%

39

8.0

48

9.7

38

7.8

31

6.4

(Rating Scale: 1= very weak; 10= very strong; SR= Strength Rating; S= Score) â&#x20AC;˘

High Quality Innovation Quality product and innovation are keys to any company's success. With the mission of

making all athletes better through passion, design, and the relentless pursuit of innovation, Under Armour has focused on regulating the body temperature of the athletes as well as increasing their comfort (Under Armour, 2015). Nike still dominates the global sportswear market. By focusing on high-end quality product, in 2014, Under Armour beat Adidas to become the second largest athletic apparel company in the U.S. Under Armour continually seek to enhance their products with the latest in innovative technology while increasing their product line. But as a sports brand, UA has gained huge recognition. Under Armour product are unique, unlike its competitors, the

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company is focusing on creating innovative and high-quality products, breaking into new segments, and continuing to keep a niche-market image. Under Armour has passed Adidas and continues to gain attention in the market (Fool, 2015). With its high quality and innovative product design, Under Armour continue to grow and is attracting more athletes, consumers and investors.

Table # 9

( Source: http://www.tellermate.com/en-us/News/View/6204) The chart above shows that survey result of different athletic clothing brand for among different class of teens. This clearly shows that Nike has the maximum popularity and are preferred the most followed by Under Armour, Adidas and Lululemon. Since, Nike is considered to innovate high quality products, it has been listed on the top with the strength rating of 9 followed by Under Armour, Adidas, and Lululemon respectively. Although, Under Armour is focusing on high quality product innovation, it is still behind Nike products.

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â&#x20AC;˘

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Sports marketing Marketing plan is very important to the success of the organization as it aims for growth

and positive change in company's reputation and financial growth. Under Armour has focused on major areas in order to expand its business nationwide as well as worldwide with its marketing strategies and promotion. Although it is gaining more and more market share, Under Armour is overall weaker than its rival Nike in brand reputation and market share and Adidas in brand reputation and has limited presence in international market. That is why, Nike receives strength rating of 10, and Under Armour 9. Under Armour gets about 90% of their total sales from the North American market while only 10% of its sales is coming from international market. The marketing team of Under Armour has done its great effort for its product promotion; Under Armour spent $18 million in 2013 as media spending (Scultz, 2014). Since 2009, Under Armour has been continuing its exclusive licensing arrangement with NFL and also became multiyear global partner with NBA, title partner of NBA Draft Combine and presenting partner of junior NBA (Under Armour, Inc. - Annual Report, 2015). While Nike has been creative since the beginning. With the advantage of being in the market for longer time and with higher market share, Nike has been pushing the technological boundaries of innovation to offer its customers new products and also differentiate itself from its competitors. Within its marketing strategy, Nike has given endless chances for customer segmentation and product differentiation. Adidas on the other hand has a product innovation and its rich heritage differentiates its brand with the competitors. "Play to win" marketing strategy shows a connection of Adidas with sports and conveying the message that if customer play sports then they should win and to win they should use Adidas products. Adidas has always been keen in sustainability innovation with the ultimate goal of creating a product that delivers high performance, but which is also made in a sustainable

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way (Sustainability Innovation, 2015). Adidasâ&#x20AC;&#x2122;s differentiation product strategy helps it in gaining a competitive advantage over its competitors. So, after analyzing the sports marketing strategies, Adidas receives strength rating of 8 and Lululemon receives 7. â&#x20AC;˘

Product Distribution System The headquarter of Under Armour is in Baltimore, USA with its two major distribution

channels in Baltimore and California. With the real time visibility of information, both of those distribution centers share full picture of supply chain activities that tracks their performance regularly (Morgan, 2015). Under Armour distributes its products through three major channels: wholesale channel, direct to costumer, and licensing channels in different countries representing 67%, 30%, and 3% of net revenues respectively in 2014 (Under Armour, Inc.-Annual Report, 2015). Lululemonâ&#x20AC;&#x2122;s sales its products through three main channels: 1) Corporate-owned retail stores 2) direct to costumer which includes online sales, and 3) wholesales, franchise and other channels representing 77%, 16.5%, and 6.2% of net revenues respectively in 2014 (Market Realist Inc., 2015). Nike distributes its products through three main channels: 1) national and international wholesalers, 2) Direct to costumers including in line and factory retail outlets and ecommerce, and 3) global brand divisions. The wholesale revenue was the largest that accounted for 79.2% and Direct to costumers revenue accounted for 20.3% in 2014 (Market Realist Inc., 2015). This depicts that the wholesale channel is the major channel through which Under Armour, Lululemon, and Nike generate major portion of their net revenue. After exploring the distribution system of Nike, Adidas, Under Armour, and Lululemon, the strength rating of 9,8,7,6 are given respectively.

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UNDER ARMOUR â&#x20AC;˘

Brand Image Brand name plays an important role in todayâ&#x20AC;&#x2122;s market. It is believed that brands deliver a

uniform quality, credibility and experience to its customers. Branding creates trust on the costumers that makes the costumers strongly positive about purchasing specific brand products.

Recently, Under Armour has been very popular, recognized, and growing at 20% per year in the sportswear market.

Table # 10

The chart above depicts the increasing rate of Under Armourâ&#x20AC;&#x2122;s revenue each year because of its brand popularity among costumers. However, in 2014, Nike still holds the number one position in the market with the revenue of $ 27.8 billion. Similarly, Adidas has the revenue of $17.67 billion. Under Armour still has much smaller revenue than its competitors Nike and Adidas with the revenue of $3 billion. Likewise, Lululemon has its revenue of $1.2 billion in 2014 (The Statistics Portal, 2015). Based on the above comparison, strength rating of 10 is given

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for Nike, 9 for Adidas, 8 for Under Armour, and 7 for Lululemon. Under Armour still has been successful in maintaining its brand popularity through innovation of quality performance gear and active wears and promoting them in sports market. â&#x20AC;˘

Market share Market share shows the percentage of total market accounted for by an individual

company over a specific time period. Market share helps a company to visualize their performance and competitiveness in overall market over that period of time while helping the company to analyze its marketing strategies. Soni (2015) compares the market share of active wear in first quarter of 2015. Nike was the market leader for active wear with a 13% market share. Under Armour becomes second leading sportswear company with 6% market share by overtaking Adidas which shares 3% of the market followed by Lululemon with a minimum market share (Soni, 2015). Based on the market share, Nike, Under Armour, Adidas, and Lululemon are given the strength rating of 10, 7, 6, and 5 respectively.

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Financial Analysis This financial analysis will provide readers an in-depth view to the success that Under Armour has found in the athletic apparel and footwear industry. The following chart shows the companyâ&#x20AC;&#x2122;s financial performance from fiscal year 2013 to current and provides comparison points through industry averages and financial data for Nike, Under Armourâ&#x20AC;&#x2122;s strongest competitor.

Table # 11

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Profitability Ratios Profitability ratios are used to measure how efficiently a company turns their business activities into profit. Profit margins quantify the companyâ&#x20AC;&#x2122;s ability to earn profit from revenue while return of assets an equity measure the companyâ&#x20AC;&#x2122;s ability to earn profit from invested capital and company owned assets. Higher percentages signify a companyâ&#x20AC;&#x2122;s ability to retain more of their earnings after accounting for operating expenses as well as a more efficient use of company assets and shareholder investments (Investopedia, 2015).

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Gross Profit Margin The first profitability ratio shown in Table # 11 is gross profit margin. This is a financial

metric that demonstrates the proportion of revenue that remains usable to the company after the cost of goods sold have been accounted for. It is calculated by subtracting the cost of goods sold from revenue and dividing the result by the company’s total revenue (Investopedia, 2015). In the case of Under Armour, they have had a very stable gross margin over the last several years.

Their most recent figure is 48.76% in the trailing twelve months. This is right on par with results of their last two fiscal years. This number essentially boils down to Under Armour retaining 48.76 cents of every dollar they earn through sales. This money is used to cover the cost of goods sold and the remainder is the company’s reported profit. A gross margin of 48.76% has Under Armour outpacing the industry by 7.76% and their closest competitor (Nike) by 2.25%.

This is a very promising sign that Under Armour will continue its steady growth as a result of higher than average profits that can be reinvested into the company.

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Operating Profit Margin A company’s operating profit margin is a ratio that is often used as a way to determine

how much cash is remaining after all expenses have been paid. As is the case with Under Armour, operating margin is often significantly lower than gross margin. This is a result of accounting for all expenses rather than just the cost of goods sold. These expenses include administrative and selling expenses as well as overhead, wages, etc. Operating margin is calculated by first finding operating income by subtracting all operating expenses, cost of goods sold, and depreciation from gross income. Operating margin is then calculated by dividing operating income by net sales (Investopedia, 2015). The result is essentially how much a company makes per dollar of sales. Under Armour recently saw a downward trend in their

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operating margin as it has dropped 1.19% to 10.29% in the trailing twelve months. This puts them slightly below the industry average of 10.62% and well below Nike who sits at 14.02%. â&#x20AC;˘

Net Profit Margin The net profit margin of a company is a ratio that that expresses how much of each dollar

earned directly translates into profit. Net margin takes operating margin a step further by subtracting interest and tax expenses from revenue in addition to cost of goods and traditional operating expenses (Investopedia, 2015). The result is a percentage shows the true profit earned from revenue. Under Armour for example enjoys a net margin of 5.94%. Simply put, Under Armour earns 5.94 cents in profit for every dollar of revenue generated. This is a concerning figure as it is a full percent decrease from last year and significantly lower than the industry average of 8.04%. â&#x20AC;˘

Return on Total Assets (ROA) Return on assets is a ratio that is often used to indicate a companyâ&#x20AC;&#x2122;s profitability in

relation to its assets. In other words it paints a picture as to how well a company uses its assets to generate income. Return on assets, often referred to as ROA, is expressed as a percentage and is found by dividing net income by total assets (Investopedia, 2015). Over the last twelve months Under Armour has seen an ROA of 8.79%. This is a significant decrease from their ROA of 11.33% in 2014 and 11.87% in 2013. These previous years were well over the industry average of 9.52% that Under Armour now finds themselves below. This could be a result of an increase in expenses that has reduced net income coupled with an increase in assets outpacing revenue growth. In comparison, Nike enjoys and ROA of 17.77%. This translates into Nike earning 17.77 cents of profit for every $1 of assets that the company owns while Under Armour earns nearly half of that at 8.79 cents.

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Return on Equity (ROE) Return on equity or ROE is a ratio that is used to measure a company’s profitability in

relation to invested capital. It is calculated by dividing net income by stockholder equity and the resulting percentage illustrates the amount of profit earned per dollar invested by shareholders (Investopedia, 2015). In the trailing twelve months of operating Under Armour has seen a similar decrease in ROE as they have in other profitability categories as the ratio has dropped to 15.91% from remaining in the 17.3% range in the previous two fiscal years. This is much lower than the industry average of 21.77% and an ROE of 29.08% from Nike. This means that at 15.91 cents per invested dollar Under Armour is earning much less than their competitors.

Liquidity Ratios Liquidity ratios are a class of financial ratios that aim at measuring a company’s ability to cover debts and other short term obligations. Generally speaking, higher ratios signify an increased ability to pay of these liabilities (Investopedia, 2015).

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Current Ratio A company’s current ratio is a measure of their ability to cover debts. This is done by

comparing the current assets of a company (cash, accounts receivable, etc.) to the current liabilities the company is responsible for (wages, accounts payable, short term debt, etc). Current liabilities can also be described as all debts or financial obligations that will come due within one year (Investopedia, 2015). Under Armour’s current ratio of 2.63 over the past twelve months is a sign of a fairly healthy company. Simply put, Under Armour has $2.63 in assets for every dollar

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they owe. This is slightly above the industry average of 1.97 and respectfully comparable to Nike’s current ratio of 2.89.

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Quick Ratio A company’s quick ratio is very similar to the current ratio in that is measures the ability

to cover liabilities with company assets. The difference is in the word quick. This particular ratio aims at measuring short term liquidity. Therefore, current assets in this case do not include inventories because of the time associated with turning them into cash. Quick ratio is calculated by dividing current assets minus inventories by current liabilities (Investopedia, 2015).

Alternatively, cash equivalents, marketable securities, etc. can be used in place of current assets with a removal of inventory. The result is a number that represents the ability to cover liabilities in a quick amount of time with the most liquid assets. Under Armour again leads the industry average of 0.87 with a quick ratio of 1.22. They do, however, still fall short of Nike’s 1.65.

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Operating Cash Flow to Current Liabilities Operating cash flow to current liabilities is another method of measuring a company’s

ability to cover short term obligations. Due to the fact that bills are typically paid with cash, using cash flow rather than assets can be a more reliable determinant as to a company’s liquidity.

As with the previous ratios, it is calculated by dividing operating cash flow by current liabilities (Investopedia, 2015). Under Armour’s operating cash flow ratio of 0.52 indicates that only half as much cash is flowing into the company than is due to liabilities. This can be a result of large undertakings like the construction of retail locations or manufacturing plants and typically shows a need for the raising more capital. Nike on the other hand, has a ratio just shy of 1. While they too do not generate enough cash flow to cover liabilities, they are much closer to meeting those obligations without significant changes.

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Working Capital Working capital is a method of measuring a company’s efficiency and overall short-term

financial health. This is done by subtracting all current liabilities from current assets. The remainder is the amount of capital that the company retains to proceed with daily operations should they need to cover all obligations (Investopedia, 2015). Under Armour has seen a generous increase in working capital from 702 million in 2013 to 1.128 billion in 2014. While this radically lower than Nike’s working capital of 9.6 billion, the different is to be expected and is proportionate the difference in annual revenue between the companies.

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Inventory to Net Working Capital Inventory to Net Working Capital is a ratio commonly used to assess the liquidity of a

company. It essentially measures the portion of available cash that is being used to fund inventory. Generally speaking it is desirable to have a ratio below 1 but this varies between industries. In fiscal year 2014 Under Armour saw a dramatic decrease in their inventory to net working capital ratio from 0.67 to 0.48. This new level of 0.48 puts them directly in line with their largest competitor at 0.45. This means just below half of Under Armour’s available cash is tied up in inventory. The decrease can represent a more efficient use of inventory as inventory has been turned over faster.

Leverage Ratios Leverage ratios are a series of ratios used to analyze how a company is funding their operation. As most businesses use a combination of equity and debt to finance their daily operation, it is important to measure the proportions by which these methods are used (Investopedia, 2015).

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70 •

Debt to Total Assets Debt to total assets is a ratio used to determine the amount of a company’s assets that

were funded through debt. It is calculated by dividing total debt by total assets. The resulting ratio can be a signifier of financial risk (Investopedia, 2015). In fiscal year 2014 Under Armour saw a debt to total assets ratio of 13.57%. This indicates that of all of the assets owned by Under Armour, just 13.57% of them were financed through debt. This is a vast increase from the 9.69% observed in 2013 and significantly higher than the 4.99% seen with the Nike Corporation. This is not to say that Under Armour finds themselves in a risky financial situation, it simply indicates a shift in business strategy.

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Debt to Equity Debt to equity is a ratio used to determine the proportion of debt a company uses in

comparison to equity when funding an operation (Investopedia, 2015). Under Armour for example had a debt to equity ratio in 2014 of 21.05%. This indicates that of the capital that Under Armour uses to finance its business, 21.05% of that money is generated through debt. The remaining 78.95% is generated through shareholder investments. This is a rather significant increase from the 14.52% in fiscal year 2013. Comparatively, Nike finances their operation with just 8.49% debt. This is not to say that Under Armour is experiencing any financial hardship.

On the contrary, it is accepted and often encouraged to use debt to finance business operations if the net profit exceeds the financing charges.

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Equity to Total Assets Just as debt to total assets aims at measuring the amount proportion of a company’s assets

are funded through debt, the equity to total asset ratio aims at measuring the proportion of assets funded through shareholder equity (Investopedia, 2015). Under Armour saw an equity to total

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asset ratio of 64.45% in fiscal year 2014 which compares similarly to previous years. In comparison Nike uses equity to fund 58.83% of their assets. These numbers can be expected to vary from company to company as everyone has different strategies for success as well as different assets. Nike for example owns many of their own manufacturing plants while Under Armour still relies on third parties for much of their manufacturing. These plants are very costly and most likely funded through long term debt.

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Interest Coverage The interest coverage ratio is a method of calculating a company’s ability to pay the

interest on outstanding debt. As has been seen in several of the previous ratios, debt plays a large role in the finance structure for many businesses. It is important for a company to be able to cover the interest on these loans in order to keep from defaulting. It is calculated by dividing the company’s earnings before interest and taxes during a specified period by the interest expense to be paid during that same period (Investopedia, 2015). In Under Armour’s case, they have an interest coverage of 57.63 over the previous twelve months. Essentially, this indicates that over the given period Under Armour could cover their interest expense over 57 times with their earnings. No industry data was available in this matter, but Nike enjoys an interest coverage of 116.58, more than double that of Under Armour. That being said, it is worth noting that with revenue nearly 9 times higher than Under Armour, this ratio indicate that Nike has taken on significantly more debt.

Activity (Efficiency) Ratios

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Activity ratios aim at measuring a companyâ&#x20AC;&#x2122;s ability to turn different accounts into cash or sales. These include the ability to collect on credit issued, inventory management, and the use of assets to generate sales (Investopedia, 2015). â&#x20AC;˘

Days Sales Outstanding Days sales outstanding or DSO, is a measure of the amount of time on average it take for

a company to collect the revenue from a sale it has made. This is particularly important in the apparel industry as most sales are made to large wholesalers who purchase on credit. A lower DSO means that it take a shorter amount of time for the company to collect its earnings (Investopedia, 2015). Under Armour has see their DSO hover around 30 days over the previous two fiscal years. This has slightly increased to 33.2 in the trailing twelve months. These values are typical as business use a 30 day billing cycle. The values indicate that very few customers are exceeding that allotted time. Nike on the other hand, is experiencing a DSO of 40.43. It is taking them nearly ten days longer to collect their earnings than Under Armour. This is a possible side effects of a much larger portion of their business coming internationally than Under Armour who sees 97% of their sales coming from within the United States.

â&#x20AC;˘

Receivables Turnover Receivables turnover is a measure of how effective a company is at collecting debts on

credit they have issues to customers. Given that Under Armour sells most of its products via wholesalers, it is important to analyze their ability to collect on the credit they issue said creditors. It is calculated by dividing the net sales made on credit during a period of time by the average accounts receivable for that time (Investopedia, 2015). Under Armour has seen a

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decrease in their receivables turnover as it has moved from the low to mid 12’s to 10.99. This is a reflection of the decreased ability to collect on debts which was illustrated by the previous ratio and the 3 days increase in the time period it take to collect. In comparison, they are still above the industry average of 10.01 and even more efficient in their collection practices than Nike who reported a turnover of 9.03.

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Inventory Turnover Inventory turnover is a ratio that illustrates how many times during a given time period a

company sells and replaces its inventory. It is calculated by dividing sales by the company’s inventory (Investopedia, 2015). Under Armour has seen a very stable inventory of 3.03 in 2013 and 3.13 in 2014. As has been observed in many other areas of their business, there has been a slight decrease in the trailing twelve months with the turnover rate now at 2.34. This could be the result of many factors but will most likely stabilize during the remainder of the fiscal year.

Regardless, Under Armour is still turning their inventory over nearly twice as often as the industry after of 1.74 yet they are still falling short of the mark set by Nike at 3.95.

•

Days Inventory Days inventory is a calculation used to determine the length of time it takes to turn

inventory into sales. It can be calculated by dividing a period of time, 365 days for example, by the inventory turnover ratio (Investopedia, 2015). By dividing 365 days by Under Armour’s 2014 inventory turnover ratio of 3.13, the days inventory is found to be 116.75. This represents a product lifecycle of 116.75 days from production to sale. As this is a direct correlation with inventory turnover, it is no surprise that Under Armour has seen an increase in the days inventory while they lag behind Nike with an average of 92.32 says spent in inventory. This is most likely a result of Nike’s much more established supply chain and network of suppliers in addition to

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internally operated production plants. Under Armour is in a position where sufficient level of inventory must be kept in order to ensure timely delivery to customers in the event of supply chain disruptions. â&#x20AC;˘

Asset Turnover The asset turnover ratio for a company is a measure of their ability to generate revenue

with its assets. The calculated ratio illustrates the sales produced per dollar of assets the company holds. It is calculated by dividing sales by total assets (Investopedia, 2015). Under Armourâ&#x20AC;&#x2122;s asset turnover has been very stable from in 2013 and 2014 with the company having reporting ratios of 1.71 and 1.68 respectively. They have seen a slight downturn in the trailing twelve months but that could very well stabilize during the end of the fiscal year. These ratios are a very promising sign for the young company as it outpaces the industry average of 0.87 and is slightly higher than Nike. This indicates that the company is running very efficiently as they generate nearly $1.50 for every dollar of assets under their control. â&#x20AC;˘

Fixed Asset Turnover The fixed asset turnover ratio is similar to the asset turnover ratio in that it aims to

measure how effectively a company is generating sales from its assets. It does differ, however, in that it focuses on the sales generated specifically from fixed assets such as plants, equipment, and other properties. It is calculated by dividing net sales by fixed assets. The resulting value is a measure of earnings per one dollar invested in fixed assets (Investopedia, 2015). Under Armour has maintained a fixed asset turnover ratio of 11.52 in 2013 and 11.65 in 2014. They have seen a slight decrease to 9.98 in the previous twelve months which could be explained by a decrease in sales or the purchase of new property which has yet generate additional sales.

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Regardless, 9.98 is still very close to the 10.33 reported by Nike, Under Armourâ&#x20AC;&#x2122;s largest competitor.

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Pro Forma Under Armour has had a tremendous history of growth. They have averaged a 31.13% annual growth in revenue over the last ten years and 28.98% annual growth in net income (Morningstar, 2015). This growth is a result of a company that is constantly evolving with the market. With the addition of the “charged cotton” product line to complement their synthetic performance apparel and a new found emphasis on gaining a larger market share in women’s athletic apparel, fiscal year 2016 should not be an exception. The following pro forma income statement estimates that Under Armour will increase their annual growth in revenue as a result of their continued product innovation and an increased presence internationally. Furthermore, with a focus on streamlining the supply chain and the possibility of an acquisition of a manufacturer has led to a slight initial decrease in cost of goods from nearly 50% to 45%. Increases to expenses, depreciation and amortization, interest, etc. have been calculated using the average increase seen annually from 2013 to present. Lastly, as Under Armour’s fiscal year ends on the 31st of December, final 2015 financials have yet to be released. Thus, the 2015 values in this table were estimated from the quarterly statements issued by Under Armour.

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Table # 12

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SWOT Table # 13 Strengths

Weaknesses

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Strong branding name

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High buyer power

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Unique tech support

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Low output on footwear

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High quality and Innovation focus

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Narrow promotions focus

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Sports marketing

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Lack of enough sizes options

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Unsatisfied online customer service

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Need improve supplier engagement and control

•

Production

Opportunities

Threats

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National/ International expansion

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Intense competition (Nike, Adidas)

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Variety of sports

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Weak global economy

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High feminine expand market

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Price war

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Effective days in inventory supply

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Improve revenue generation through innovation

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FINAL REPORT ANALYSIS Key Result Areas 1. Inventory management – Under Armour currently keeps 156 days in inventory. This is

significantly higher than their main competitor, Nike at 92 days.

2. Revenue generation – Under Armour has seen tremendous growth and generated over

$3 billion in sales in 2014. This is promising but still falls short of Nike and their $27 billion in annual sales.

3. Available Product Sizes – Under Armour makes people think that it is a brand for

professional athletes and taller people. There are many reviews on its own website that complain about sizing. A lot of female customers were not happy that they could not find their perfects sizes in store. One customer complained that all of the apparel was perfect except for anyone who is small or short (“Reviews,” 2015).

4. Online Customer Service – Under Armour is well-known for its good quality products.

However, the company needs to work on its online customer service. Online reviews show that the Under Armour customer service team replies to emails extremely late. One customer posted a review in ResellerRatings on August 20, 2015 and said, “Ordered a t shirt 8 months ago through the student rep for my sports team. Have been emailing them for the last 2 or 3 months trying to find out what on earth has happened. The correspondence has been diabolical to say the least, I have to send 3 emails before I get a reply” (“Under Armour Customer Reviews,” 2015). Under Armour has obviously lost this customer and his sports team’s business due to its poor customer services. On this rating site, many customers complained that they could not post negative reviews on

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Under Armour’s own website. The reviews were declined by the company because they were not positive (“Under Armour Customer Reviews,” 2015). This made a lot of customers really disappointed with the brand. Another customer, Dave from SiteJabber, posted reviews on September 15, 2015. He also had a similar problem with Under Armour, which is that he had not heard anything from Under Armour in nearly five weeks after he sent an email out, so he needed to contact them again about his issues (“Under Armour Reviews,” 2015). There must be many situations like this happening daily since people have nowhere to post their complaints. Under Armour has to seriously work on this in order to keep their current customers satisfied and attract new customers.

5. Internal Supply Chain Management Due Diligence – As previously mentioned in Supply

Chain Model that Under Armour’s athletic supply chain is a core element in driving rapid growth Under Armour’s confident, visionary, supply chain centric competitive business philosophy. That being said, Under Armour has great opportunities to expand into other countries to increase sales and its market cap. To do so, they have to expand their game plan by doing things such as increasing marketing in other countries, as well as working on different product lines for popular emerging sports markets, such as yoga, women’s sport bra etc. with an efficient methodology to control supply chain model (Under Armour, Inc., 2015). Supply chain improvements and a favorable sales mix drove a 71% gain in diluted earnings per share, to $0.06 -- and that's adjusted for Under Armour's recent 2-for-1 stock split. By contrast, analysts were only looking for earnings of $0.04 per share (Symington, 2015). This is very high time that Under Armour take care of its supply chain model and inputs efficient supply chain model into practice in order to achieve greater accomplishments.

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6. Supplier Engagement and Control – In order to create successful supply chain mechanism

Under Armour is working immensely to establish a system of controls and transparency over the mineral supply chain. For example, the process includes, key supply chain analysts will implement a process to evaluate parts and suppliers in the supply chain for potential conflict minerals risk. Supplier agreements will be updated to require suppliers and licensees to provide information on their use and source of conflict minerals. Under Armour will participate with industry associations to enhance transparency and traceability in the supply chain. Under Armour uses a standardized documentation format to capture key program decisions, processes, and procedures. Under Armour will maintain conflict minerals records for a period of five years (Under Armour, Inc., 2015).

7. Product Innovation – Product Innovation is one of the key result area for Under

Armour. With the mission of making all athletes better through passion, design, and the relentless pursuit of innovation, Under Armour has focused on regulating the body temperature of the athletes as well as increasing their comfort (Under Armour, Inc., 2015). Under Armour has been stepping up in athletic wear, footwear and has even recently moved into technology by creating apps that track calories and fitness. Under Armour's success has been dependent on the ability to constantly innovate and differentiate itself from the bigger industry and its competitors.

8. Employee Training and Motivation – Under Armour provides job-related training

courses to its employees. These training courses are not part of college degree program.

In fact, it involves seminars, worshops, courses, and on- and off-site training presentations which develops and increases knowledge and skills of employee (Training Programs, 2015). Under Armour also assesses and reviews teammate’s performance

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periodically which has direct affect on the companyâ&#x20AC;&#x2122;s growth. To motivate its employees with benefits, Under Armour provides tuition reimbursement for full-time employees based on certain requirements, as well as reimbursement for professional certification study materials and exam fees (Training Programs, 2015). Kevin Plank, the founder of Under Armour, believes in reinforcing the companyâ&#x20AC;&#x2122;s culture in which the workers are encouraged to think like entrepreneurs but to act like teammates (Mirabella, 2009. c).

Communication is believed to be a key element in Under Armour where employees are counted as part of process and their voices are valued. According to Inc. (2009), employees with strong leadership skills are places strategically around the organization who take big, tough decisions and who can take pressure and responsibility.

1.

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Strategies 1. Inventory management – Under Armour should consider addressing their supply chain

to become more efficient in managing their inventory. Their current relationships with third party suppliers need to be streamlined in order to move closer to a just in time delivery strategy. Less money tied up in inventory allows for the use of capital in other, more beneficial way.

2. Revenue Generation – As of 2014 Under Armour generated 97% of their revenue

domestically. They could significantly increase their revenue by turning to the previously untapped international market. Furthermore, adding new innovative products can attract new customers and draw customers away from competitors. While this may be an expensive undertaking at first, eventually the increased revenue would allow Under Armour to evolve their strategies and improve their key financial ratios that have fallen short of their competitors.

3. Available Product Sizes – Under Armour should produce various apparel sizes to meet

customers’ needs. The company should have more options of sizes to help customers find their perfect clothes for short, tall, skinny, and oversize people.

4. Online Customer Service – Under Armour should hire professionals to effectively train

its employees’ customer service skills. They should be giving their employees monthly or seasonally customer service qualification exams. Also, Under Armour can have secret shoppers come in to test the company and its employees. Plus, the company can set up best customer service awards to encourage employees and motivate them. Last but not least, Under Armour has to change its review pages on its website. They should allow

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customers to post any comments, not just limit them to positive reviews. If the company wants to move on and be more competitive, it will need to hear about all of the company negatives in order to make changes and improve it.

5. Internal Supply Chain Management Due Diligence – Under Armour should and have

started recently to establish a governance model to oversee the implementation and ongoing management of its conflict minerals compliance program. The objective is to develop, document and maintain a governance structure which enables sustainable compliance and actively mitigates the risk of not meeting regulatory requirements. The goal of this strategy is to systematically condense the extent of exposure to certain risk and the likelihood of its occurrence. In addition to that, Under Armour should implement the risk management plan, monitor and track performance of risk mitigation, report back to designated senior management and consider suspending or discontinuing engagement with a supplier after failed attempts at mitigation (Under Armour, Inc., 2015).

6. Supplier Engagement and Control – Under Armour will communicate its policy regarding

conflict minerals to all suppliers and provide those suppliers identified as “at-risk” with compliance training. Under Armour will provide a feedback mechanism on its website available to all interested parties to provide information or voice their concerns regarding the Company’s sourcing and use of conflict minerals in its products. Last, UA should consider increased engagements with their suppliers’ indigenous governments to show a concerted effort towards increased social responsibility (Under Armour, Inc., 2015).

7. Product Innovation – Under Armour will continue focusing on product innovation and

try to develop the most high-tech products in order to continue the expansion of its

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product line and development. They should come up with products that are rare and difficult to be replaced by other competitors. They should target different market segments in selling new quality products. The expansion of womenâ&#x20AC;&#x2122;s, footwear, international, and direct-to-consumer business, and continual business growth are Under Armour's key growth strategies.

8. Employee Training and Motivation â&#x20AC;&#x201C; Under Armour should provide onsite job-related

training and learning opportunities of its products and processes Although it has been included training and development goals as part of the employee's annual performance review and assessment, it should be mandatory and more frequently done.

According to Inc. (2009), employees with strong leadership skills are placed strategically around the organization who take big, tough decisions and who can take pressure and responsibility. They should motivate their employee by providing benefits such as bonus, awards and recognition.

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Decision Criteria To achieve the financial objectives, Under Armour overcome one of its biggest criticisms and declined the number of days in inventory from Jun.2014 (167.15) to Jun. 2015 (159.54).

(Gurufocus, 2015). Through reduced its inventory, Under Armour has less money tied up in inventory and those money allows for the use of capital in other. The following table clearly reflects the significant improvement of inventory management.

Table # 14 Inventory Turnover Ratio Statistics High

Average

Low

10.93

4.47

2.62

(March 31, 2014)

(June 30. 2015)

With the purpose to effective structure company’s internal management systems to support their supply chain, they conformed in all material respects with the OECD, and establish a system of controls and transparency over the mineral supply chain. In order to do so, Under Armour established “a code of conduct for suppliers” website page under their office website, they also provided their California transparency in supply chain act of 2010(SB657), Conflict Minerals report 2014 and Conflict Minerals report 2013, so that all interested parties can make their own voice through that website (Uabiz, 2015).

Employee training effectiveness is determined through improvement in job performance.

Under Armour provides many product and equipment training for their employees, which include introduction to the product, principle of operation, installation mechanical systems, software, and operation and so on. Each employee will received a training record created by their

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department supervisor to evaluate the effectiveness of training (Buckley, 2015). In addition, their full-time teammates are also eligible for tuition reimbursement as well as reimbursement for professional certification study materials and exam fees (Underarmour, 2015). After their employee has a professional training in person, they will understand the majority of the products and will give customer a better associate with help and sales.

Under Armour had some customer service problems such as their apparel size could not meet customer need and its unsatisfied online customer services. For customersâ&#x20AC;&#x2122; convenience, Under Armour now put together a comprehensive fit guide to help their customer find out the right fit for them. Under Armour stated that their gear was built to be consistent with traditional sizing parameters, so that customer can order their apparel just according their real body size with no worry. To improve online customer service, UA has a universal guarantee of performance statement. According this guarantee, the return shipping is free and the processing timeframe is currently 5-9 business days from date of receipt.

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Balanced Scorecard Table # 15 Key Result Areas Financial:

Measures

Strategies

1.) Inventory Management (O)

1.) Evaluate days in inventory supply and inventory turnover ratio

1.1) Improve supplier relationships to streamline manufacturing process

2.) Revenue Generation (O)

2.) Measure revenue

1.2) Transition into a just in time inventory strategy 2.1) Expand customer base internationally 2.2) Offer new products to attract new customers

Customer Service: 1.) Available Product Sizes (W) 2.) Online Customer Service (W)

1.) Tracking for new sizes offering 2.1) Customer satisfaction survey 2.2) Have secret shoppers to evaluate

Internal Process: 1.) Internal Supply Chain Management Due Diligence(W) 2.) Supplier Engagement and Control(W)

Growth and Learning: 1.) Product Innovation(S) 2.) Employee Training

1.1) Increase more sizes options 2.1) Hire professionals to train employees 2.2) exam employees skills frequently

1.) Provide a feedback mechanism to monitor the governance model

1.) Establish a governance model to oversee the implementation and management.

2.) Random inspection

2) Implement a favorable policy to control as well as to engage the suppliers with social responsibilities.

1.) Market review of the product and customersâ&#x20AC;&#x2122; feedback

1.) Focus on product innovation, develop the most high-tech products in order to continue the expansion of innovative product line and its development

2.) Evaluate results form performance review

2.) Training and development goals are part of employee performance review and assessment program

CONCLUSIONS

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This analysis has painted a clear picture of just how competitive the environment Under Armour and others in the athletic apparel and footwear industry find themselves in. With direct competition within retail locations among other challenges, companies must be innovative and forward looking in their strategies to remain one step ahead of their rivals. These companies share similar strategies that have led them to success. These include a fairly low priority placed on direct-to-consumer sales and heavy involvement with wholesalers and large retailers.

Ironically, the aspect that they share the most is their difference from each other. While, their business and product types undeniably overlap, their ability to carve a niche in the market has been a key factor in these companiesâ&#x20AC;&#x2122; ability to thrive.

The internal analysis of Under Armour has painted a colorful picture of the inner workings of this very successful performance apparel company. Their annual growth rates have been nothing short of amazing, and their ability to carve a niche in such a diverse and competitive industry has been remarkable. Regardless of the strategy itself, it is clear that a well thought out and executed strategy can boost a relative newcomer in the industry such as Under Armour into the spotlight and competing with giants like Nike. That being said, Under Armour is a very young company in comparison to their leading competitors. The financial analysis shows very competitive figures over the last two fiscal years with a recent drop that has widened the gap between them and Nike. This should not be a cause for alarm, however. This indicates a shift in strategy that aims at taking the factors that have made them so successful thus far, to the next level.

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RECOMMENDATIONS Under Armour has enjoyed significant growth over its relatively short 19 year lifespan.

With an average annual growth in revenue exceeding 30%, they have outpaced their competitors and claimed a substantial portion of the athletic apparel market. That being said, there is still room for improvement in order to sustain such growth. After an in depth analysis of the industry, competitors, and Under Armour itself, the following recommendations are being made to push Under Armour to the next level.

It would be a grave injustice not to acknowledge how far Under Armour has come in a relatively short time. In just 19 years they have become a leader in the athletic apparel industry among giants that have been streamlining their businesses and product lines since the 1960â&#x20AC;&#x2122;s.

Thus, it is recommended first and foremost, that Under Armour stay true to themselves. Their philosophy of providing the customer with innovative and quality products has been a key to their sustained success. Under Armourâ&#x20AC;&#x2122;s ability to continuously improve on their products and bring something truly unique to the market will remain vital in maintaining their impressive growth.

The impressive growth that has been previously discussed is even more impressive when considering that 97% of their revenue is generated domestically. A mere 3% of Under Armourâ&#x20AC;&#x2122;s revenue came from sales outside of the United States compared to Nike and Adidas who earned 54% and 85% of their revenue internationally respectively. Having clearly focused on the American market and becoming a household name in the process, it is time to expand. It is recommended that Under Armour begin focusing on international sales. Given the success that their competitors have seen, it is clear that there is an international market for athletic apparel and thus, tremendous opportunity for Under Armour to claim a piece of that market. Even a

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slight increase to 10% from their current 3% of revenue generated internationally would mean a nearly $300 million increase in revenue. Under Armour has conquered the United States and it is now time to set their sights on the international market.

Under Armour currently uses third party suppliers and manufacturers for their synthetic material and final products. Given the growth that Under Armour has experienced and will see in the future with a focus on increasing international sales, it is recommended that Under Armour explore the possibilities of revamping their supply chain. Specifically an acquisition. It is clear that Under Armour is a success and barring extreme circumstances, will remain a major player in the athletic apparel industry for the foreseeable future. This continued need for inventory poses minimal risk, and high upfront costs will be immediately offset by the elimination of premiums paid to current manufacturers. This long term strategy will not only increase margins by reducing costs in the long run but will allow for the retaining of proprietary information and most important, vastly improve inventory control.

The final recommendation for Under Armour is for them to dive into the blue ocean of fitness technology. While fitness technology in general is a very popular industry with many competitors, the available products have many similarities. They are all external devices. A quick visit to a sporting goods store will reveal an abundance of wearable devices that track steps, heart rate, etc. They come in the form of watches, chest straps, and even chips that fit into running shoes. However, Under Armour has also begun the development of a unique product.

The E39 compression shirt is a quite literally an electric shirt. Built in sensors track heart rate and breathing patterns and accelerometers allow for the analysis of movement with the ultimate goal of improving performance. While this product is geared towards professional and even college level athletes, it does present a tremendous opportunity. Under Armour has the ability to

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take a shirt that many athletes already wear and incorporate technology that far exceeds the features available in current products while at the same time eliminating the need to wear a bulky wrist band or being tangled in wires from a chest strap. In an era when more and more people are becoming active and events like obstacle course races are growing in popularity by the day, Under Armour could very well bring a unique product into an emerging market. Furthermore, Under Armour recently acquired the cell phone application, MyFitnessPal. This would allow for a unique platform where data from the wearable technology could seamlessly sync with the userâ&#x20AC;&#x2122;s smartphone further increasing the user experience.

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APPENDICES. A Team Member Assignments Team Members

Section of Report Contributed External Report

Internal Report

Ashish Bhandari

Driving Forces; Key Success Factors

Weighted Competitive Strength Assessment

Narayan P. Dhakal

General Environment

Supply Chain

Xiangle Jiang

Competitor Environment; Title page; Table of Contents; References

Competitive Advantages; Title page; Table of Contents; References

Strategic Group Map; Introduction; Conclusion

Financial Analysis; Pro Forma; Introduction; Conclusion

Industry Environment

Resources; Capabilities; Core Competencies; SWOT

Philip Paul

Xiaoya Song

Final Report 2 KRA & Strategies: Growth and Learning; Balanced Scorecard 2 KRA & Strategies: Internal Process; Balanced Scorecard; Executive Summary 2 KRA & Strategies: Customer Service; Balanced Scorecard; Conclusions; Table of Contents; References; Appendices: Team Member Assignments; Visual Slides 2 KRA & Strategies: Financial; Balanced Scorecard; Introduction; Recommendations; Appendices: Financial Decision Criteria

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APPENDICES. B Financial Statements NIKE INC CLASS B (NKE) INCOME STATEMENT Fiscal year ends in May. USD in millions except per share data.

Revenue Cost of revenue Gross profit Operating expenses Sales, General and administrative Total operating expenses Operating income Interest Expense Other income (expense) Income before taxes Provision for income taxes Net income from continuing operations Net income from discontinuing ops Net income Net income available to common shareholders Earnings per share Basic Diluted Weighted average shares outstanding Basic Diluted EBITDA

2013-05

2014-05

2015-05

TTM

25313 14279 11034

27799 15353 12446

30601 16534 14067

31033 16692 14341

7780 7780 3254

8766 8766 3680

9892 9892 4175

9989 9989 4352

18 3272 808 2464 21 2485 2485

-136 3544 851 2693

30 4205 932 3273

69 4421 931 3490

2693 2693

3273 3273

3490 3490

2.77 2.71

3.05 2.97

3.8 3.7

4.06 3.96

897 916 3767

883 906 4312

862 884 4824

859 882 5011

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UNDER ARMOUR NIKE INC CLASS B (NKE) BALANCE SHEET Fiscal year ends in May. USD in millions except per share data.

Assets Current assets Cash and cash equivalents Short-term investments Total cash Receivables Inventories Deferred income taxes Prepaid expenses Total current assets Non-current assets Property, plant and equipment Gross property, plant and equipment Accumulated Depreciation Net property, plant and equipment Goodwill Intangible assets Deferred income taxes Total non-current assets Total assets Liabilities and stockholders' equity Liabilities Current liabilities Short-term debt Accounts payable Taxes payable Accrued liabilities Other current liabilities Total current liabilities Non-current liabilities Long-term debt Deferred taxes liabilities Total non-current liabilities Total liabilities Stockholders' equity Common stock Additional paid-in capital Retained earnings Accumulated other comprehensive income Total stockholders' equity Total liabilities and stockholders' equity

2013-05

2014-05

2015-05

3337 2628 5965 3117 3434 308 802 13626

2220 2922 5142 3434 3947 355 818 13696

3852 2072 5924 3358 4337 389 1968 15976

5500 -3048 2452 131 382 993 3958 17584

6220 -3386 2834 131 282 1651 4898 18594

6352 -3341 3011 131 281 2201 5624 21600

178 1646 290 1572 240 3926

174 1930 636 1993 294 5027

181 2131 245 3375 402 6334

1210 1292 2502 6428

1199 1544 2743 7770

1079 1480 2559 8893

3 5184 5695 274 11156 17584

5868 4871 85 10824 18594

6776 4685 1246 12707 21600

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UNDER ARMOUR INC CLASS A (UA) INCOME STATEMENT Fiscal year ends in December. USD in millions except per share data.

Revenue Cost of revenue Gross profit Operating expenses Sales, General and administrative Total operating expenses Operating income Interest Expense Other income (expense) Income before taxes Provision for income taxes Net income from continuing operations Net income Net income available to common shareholders Earnings per share Basic Diluted Weighted average shares outstanding Basic Diluted EBITDA

2013-12 2014-12 TTM 2332 3084 3688 1195 1572 1898 1137 1512 1790 872 872 265

1158 1158 354

1413 1413 377

-4 261 99 162 162 162

-12 342 134 208 208 208

-20 357 143 215 215 215

0.77 0.75

0.98 0.95

1 0.97

211 216 316

213 219 426

215 222 469

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UNDER ARMOUR UNDER ARMOUR INC CLASS A (UA) BALANCE SHEET Fiscal year ends in December. USD in millions except per share data.

Assets Current assets Cash and cash equivalents Total cash Receivables Inventories Deferred income taxes Prepaid expenses Total current assets Non-current assets Property, plant and equipment Gross property, plant and equipment Accumulated Depreciation Net property, plant and equipment Goodwill Intangible assets Deferred income taxes Other long-term assets Total non-current assets Total assets Liabilities and stockholders' equity Liabilities Current liabilities Short-term debt Accounts payable Accrued liabilities Other current liabilities Total current liabilities Non-current liabilities Long-term debt Other long-term liabilities Total non-current liabilities Total liabilities Stockholders' equity Common stock Additional paid-in capital Retained earnings Accumulated other comprehensive income Total stockholders' equity Total liabilities and stockholders' equity

2012-12

2013-12

2014-12

342 342 176 319 23 44 904

347 347 210 469 38 64 1129

593 593 280 537 52 87 1549

326 -145 181 4 23 46 253 1157

396 -172 224 122 24 31 48 449 1578

522 -217 306 123 26 34 57 546 2095

9 144 85 14 252

105 165 134 22 427

29 210 148 35 422

53 35 88 340

48 50 98 524

255 68 323 745

0 321 493 2 817 1157

0 397 654 2 1053 1578

0 508 857 -15 1350 2095

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APPENDICES C. Visual Slides

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