Table of Contents

Executive Summary......................................................................................................................2
Identification.................................................................................................................................3
Background.................................................................................................................................3
Strategies....................................................................................................................................3
Objective and Goals....................................................................................................................3
Problem Statement......................................................................................................................4
Internal Analysis...........................................................................................................................4
SWOT Analysis..........................................................................................................................4
Financial Analysis.......................................................................................................................5
Value Chain Analysis..................................................................................................................6
External Analysis..........................................................................................................................7
Industry Overview......................................................................................................................7
Competition Analysis..................................................................................................................8
Perceptual Map...........................................................................................................................9
Five Forces Analysis...................................................................................................................9
PESTEL Analysis......................................................................................................................11
Consumer Analysis...................................................................................................................11
Key Success Factors and Uncertainties.....................................................................................12
Analysis of Alternative Solutions...............................................................................................12
Decision Matrix...........................................................................................................................14
Recommendations.......................................................................................................................15
Action Plan..................................................................................................................................16
Contingency.................................................................................................................................16
Appendix.....................................................................................................................................17
Exhibit 1: Strategic Fit Test......................................................................................................17
Exhibit 2: Financial Analysis Stock Performance..................................................................17
Exhibit 3: Financial Analysis Profitability Ratios..................................................................19
Exhibit 4: Compound Annual Growth Rate 2010 to 2013........................................................20
Exhibit 5: Value Chain Analysis...............................................................................................21
Exhibit 6: Segment Chart..........................................................................................................22
Executive Summary
This report was undertaken to provide Under Armour executives with an analysis of the
companys overall situation and to recommend a set of actions to improve the companys future
prospects. Under Armour has a financial objective to increase sales by 71% from 2013 to 2016.
Under Armours strategic plan must change to address achievement of the key success factors of
the industry which are continued technological advancement and innovation, quality and
performance in product and services, product variety and to continue growing brand awareness
and image.

The methods of analysis used in the report include a summary of past and present strategies used
by Under Armour including a strategic fit test which demonstrates that Under Armour has crafted
a winning strategy which provides the company a good basis for its changing business plan and
strategy.

An internal analysis including a SWOT assessment, financial analysis and value chain analysis is
performed to determine Under Armours strengths to build upon as well as isolating areas for
improvement. The internal analysis emphasizes Under Armours strength in product innovation
and successes in sales and achieving market share within North America. The internal analysis
exposes Under Armours limited global presence and highlighted opportunities outside of North
America.

The external analysis provides an industry overview, competition analysis (including a perceptual
map displaying Under Armours position in the market), five forces, PESTEL and consumer
analysis. The external analysis displays areas within the market for Under Armour to grow where
they are clearly behind industry leaders Nike and Adidas from a global perspective. Under
Armour has room to grow in market segments outside of athletes and in product development by
adding or expanding other athletic apparel lines such as footwear.

The complete analysis and evaluation of 5 various alternatives leads to a recommendation that
Under Armour has the financial resources to undertake the creation of Under Armour Concept
Shops in addition to expanding product range and research and development. Both of the
alternatives chosen address the industrys key success factors as well as working well in

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conjunction with one another in providing the new products developed an Under Armour brand
store to highlight them.

Identification

Background

Under Armour was originally founded as KP sports in 1996 by Kevin Plank, a former United
States college football player with the mission to make all athletes better through passion,
design, and the relentless pursuit of innovation. Under Armour is the originator of performance
athletic apparel made from innovative, lightweight, synthetic materials designed to keep athletes
cool and dry.

Strategies

Under Armour started out using a focused differentiation strategy, as they entered the market
focusing primarily on male athletes and using innovative technology to create apparel designed to
wick away perspiration, regulate body temperature and improve comfort. The popularity of these
products rapidly grew and the company went from selling directly to individual athletes to
athletic teams primarily at the collegiate level.

Currently, Under Armour has progressed towards a board differentiation strategy with the offering
of a widening product line and ongoing innovative technological advances. As the company
continues to grow, they find themselves competing against sportswear giants such as Nike and
Adidas. A key element that has allowed the company to compete against such rivals that are
bigger in size, more established and with more capital is innovation. The company continues to
focus on producing items that are superior to traditional products. As the company climbs to the
top they recognize a need to expand their marketing efforts, in particular the use of sponsorships
and endorsements with star athletes. Under Armour also saw an opportunity to expand globally
and secure a leadership position in the global market.

After conducting three tests to evaluate the merits of UAs strategy, the results show that the
company has overall crafted a strong winning strategy providing the company an exceptional
backbone for their business plan. UA has grown at an impressive pace since the start and is well
positioned to continue to grow in the global market based on their solid strategies and ability to
adapt to their internal and external conditions (See Exhibit 1).

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Objective and Goals

Under Armours financial objective is to generate $4 billion sales revenue by 2016, which is a
71% increase from the 2013 sales level. Kevin Plank will need to re-evaluate the current strategy
and develop a new one that will strengthen their organization while weakening competitors.

Problem Statement

Under Armours performance has been favourable since its inception, however, there is huge
potential for growth. The companys strategic plan must change to address their need to deliver
more value to its customers and generate better business results. With revamping their strategic
plan; the company may potentially be risking more than near-term disruption that will affect the
companys long-term viability.

Internal Analysis
An internal analysis is performed on Under Armour to identify and evaluate its competency, cost
position and competitive viability in its marketplace.

SWOT Analysis

The SWOT Analysis provides a useful framework for analyzing UAs strengths and
weakness, as well as its external opportunities and threats.
Strengths:
Strong brand name and company image able to build a reputable and authentic brand
in a short period of time.
Diversified product offering continue to effectively develop and launch new,
innovative and updated products.
Financial Stability tremendous growth from 2008 to 2013 and continuously generating
positive cash flow.
Innovation Specialty fabrics used in UAs products are technically advanced textile
products developed by third parties.
Weakness:
Outsource of Manufacturing although outsourcing has financial benefits, it can also
be a risk to UAs core competencies. Some risks involved are loss of expertise and skills
that may prove critical to the companys long-term competitiveness and loss of control
over costs.

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 Lacks significant global/international presence UAs growth strategy of single
geographic market penetration is high-risk since majority of revenues comes from North
America
High profile athlete endorsement UA carefully selects the athlete who will represent
the image and promise of their brand. This advertising strategy relies heavily on the
athletes performance and image.
Opportunities:
International expansion UA has been very successful in its home market while its
competitors are making large strides within the international market. The large sales
percentage from outside markets realized by competitors, such as Nike and Adidas, is a
good indication that international expansion efforts are essential for UA to remain
competitive and boost future growth.
Technology Innovation and development is a key component of UAs competitive
advantage, which makes gaining access to the state-of-the-art technology crucial to
success of the company.
Women and Children Currently majority of UAs revenue comes from mens product
line. Increasing the focus on women and children will widen UAs customer base and
increase future growth
Growth in athletic footwear industry expected to reach $85 billion by 2018
Threats:
Giant sportswear competitors Nike and Adidas
Fluctuating petroleum cost the synthetic fabrics used by the suppliers and
manufacturers involves raw materials such as petroleum which is subject to price
fluctuations and shortages
Economic condition some of the major economic factors that affect UAs sales are
employment, wages and price/inflation.

The SWOT analysis above shows that with UAs innovation and huge market potential, the
business can flourish and thrive in various locations. The company will need to evolve their
strategic plan to fully comprehend the weaknesses of its business and in turn will help manage
and eliminate its threats and allow the company to compete successfully in the market.
Financial Analysis

Under Armour has continuously improved its financial performance over the past 5 years. There
is constant growth in both revenue and income. UA show a positive cash flow throughout 2008 to
2013. This positive cash flow is a good indication that the company has not had to borrow money
to keep operating with the exception of 2011. Cash flow was particularly tight this year and a loan

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was obtained to keep KP sports afloat. This decision was proven to have been worth sacrificing
near-term profitability for longer-term growth, which is evident in 2012. It also indicates that its
inventories are selling and receivables are being collected.

Stock Performance Earnings per share is a very good indicator of a companys profitability.
UAs stock portfolios increased each year for the past 5 years. The operating cash flow per share
in 2008 and 2012 indicates that the reported EPS are of high quality which generally indicate that
the EPS reported is a relatively true representation of what the company actually earned;
however, operating cash flow per share in 2010, 2011 and 2013 are of low quality. Although these
years are of low quality, the gap between EPS and actual cash is minimal with the exception of
2011 (See Exhibit 2).

Profitability UA has experienced ROA rising from 7.84% in 2008 to 11.13% in 2012 with a
slight drop to 10.29% in 2013. A similar pattern has occurred with the companys ROE and ROI,
rising from 2008 to 2012 with a slight drop to 15.41% and 10.29% respectively in 2013 (See
Exhibit 3). Overall, UAs ability to generate profits from shareholders money appears rather
impressive. Also, the steady increase in ROA indicates that the business has efficiently managed
its assets to generate profits.

Additionally, when compared to its rivals Nike and The Adidas Group, although UA only has a
14.7% share of the market the company continues to surpass them in their compounded annual
growth rate (CAGR from 2010 through 2013). Net revenue had a four-year growth between 2010
and 2013 of 21.68% compared to Nike who only had an 8.54% growth and worse yet the Adidas
Group who had a 4.85% growth. Most of UAs growth was in North America, which further
highlights the opportunities outside of North America that can be easily financed with positive
cash flow (See Exhibit 4).

Value Chain Analysis

Supply Chain Management: Under Armour does not manufacture their fabrics or garments
directly and outsources instead. Up to 55% of the fabrics are purchased from six suppliers with
them located primarily in Asia and Mexico.
Operations: Operating functions: Converting fabrics to the final product are outsourced to
manufactures as well. With 66% of the products manufactured in Asia and the balance in Central
and South America, the Middle East and Mexico.

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Distribution: Under Armour has two distribution centres on the east coast of the US and one on
the west coast; these centres provide products for wholesale retail accounts, direct-to-consumer
sales and their own retail and factory locations. Under Armour has recently setup distribution in
Mexico to handle Latin American inventory requirement. For other global locations, they have
either licensed their name or used a third-party distributor.
Sales and Marketing: Under Armour has several marketing and sales strategies; with sports
marketing being a key element. Sport marketing is used to ensure consumers see the products
being worn by athletes while on the playing field to show the on-field authenticity of the
products. While in retail spaces, the concentration is to create concept stores exclusive floor
space for that showcase and educate the consumer about Under Armour products. Under Armour
also utilizes advertising in several formats which catchy slogans showing prominent athletics
using the products with an emphasis on the technological aspects.
Service: Under Armour does direct-to-consumer sales through their website as well as retail
stores under either a Brand House or a Factory House label. Brand Houses are full retail locations
and located in high traffic retail locations, while Factory House locations sell discounted, out of
season and overstocked inventory and provide a way for Under Armour to familiarize consumers
to their brand.

As illustrated in the Value Chain analysis, Under Armours primary and secondary activities have
helped in gaining its competitive edge. As only 3 elements scored strong, there is significant room
for AU to improve its value chain framework (See Exhibit 5).

External Analysis
An external analysis is conducted to help UA scan and evaluate the major external forces and
trends that may potentially impact its performance.

Industry Overview

The global sporting goods industry consists of many distinct product categories and market
segments, two of the largest segments are the athletic footwear and athletic and fitness apparel.
The athletic footwear segment is valued at approximately $75 billion in 2012 and forecasted to
reach $85 billion by 2018. The global market for athletic and fitness apparel is estimated to be
$135 billion in 2012 and forecasted to grow by 4% annually and reach $178 billion by 2019. The
growth is primarily driven by rising and ageing populations, increased disposable incomes, and
rising health awareness.

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Competition Analysis

The competition globally in the multi segment sports apparel, footwear and accessories markets
have approximately 25 different brand name competitors with broad product lines covering
various geographical locations. The main direct competitors to under Armour are industry leaders
Nike and Adidas along with other name brands such as Polo Ralph Lauren, Columbia, Puma,
Lacoste and others competing for market share in the performance active wear and sports apparel
market segments. Under Armour also had many indirect competitors consisting of small
companies with specialized-use apparel lines who generally operated in a single country or
smaller geographical regions.

Competition in the various market segments tended to be intense with the varying brand names
competing for sales by trying to offer products with high performance features, reliability, varied
selection of styles, competitive pricing and brand name recognition. To increase brand name
awareness many leading companies sponsored sporting events, sports teams and individual
athletes to raise awareness and recognition to their products and brand name.

Under Armour Nike Adidas Various Niche

Players

Products in Performance & Performance Performance Performance &

Market fitness apparel, apparel & fitness, apparel & Fitness apparel,
segments athletic footwear athletic footwear, fitness, athletic athletic
and athletic and golf apparel, footwear, golf footwear, active
sports sports equipment apparel, sports wear, skiwear,
accessories equipment, golf apparel
casual footwear
Market Share 14.7% of sports 27% of sports 7.4 % of sports 50.9% of sports
apparel in the apparel in the US apparel in the apparel in the
US Global market US US
leader Second in the
global market
Quality / High Quality High Quality Moderate to Low to High
Selection Low to Moderate to High High Quality Quality
Moderate Selection Moderate to Low to High
Selection High Selection Selection
Marketing $246.5 million $2.75 billion in 1.46 billion in Unknown
Spending in 2013 2013 2013
Retail Over 25,000 Over 40,000 Thousands of Varies
availability retail stores, 121 retail accounts, third party
company owned 753 company retailers, 1,661
stores and owned stores, company owned
license selling stores, 779
agreements arrangements factory outlets,
with independent

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 distributors and
licensees in over
190 countries

Perceptual Map

Athletic & Fitness Apparel

The perceptual map above shows that UA is well positioned as it fills the gap that exists in the
market of high cost quality performance. There is also a gap in the high price poor performance
but it is unlikely that consumers will want to pay a lot of money for low quality product.
Similarly, the low price high performance box is empty because retailers would find it difficult to
produce high performance products at a low price and make profit.

Five Forces Analysis

Porters Five Forces analysis model was used to determine the intensities or strengths of external
factors influencing UAs business. To ensure long-term competitive advantage, UAs strategic
direction must overcome these forces. Presently, the intensities of these forces relative to the
company are as follows:

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Competition (High)
Many direct and indirect competitors in athletic apparel and footwear/accessories market
Direct competitors are large firms with well-developed global distribution networks
Between large and small competitors where large amounts of the market are already well-
served and there is little room to add on
Threat of New Entrants (Low to Medium)
Entry barriers to global markets are high due to high capital costs to develop production
facilities and distribution networks
Niche companies enter the market to cater to specific segments and/or geographically
markets as the capital cost are lower then needed to compete globally
Supplier Power (Low to Medium)
There are many suppliers available in comparison to the number of buyers
High volume purchases provide the buyers with bargaining power over suppliers
Being a large portion of suppliers sales causes threat of losing business
Buyer Power (High)
Many different brands and options to choose from
Significant advertising by all competitors informs consumers of options giving them
additional power
Product options exist in all parts of the price to quality spectrum
Threat of Substitutes (Medium)
Under Armour uses highly specialized materials and designs which are difficult to
replicate
A diverse range of options exists in substitute products in the low-quality range up to just
below that of Under Armour
Many local competitors offer niche products that act as substitutes

The above Five Forces analysis shows that Under Armour faces challenges linked to most of the
five forces. The emphasis however is placed on competition and bargaining power of customers
as these two forces have the highest intensities among the five. As such, these should receive the
most significant considerations with the companys strategic decisions. To combat the effects of
competition, UA should continue to implement strategies that will enhance innovation. This in
turn will increase product attractiveness, which addresses the potential negative effects of
bargaining power of customers.

PESTEL Analysis

PESTEL analysis is performed on Under Armour to identify the various external variables that
affect its performance.

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Political: Political factors play a critical role in any retailers survivability. With UA operating in
various countries, it is important for the company to be in compliant with each countrys rules.
Economical: Economic growth or downturn will likely have an impact on the athletic apparel
and footwear industry as it is directly related to the purchasing power of consumers. Another
major concern is the potential increase in cost of raw materials, resources, shipping costs, labour
costs and interest rates.
Social: There has been a growing trend toward a more healthy and active lifestyle. Another
social factor is fans want to connect with their favorite athlete or team and one way to do this is to
purchase the brand / products they are wearing.
Technological: The advancement in technology will provide companies the ability to innovate in
many different ways from customer interaction to product design. Technological factors affecting
UA include: 1) Social Networking, which has allowed the company to interact with consumers
and increase product appeal. 2) Innovative products with breakthrough qualities and design,
which has made it possible for the company to compete against giant sportswear rivals such as
Nike and Adidas. 3) E-Commerce has allowed customers to purchase UA products without going
through retailers.
Environment: Over the years, the concept of going green has been a growing trend. Many
companies are striving to be environmentally friendly. UA recognizes the importance of operating
in an environmentally sustainable way hence they have made efforts in integrating being green
in its operations such as manufacturing and packaging.
Legal: There can be some legal implications upon the athlete apparel and shoes industry. For
UAs global operation, it is important to follow the laws in each country.

The PESTEL analysis above indicates that Under Armours external environment appears to be
stable and strong. This gives UA a solid foundation to consider further expanding its business.
Under Armours target consumer is athletes, individually and teams, however as the trend towards
health and active lifestyles has grown which has provided Under Armour with other consumer
segments. In addition to sports athletes, the other consumer segments that Under Armour should
focus on is the active lifestyle segment, particularly as this segment is growing and reachable
through traditional advertising, social media and other promotions. See exhibit 6 for segment
chart.

Key Success Factors and Uncertainties

Success Factors

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 Technological advancement and innovation
Quality and performance in product and services
Product variety
Brand awareness/image
Uncertainties
Consumers response to any scandal involving a team or athlete associated with the brand
Patents on synthetic fabrics restricting their use
Continuous change in consumer preferences

Analysis of Alternative Solutions

Alternative 1: Increased International Expansion
Although Under Armours sales growth currently outpaces its rivals it is slowing as it penetrates
more of the market. Under Armour can utilize their cash flows from their existing operations as
cash cows to fuel expansion into new markets which will be cash hogs in the first few years.
Pros
Increased sales from new customers
Increased brand awareness
Great market opportunity from growth in developing countries
Cons
Restrictions due to foreign laws and regulations
Political situation in some countries
High investment cost to learn and develop relationships in new market
Alternative 2: Create Under Armour Concept Shops
Under Armour can expand on retail sales with concept stores which will provide a way for
consumers to interact with the brand and increase awareness of new concepts Under Armour is
developing.
Pros
Increased brand awareness
Increased product visibility
Educate customers on new products
Increase sales by enticing customers with exciting products
Cons
Retailers may not want to give up floor space
This will require a large investment
Alternative 3: Expand Product Range and Research and Development
Under Armour could choose to increase its sales growth by expanding its range of product
offerings. There is plenty of room for growth in industries that are closely related to the sports
apparel industry particularly shoes specifically and sports equipment. This will allow Under

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Armour to capitalize on its strong brand recognition in the sports industry and increase sales from
customers it has already won over with other products.
Pros
Will not have to rely on third parties
Will continue down the learning curve ahead of competitors
More products will lead to increased sales with proper marketing
Increased product offerings can lead to synergies across all production operations
Cons
This will have high costs in terms of research and development
High capital investment costs to produce new products
Under Armour has less expertise in these new products
Alternative 4: Increase Marketing to Women and Childrens Markets
The women and childrens markets in North America provide room for additional expansion by
Under Armour without having to begin increasing international expansion immediately. Under
Armour can focus more advertising dollars on women athletes and appealing to youth. This will
allow them to expand more into markets they already have a foothold in and gain synergies from
existing campaigns.
Pros
Large market easily accessible to Under Armour
Increased sales from new customers
Synergies with existing marketing to male consumers
Cons
Delayed action in international markets could allow first-mover advantages for
competitors
Childrens market may be harder to sell premium product due to price
This will require additional research and development to increase product line to suit new
customers
Alternative 5: Increase Online Presence
Under Armour can benefit from the growing e-commerce craze by increasing its online presence.
Under Armour already plans to gain a lot of its growth from direct sales and online sales offer a
convenient way to expand sales to areas out of reach of current retail. Under Armour can also use
its web presence for online marketing activities to grow its brand name and product awareness.
Pros
Synergies with online marketing
Inexpensive way to slowly access new markets
Access to remote customers
Increased sales
Cons

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 Could upset some retailers due to cannibalized sales
Online activities require development of additional human resources
Under Armour will have to take a larger stake in daily operations and distribution for
online sales

Decision Matrix

Key Success Factors Alternatives

1 2 3 4 5

Technological advancement and innovation 1 2 4 1 2

Quality and performance in product and services 2 2 3 2 2

Product Variety 2 1 4 1 1

Brand awareness/image 4 3 2 2 2

Totals 9 8 13 6 7

1. Accomplishes KSF the least

2. Accomplishes KSF moderately
3. Accomplishes KSF well
4. Accomplishes KSF the best

Recommendations
Based on our decision matrix alternative 3 best matches the key success factors (KSF) that UA
needs to further develop its position in the market and increase long-term shareholder value.
However, due to UAs currently large cash flows and good financial standing we believe it is
possible to also pursue a second strategic objective simultaneously. Alternative 2 has been
selected as it provides good synergy with alternative 3.

Alternative 3 fits very well with the important industry KSFs of technological development and
product innovation and allow UA to increase its product offerings so that it can continue to
exploit its position in the North American market and other markets it is already strong in. This
will save UA significant costs in international expansion and allow it to add growth to its
currently slowing sales by gaining new customers and increasing sales from the existing customer
base.

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The new product lines will benefit from synergies with UAs existing products in the markets
where it has been consistently gaining market share. Conversely, the existing products will also
receive a boost from the introduction of these new innovative products. By spending more on
research and development UA will also be able to develop internal competencies which will
eventually reduce its reliance on third party suppliers. UA will also move down the learning curve
faster and can move past its competitors allowing it to gain a first-mover advantage in introducing
exciting new products without existing substitutes at premium prices. This will allow UA to turn
its good financial situation into a permanent competitive advantage.

Pursuing alternative 2 in conjunction with these increased product development efforts will give
UA a perfect means of giving its new and innovative products visibility. It will be able to grow its
brand recognition and sales while also advertising its new product lines. Adding these concept
stores in existing markets will also synergize with the strategy of gaining as much market share in
markets where UA has a good foothold before pursuing further international expansion.
Negotiating the development of the concept stores will also provide UA and opportunity to
develop better relations with its retail partners which can later be leveraged to its advantage.

Alternative 1 was considered a viable option which fulfilled the key success factors well,
however it is too expensive for UA to expand internationally while also significantly increasing
its product development efforts. Alternative 4 is a good alternative, however the childrens market
did not seem as lucrative for a premium product, and shifting too much marketing to these
demographics could begin to alter the way customers see the brand. Alternative 5 should continue
to be pursued in measure, but it does not offer a significant enough differentiation from
competitors to justify a strategic focus and also risks cannibalizing sales from existing retailers.

Action Plan

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 Timeline Action Description Person Responsible

Immediately Increase R&D Analyze cash flows Chief Financial

and cash needs to set Officer
suitable increase

Next 1-3 Months Open negotiations Approach best retail Chief Marketing
regarding concept partners Officer
stores

Over Next Year Increase product Make capital Production Manager

development and investments in new
production capacity technology and
facilities

Over Next Year Improve quality Strive to improve Production Manager

quality through TQM
and Six Sigma
practices

Over Next Year Open concept stores Roll out concept Chief Marketing
stores in test markets Officer

Next 1-3 Years Open all concept Roll out concept Chief Marketing
stores stores in all markets Officer

Next 1-3 Years Introduce new Show new product Chief Marketing
products lines in concept Officer
stores

Continuous Culture of innovation Create programs to Human Resources

encourage employee Manager
innovation and

Continuous Reward innovation Reward ideas that Human Resources

improve production Manager, Production
efficiency Managers

Contingency
In the event that the alternatives selected does not generate the expected profit, UA should
consider expanding its business globally. Operating globally presents the company with new
market opportunities, which could mean an increase in customer base, increase in revenue, and
increase profit margin. Becoming a widely-diversified company will lessen its vulnerability to
changes in its local demand thus reducing the uncertainties in UAs sales and profits.

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