Under Armour:PEST and Industry Analysis Brian Teufel MGT 490-004 Assignment #2 Professor McDermott March 17, 2011
Kevin Plank, the CEO of Under Armour developed a blue ocean strategy Created Performance Apparel market – enhances consumers performance while offering greater comfort Total sales over $1.0 billion in 2010 First-mover advantage has allowed UA to gain 70% of the U.S. market and about 15% of the global market Performance Apparel has evolved from niche to mainstream in terms of target market and competition (Nike and Adidas) Under Armour Snapshot
Under Armour owns branded retail stores in 28 U.S. states (30+ stores) and 23 other countries (25+ stores).
- First UA branded retail store opened on November 1, 2007.
Pest Analysis • Opportunities and Threatsare ranked in terms of importance separately; top five of each are ranked accordingly. (1 = extremely important, 5 = Not very important.
Political Factor FDI Policies- Some foreign countries have policies in place that prohibit 100% ownership of retail stores which poses threat to internationalization Chinese Labor Costs Increasing Costs of international labor is on the rise. Hourly compensation costs of manufacturing employees in China from 2002-2008 is shown below. Economic Factors
Economic Factors (cont.) •The growth of the performance apparel industry is the greatest opportunity. •More Consumers = More Revenues
Obesity rates in U.S. show people not physically active Consumers focus on quality more than price Increase in physically active women Increase in health conscious consumers = more exercise/physical activity Sport participation is a key aspect of U.S. culture Aging population and increase in physically active seniors Increase in sports participation in emerging markets Social Factors
Industry Analysis Overview Under Armour is in the extremely competitive performance apparel industry which is defined as anything that is worn which enhances the performance of the user. Performance apparel global sales = $6.4 billion in 2010 and is expected to grow to $7.6 billion by 2014. In 4 years, the industry is expected to grow by 15%.
Threat of New Entrants - High With the expected growth of the performance apparel industry, there will be new entrants in the industry from all over the world. Most companies who enter the performance apparel industry are unable to compete due to existing brand loyalty and the high barriers to entry. Examples include New Balance, Velocity, and Sugoi
Threat of Substitutes – Moderate to High Substitutes are limited to conventional apparel or no apparel at all. Core athletes have a large number of substitute options to choose from.
The bargaining power of buyers depends on the consumer’s skill level and the level of the team.
Bargaining Power of Suppliers - Moderate
The use of third party suppliers allows performance apparel companies to chose their suppliers based on highest quality and lowest production cost.
Third party suppliers have high bargaining power by being able to choose the companies that they want to supply for.
The best third party suppliers can select the company orcompanies that treat them the best and provide the best compensation.
There are thousands of third party suppliers all over the world.
Currently, the performance apparel industry is growing rapidly at 15%; this allows rivalry to grow rapidly as well. There is a high # of competitors but UA, Nike, and Adidas make up the majority of the industry due to a quality advantage over other competitors. Rivalry Intensity - High
Innovation Differentiation Blue Ocean Strategy Niche R&D Enhance Performance
The opportunities for the performance apparel industry outweigh the threats. Labor and gas costs are increasing but opportunities such as the global growth of the PA industry, global increase in sport participation, and increase in both e-commerce and m-commerce outweigh the threats. Rivalry is extremely high in the performance apparel industry. The competition between Nike, Adidas, and Under Armour is fierce and it continues to heat up. Participants in the performance apparel industry must always be aware of new entrants because the industry is on the rise. Create high barriers to entry. Blue Ocean Strategy was the basis for Under Armour and it allowed them to achieve success in the PA industry. Innovation, Differentiation, R&D, Creating Niche of performance apparel that enhances performance while allowing comfort. Conclusions