Under Armour is a sports apparel company founded in 1996 that sells clothing and equipment. It has pursued several strategies for growth, including signing influential athlete endorsers, expanding internationally, acquiring fitness technology companies, and increasing marketing to women. Currently, Under Armour faces challenges competing with Nike and Lululemon in the women's market and improving its fashion component to attract today's consumers.
1. BA 680 Strategic Organizational Leadership
Strategic Analysis: Under Armour
Submitted to: Dr. John Cirone
By: Timothy Buana
April 20, 2016
2. 1
Strategic Analysis: Under Armour
1. Company Choice: Under Armour
2. Company Background
a. Company Overview
Under Armour is a company
started in 1996 and mainly sells sporting
goods ranging from but not limited to
apparel to sports equipment. Under Armour
started from the idea of Kevin Plank, current
Under Armour CEO and a former University
of Maryland football special teams’ captain, to create revolutionary sport apparel because he
is tired of having to change his cotton T-shirts that are soaked with sweat multiple times a
day because of Football practice. He got his inspiration from the compression shorts that he
wore on training and he noticed that the compression shorts did not absorb sweat and actually
was comfortable. He then got the idea of creating apparels that are designed to be the
solution of this problem, apparels that will stay cool and dry even in the heat. He continued
his research of using synthetic fabrics as the clothing material and it paid its dividend. He
named the product #0037 or the Under Armour HeatGear®
, keeping its wearer comfortable
despite of the heat and sweat.1
Plank started this business in his grandmother's basement back in 1996 in the
Washington D.C. area. The first time he started this business, he uses the connections that
he had through playing sports. Having friends who were going pro to the NFL (National
Football League) surely was an advantage Plank has during his early days in the business.
The first sales he had done amounted up to $17,000 by the end of 1996, and this sale was
generated through his effort of traveling up and down the east coast to introduce his
innovative products to the potential buyers.2
In the end of 1998, the growth of the company
forced Plank to move from his grandmother’s basement to the new Under Armour
headquarter and warehouse in Baltimore, MD.
Source: http://www.UnderArmour.com
3. 2
The brand took
off when Plank decided to
take part in supplying
product needed in a movie
titled “Any Given Sunday”
in 1999. He then used the
momentum and bought a
print advertising space in
the ESPN the magazine.
This move was proven to be
successful seeing from the
$750,000 increase in sales
that year.3
Based on this
growth and positive feedbacks from the customers, Plank started to expand Under Armour
market to another level by entering the women product line in 2003, and the athletic
footwear market in 2006. The company went to public in 2005 and became the first U.S.
based company in the past 5 years that saw at least 100% rise during the first day of the
IPO.4
Under Armour stocks at one point was traded at $31, more than double of its offering
price at $13. Under Armour generated $3.963 billion in revenue in 2015, seeing a 28.6% of
increase from the previous year.5
Under Armour is now trying to generate more revenue
outside of the U.S., just like what its biggest competitor, Nike, is doing.
b. Company Foundations
Vision: “EMPOWER ATHLETES EVERYWHERE”6
Mission: “MAKE ALL ATHLETES BETTER THROUGH PASSION, DESIGN,
AND THE RELENTLESS PURSUIT OF INNOVATION”7
Values: In order to fulfill the vision and mission that the Under Armour has as a great
company, Under Armour creates 4 values that it expects its employee to hold dearly.
The 4 values are:
o “Makes Great Product
Kevin Plank, CEO and Founder of Under Armour
Source: http://www.UnderArmour.com
4. 3
o Tell a Great Story
o Provide Great Service
o Build a Great Team”8
Basing on the values that Under Armour holds, the company created an “I Will”
campaign that empowers its employees to pursue the company’s goals. The “I Will”
campaign consists of these 4 wills:
o “Act Like a Global Citizen
Cross timezones, and encourage the diverse multi-cultural energy and global
ambition of Our Brand. Regardless of where you work or how much you travel,
take action with an international mindset and a passion for bringing our
message to all athletes everywhere.
o Think Like an Entrepreneur
You’re an OWNER of this Brand. Be accountable. We’re the underdog whose
successes and failures rest fully on our own shoulders and are not separated
by organizational charts or office locations. Nothing’s done until its DONE,
DONE, DONE. And always, always, always be Humble & Stay Hungry.
o Create Like an Innovator
Taking risks and failing is a part of striving for greatness and will truly lead us to
making our defining product one day. But at every level and across every
business, be ready to adjust and drive change, while maintaining the core
attributes that define our Brand’s Culture.
o Perform Like a Teammate
UA is special…which means it’s not for everyone. The fast pace of the Brand
demands our respect, integrity, and transparency. And our ambitious goals
require that we empower, support, challenge, and inspire our Teammates to be
great.”9
Current Goals or Objectives
o Under Armour plans to double its 2014 fiscal year revenue by 2018
according to Kevin Plank in Investor Day 2015.10
5. 4
o Improving international sales in the long run. In 2013 fiscal year, only 6% of
Under Armour’s revenue is generated from outside the U.S., which is
nothing compared to Nike’s 56%.11
o Helping athletes to reach new level in sports by using technology to get data
that were not be able to be measured before. Kevin Plank spent $1 billion on
fitness to expand Under Armour business.12
o After being founded as a brand that is associated with men’s sports apparel,
Under Armour has been trying to find itself some share in women market.
Kevin Plank believes that women’s business will be the key of company’s
growth in the future.13
Strategies
o Signing Influential Athletes and Models
Signing influential people as spokespersons is an important move in this
business. Having many public figure that wear the brand’s merchandises will
drastically increase the brand recognition to
the public. During these past years, Under
Armour has successfully signed several
athletes with amazing achievements. One of
the example is Jordan Spieth. Under
Armour signed Spieth in 2013, not long
after he turned pro, and now Under Armour
just extend his contract for another 10 years
in 2015.14
Spieth won the Masters in 2015,
making him the second youngest ever to
win it. The Masters is 1 of the 4 major golf
championships that which title is prestigious
in professional golf. With Spieth’s
name getting bigger and more famous, Under Armour is able to establish its
position in golf industry and help it to gain more revenue from it.
Jordan Spieth, Second Youngest to Win the Master
Source: www.UnderArmour.com
6. 5
While Spieth help
Under Armour to gain a footing
ground in the golf market, there
is another Under Armour
signee that makes a significant
impact to Under Armour
footwear industry. That person
is Stephen Curry. Curry is an
exceptional Basketball player
that brought his team, Golden
State Warriors, to be NBA
champion in 2015. He also won
NBA MVP (Most Valuable
Player) award in the same year. Curry brings humongous impact to Under
Armour’s basketball footwear industry. Because of his popularity, Under Armour
saw an 350% increase in basketball shoes sales since its inception.15
Because of
the impact that Curry has made, Under Armour is predicted to be valued at $14.1
billion in normal case and $28.2 billion in bullish scenario.16
Under Armour goal
of doubling its revenue by 2018 is not impossible if they are supported by superb
performance and the rise of its athletes’ popularity both on and off the court.
Besides using athletes
to endorse its product, Under
Armour also signed some
public figures such as women
supermodels to endorse its
products. One of the
supermodels that Under
Armour signed is Gisele
Bündchen. Bündchen is a
fashion model from Brazil and also a wife of Tom Brady, a professional
American football playing for New England Patriots of NFL. This move is done
Stephen Curry, 2015 NBA MVP and NBA Champion
Source: http://www.slamonlineph.com/
Gisele Bündchen is posing for Under Armour
Source: Gisele Bündchen’s Instagram account
7. 6
by Under Armour in order to penetrate women’s market. Being in women’s sports
apparel market is essential for Under Armour because of its huge share of the
overall sporting apparel market. Signing influential people as spokespersons for
the company is proven to be effective throughout the year as we can see
o Increasing Presence in International Market
Under Armour has been trying to increase their presence in the international
market by building more and more brand awareness in the markets outside of the
U.S. Under Armour international revenue has been increasing steadily throughout
the year, starting from 6% of total revenue in 2013, to 9% of total revenue in
2014 and now at 11% of total revenue in the second quarter of 2015.17
In order to
improve the brand recognition to the international market, Under Armour has
started to sign international professional sports club in order to increase its
presence. In 2011, Under Armour sign a deal with Tottenham Hotspur, an
English professional soccer club playing in the Premier League, for a 5 year deal
from 2012 – 2017.18
This is a good move by Under Armour as the company tries
to introduce people to its brand which is relatively new to the international
market. The company targeted to open 100 Brand House stores internationally
with most stores opened mainly in Latin America and Asia.19
These effort will
help Under Armour to compete with Nike, Luluemon, Athletica, and VF
Tottenham Hotspurs 2015/2016 Home Jersey
Source: www.tottenhamhotspurs.com
8. 7
Corporation in the term of international sales as Under Armour is lagging behind
these 3 American companies.
o Having a Research and Development Division Focusing on Improving
Sports Technology
Kevin Plank has envisioned Under Armour as one of the leader in the sports
technology with the development of wearable technology. In order to be ahead in
the competition Plank made big purchases of technology companies to keep up
with the latest technology. Based on his belief and the company’s mission which
is to make athletes to perform better through technology and innovation, Plank
aggressively pursues this idea. In these past few years, Under Armour has spent
almost $1 billion to make this vision happen. The $1 billion spent includes the
acquisition of 3 major fitness applications that have tons of users helping Under
Armour with the transition. The 3 major fitness apps are:
MapMyFitness – Acquired for $150 million
“MapMyFitness is the leader in Connected Fitness – building the
world’s largest digital fitness community by providing interactive
tools to make fitness social, simple and rewarding. The flagship
consumer brands – MapMyRun, MapMyRide, and MapMyWalk –
are among the most popular apps on iOS and Android and the
cloud-based platform has been supporting millions of users
since it launched in 2007. MapMyFitness is an open platform,
seamlessly integrating with more than 400 fitness tracking
devices, sensors and wearables. Headquartered in Austin, Texas,
MapMyFitness has over 100 employees and offers integrated
marketing and advertising solutions, premium consumer
subscription products, and a SaaS platform that helps partners
of any size tap into advanced fitness tracking technology,
workout database, nutritional data, calorie calculators, and 160+
million of the best running, cycling and walking routes around
the world.”20
MyFitnessPal – Acquired for $475 million
9. 8
“With over 80 million users, MyFitnessPal has helped millions of
people achieve and maintain a healthier and happier lifestyle.
With a database of over 5 million foods and hundreds of
exercises, top fitness technology partners and community
insights, MyFitnessPal is the leading free resource for achieving
and maintaining health goals. MyFitnessPal is headquartered in
San Francisco, CA.
Endomondo – Acquired for $85 million
Founded in 2007, Endomondo's social fitness network and
popular Endomondo Sports Tracker mobile app help turn a
smartphone into a personal trainer and social motivator. Now
with 20 million registered users around the globe, Endomondo
lets people track workouts, analyze performance, and support
each other so people become and stay active.”21
With these 3 acquisitions, Under Armour is trying to catch up with its
current greatest competitor, Nike. This move are questioned by many economic
analysts because they are not sure whether this technology will revolutionize the
sports apparel industry. Plank did this simply to work on the vision of the
company which is to improve the performance of the athletes. Plank once said “It
is absurd that you know more about your car than you know about your body.”22
This statement fuels Plank to bet in this venture even though the future of this
industry cannot still be predicted.
o Creating a Campaign to Inspire People in Multiple Different Fields
Under Armour created a campaign called “Rule Yourself” which
advertisements show how hard professional athletes work to reach the level where
they are now. Besides promoting the brand, the advertisements are also used to
urge people to work hard to reach their goals and dreams. The advertisements
feature many different popular and successful athletes such as but not limited to
Michael Phelps (U.S. national swimmer who won the most medals in the
Olympics), Stephen Curry (A NBA champion and NBA MVP), Misty
10. 9
Copeland (A famous ballet dancer), and Jordan Spieth (The Masters golf
Championships winner).
According to Under Armour executive vice president of global marketing,
Adam Peake, says that the purpose of this ad is to show that training is the only
way for athletes to get better. The other thing that Adam Peake says is, “Under
Armour provides the footwear, apparel and equipment the athlete needs to push
through a tough workout. But we also want to give them that extra inspiration to
improve every day, to keep building their inner army, and to stay focused on
success even when the going gets tough.”23
Even though it is hard to measure the
effectiveness of the campaign to the change of the revenue, this campaign totally
will bring Under Armour closer to the heart of potential customers. This
advertisement generally received positive reviews from the viewers which is good
for the future expansion of the brand. Having potential customers remembering
the brand will affect them when they are making purchase decisions on sports
apparel which eventually will lead to the increase sales in the future.
o Increasing Women’s Brand Recognition
Kevin Plank has seen the importance of women market for the development
of the Under Armour Brand. Currently, the sales generated from selling women’s
Stephen Curry in the Rule Yourself Ad
Source: http://static.businessinsider.com/image/55daf684bd86ef14008b54ba/image.jpg
11. 10
sportswear makes up to 30% of the total revenue of the company in 2015, up from
just 20% in 2005.24
Under Armour has been pushing campaigns that would boost
the way women see the brand. Under Armour has been too long to be seen as
sports brand for men. The campaign that involves popular women figures such as
Lindsey Vonn (Olympic Skier), Misty Copeland (A famous ballet dancer), and
Kelley O’Hara (USA national soccer team player) are deemed to be successful to
expose the brand to the potential customers. “I Will What I Want” is the title of
the campaign that Under Armour use to encourage women to give it their all to
reach their dreams. The other campaign that Under Armour did is the campaign
using Gisele Bündchen that showed how she fought the haters who keep insulting
her in social media. The Gisele’s campaign was considered successful according
to Droga5, the advertising agency Under Armour used to conduct its campaigns.
Droga5 said that, “the Gisele campaign led to 1.5 billion media impressions, $15
million in earned media, an average of four minutes spent on the site at the
campaign's peak, a 42 percent increase in visits to UA.com and a 28 percent sales
increase for the brand.”25
These efforts are the evidence that Under Armour is
seriously want to improve its women’s market which will be vital to the
company’s wellbeing in the future.
c. Statement of Problem / Opportunity
Under Armour has been under a lot of problem lately in the women’s market after
trying to compete against Nike and Luluemon in the field. Seeing all the competition that
Under Armour is facing shows that Under Armour has a lot of room to grow. Under
Armour stocks has been under fire lately after a Morgan Stanley analyst wrote “We think
UA products for women are lacking the fashion component today's consumer is
demanding and can now easily get from the multitude of new brands that have emerged
as legitimate competition. UA is attempting to fix this issue, but it is unclear if it will
work. If it does not, we think it will be hard for UA to replace the growth it is expecting
in this category.”26
This is a big problem for Under Armour to fix because just after that
comment, the stock went down almost 6% just after that statement was released. 27
This
problem needs to be fixed in the near future to avoid future setbacks to the brand. The
12. 11
other problem to this brand is the competitors that are anticipating Under Armour and its
moves. Nike is unquestionably still out of Under Armour reach, but Nike is anticipating
Under Armour invasion to its market share because of the good performances that Under
Armour has done since its inception. Under Armour has to be extra innovative in order to
stay strong in the competition
Besides the big problems the company is dealing with, there are good
opportunities where the company can grow to another level. With the connected fitness
app, Under Armour is trying to lure in new customers to the brand. Under Armour has
160 million users who are using the apps regularly and it has more users than any of its
competitors.28
In order to stay ahead of the game, Under Armour has made a deal with
IBM to have the service of Watson, IBM most famous artificial intelligence, to bring
virtual coaching to its users using the users’ data. This move certainly will bring Under
Armour big opportunities to compete in this field. The other opportunity that Under
Armour has is the international market. Under Armour still leaves a plenty room to grow
in the international market and footwear market. The data shows it that Under Armour
only generates about 12% of its total revenue from outside the U.S. which clearly lags
behind its competitors. If Under Armour takes a bold move that will revolutionize its
international sales then the company will have a great opportunity to expand its market
share. In the footwear market, Under Armour has enjoyed continuous growth over the
year. Under Armour footwear revenue in 2015 is at $678 million which is almost 4 times
bigger compared to the footwear revenue in 2012 with $182 million.29
With this kind of
growth, Under Armour can dominate the footwear industry in the future.
3. Situational Analysis
a. Environmental Scanning
i. Demographic
Age / Population
Under Armour mainly targets people who are into sports, ranging from
recreational to competitive purposes. In the latest advertising campaign, Under
Armour is targeting women with the age of 18-34 which generates the largest
13. 12
sales.30
I would say that the age range for the men segment in the company will be
relatively close to that range. As people grow older they are less likely to exercise
and care about their appearance. Seeing that many Under Armour clothing is
made to fit and tight fitting, people who are out of shape are less likely to wear it
since it does not look that good on them.
Sex
Under Armour was founded as a brand that solely served men in competitive
sports. It was not until 2003 that Under Armour started the marketing line for
women’s products in the brand and now the women’s line generates around 30%
of the company’s total revenue.31
Under Armour has been since trying to push
more women’s products to the market through various marketing campaigns that
mostly target women.
Geographic Distribution
In the end of 2015, Under
Armour reportedly has 30
Brand House stores and 161
retail stores.32
Under Armour
stores are located across the
globe in order to anticipate
increasing demand in the
market. Brand House stores
has a purpose which is to show the customers the power of the brand itself with
having a full control of displaying what the company wants. Brand House stores
will also display the latest technology available by the company. Brand House
stores carry the best items available with a full price tag and on the other hand, the
retail stores feature more items with more affordable price to customers.
Income
Under Armour product prices are relatively expensive in the sports apparel
departments. We can see that Under Armour targeted a niche market where
Under Armour Newly Opened Brand House Stores in Chicago, IL
Source: http://www.activatethespace.com/UA-Chicago.html
14. 13
people really intend to use its product to improve their performance. Many of
Under Armour customers must be well off to be able to afford expensive gears for
sports. Sports can be a luxury for some people because they cannot afford to use
their time to exercise. According to the U.S. Census bureau, a typical American
family earns $53,657 in 2014.33
I would say that Under Armour customers’
income should range around that amount or higher because people who are well
off will have extra money to spend for sports.
ii. Economic
Many economic factors can affect customers whether they want to spend money
to luxury items such as sporting goods and hobby items. According to the data
from St. Louis fed, in 2015 the retail sales for sporting goods, hobby items, books,
and music stores reaches $7.374 billion.34
From the graph that we see in graph 1,
we can see that the sales of is trending up in the past 5 years. We learn that
customers are willing to spend more on this category. This is a good sign for
Under Armour business since they know that the demand of their product is
trending up in the future.
Graph 1: Sales of Sporting Goods, Hobby, Book, and Music Stores
Source: https://research.stlouisfed.org/fred2/series/RSSGHBMS
15. 14
iii. Political / Legal
OSHA (Occupation Safety and Health Administration)
OSHA is one of the agencies under the U.S. Department of Labor that regulates
employers to provide a safe and healthy working conditions for employee. OSHA
is enacted on 1970 by President Richard M. Nixon.35
Through OSHA regulations,
companies need to provide their employees with good working conditions that are
safe and healthy as a part of the employees’ right.
FTC (Federal Trade Commission)
FTC regulates companies to comply with rules regarding the market in order to
protect consumers and also the competition in the market.36
FTC usually will act
if there is a violation to the rules enforced by FTC. FTC will make sure that
companies have a healthy competition in the market.
USPTO (United States Patent and Trademark Office)
Companies that involves with technology and design like Under Armour needs to
protect its intellectual properties through creating a trademark and a patent.
USPTO is a federal agency that helps company to register a trademark and accept
patent.37
By registering trademarks and patents, companies are at ease in case of
their intellectual properties are stolen. On the other hand companies also need to
be careful not to infringe any patent and trademark which may cause punishment
by the law.
EEOC (Equal Employment Opportunity Commission)
EEOC is a government agency that regulates against discrimination to job
applicants or employee. EEOC regulates companies to treat people with
difference race, color, sex, national origin, age, disability or genetic information
equally. EEOC also has the power to do an investigation if any violation occur.
16. 15
iv. Sociocultural
Workforce
Many companies located in the U.S. who needs labors to produce their goods
are often forced to outsource the job to other countries because of the lower
cost of labor than in the U.S. and lower cost of production helps the
companies to achieve higher profit. Many of the countries picked by the
companies have different standard of living than the U.S. The largest highlight
of the inappropriate labor lately is child labor. Many of the companies do not
run a thorough check to their suppliers which in some case many suppliers
violate human rights. Here is the quote from ILO regarding child labor:
“The ILO estimates that 170 million are engaged in child
labour, with many making textiles and garments to satisfy
the demand of consumers in Europe, the US, and
beyond”38
This has become more and more serious problem each and many human
rights activists are fighting against. Under Armour clearly states its position
regarding these social issues. In their corporate social responsibility
statement, Under Armour states that the company are against child labor and
forced labor by not purchasing the supplies from the company that are doing
Countries with the Highest Child Labor Index
Source: www.cnn.com
17. 16
those illegal practices. Discrimination, harassment, etc. that will violate
social ethics and norm also will not be tolerated.
Diversity
Companies are starting to look for more diversity in the workforce.
According to a study done in Harvard Business Review, the author says that
generally companies who have diversity in the workforce tend to innovate
more and perform better than the ones who are less diverse.39
Focusing on
the results, many companies are striving for a more diverse workplace.
Norms
According to the Oxford dictionary, the definition of norms is: “A standard or
pattern, especially of social behavior, that is typical or expected of a group”40
Targeting market globally, many companies need to see the norms and culture
of the targeted country. As we know that many eastern countries in the Asia
have a totally different culture than the countries in Europe and America.
Companies that fail to take account of norms will have a hard time to survive
globally. Under Armour tight-fitting clothes that will show body shape might
be inappropriate for some countries in the Asia and Middle East that are
The Benefit of Diversity in the Workplace
Source: http://www.forbes.com/sites/ruchikatulshyan/2015/01/30/racially-diverse-companies-
outperform-industry-norms-by-30/#7f95e6635742
18. 17
culturally more reserved and against revealing clothing. Under Armour needs
to take the difference in the cultures seriously in order to excel in other
countries globally.
Increase of Health Awareness
Nowadays companies are pushing their customers to live a healthier lifestyle.
We can see a lot of items in the grocery stores that are promoting a healthy
lifestyle such as organic produce. Younger people are getting more conscious
in the food choice that they eat (41% of the participants who are under 20 are
willing to spend more money in order to eat healthy) than the older
generations, according to the survey that Nielsen's Global Health and
Wellness Survey conducted to about 30,000 customers in 60 countries.41
When people start getting more conscious about their health, companies in
sports industries like Under Armour, are exposed to potentially significant
growth in the near future since health does not consist of diet alone but also
exercising enough.
v. Technological
Technology has developed a lot since the invention of computer. Companies are
racing against each other in order to be ahead in technology department that will
bring more innovation to the companies. As for sporting goods companies, here
are the hottest technologies available in the market:
Wearable Tech
Sports companies are pushing wearable technologies to customers. Wearable
techs’ main purpose in sports is to collect fitness data from its users. The users
can use the technology to measure their heart rate and approximately calories
burn when they are exercising. Combined with smartphone technology and
mobile broadband Internet, wearable techs can give you decently accurate
19. 18
numbers with the help of the server
through the Internet. Under Armour
is partnering with HTC to release its
wearable technologies called UA
HealthBox™. The UA HealthBox™
consists of a wristband, a heart rate
monitor, and a scale that can be
connected to a smartphone to track
and analyze the data from all those
devices. Under Armour is really
focusing in this market in near future, seen from Kevin Plank move to spend
around $1 billion in this area. When introducing this product Under Armour’s
VP Creative Design and Brand, Brian Boring, says “In 1996 we changed the
way athletes dress. In 2016 we will change the way athletes live.”42
3D Printing
The invention of 3D printers
change the way people design
things which are usually
limited through 2 dimensional
printing. The 3D printing that
are getting popular lately
revolutionize many industries
in the term of designs. Only
imagination that limits the
usage of 3D printers. In one instance, there is a student from Israel’s Shenkar
art and design school named Nina Peleg who did a project on 3D printed
clothing. She says that the project took around 220 hours to print and about 2
pounds of materials.43
Under Armour became the first company ever to sell a
3D-printed athletic shoes to the public in which the shoes are limited to 96
UA HealthBox™ are released with $400 price tag
Source: money.cnn.com
UA Architech, 3D-printed shoes by Under Arnour
Source: www.underarmour.com
20. 19
pairs and are sold at $300 each.44
This innovation by Under Armour surely
will revolutionize the footwear industry in the future.
vi. Global
Under Armour’s majority of sales is still generated in the U.S. and the company
has been trying to expand overseas since then. Under Armour is targeting to have
800 stores open internationally in 40 countries by 2018.45
vii. Physical
Companies are getting more conscious regarding the environment. Under Armour
clearly states in its code of conduct that “Under Armour suppliers and their
subcontractors will comply with all environmental rules, regulations and
standards applicable to their operations.”46
Under Armour has some products that
are made from recycled materials which is friendly to the environment.
b. Stakeholder Analysis
The Stakeholders of Under Armour are:
Primary Stakeholders
Shareholders
Shareholders are an important part of Under Armour since the company went to
public back in 2005. Shareholders have been enjoying Under Armour’s
spectacular growth in its first decade after the company went public. Shareholders
need to be informed about the latest decisions that decide the future of the
company because technically they are the ones who own the company.
Employees
Employees’ role are irreplaceable for companies. Under Armour currently
employs 13,400 in 2015.47
As a highly innovative company Under Armour relies
heavily on its employees to perform well and being creative. According to Under
Armour websites, employees receive benefits in health, wellness, insurance
protection, financial health, life, work and family.48
Keeping employees satisfied
21. 20
with their job is important to keep the employees performance at the workplace.
Employees need to know changes that are happening in the company so that they
have the ownership feeling that will help them to be more responsible to the
company.
Executives
Executives are one of the most important stakeholder of a company since they are
the ones who are entrusted to make critical decisions that will decide the future of
the company. Their interest of the well-being of the company are high and they
have to always be in the loop regarding things that are happening in the company.
Consumers
Under Armour customers are mainly athletes who strive to perform better in the
field. Without the supports from the consumers, Under Armour will not be able to
grow as big as it is now. Consumers do not need to be informed with every
decision that the company takes. Consumers should be informed if there are
exciting changes that are happening and will benefit them in the future.
Secondary Stakeholder
Communities
Under Armour are committed to give back to the community as stated in its
website. Under Armour considers that communities are the ones who inspire them
to do better.49
There are 3 causes that Under Armour is currently participating in 3
causes:
UA Power in Pink®
"Our Mission: UA Power In Pink® celebrates the many women
who use fitness and exercise to stay healthy, and serves as a
platform to help raise awareness about breast health.
#UAPowerinPink
UA Win Global
22. 21
UA WIN Global is our commitment to empowering athletes of
the Next generation by providing youth access to sport. #UAWIN
UA Freedom
UA Freedom is our way of making sure our heroes get the
support they deserve. #UAFreedom”50
4. Industry / Competitor Analysis
a. Industry Definition
NAICS code: 339920
Definition: Sporting and Athletic Goods Manufacturing
b. Competitive Structure
Monopolistic Competition / Oligopoly
Under Armour falls under a mix of monopolistic competitions and oligopoly because
of the characteristics of the monopolistic competition are mixed with the high barrier
of entry in oligopoly scheme. Some of the characteristics are:
There are no perfect substitutes
In this kind of market, firms offer products that have the same utility but at
different style / characteristics making it impossible to find a perfect
substitutes. For example, every clothing companies will have different
technologies that constructs its products. One company will not offer the
same design or technology that the other companies offer causing the
customers to pick a certain company in order to get the design or the
technology that they want.
Entry Barrier
In the case of regular apparel industry, the entry of barrier would be low
because of the availability of garment companies who would do the
production orders for newcomers allowing them to operate. There is barely
anything that would differentiate the new entrants and the current players
23. 22
beside the brand. The thing with diversified athletic goods, the entry barrier
would be high and nothing like the ones in monopolistic competition because
of the high cost of research and development for the latest sport technology
in order for the company to relevant in the industry. Not every company can
make sports apparel with a unique technology of that certain brand.
Demands are elastic
A change in the product prices may make customers to rethink their decisions
and switch to other brand that offers relatively same items with lower prices.
Even though brand loyalty does affect the customers, a change in price can
easily affect the customers in making the decision because of the vast
availability of substitutes that have the same utility. Under Armour cannot set
its price freely considering that Under Armour has many competitions from
companies such as Adidas, Nike and Luluemon.
Product differentiation exists
This market emphasizes product differentiation because companies needs to
present a different way seeing similar products offered by the competitors.
We can see a heavy dose of advertisements are done by the companies that
are participating in this monopolistic competitions in order to show
customers the advantage of the goods sold by the companies. Under Armour
spent $15 million in its last marketing ad campaign (the biggest one so far
for Under Armour) which targeted women in order to increase the brand
exposure to women’s market.51
c. Industry Life Cycle
Having been in the industry for 20 years, Under Armour has passed the introduction
phase and is now in the growth phase. Indications that Under Armour is still in the
growth phase are:
Fast and high growth
24. 23
As we can see in Table 1, we can see that Under Armour has been enjoying
at least 24% revenue growth for the past 6 years. Even though it might not be
sustainable through the end of the industry life, now is the time that Under
Armour should accommodate the growth with appropriate innovation and
expansion.
Under Armour Revenue Growth Year by Year
Year 2009 2010 2011 2012 2013 2014 2015
Revenue (In million US$) 856.41 1,064 1,473 1,835 2,332 3,084 3,963
Growth N/A 24.24% 38.44% 24.58% 27.08% 32.25% 28.50%
Table 1: Under Armour Revenue Growth
Source: investor.underarmour.com/income.cfm
Expanding fast to accommodate growth
As we read from the earlier section of this paper, we see that Under Armour
has been striving to expand globally targeting to open a lot of stores as a
direct channel to customers in years to come. After increasing the presence of
the brand through advertising and signing foreign sports teams / athletes,
Under Armour needs to provide a channel where customers can get access to
the merchandise.
High rate of innovation
Under Armour has been innovating non-stop in these past years. The latest
technologies Under Armour is working on are the connected fitness app and
3D printed shoes. Under Armour is trying hard to be the pioneer of
innovation in its industry to stay ahead of the competition.
Advertising’s main purpose is still to increase brand awareness
Under Armour spend more and more money for advertising as the revenue
grows. Under Armour spent $330 million in 2014, up 34% from 2013 and
$125 million more than the marketing budget in 2012.52
Under Armour
needs to spend a lot of money to market the brand because they are always
being overshadowed by its arch-nemesis in the industry, Nike.
25. 24
d. Porter's Five Forces Model
i. New Entrants – Moderate Threat
In the industry that Under Armour is in, the possibility of a new entrant to
enter the industry is moderate. The amount of capital needed in order to enter
this specialized athletic apparel industry is high because of the research that
needs to be done to come up with great technologies while making them
affordable. On the other hand, there are a lot of third party manufacturer that
are independent and can produce goods on demand which can be utilized by
new entrants. Even though it is relatively easy for new entrants to enter the
industry, new entrants need to be able to create a disruption in the industry if
they want to be recognized. The loyalty that the customers have toward some
brands can make new entrants having a hard time to establish their position
in the market.
The rise of technology could bring a new threat to this industry. Seeing that a
lot of technologies start to be wearable, technology companies can have a
competitive advantage against the current players in this industry.
ii. Bargaining Power of Suppliers – Weak Power
The supplier of Under Armour has weak bargaining power toward the
company because of the high availability of the main material of the apparel
such as cotton, rubber, cloth, and fabric blends. Many of Under Armour
suppliers are located outside the U.S. mainly in the U.S. and Latin America.53
Under Armour checks each one of every supplier to comply with the
regulations and to avoid bad PR and legal challenges in the future. The other
thing that we need to know in this segment is that the competition of the
suppliers will help the industry to keep the supply cost low. The availability
of the suppliers gives power to the company to be able to switch suppliers
easily. The existence of Under Armour is vital to the suppliers especially
given the fact that Under Armour is growing at a great rate.
iii. Bargaining Power of Buyers – Moderate Power
26. 25
In this industry, buyers will have a decent bargaining power of buying. In the
industry of diversified sports apparel the product differentiation is apparent.
If the price are deemed too expensive for the customers, they can easily
switch to the other brand that offer relatively same goods with the same
utility. Companies pay big bucks for endorsement because research shows
that the way customers see the brand is important.54
Understanding this
matter, Under Armour tries to create better product with affordable price and
also tries to build its brand name through signing big names in sports and
fashion.
iv. Threat of Substitute Products – Moderate Threat
In the industry of athletic apparel, substitutes product pose a moderate threat
to Under Armour specially designed apparel. People with low budget can
substitute premium Under Armour clothing product to cheaper clothing
products from private labels that can be bought from low cost retail stores
such as Walmart and Target. Since Under Armour possesses a special
technology that are not available in some other brand the threat of substitute
products can be managed. People with low budget eventually will buy Under
Armour products if they really need to utilize the product technology that is
only available in Under Armour brand.
v. Intensity of Rivalry Among Competitors – High Threat
The threat from the old players in industry such as Nike and Adidas is high.
They have been around long enough to control majority of the market share.
A mediocre effort will not be enough to shake the competition. This is the
reason Under Armour has been innovating non-stop. Under Armour’s sales
still lags behind Nike and Adidas, but the growth of Under Armour is way
higher than those 2 companies. This shows how receptive the market has
been to Under Armour products.
Beside from those 2 major competitor, Under Armour is facing competition
indirectly from retail stores such as Walmart and Target which sells sports
27. 26
apparel at a low price and sometimes at an acceptable quality. Since Under
Armour is developing toward a fitness technology company, Under Armour
is facing competition from the technology companies that are also expanding
toward fitness area.
e. Perceptual Map
Price and quality are important factors in this industry because athletes have a need of
apparels that will help them to perform at their maximum capability. We can see that
Under Armour main competitors are Nike, Adidas, Luluemon, Columbia, and Adidas.
Under Armour
Nike
Adidas
Reebok
Columbia
Skechers
Luluemon
Under Armour Nike Adidas Reebok Columbia Skechers Luluemon
28. 27
f. Competitive Intelligence Matrix
Under Armour Nike Adidas
Critical Success Factor Weight Rating Score Rating Score Rating Score
Product Line Variation 0.20 5.00 1.00 5.00 1.00 5.00 1.00
Technology 0.16 5.00 0.80 4.00 0.64 3.00 0.48
Revenue 0.15 1.00 0.15 5.00 0.75 3.00 0.45
Brand Reputation 0.10 4.00 0.40 4.00 0.40 4.00 0.40
Celebrity Factor 0.15 4.00 0.60 5.00 0.75 4.50 0.68
P/E Ratio 0.06 5.00 0.30 2.00 0.12 3.00 0.18
Growth Rate 0.08 5.00 0.40 2.50 0.20 2.00 0.16
Retail Presence 0.10 3.00 0.30 5.00 0.50 4.00 0.40
Total 1.00 3.95 4.36 3.75
Rating Scale: 1 – Poor, 2 – Fair, 3 – Average, 4 – Good, 5 – Excellent
Product Line
Under Armour, Nike, and Adidas all have 3 main product lines which are
footwear, apparel, equipment. These 3 main lines are necessary in order to
serve athletes that plays various sports.
Technology
Technology is one important aspect that companies cannot overlook. The fast
development of technology causes sport companies the urgency to adapt so
that they will not miss a beat and help athletes to perform better. Under
Armour recently crawled up in this category by acquired 3 fitness technology
companies that will enhance the performance of Under Armour fitness
technology.55
Revenue
Revenue is one of the best indicator to measure the size of a company in the
industry. Under Armour revenue is relatively small compared to Adidas and
Nike because Under Armour is the new comer in the industry. In 2015 the
revenue for the respective companies are:
Under Armour – $3.96 Billion56
29. 28
Nike - $30.6 Billion57
Adidas - $18.4 Billion58
Brand Reputation
Brand reputation is an important factor in this industry. Brand reputation can
bring a lot of impact to the company ranging from profitability to
sustainability. Company with good reputation tends to be able to retain their
employees and generate more profit and growth.59
In some occasion, the
company has little control to the brand reputation caused by external factors;
for example, some third party suppliers and manufacturers violate the
regulations through the use of child and forced labor. That kind of problem
will hurt companies’ image to the public and fixing bad reputation is not an
easy task to do.
Celebrity Factor
All three companies have their own celebrity ambassadors to promote their
brand to the public. These sports companies are using not only professional
athletes as their brand ambassadors, but also media celebrities such as movie
actors, singers, television personalities and etc. This move is done to reach
non-athlete customers in the market. The goal is nothing but to make people
purchase their product because of the publicity that the products get from the
celebrities.60
P/E Ratio
P/E ratio is one of the indicators that many investors use to see the
expectations that are laid to the respective companies. The P/E ratio of these
3 companies in 2015 are:
Under Armour: 80.5261
Nike: 32.1662
Adidas: 33.563
30. 29
Revenue Growth Rate
Growth is one of the goals that people are targeting in business. Higher
growth rate meaning that the company is getting bigger. Since Adidas and
Nike have been around in the industry long enough they do not enjoy
significant growth like what Under Armour is having right now. The revenue
growth in 2015 for the respective companies are:
Under Armour: 28%64
Nike: 10%65
Adidas: 11%66
Retail Presence
Retail presence is an important aspect for apparel companies to reach their
customers. According to the research done by PriceWaterhouseCooper, many
customers still prefer to shop in physical stores than to shop online.67
There
are many things customers can do when they are buying products through
physical stores such that can affect their decision to buy the products. These
3 companies have retail stores spread all over the place globally. However,
Under Armour lags behind in the term of store numbers outside the U.S. and
it impacts its ability in generating additional sales. In 2015, Nike has more
than 930 retail stores worldwide68
, Adidas has 490 stores globally69
, and
Under Armour operates 144 stores globally70
g. Best Practice Benchmarking
Building Brand Loyalty
Brand is a crucial aspect of any company because it represent the company to
the customers. Bad image will ruin companies’ reputation hence making them
to avoid to be associated with the companies’ brand. Nike has done a
tremendous job in building its brand image over the year. A catchy slogan
combined with a simple memorable logo has been a strong point for Nike.
Nike has been successfully built a brand loyalty among its customers that help
31. 30
it to dominate the market. Brand Loyalty makes customers to be less affected
by price and will be receptive to the promotions done by the company.71
Nike
generates majority of its revenue from the sales of footwear (57.8% from total
revenue) and currently it commands the world’s athletic footwear market
share with 33.6%.72
Generating over $30 billion sales in 2015, Nike’s position
as a leader in the sports apparel industry is untouchable and it is all thanks to
the strong brand image in the eyes of the customers.
Creating Limited Edition Products
Creating limited edition products has been a strategy that many companies do
in order to create hype towards their products and bring publicity to their
brand. By limiting availability of a product, the sense of scarcity will make the
owner of the product feel special owning it.73
As an example, Adidas released
a limited edition shoes designed by Kanye West, a famous rapper, and the
shoes sold out in just one hour of its release online.74
People were also spotted
queuing in front of Adidas store in Newcastle 3 days before the release to buy
the shoes.75
From this evidence, we see that the sense of exclusivity can create
hype among the customers.
Trainer fans queue outside the End store in Newcastle
Source: http://www.theguardian.com/music/2015/nov/12/kanye-west-fans-queue-adidas-yeezy-350-
boost
32. 31
Sponsoring Big World Events
The FIFA World Cup and Olympics Games are some of the biggest sporting
event in the world generating billions of views during the event. Around 3.2
billion people watched 2014 FIFA World Cup76
and 4.7 billion people
watched 2008 Beijing Olympics games.77
Just imagine the possibility of
publicity gained by companies who sponsor that event. In the World Cup
event, the most prominent sporting apparel that are worn by the teams are
Nike and Adidas. In that event, the market share of those 2 companies
combined is 70%.78
Since the publicity of these 2 brands have been built
overtime, its popularity are top notch. Basically by sponsoring teams / athletes
that participate in the big sports event, the companies will benefit from the
exposure of the brand to the public.
Customization of Products
Customization of products can give customers a more personal feeling to the
products they bought. In 2005, Nike released Nike iD product line which
allows customers to order a customized shoes based on the customers’ design.
The product had a good reception having generated $100 million in sales not
long after the product was released.79
Customization adds product
differentiation to the customers making the brand standing out compared to
others.
33. 32
5. Internal Assessment
a. SWOT Analysis
Strengths Weaknesses
1. Never stop innovating 1. Retail presence
2. Visionary leadership 2. Third Party manufacturer
3. High Growth Rate Dependency
3. Decline in women’s apparel
Opportunities Threats
1. Global athletic market positive growth 1. Financial analyst bad reviews
2. Increasing International market share 2. Under Armour Athletes' performance
3. Growth in footwear division
Strengths
i. Never Stop Innovating
What makes Under Armour different from many other sport companies is their
urge of being the leader in technology innovation. Starting from the beginning
of the company, Kevin Plank designed and sold T-shirts with new
revolutionary technology that makes athletes feel dry and comfort through
strenuous practice sessions. Since his products were different than others,
business started to come in. Nowadays, Under Armour tries to be steps ahead
in the competition through technology advancement. Believing that connected
fitness app will be the future of the industry, Under Armour makes its moves
by buying technology companies and creating R&D division concentrating on
the fitness app.
ii. Visionary Leadership
Under Armour is blessed with such leadership found in Kevin Plank. Through
his vision, Under Armour enjoys continuous growth over the years. Vision is a
really important thing that companies need to have in order to be successful.
Without a vision, companies would not know in which direction the companies
34. 33
should gos. In one interview Kevin Plank said, “My vision in 1996 wasn’t
saying, ‘I’m going to build this great big, huge global brand.’ My vision was,
‘I’m going to build the greatest T-shirt in the world, and athletes are going to
love it. Men, women, Americans, anybody from other countries, anywhere, are
going to love this product.’80
Through that interview we learn what fuels Under
Armour to be a better company.
iii. High Growth Rate
Having still in growth stage of the life cycle, Under Armour has a high growth
rate compared to its competitors. As we can see from the previous explanation
regarding Under Armour growth rate in 2015, the revenue growth rate for the
company is at 28%, more than twice as much to its competitors Nike and
Adidas with 10% and 11% revenue growth respectively. The high P/E ratio of
the company shows that the investors are expecting big things from the
company in the future.
Weaknesses
i. Retail Presence
Under Armour is lacking of retail presence in order to present the company
better and interact with the customers. Since Under Armour has been trying to
improve its international sales, Under Armour needs to establish its brand
outside the U.S. Under Armour has built some brand houses outside the U.S.
but it is still not enough stores available to accommodate customers outside the
U.S. As mentioned before, Under Armour only has 144 stores compared to
Adidas’ 490 and Nike’s 930.
ii. Third Party Manufacturers Dependency
Under Armour manufactures its products with the service of third party
manufacturers. According to the SEC fillings filed by Under Armour, “In
2015, our products were manufactured by 44 primary manufacturers, operating
in 16 countries, with approximately 63% of our products manufactured in
China, Jordan, Vietnam and Indonesia. Of our 44 primary manufacturing
35. 34
partners, 10 produced approximately 45% of our products.”81
Having
depended so much to the third party manufacturers is a bad thing for a
company as big as Under Armour. By not having its own factory, the overhead
cost can be reduced but the risk of not producing enough merchandise is higher
and Under Armour has low control in those manufacturers. Nike was notorious
of having child labor and forced labor through its unaffiliated manufacturers in
which Nike had almost no control in that manufacturers’ activity.82
iii. Decline in women’s apparel
Even though Under Armour has been enjoying a good rate of growth overall,
the women’s apparel is suffering a setback. According to Morgan Stanley
report, “Under Armour (UA) saw a 7% decline in women's apparel in the first
quarter, following a 6% decline in the previous quarter.”83
This is a big
problem for Under Armour to figure since women’s line is one of the area that
has a potential to grow.
Opportunities
i. Global Athletic Market Positive Growth
Global athletic market has a promising future seeing from the past sales data
and trend. According to Morgan Stanley Research, the sales of sports apparel
and footwear have increased 42% to 420 billion from the year 2008-2014 and
this industry could have another 30+% growth by 2020.84
This statistics is
encouraging to know because we know that Under Armour will have more
opportunity to gain more customers.
ii. Increasing International Market Share
Having several years of slump in the international market, Under Armour
improved a lot in the past 2 year in this division by almost doubling its
international revenue percentage from its total revenue according to the data
from the fillings.85
This shows that Under Armour is gaining more and more
interest in the global sports apparel market.
36. 35
iii. Growth in Footwear Division
Through the success of Stephen Curry in the NBA, Under Armour’s footwear
division has been enjoying huge increase in its footwear sales. Footwear
division revenue made 17% of total revenue in the past year with a growth of
95%.86
The growth of footwear revenue allows Under Armour to expose
customers with its various lines of Under Armour shoes.
Threats
i. Financial Analysts’ Bad Reviews
Morgan Stanley recently set Under Armour stock to a “sell” rating having
changed the price target from $64 to $32.87
This bad rating about Under
Armour will decrease investors’ confidence towards this brand. Even though
Under Armour is having a good revenue growth rate, Under Armour is facing
problem with the wholesale apparel which declines 2% in sales last quarter.88
Under Armour Year to Year International Revenue % growth
Source: http://www.fool.com/investing/general/2016/02/18/the-3-most-important-growth-drivers-for-
under-armo.aspx
37. 36
Any further declines and bad reviews from financial analyst could bring this
brand in jeopardy.
ii. Under Armour Athletes’ Performance
Under Armour’s professional sports athletes are one of the reason why this
brand is growing. However, having instant significant growth from its athletes
popularity can be a double-edged sword to Under Armour. The popularity of
the brand will be sustainable if the athletes keep their optimal performance on
the court. Under Armour seems to rely too much on its athletes’ performance
that if they ever fail to perform well, the brand will see a significant drop of
popularity.
b. Company / Product Portfolio (BCG)
i. Star
Under Armour’s footwear division is the current cash cows for the company.
This division grows from $182 million of sales in 2012 to $678 million in
2015 (About 350% growth)89
. Helped by the popularity of the athletes, the
sales of the footwear skyrocket each year. With that kind of growth this
division is the star in this company. If the growth is sustainable in the long
future, this division will become cash cows for the company.
ii. Cash Cow
The cash cow in Under Armour is the apparel line. The total revenue of Under
Armour are mostly made up from the sales of apparel. In 2015, Under Armour
generate $2.8 billion from the apparel sales which makes it around 71% from
the total revenue of $3.96 billion.90
With less maintenance, this division
generates most money in the company since its inception.
iii. Question Mark
Under Armour’s newest product line, which is the connected fitness app, is the
question mark in this portfolio because the industry itself is relatively new. So
far in early 2016, this new fitness app has over 160 million users.91
Under
38. 37
Armour has made a move to make this app interesting to its users by pairing
the app with IBM Watson, an AI that analyzes the data from the users. Watson
then will give the users an insight for their activities and give some suggestions
about their activities. This product line will need some time and development
before we are able to tell whether this line is a star or a dog.
iv. Dog
Under Armour is a company specialized in sports apparel, but the company has
been trying to make some equipment. Some sports equipment are the dogs in
this company. When people think of Under Armour the image of apparel will
come into their mind, not a basketball or a soccer ball. Although information
regarding equipment sales cannot be found anywhere, I am pretty sure Under
Armour will not be successful just like Spalding with its basketballs or Adidas
with its soccer balls hence the company need to rethink about its decision to
make sports equipment.
c. Competitive Advantage Continuum
Under Armour has competitive advantages to its competitors that help Under Armour
to stay strong in the midst of a though competition in the market. The tangible
resource that Under Armour has is the technology. The company’s revolutionary
technology makes its apparel different from the other company. The reason why
Under Armour apparel products are appealing because it was designed carefully with
the perfect blend of material to improve the performance of its wearers just like what
Kevin Plank envisions. The intangible resource that it has is the young leadership of
the company. Kevin Plank turns 44 this year which is considered young for his
achievement in the industry. In the other hand, Nike’s founder is turning 78 this year.
Having a young leader help the company to stick to its vision and to come up with
more creative ideas compared to the companies that have older leaders. The
leadership in a company is important to set the course of the company in the future.
The core competency has been achieved in Under Armour by providing a cutting
edge technology in its apparel. Combining high technology with a visionary leader
39. 38
will help the company to strive in the future. Leadership and technology are hard to
imitate hence they give Under Armour a competitive advantage compared to the other
competitors.
Under Armour use a differentiation strategy by utilizing its marketing campaign
advertisement. Under Armour tries to implant its image to the mind of the customers
and make them to realize what sets Under Armour apart from its competitors.
d. Balanced Scorecard
Financial Perspective92
Revenue: In 2015 fiscal year, Under Armour generated $3.96 billion in total
revenue which grew from $3.08 billion last year.
Net Income: Under Armour revenue for 2015 fiscal year is $232.57, which
only grow around 15% from the previous fiscal year. Under Armour pay a lot
of tax percentage compared to Nike and Adidas because majority of Under
Armour sales are from the U.S.
Cash Flow: Under Armour has a negative cash flow in 2015 because of the
acquisition of fitness app companies such as Endomondo and MyFitnessPal
which cost Under Armour around $500 million. Buying property, plant and
equipment also reduce the net cash that Under Armour has hence the company
issued a $650 million debt in 2015.
Customer Perspective
Under Armour is built as a customer oriented company. Looking at its vision
which is to “Empower Athletes Everywhere”, Under Armour set its goal to
provide the best quality products for the customers to improve their ability in
sports.
To improve the brand strength, Under Armour did marketing campaigns that
encourage athletes to keep giving their best in their practice so that they can
reap all the hard work that they have done. The marketing was so well done
that you will feel goosebumps when you watch it. The campaign features the
40. 39
best athletes in sports such as Jordan Spieth, Michael Phelps, Stephen Curry,
and Misty Copeland.
Internal Process Perspective
Even though Under Armour products are produced by third party
manufacturers, Under Armour strictly controls its quality from the inside of
the company. In the corporate responsibility section in the website, Under
Armour state “By the terms of its Code of Conduct and its agreements with its
third party suppliers and licensees, Under Armour reserves the right to take
appropriate action against entities that fail to meet their legal or contractual
responsibilities or to take adequate action to address reported issues”93
to
show that they take internal quality control seriously. Under Armour takes
corporate responsibility seriously because the company wants to maintain or
even improve the strength and reputation of the brand. The brand reputation
can get tainted if the company fails to deliver its best performance to the
customers hence failing customers’ expectation.
Learning / Growth Perspective
Besides keeping the quality in production side, Under Armour maintains the
culture of the company for the employees so that they can perform well.
Under Armour’s culture in the company encourage the employee to follow the
4 pillar of greatness that can be seen in the company’s website.
Kevin Plank has the right idea to keep the employee engaged in company’s
decision. By keeping the employees in the part of the process, employees will
feel appreciated and needed hence they will be less likely to leave the
company.94
The turnover rate will be minimalized if this effort is done by the
company.
e. Organizational Structure
i. Organizational Chart
41. 40
Under Armour does not specify publicly the organizational chart within the
company. The company only shows the corporate executive officers as
follows:
Kevin Plank – Chief Executive Officer and Chairman of the Board
Kerry D. Chandler – Chief Human Resources Officer
Paul Fipps – Chief Information Officer
James H. Hardy, Jr. – Executive Vice President, Global Operations
Karl-Heinz (Charlie) Maurath – Chief Revenue Officer
Matthew C. Mirchin – President of North America
Lawrence (Chip) Molloy – Chief Financial Officer
Henry B. Stafford – Chief Merchandising Officer
Robin Thurston – Chieft Digital Officer
From the look of it, the company uses the flat hierarchy because of the numbers of
chief officers stated in the company, meaning that one of them will be a head of
their own department.
ii. Departmentalization
The firm should be organized based on the products that the company has
hence it will be simpler to manage. The main product lines that the company
offers are: Apparel, Footwear, Accessories and Equipment, and Connected
Fitness App.
Under
Armour
Apparel Footwear
Fitness App
Equipment
and
Accessories
42. 41
iii. Decision Making
On the corporate level, the board of directors is the ultimate decision-making
body according to what is stated in the Under Armour’s website under the
governance guidelines.95
iv. Organizational Culture
Looking from the way things get organized, Under Armour falls into a formal
company where everything has to be in order. According to Kevin Plank,
Under Armour is built on a culture that is built on people.96
What Kevin Plank
says is consistent with what Under Armour is trying to build in the company as
stated in the values statement in the website.
43. 42
SUMMARY
This information below are the summary of what has been written and are deemed
important to highlight
Under Armour’s vision statement (“Empower Athletes Everywhere”) and mission
statement (“Make All Athletes Better through Passion, Design, and the Relentless Pursuit of
Innovation”) help to guide the company to walk in the path throughout the 20 years since it was
started back in 1996.
Under Armour currently striving to fulfill their current goal which is to double its 2014
fiscal year revenue by the year 2018. Under Armour are created to fulfill the need of athletes
who want to perform better in sports. The target market of Under Armour is people in their teen
through mid-thirties whose economic condition is above average.
Technology is one of the main forte in Under Armour and the company is preparing for
the future of the fitness through its connected fitness app that are created to gain more customers
in the market. The future of sports apparel industry is bright since more and more people are
aware of the importance of being healthy.
Under Armour is growing at a magnificent growth rate seeing from the past revenue
growth rates. Under Armour has been enjoying at least 20% growth for the past 5 years. In order
to accommodate the growth Under Armour is expanding internationally and inside the U.S.
Under Armour uses advertising campaign to lure more and more people to its brand.
Under Armour is facing a lot of competition from the older players in the industry such as
Nike and Adidas. Under Armour is at lose in the term of revenue but since Under Armour is still
in growth stage of its industry life cycle, Under Armour’s revenue rate growth more than
doubled compared to its competitors. This causes Under Armour to have a high P/E Ratio which
will hurt the company’s stock price in the long run.
Under Armour’s women line is experiencing some decline the recent years which
becomes a concern to financial analysts. Bad reviews from financial analysts damaged Under
Armour’s stock rating. Under Armour is working on the way to fix the problem in the women’s
product line.
44. 43
Apparel line is the Under Armour main weapon to compete in the sporting goods
industry. Being a large proportion of Under Armour’s revenue, the clothing line is the cash cow
for this company. The other product line selection that is popular right now is the footwear
division. Having signed 2015 NBA MVP and Champion Stephen Curry, Under Armour was able
to increase its footwear division revenue by 350% from 2012.
RECOMMENDATION
There are some recommendations that Under Armour may consider that can help the company to
perform excellently through a strategy plan that can be implemented in the next 3-5 years. These
recommendations are made based on the problems and the opportunities that the company has.
The problems need to be handled very soon because they will damage the company even more if
left untreated. The recommendations are listed here below:
The first recommendation is to fix the problem with the women’s product line. The women line
has so much potential to be the source of revenue of the company. As what Morgan Stanley
points out, the Under Armour’s women line lacks of fashion aspect which is a really important
part of women’s decision making in buying apparel. We learn that the sports apparel industry
will keep looking bullish for the next 5 years, so this opportunity is important for Under Armour
to regain the lost glory of the women’s line market.
The way we can fix women’s clothing line:
Partnering with women’s named brand designers to create a fashionable sports
clothing that carries that characteristics of both brand. Good design will make Under
Armour’s women clothing line look far away from the boys club feeling in their clothing
line.
Create a campaign to empower women using regular people so that people can
really relate to the people modeling for the campaign. Often times, companies use
famous people to promote their brand but some customers find them not relatable to the
customers’ condition. Having real people who are now actively exercising but used to
have struggles with weight loss, staying in shape, and being fit as the brand advertising
45. 44
models will help target audiences who watch the advertisement to feel relatable with the
condition.
Creating free fitness programs that will motivate women to work out and eventually
will increase the publicity of the brand through the programs.
Hopefully through these alternatives, women will be more receptive to the brand and will
remember Under Armour when they are shopping for sports apparel.
The second recommendation is to find more hidden gems just like when the company
signed Stephen Curry and Jordan Spieth. Under Armour find rare persona in Stephen Curry
and Jordan Spieth when the company signed them contracts. Nobody sees Stephen Curry to
be a phenomenal player that would win NBA MVP and NBA championship. Same case with
Jordan Spieth who became the second youngest to win the Masters tournament. Under
Armour almost lose bid of Curry to Nike, but luckily through Nike’s half-hearted effort in
pitching Curry, he picked to be with Under Armour instead. The presence of Curry totally
change the future of the brand. Curry’s existence to Under Armour is being valued at $14
billion as mention previously in the analysis. If Under Armour can find professional athletes
who bring a big impact to the company like them, Under Armour will do well in the market
in spite of the tough competition in the market.
Here are some recommendations on how to select potential pro athletes:
Look for the one that has the heart for what they do
When people are doing everything wholeheartedly, the result will be significant and
satisfying knowing that they have done the best that they can. Athletes with good
work ethic will excel in the sport and are a good choice to be selected as brand
ambassadors.
A good character is more important than just mere achievements
Athletes that only have talents but not a good character will not bring a big impact to
the companies. There are tons and tons of talented and popular athletes who have a
bad character and image in the public. Companies who sponsor them are at risk when
these athletes do stupid things that violates the law and regulations which will bring
bad PR to the company as well.
46. 45
Start scouting before potential athletes turn pro
Starting to scout early never hurts the company. Having being introduced to the brand
since young age will help Under Armour to pitch them later on when they are
successful.
The last recommendation is to create limited edition items that are produced in a little quantity
to create a sense of rarity. Under Armour has to learn from Nike and Adidas in creating exclusive
items that are limited in availability. Exclusive and rare items will bring hype toward the brand
and will bring a promotion to the brand through the word of mouth.
IMPLEMENTATION
First Recommendation:
Timeframe: As soon as possible to prevent further damage to the women product line.
Under Armour should start finding options of companies to partner with in order to get back to
the business quickly. We can allocate some small percentage from the apparel revenue in order
to develop these products to even better products
Second Recommendation:
Timeframe: As soon as possible
Under Armour should find athletes that will help the company in the case of losing current
athletes to injury or other reasons. We can create a specialized team with good sports scout that
will help the company to recruit only the best people with a good character both on and off the
court. Allocating around 5% of marketing revenue will help this division to operate freely.
Third Recommendation:
Timeframe: After releasing a well-received product
After we establish the market in the footwear and clothing industry we can start by releasing a
high-quality premium priced product. If the response of the customers toward that product is
good, we can then start to make a special limited edition. We can use our popular brand
ambassador like Stephen Curry to endorse the product and make the product exclusively
47. 46
represent him to improve the acceptance of the product. Keep track of the sales closely and see if
this alternative works out. If it does not then it’s better to stop before it is too late.
48. 47
NOTES
1. Under Armour, “Under Armour: Company History”,
http://www.uabiz.com/company/history.cfm. (Accessed March 25, 2016)
2. Ibid.
3. Ibid.
4. Steve Gelsi, “Under Armour’s IPO doubles”, http://www.marketwatch.com/story/under-
armour-up-100-in-biggest-us-open-since-2000. (Accessed March 26, 2016)
5. Nasdaq, “Under Armour, Inc. Revenue & Earnings Per Share (EPS)”,
http://www.nasdaq.com/symbol/ua/revenue-eps.
6. Under Armour, http://www.underarmour.jobs/why-choose-us/mission-values/. “Under
Armour: Mission and Values”. (Accessed March 25, 2016)
7. Ibid.
8. Ibid.
9. Ibid.
10. Steve Symington, “The Surprising Way Under Armour Plans to Double Revenue by
2018”.,http://www.fool.com/investing/general/2015/10/17/the-surprising-way-under-
armour-plans-to-double-re.aspx (Accessed March 20, 2016)
11. Andrew Marder, “The Future of Under Armour “,
http://www.fool.com/investing/general/2013/03/14/the-future-of-under-armour.aspx.
(Accessed March 26, 2016)
12. Tom Foster. “CAN THIS DECADE’S MOST UNLIKELY TECH STARTUP BEAT
NIKE?.”. Inc., 38 (2016): 28-35.
13. Trefis Team, ” Armoured For Growth; Potential Opportunities For Under Armour”,
http://www.forbes.com/sites/greatspeculations/2013/12/17/armoured-for-growth-
potential-opportunities-for-under-armour/#1d799de6d730. (Accessed March 19, 2016)
14. Alex Myers, “Jordan Spieth will be an old golfer by the time his new Under Armour deal
runs out “, http://www.golfdigest.com/story/jordan-spieth-signs-big-under-armour-deal.
(Accessed March 20, 2016)
15. Luke Kawa, “Morgan Stanley: Stephen Curry Is the Key Risk to Our Bearish Call on Under
Armour”, http://www.bloomberg.com/news/articles/2016-03-03/morgan-stanley-stephen-
curry-is-the-key-risk-to-our-bearish-call-on-under-armour. (Accessed March 20, 2016)
49. 48
16. Bob Bryan, “MORGAN STANLEY: Stephen Curry could be worth $14 billion to Under
Armour”, http://www.businessinsider.com/steph-curry-worth-14-billion-to-under-
armour-2016-3. (Accessed March 18, 2016)
17. Investor’s Business Daily, “Under Armour Eyes Bigger Footwear, International Sales”,
http://www.nasdaq.com/article/under-armour-eyes-bigger-footwear-international-sales-
cm371439. (Accessed March 19, 2016)
18. Sports Pro, “Tottenham sign kit deal with UA worth $16 million annual”,
http://www.sportspromedia.com/news/tottenham_sign_surprise_multi-
million_dollar_deal_with_major_american_backe. (Accessed March 25, 2016)
19. Phalguni Soni, “Under Armour Increases Presence in International Markets in 2Q15”,
http://marketrealist.com/2015/07/armour-shores-presence-international-markets/
(Accessed March 21, 2016)
20. Allison Glass, " Under Armour to Acquire MapMyFitness, One of the World’s Largest Open
Fitness Tracking Platforms”, http://about.mapmyfitness.com/2013/11/underarmour/
(Accessed March 22, 2016)
21. Under Armour, “Under Armour Acquires Endomondo and MyFitnessPal to Establish the
World's Largest Digital Health and Fitness Community”,
http://investor.underarmour.com/releasedetail.cfm?ReleaseID=894685. (Accessed March
28, 2016)
22. Tom Foster. “CAN THIS DECADE’S MOST UNLIKELY TECH STARTUP BEAT
NIKE?.”.
23. Adweek, “Ad of the Day: Under Armour Hypnotically Captures the Army of Athletes Inside
Each Star”, http://www.adweek.com/news/advertising-branding/ad-day-under-armour-
hypnotically-captures-army-athletes-inside-each-star-166511. (Accessed March 27, 2016)
24. Phalguni Soni, “Why Under Armour Is Expanding Its Digital Sphere with Wholesalers”,
http://marketrealist.com/2015/09/armour-expanding-digital-sphere-wholesalers.
(Accessed March 27, 2015)
25. Adweek, “Droga5's Gisele Campaign for Under Armour Scores the Cyber Grand Prix at
Cannes”, http://www.adweek.com/news/advertising-branding/droga5s-gisele-campaign-
under-armour-scores-cyber-grand-prix-cannes-165541. (Accessed March 29, 2016)
26. Hayley Peterson, “Morgan Stanley signaled a huge red flag for Under Armour”,
http://www.businessinsider.com/morgan-stanley-under-armour-note-2016-4. (Accessed
April 14, 2016)
27. Ibid.
50. 49
28. Lorraine Mirabella, “Under Armour raises the bar on digital fitness”,
http://www.baltimoresun.com/business/under-armour-blog/bs-bz-under-armour-ibm-
watson-20160109-story.html. (Accessed March 23, 2016)
29. Palbir Nijar, “The 3 Most Important Growth Drivers for Under Armour Inc”,
http://www.fool.com/investing/general/2016/02/18/the-3-most-important-growth-drivers-
for-under-armo.aspx. (Accessed March 24, 2016)
30. Meghan McCorkell, “Multi-Million Dollar Under Armour Campaign Targeting Women”,
http://baltimore.cbslocal.com/2014/07/31/under-armour-launches-marketing-campaign-
targeting-female-customers. (Accessed March 30, 2016)
31. Palgub Soni, “Why Under Armour Is Expanding Its Digital Sphere with Wholesalers”
32. David L. Harris, “Under Armour has a location for its second-largest store in North
America”, http://www.bizjournals.com/washington/news/2016/04/13/under-armour-has-
a-location-for-its-second-largest.html. (Accessed April 17, 2016)
33. Tami Luhby, “Typical American family earned $53,657 last year”,
http://money.cnn.com/2015/09/16/news/economy/census-poverty-income. (Accessed
April 1, 2016)
34. St. Louis Federal Reserve Bank, “Retail Trade: Sporting Goods, Hobby, Book, and Music
Stores”, https://research.stlouisfed.org/fred2/series/RSSGHBMS (Accessed March 31,
2016)
35. U.S. Department of Labor, “The U.S. Department of Labor Timeline - Alternate version”,
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36. Federal Trade Commission, “What We Do”, https://www.ftc.gov/about-ftc/what-we-do.
(Accessed March 30, 2016)
37. U.S. Patent and Trademark Office, “About Us”, http://www.uspto.gov/about-us (Accessed
April 6, 2016)
38. Josephine, Moulds, “Child labour in the fashion supply chain”,
https://labs.theguardian.com/unicef-child-labour. (Accessed April 4, 2016)
39. Kim Abreu, “The Myriad Benefits of Diversity in the Workplace”,
https://www.entrepreneur.com/article/240550 (Accessed April 3, 2016)
40. Oxford Dictionaries, “Norm Definition in English”,
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4, 2016)
41. Bruce Horovitz, “Younger folks want healthier food - and will pay for it”
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wellness-study/22000167/ (Accessed April 4, 2016)
51. 50
42. Zach Epstein, “Under Armour showed me the future of fitness tech”,
http://bgr.com/2016/01/05/under-armour-healthbox-release-date-price-announced
(Accessed April 5, 2016)
43. Hannah Marriot, “Are we ready to 3D print our own clothes?”,
http://www.theguardian.com/fashion/2015/jul/28/are-we-ready-to-print-our-own-3d-
clothes. (Accessed April 5, 2016)
44. Beth McKenna, “3D-Printed Shoe Race: Under Armour: 1; Nike, Adidas, and New Balance:
0”, http://www.fool.com/investing/general/2016/03/21/3d-printed-shoe-race-under-
armour-1-nike-adidas-an.aspx (Accessed April 4, 2016)
45. Phalguni Soni, “Why Under Armour Unveiled a Blueprint for International Expansion”,
http://marketrealist.com/2015/09/armour-unveils-blueprint-international-expansion
(Accessed April 6, 2016)
46. Under Armour, “Corporate Responsibility”,
http://www.uabiz.com/company/corpResponsibility.cfm (Accessed April 7, 2016)
47. Under Armour, “SEC Fillings”,
http://investor.underarmour.com/secfiling.cfm?filingID=1336917-16-64&CIK=1336917
(Accessed April 17, 2016)
48. Under Armour, “Why Choose Us?”, http://www.underarmour.jobs/why-choose-us/benefits
(Accessed April 8, 2016)
49. Under Armour, “Give Back”, https://www.underarmour.com/en-us/give-back (Accessed
April 6, 2016)
50. Ibid.
51. Meghan McCorkell, “Multi-Million Dollar Under Armour Campaign Targeting Women”
52. Natalie Zmuda, “Under Armour Adds Millions to Marketing Budget”,
http://adage.com/article/cmo-strategy/armour-adds-millions-marketing-budget/292854
(Accessed April 7, 2016)
53. Phalguni Soni, “The Cogs In The Under Armour Supply Chain”,
http://marketrealist.com/2014/12/cogs-armour-supply-chain (Accessed April 7, 2016)
54. Jeremiah Strider, “Analyzing Porter's Five Forces on Under Armour (UA)”,
http://www.investopedia.com/articles/markets/020316/analyzing-porters-five-forces-
under-armour-ua.asp (Accessed April 8, 2016)
55. Parmy Olson, “Silicon Valley's Latest Threat: Under Armour”,
http://www.forbes.com/sites/parmyolson/2015/09/30/kevin-plank-under-armour-apps-
technology/#2f22cb294b25 (Accessed April 8, 2016)
52. 51
56. Under Armour, “Financial History”, http://investor.underarmour.com/income.cfm (Accessed
April 7, 2016)
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results (Accessed April 9, 2016)
58. Yahoo Finance, “Adidas Income Statement”,
https://finance.yahoo.com/q/is?s=ADDYY&annual (Accessed April 9, 2016)
59. Alexander F. Brigham, and Stefan Linssen, “Your Brand Reputational Value Is Irreplaceable.
Protect It!”, http://www.forbes.com/2010/02/01/brand-reputation-value-leadership-
managing-ethisphere.html (Accessed April 11, 2016)
60. John Kell, “Why Nike, Adidas Are Turning to Celebrities in 2016”,
http://fortune.com/2016/03/19/nike-adidas-kevin-hart-kanye/ (Accessed April 11, 2016)
61. Nasdaq, “Under Armour P/E Ratio”, http://www.nasdaq.com/symbol/ua/pe-ratio (Accessed
April 11, 2016)
62. Nasdaq, “Nike P/E Ratio”, http://www.nasdaq.com/symbol/nke/pe-ratio (Accessed April 11,
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63. Amigo Bulls, “Adidas Income Statement”, http://amigobulls.com/stocks/ADDYY/income-
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Full Year Net Revenues Growth Of 28%”,
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53. 52
70. Brian Sozzi, “Under Armour Moves to Control Own Future by Opening 200 New Stores in
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54. 53
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55. 54
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