1.1 Company background
Kevin Plank a former football player created performance enhancing gear for athletes to wear. The gear was built for athletes to have a lightweight and comfortable fabric that keeps the body dry and regulate body temperature in any weather conditions. The brand started as high tech microfiber shirts being sold under Kevins original company KP Sports. Kevin brought on another Maryland alumni Kip Fulks, Ryan Wood and older brother Scott plank to help the business and help the company grow.
KP sports grew quickly when they started tailoring undergarments for athletes in different sports enlarged KP sports customer base. A larger break came in 2000 when a retail store Gaylans agreed to sell KP Sports products over 500 stores. Due to the success KP sports changed from S corporation status to C corporation status. The company expanded into Canada in 2003 and in the U.K. in 2005, Under Armour went public raising $115 million in capital.
1.2 Description of the industry
The athletic sports apparel industry is supported by consumers looking to get the best reward from their efforts.
The athletic sports apparel industry is growing because consumers are more aware to healthier lifestyles that will directly involve sports apparel and performance. The $250 billion global market for sports apparel, athletic footwear, and related accessories has 25 name brand competitors with diverse product lines (Thompson 71). Nike is the biggest competitors in the market second is adidas third is Under Armour. The Global market footwear is projected to reach $114.8 billion by 2022 growing at a CAGR of 2.
1% during the period 2016 to 2022. The Global market for athletic and fitness apparel was forecast to grow 4.3 percent annually from 2015 to 2020 and reach about $185 billion by 2020 (Thompson 71). Differentiation is key in he athletic sports apparel industry because every produces similar goods. Under Armour is currently using a board differentiation strategy.
2. Macro-Environment External Analysis
2.1 Political factors for the industry
Almost all the brands in the sports apparel industry are worldwide. Each country will have different cost of doing business due to having different tax rates and trade policys. Tariffs and quotas can affect Under Armour business. Stable countries will make companies to be secure in regard to where to locate production that will abide by labor laws.
2.2 Economic conditions
Economic influence on the industry comes from governments that set interest rates and tax policy for corporations. Because Under Armour was born in the United States, there were few economic barriers to hold it back. In the U.S. Under Armour started with small individual sales before reaching economies of scale thanks to large orders of team uniforms and agreements. The production of many units reduced the per unit production cost for the company.
2.3 Socio-Cultural forces for industry
The socio-cultural forces that affect the sports apparel industry include differences in accepted norms and practices, consumer purchasing power, and consumer preference. Although it seems like history in the United States, in some other countrys women are just now becoming more involved in athletics and creating demand for feminine sports apparel. The spread of education and development explain why the Asian pacific region is projected to be the industrys largest market. Within the industry Under Armour has the luxury of being the generic trademark for compression gear. This is a result of them being a first mover in high-tech synthetic wearable materials. When people refer to layers worn underneath outerwear in athletic environments, it is not uncommon to hear it referred to as Under Armour. Under Armour also set the standard of functionality that consumers expect from athletic apparel.
2.4 Technological factors for the industry
Technology is growing faster than humans can learn. Sports apparel links well with technology especially for consumers pursuing healthier lifestyles. Specific examples of these links are Nikes NIKE+ and Under Armours smart shoes. These products allow for users to link their shoes to apps on their mobile devices to track their running metrics to help them improve their performance. Under Armours My Fitness Pal is another example of how technology is affecting the industry. The companys app allows users to track overall health with food logs, activity trackers, and even links to shop Under Armour gear. E-commerce is a large result of technological advancement. The ability of buyers to make orders through the web has allowed for increased revenues for companies and allow for easier access to products for consumers.
2.5 Environmental forces for the industry
The sports apparel industry is heavily influenced by environmental factors. Scarcity is already playing a large role in sourcing for production. Raw materials like cotton are affected by supply and demand, affected by pollution, and for the companies in the industry, their consumers expect those raw materials to be grown sustainably, and workers to be treated well. Other materials like synthetics that require petroleum, a finite resource, in the production. The need for finite resources will push producers to search for lower costs and the expectation of them to act in the interest of a better environment constricts their choices. Under Armour employs a quality assurance team that reviews manufacturers who supply Under Armour with their finished products. The quality assurance team also preapproves the suppliers of raw materials used in Under Armour products.
2.6 Legal and regulatory factors for the industry
Under Armour holds their suppliers and manufacturers to strict standards they set to ensure they are following the laws and regulations of whatever country they may be producing in. The licenses that they issue to produce their goods could be revoked at any point that Under Armour deems the supplier is unfit for their operation. Intellectual property protection is very important in the sports apparel industry because production capabilities have become so advanced that creating near exact replicas of products is not unrealistic or unheard of. If the designs of a product are not patented, they are vulnerable to duplication and the brand would be at risk of having its reputation tarnished due to lack of quality or performance.
2.7 Summary based on Macro-Environmental External Analysis of the industry
The environment that Under Armour is in is strong. The industry of sports apparel is established and well overdue for a breakthrough in innovation. The industry was as result of the movement toward functional apparel that enabled athletes to perform better and more comfortably. Kevin Plank launched KP Sports with his pursuit of high-tech compression gear that was unheard of before. He made a bold move into uncharted territory and it proved to be a massive success with Under Armour as a result. Under Armour needs to take advantage of its current opportunity and further its role of innovation in the industry. They need to develop something new and unique to differentiate their brand even more.
3. SWOT Analysis for Under Armour
-Strict quality assurance team
Under Armours quality assurance team ensures that its manufacturers are adhering to company policies regarding manufacturing processes that need to be in line with their local laws and regulations. By monitoring the production at this level Under Armour is making sure that they are giving buyers high quality goods
-Abundance of manufacturers
Having so many manufacturers allows Under Armour to exercise its bargaining power over them. Under Armour does not maintain long term agreements with the manufacturers meaning they could abandon a manufacturer if at any point they are dissatisfied with their practices.
-Special Make-Up shop in Maryland
The special make up shop allows Under Armour to fulfill custom orders for high-profile customers and meet tight deadlines. The ability to fulfill the custom orders for their select customers is a significant feature.
Under Armour has expanded beyond U.S. borders and across seas. These moves outside of its country of origin have proved to be beneficial as Under Armour is becoming more well known in its new markets.
After going public in 2005, Under Armour had a streak of growth consistently reporting high growth rates and large earnings. Although growth has slowed in recent years, the strong foundation gives the company something to build off of and see what they are capable of.
-Lower sales figures than competitors
Under Armour has lower sales revenues than its main competitors Nike and Adidas in the U.S. and globally. This lack of market share is not a direct reflection of Under Armours dominance in sports apparel but more of a display of the companys size relative to competitors.
-Lack of Subsidiaries
Under Armour does not have the same tier of revenue streams as competitors. Nike and Adidas own other well know brands that boost their bottom line. The smaller companies that the competition owns allow them to reach niche markets without significant differentiation the original products.
The potential presence in the Asian pacific market is a large opportunity because establishing a foothold in a region that will likely explode in growth will pay dividends after the region is fully developed, they will have the purchasing power to obtain the products they are already familiar with
Acquiring small companies that are already established in niche markets could be beneficial in expanding Under Armours reach. One possible acquisition is Cliff Keen Athletics. Cliff Keen is a well-respected producer of wrestling gear and apparel. This acquisition would give Under Armour an express route into the wrestling niche.
The size of Under Armours competition is intimidating. Those around them have dominated nearly all other industries outside of sports apparel.
Because technology is so rapid advancing, the competition is rapidly catching up to Under Armour. Under Armour maintained an advantage with their technologically advanced fabrics that was more functional and comfortable than competitors traditional garments until those competitors were able to produce similar items.
Under Armours production is heavily dependent upon natural resources. The compression garments they produce require the use of petroleum-based synthetics, the non-compression garments require cotton, and nearly all the footwear requires rubber. These dependencies mean that the cost Under Armour incurs from production is going to fluctuate on the available supply and market price of the raw materials they use.
3.5 Summary of SWOT analysis
It would be in Under Armours best interest to continue to exercise the use of the quality assurance team to seek out more producers to reduce their dependency and increase the bargaining power over their suppliers. Maintaining the integrity of the quality assurance team will be reflected in maintained quality of production and performance. If Under Armour is going to compete with bigger rivals then they need to put an emphasis on expanding their global operations. They may be present in foreign markets but they are far from thriving. Under Armour must also take advantage of their resources and capabilities. The main resource is their abundance of suppliers and their capability is there proven production of performance enhancing sports apparel. Under Armour produces the best functional gear because they have the experience with the technologically advanced materials and should continue to research and develop these materials to find ways to improve them. Staying the course may be the only thing that will propel Under Armour to continued growth
4. Ethics and Social responsibility
Under Armour is dedicated to the ethical treatment of all of its suppliers, employees, and affiliates. In Under Armours published Sustainability Report, the company lists guidelines that suppliers must follow to maintain the privilege of being an Under Armour approved manufacturer or supplier. Under Armour is adamant about upholding these rules because the integrity of their company depends on it. Under Armour employs a UGOP (Universal Guarantee of Performance) for all of their products in an effort to reduce the rate that the products will need to be replaced.