Table of Contents

Introduction.............................................................................................................. 2
Brief Background of Under Armour..............................................................................2
Competitive Forces of the Company.........................................................................2
Positioning Strategy [Distinctive Competency of the company].....................................2
Target Market [Core Competency for the company].....................................................2
Macroeconomic situation analysis...............................................................................3
Industry Outlook.................................................................................................... 3
Porters 5 force Analysis......................................................................................... 3
Impressive Facts about Financial Performances of Under Armour....................................4
Comparative Strength Assessment and Comparison......................................................5
SWOT analysis of Under Armour.................................................................................6
Comparison of Under Armour, Nike and Adidas and their elements of Strategy..................6
Issues to be Addressed.............................................................................................. 7
Recommendations for CEO........................................................................................ 7
References.............................................................................................................. 8

Introduction
In this report an examination of the company Under Armour is performed from a strategic
perspective and an attempt is made to understand and analyse its competitive positioning,
especially with respect to its two biggest competitors, Nike and The Adidas group. The report
also examines the companys strengths and weakness, both on a stand-alone basis and
relative to the competitors and contains strategic recommendations for it.
Brief Background of Under Armour
Under Armour was established in July, 1996 in USA and it operates in the sportswear sector.
It manufactures and sells high quality branded, sport clothes, footwear and other sports
accessories for both men and women of all age groups (Reuters, n.d.).One of its unique
features includes its range of apparels which are created from a specially created fabric that
is light but helps the body in regulating its temperature in the different weather conditions
and hence can be used in all seasons.(Reuters, n.d.; Under Armour, 2015).Its primary target
sector is the athletes while its secondary focus is on the people interested in sports and like
to maintain an active lifestyle (Soni(a), 2014). One of its major marketing tagline is that it is
made for the athletes by an athlete (Advameg, Inc, 2015), which implies that the brand
understands the needs and demands athletes and also the competitiveness associated with
their sport and therefore they can offer superior products to bridge that gap.
Under Armour is a major financial success as well. It secured overall revenue of more than
USD 3 billion in 2014 and achieved a massive growth of 31% as well (McGrath, 2015).
Competitive Forces of the Company
Its overall product portfolio is as described below (Soni(a), 2014):

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a
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A
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Source: (Soni(a), 2014)

The company ventured into business through it apparel line, where it produce Heatgear
range for hot weather, Coldgear for cold weather and All season gear for mild weather (Trefis
Team, 2012). Its footwear business started only in 2006 (Trefis Team, 2012). MapMyFitness
is a digital program that offers many fitness tracking devices (MapMyFitness, Inc, 2014). Due
to the rising popularity of this program among the athletes and fitness enthusiasts, Under
Armour acquired it in 2013 (MapMyFitness, Inc, 2014).
Positioning Strategy [Distinctive Competency of the company]
Under Armour has positioned itself as a brand that is solely focused on helping the athletes
to improve their performance. Its mission statement is to make all athletes better through
passion, design and the relentless pursuit of innovation (Under Armour, 2015). Through this
it cleverly communicates its values of innovation, perfection and dedication to professional
sports to all of its customers. It also communicates the fact that all of its products are doing
something for their improvement, irrespective of the fact whether they are professionals or
not. This also complements the premium appeal of its products that it has created.
Target Market [Core Competency for the company]
Active athletes who are currently into professional sports, belongs mainly in the age group of
18-35 years which is the main target of Under Armour. Along with them the company also

focuses on aspiring athletes, general people who are interested in sports or remaining active
and belong to the middle or upper strata of the society.
Macroeconomic situation analysis
Industry Outlook
The US athletic apparel and footwear sector is considered among the fastest growing
segments in the US retail industry. Globally, the revenue from this sector alone is expected
to reach USD 171 billion (Statista, n.d.).People are getting more health-aware worldwide
and this trend is expected to continue, making this sector highly lucrative.

Source: (Headwaters, 2014)

In 2013, the overall US apparel retail market was valued at USD 263 billion and sport
apparel constituted a major share of 15%, which amounted to almost USD 40 billion
(Headwaters, 2014).While the US apparel industry grew by 5.1%, the sportswear industry in
US outpaced it by registering a growth of 6.9% in 2013 (Headwaters, 2014).

Source: (Headwaters, 2014)

Porters 5 force Analysis
Intensity of rivalry - High
The US sportswear and footwear industry is highly competitive because it is still highly
fragmented. The sneaker market in US is the largest in the world (Harwell, 2015). Therefore,
there is a stiff competition among the players in the market so as to gain a larger market
share. Nike, Under Armour and Adidas are the top three companies in the athletic gear
sector in US and news of their squabbling over sponsorship deals, endorsements and
events are rife in the media.News of these companies trying to outbid each other in order to
have successful sports professional endorse their brands (Goodkind, 2014), their rigorous
attempts to overshadow the sporting event sponsored by the other company and highlight
their own (O'Donnell, 2015), and their endeavours to positively influence an ever larger
customer base at the cost of the other, are already well-known.

Nike is the overall market leader among the three companies holding 46% market share with
sales of USD 8.9 billion (Mirabella, 2014), followed by Under Armour, with sales of USD 1.2
billion in 2014 and Adidas having total sales of USD 1.1 billion (Mirabella, 2014).
Threat of new Entrants- Moderate
Following the high potential of the sportswear market, large numbers of participants are
entering in the sector. While there are no significant barriers on entering into the industry, the
barriers are significantly high when it comes to compete with the established players like
Nike and Under Armour. Innovation and technology have also become extremely important
to succeed in this sector. The established companies have invested heavily in research and
development and are coming up with newer offerings to enhance the performance of
athletes, which is somewhat of an entry barrier for the new entrepreneurs and companies.
Threat of Substitute Products Low
The sports gear and the footwear market have created a niche for itself which is highly
popular among the people. Therefore, the threat from other products and apparels outside of
this segment do not pose any major threat to the companies in this segment.
Bargaining power of Suppliers Moderate
Suppliers and manufacturers are the backbone of this industry and therefore exert a
significant force on the participants. However, the supply chain in the industry is largely
dispersed. For example, the top five players in this sector have their manufacturing facilities
outsourced to third parties and present in third world countries, where the cost of
manufacturing is sufficiently low (Soni(b), 2014). Since these companies are creating job
opportunities in the third world countries, it is a win-win for all.
Bargaining power of Customers High
The customer switching cost is extremely low in this sector and there is also not a great level
of brand loyalty among the people as well. Although people have a propensity towards
leaning towards the bigger names and brands, their buying decision is ultimately derived
from the advertising efforts of the companies and their purchasing power.
Impressive Facts about Financial Performances of Under Armour
The historical financial performance of the company is shown in the chart below.

Source: (Soni(c), 2014)

The steady, double-digit growth of the revenues, EBITDA and EPS since 2008 is indicative
of a strong financial performance displayed by UnderArmour.
The company has also been successful in reducing their Selling, General and Administrative
(SGA) costs, as its SGA s have come down from being 28.4 % of revenue to 28.10%
(Bloomberg Business, n.d.), which is a high cost saving considering that the overall revenue
of the firm was more than USD 3 billion.
Comparison of financial ratios (MarketWatch, Inc. (a), 2015; MarketWatch, Inc.(b), 2015):
Liquidity Ratio
Current Ratio
3.67
2.52
UA
Nike
Quick Ratio
2.4
1.84

Cash Ratio
Profitability Ratio

1.41

0.94

Gross Margin
Operating Margin
Net Margin
Return on Assets
Return on Equity

UA
48.7
7
11.5
1
6.75
11.3
3
17.3
1

Nike
45.42
13.19
10.66
16.15
27.82

The above financial ratios show that Under Armour is maintaining sufficient liquidity; which
are better than those of Nike. This indicates a scope for Under Armour to use its assets more
in order to generate more cash. However, Nike seems to be a lot more profitable as seen
from the profitability ratios. While the gross margin of Under Armour is higher, all its other
financial ratios are lower than those of Nike.
Comparative Strength Assessment and Comparison
Competitive Strength Assessment
(1= poor 5 = high
Remarks
Under Armour
Nike
Adidas
Key
Weig Ratin Score Ratin Score Ratin Score
Success
ht
g
g
g
Factor
Product
0.2
5
1
5
1
4
0.8 All the three brands are
Innovation
known for their product
innovations, but, due to
their specific appeal
Nike and Under Armour
score higher
Marketing
0.26
5
1.3
5
1.3
4
1.04 Marketing,
advertisements and
celebrity endorsements
are extremely important
in this sector to capture
customers attention
Distribution
0.26
3
0.78
5
1.3
5
1.3 Distribution through
Network
internet, wholesalers
and retailers all are
important. Under
Armours is highly
dependent on its
wholesale networks,
unlike its competitors.
Wide
0.1
3
0.3
4
0.4
5
0.5 Reebok has largest
Product
product portfolio due to
Portfolio
its wider target base,
while Under Armour
focusses on a niche.
Research
0.1
4
0.4
4
0.4
4
0.4 All the brands are
and
equally committed
Developme
towards research and
nt
development.
Geographic
0.05
2
0.1
5
0.25
5
0.25 Under Armour is
Spread
primarily based in US,
while the other two are
globally present.
Price Point
0.03
4
0.12
5
0.15
3
0.09 Nike and Under Armour
have a more premium

appeal than Adidas

Weight
sum
Overall

1
4

4.8

4.38

SWOT analysis of Under Armour

Strengths
The Under Armour brand is highly visible and has a strong presence in the market,
especially among the sportspersons and athletes, which is the primary target market of
company. Its advertising and marketing campaigns are well received by the public. It also
has the range of products which are accepted by the customers, which is another major
strong point for the company. It is also heavily invests in the research and development,
which enables them to make new and better products. Its eco-friendly operations are also
one of its strengths as it shows awareness towards environment protection.
Weakness
It has a very small presence in the footwear segment, and almost all of its revenues come
from the apparel segment, as seen from the chart below.Under Armour is highly dependent
on the US markets, which makes it extremely susceptible to the economic cycles. As already
highlighted in the chart above, Under Armour revenues and profits took a deep fall in the
years 2007 and 2008, when the US economy was witnessing a recessionary phase.

Source: (Under Armour, 2014)

Opportunities
Under Armour is largely focused in the North American markets, which account for almost
90% of its revenues (Soni(c), 2014). It can use the globalization so as to expand in other
potential economies beyond the borderlines. The company can also take advantage of rapid
advancement of e-commerce, especially in order to assist its geographic expansion. Digital
innovation in the field of sports is yet another promising field for Under Armour, in which it
has already entered through the acquisitions of MapMyFitness and MyFitnessPal (Lorenz,
2015). This will enable it to create a fitness community and thus, propel brand loyalty.
Threats
The biggest threat that Under Armour faces is stiff competition in US market. As the
company recently overtook Adidas for the number 2 spot in terms of revenue in US markets
the market leader, Nike, also took its notice, which started market rivalry among them. At the
lower end of the spectrum, it faces threat from the newer entrants in the markets, who are
offering value oriented line in the market. Although, their product offering is not of as high
quality as that of Under Armour, these brands are still getting quite popular among the value
customers and are gaining market share gradually. The multi-brand retailers also pose a
major threat to Under Armour. The new entrants and more aggressive players in the market
are offering increased commissions to these retailers to offer them a larger and better floor
space. This tactic has the potential to negatively impact the revenues of Under Armour.
Comparison of Under Armour, Nike and Adidas and their elements of Strategy
The 2014 revenues for Nike and Under Armour have been USD 7.4 billion (Nike, Inc, 2014),
3.08 billion (Under Armour, 2015), respectively. While the Europe base Adidas group has

overall higher revenue, it has moved down to number three spot in the American markets
based on its sales in the last year (Germano, 2015).
Nike maintains its strong position due to factors like extensive innovation, strong marketing
efforts and low cost manufacturing and extensive distribution facilities. Innovation has always
been at the core of Nike. Its various technologies like Air cushion, Shoes +, Air Max etc.
have been extremely innovative and have produced some of the high-performing footwear of
their time (Germano, 2015). The products and marketing of company is also customer
oriented. Nike has shown immense adeptness in utilising its innovations in its product lines
effectively. Nike also has a global presence and is well respected all over the world. Its main
revenue segment is its footwear segment, unlike Under Armour which is primarily driven by
its apparel range. Besides being a sports apparel and footwear manufacturer, Nike is not
solely targeted on athletes. Instead it targets all the people who want to pursue sports or an
active lifestyle. It propagates a message If you have a body, you are an athlete (Nike, Inc,
2015). Another major strength of Nike is stable financial position that enables it to sail
through rough periods like recession much smoothly than its other competitors.
In spite of operating in the same sector, Nike and Under Armour have different focus. Under
Armours key has a narrower and more specific focus, both in terms of its product range and
target audience. Its appeal lies largely among the young, male athletes. Also, as opposed to
Nikes focus on the mainstream sports like running, football, basketball etc., Under Armour
focusses on other competitive sports as well, like surfing, boxing, skiing etc.
The Adidas group on the other hand is slightly different. Its major market is Europe, unlike
both Nike and Under Armour. It is clear from its mission statement itself that its focus is less
on the athletes and more on the sporting goods industry ingeneral. Its mission statement is
The Adidas Group strives to be the global leader in the sporting goods industry with brands
built on a passion for sports and a sporting lifestyle. We are committed to continuously
strengthening our brands and products to improve our competitive position (Adidas,
n.d.).Therefore, its target market also comprises not only of athletes, but of any person who
is interested in sporting activities. This gives the brands, relatively, a more generic appeal
than its competitors, making it accessible to a larger audience. Its major strength is its long
heritage and strong position in the European markets, along with a wide range of products.
Strategy on the basis of five Generic competitive strategies
Hence on the basis of the above mentioned facts and five generic competitive strategies the
Under Armour strategy is focused differentiation as it focuses mainly on the needs of
athletes.
Issues to be Addressed
The US markets are witnessing a surge in the participation of females and this is having
a significant impact on the market dynamics (Headwaters, 2014).In fact, the rising trend
in the number of people participating in sports in US is largely driven by women. The
National Sporting Gods Association has reported that out of the 47 activities that it
tracks, 40 are witnessing ever increasing participation from women, while only 11 of
these activities showed higher participation of men (Headwaters, 2014).
Under Armour does not have any patents for its fabrics or processes, hence implying that
they can be easily copied by its competitors.Most of itstechnically advanced fabrics are
developed by third party companies (Mirabella, 2014).Its biggest competitor, Nike, has a
huge list of patents for the various designs or technologies that it has developed and
making its competitive advantage more sustainable (MarketWatch, Inc. (a), 2015).
Over dependence on a single geographic market (US) might prove somewhatdetrimental
for UnderArmour.
Under Armour is highly dependent on the wholesale retailers for the sale of its products,
which increases the bargaining power of the retailers and in future might have a negative
impact on its revenues, especially with the stiffening of competition.

Recommendations for CEO

Under Armour should expand its product portfolio to include more product categories,
especially those which are targeted at women athletes. More gears and apparels
targeted at women should be launched, coupled with an updated marketing campaign
that addresses women equally.
Under Armour should focus on obtaining intellectual property rights on at least some of
its business critical innovative products and fabrics, so that not only it can charge a
premium for it, but it can also ensure that its competitors find it hard to imitate in future.
Under Armour should focus on developing itself into a global brand and increasing its
presence in other markets as well, for instance European and Asian markets.
Under Armour should also focus on launching a value-line especially for these emerging
markets, as the people there could be price sensitive.
Under Armour shall take advantage of the e-commerce potential for its expansion. Not
only can it help in getting rid of the over-reliance on retailers, but this could prove
immensely useful for it in expanding its presence in other geographies as well.
Under Armour should focus on outsourcing more to the low cost manufacturing
countries, in order to reduce its costs and increase its profits. Both Nike and Adidas
have also employed a similar approach and have been quite successful with it.

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