Strategy

Contents

1. Brand Overview

2. Financial Performance Analysis

3. In-depth analysis

4. Strategy Recommendations

5. Conclusion

Brand Overview

Corporate Introduction:

Under Armour, Inc. develops, markets, and distributes branded performance products for men, women, and youth. The Company designs and sells a broad offering of apparel and accessories made of synthetic microfibers. It operates through the following segments: North America, EMEA, Asia-Pacific, Latin America, and Connected Fitness.

Mission statement

Make all athletes better through passion, design, and the relentless pursuit of innovation. The four pillars of greatness are to make a great product, tell a great story, provide great service, and build a great team. Finally, you have the wills of Under Armour and those are: act like a global citizen, think like an entrepreneur, create like an innovator, and perform like a teammate. (Under Armour, 2019)

Brand Overview

Corporate Strategy:

Digital strategy: support its long-term objectives, thus connecting and engaging consumers through multiple digital touch points.

Web-based marketing: to maximize its sales and customer loyalty. The company posts blogs on product knowledge and trend statements. It holds website promotions and contests to attract the teen customers and involves in community-based marketing approach by undertaking marketing efforts with the local shopping center management before opening its new stores.

Brand Overview

Status quo

Major strengths: Diversified distribution channel, geographic presence, and revenue growth; growth initiatives, growth in footwear market in the US and growth prospects in E-retail industry

Major concerns: Increasing liabilities and operation performance; intense competition, stringent government regulations and rising labor cost in US

Annual Ratios.1

Annual Ratios.2

Annual Ratios.3

Performance Chart

Interim Ratios

Ratio Charts

*Source: Under Armour

Conclusions from data

Under Armour's core financial figures for the fiscal year ended December 31, 2018

In-depth Analysis

A sudden collapse in Under Armour’s financial performance

UA’s Falling Down #2 Market Position in 2017

Internal reasons for economic downturn

Restructuring plan to turn things around---Turnaround strategy

Squeezed between Nike & Adidas----Comparative Pros & Cons

Internal reasons for economic downturn

Internal reason 1

Persistent shrinkages on North America’s market

• 61% of UA’s revenue relies on wholesale, particularly on 1000 points of distribution in North America
• The bankruptcy of Dick’s Sporting Goods (biggest retail account for Under Armour)
• The fierce competition among retail industries doubles UA’s pressure in fixing distribution channels. 

Internal reason 2

Inefficient management on supply chain activities

No effective administrations were achieved to solve the production inefficiency and other supply chain issues, directly leading to high costs and a sharp decline in profit margin.

Internal reason 3

Transition in competitive strategy

• A great amount of alternative products are provided nowadays to cater to broader market segmentation

• Go through an inevitable period with less profit earned due to the immaturity of the developing products, which kept UA in deficit at the start.

• Focus differentiation Broad differentiation

Restructuring plan to turn things around

Turnaround strategy

Turnaround Strategy 1

A leaner, more cost-efficient operation

• Methods

Scaling back internal operations, budgets, and workforce size accordingly

• Results

It indeed had achieved effective control over expense----improved 50 basis points of gross margin to 45.5 percent

Internal system will not bring actual benefits if no investment was made to improve it.

Turnaround Strategy 2

Marching on the broader consumer market

Methods & Goals

1. Adjusted its product line strategy by enriching product types and designs to increase their appeal to customers through recreational activities

Example: Marketing a Stephen Curry Signature line of basketball shoes brought brilliant performance in 2015

2. Enlarge their business fields to open greater market at home and broad

From wearable equipment to digital applications, UA has already constructed a complete industrial chain.

Turnaround Strategy 3

Reducing dependence on the North American market 

1. Increase global footprints outside their main battlefield: growing global awareness of its brand name and strengthening the connection between consumers and products worldwide

2. Turns its profit goal to the internet-oriented market to cope with sales contraction

Example:

Connected Fitness business----offers digital fitness subscriptions, mobile apps and nutritional-tracking solutions to athletes and fitness-conscious individuals

“Growing the company’s connected fitness business and making it profitable”

----Growth Strategy in 2018

Turnaround Strategy 3

Reducing dependence on the North American market 

3.To help spur e-commerce sales

• Enhancing its efforts to drive traffic to websites and improve online merchandising techniques
• Offering free limited-time shipping and promotion in response to challenges brought by some other low-cost providers like Amazon

Developing digital platform promotes customers’ awareness of the high-tech professional image of the brand

Squeezed between Nike & Adidas---- Comparative Pros & Cons

1.Nike: A Success Can Not Be Replicated

• Three core beliefs to evaluate customer base

“The growing popularity of sports and active lifestyles reflected a desire to lead healthier lives”

“In a connected, mobile-led world, consumers had become infinitely better informed”

“The world wad operating at faster speeds and the numbers of powered consumers was about to explode”

• “Triple-Double Strategy” ----2X Innovation, 2X Speed, 2X Direct

2X Innovation: we will set a new expectation for style

2X Speed: we’re investing in digital end to end to serve this insatiable consumer demand for new and fresh products

2X Direct: we want as many Nike touch points as possible to live up to those expectations

Make sure their innovate products create an emotional connection with customers

Under Armour drives needs, whereas Nike creates them

• Nike’s strategies

1) Relentless pursue customers' interests

2) Are designed to create intangible values

3) Lay a solid foundation to stimulate people’s demands for Nike’s products

• UA’s strategy and restructuring plan

 1) Not a substantial progress through restructuring but more like an imitation based on others’ experiences

2) Be occupied and distracted too much by marketing----win the athlete's endorsement to help brand building

3) Aggressive entry into the market for securing such endorsements spawned intense price-war and caused the promotion expenses to go up

It is difficult for UA to drive needs simply through marketing especially from rivals like Nike who creates needs and builds strong brand loyalty

2. Adidas: Lost for Regain

• Difference in acquisition

1) Under Armour: chose to develop acquisitions at its worst period

(MapMyFitness in 2013, Endomondo and MyFitnessPal in 2015, to create the connected fitness business)

2) Adidas: divested five businesses to focus all of its resources on achieving faster and more profitable sales growth in both its Adidas and Reebook businesses

• Difference in Market targeting

1) Under Armour: exploited its overseas market outside America between 2015 to 2017

2) Adidas: launched a number of initiatives to become more America-centered

2. Adidas: Lost for Regain

• What cause the easy shift in preference of UA’s customers?

1.Not only did Adidas solidify its target consumers’ groups in America, but it also potentially change people’s taste who used to prefer Under Armour.

2. Under Armour had not truly established good consumer relationships, which also represents UA’s impulsive and anxious for success

Relationship managements like after-sale services should be taken into account.

One Thing in Common----Quicker Response to Trends and Shifts in Technical Changes

• Artificial intelligence technology was applied to evolve value chains activities

1) Robot-intensive micro-factories speed the supply chain management

 2) Intelligent pushes of online shops also shorten the time that consumers spend on purchases and earn their favor in such online shopping experiences.

Keeping up with times and consistently evolving for improvement must be the key that Nike and Adidas can make it to the end.

Strategy recommendations

Expand Overseas Market

Improve consumer recognition

Strategy recommendations

Expand Overseas Market

North America is the biggest market of Under Armour, accounted for 77% of the total market share, but over the past few years, sales in North America are very sluggish. Rival Adidas, however, is in a different position.Sales of Adidas in North America rose 31 percent over the same period.

Unlike Nike, Adidas and other competitors, Under Armour hasn't been aggressively expanding overseas in recent years, so it's more important than ever for Under Armour to engage in markets like China and India.

Strategy recommendations

Improve consumer recognition

One of their problems is that they don't have a really convincing shoe for their aggressive expansion strategy.

Under Armour started selling its products at retailers in 2017, and while the company says its new wholesale partnership has led to sales growth, it's still generating a lot of negative buzz. Nike, by contrast, announced a turnaround plan, pulling out of 30,000 retailers to focus on working with better retailers to provide better customer service.

Strategy recommendations

Improve consumer recognition

Expand Overseas Market

Conclusion

1. Corporate Overview:

A developer, marketer and distributor of apparel, footwear and accessories.

2. Downturn in Under Armour’s financial performance

3. Three general reasons

• Internal reasons
• Transition in competitive strategy
• Squeezed between Nike and Adidas

4. Two recommendations: expand international market and increase customer recognization

References

Under Armour, I. (2019). Under Armour Presents 2023 Strategic Growth Plan; Updates 2018 And Provides Initial Full Year 2019 Outlook. Retrieved 18 November 2019, from https://www.prnewswire.com/news-releases/under-armour-presents-2023-strategic-growth-plan-updates-2018-and-provides-initial-full-year-2019-outlook-300764498.html

Under Armour SWOT & PESTLE Analysis - SWOT & PESTLE.com. (2019). Retrieved 18 November 2019, from https://www.swotandpestle.com/under-armour/

What Is Under Armour Doing To Turn Its Business Around?. (2019). Retrieved 18 November 2019, from https://www.forbes.com/sites/greatspeculations/2018/09/14/what-is-under-armour-doing-to-turn-its-business-around/#58d3947a9b5f