CASE 24
Under Armour
24-15
ii. The trend has significantly impacted past performance and will
definitely boost future performance.
c. UA’s marketing performance compared to other corporations is as advance
and as rigorous as other companies. It spends around 13 percent of its
revenues on marketing.
d. N/A
2. Finance
a. Main objectives are to increase growth in profits and sales by creating
and selling new products as well as providing technology leadership with its
performance apparel products. UA broke down its revenues into apparel,
footwear, accessories, and licensing (S).
i. The objectives are clearly stated.
b. Under Armour cash position isn’t ideal due to its footwear segment.
Despite the IPO in 2005, UA has –7.5 percent cash flow margins in 2007. It
has been recovering ever since. UA had a decline in gross profit margins in
2009 due to less favorable footwear and apparel product mix and liquidation
of unsold footwear inventory. UA has generally consistent and favorable
margins (W).
i. UA is a dominant leader in the performance apparel industry and
has many proprietary technologies. However, in the footwear industry,
UA is not performing as well as it would want to.
CASE 24
Under Armour
24-16
v. Finance does provide UA with a competitive advantage as they are
considerably stable financially at the moment.
c. UA’s financial performance is comparable to other sporting goods
companies. Its market capitalization is not as large as other larger
companies, due to its specialization in performance–based products.
3. Research and Development (R&D)
a. The technologies are the main source of advantage for UA. These are the
microfiber/temperature control that helps speed up the evaporation of sweat,
marketed as the ColdGear and HeatGear; “LockerTag” that prevent skin
irritation from tags and labels. (S)
i. The R&D objectives are implied by the business they operate in
(performance apparel industry) and their financials with the operating
expenses heavily weighted to R&D.
ii. Yes, it is consistent with their objective to provide high–
performance apparel for “athletes.”
b. They are earning revenues from the sales of the performance apparels,
footwear, and accessories (S).
c. As any other sporting goods companies, UA’s product design is kept at its
HQ. There is no technology transfer to the manufacturing division, as it is
all outsourced (W).
CASE 24
Under Armour
24-17
g. N/A
4. Operations and Logistics
a. UA outsourced almost all of its manufacturing to contract manufacturers in
Asia and Latin America. A team from UA evaluates potential contract
manufacturers on quality, social compliance, and financial strengths prior to
certifying them. Manufacturers procure raw materials and provide finished
b. UA operates two leased distribution facilities in Glen Burnie, MD, near
its HQ in Baltimore, MD. Products are shipped to retailers and company stores
via third party logistics provider, both in US and Europe. Because of
overseas manufacturing, lead times for design and production is long (W).
d. N/A
e. UA cost of production is similar to other sporting goods companies that
outsource their manufacturing division.
i. UA needs to ensure the overall issues related to outsourcing to
developing countries.
f. Due to nature of outsourcing, UA does not have full control of
manufacturing process (W).
g. N/A
CASE 24
Under Armour
5. Human Resources Management (HRM)
a. UA employed 3000 people in September 2010. Half of the employees work at
manufacturing facilities, with the rest of distribution facilities and
corporate HQ. UA’s employees are non–unionized. UA has a very strong
b. UA’s HRM strategy is largely based on its culture and history of the
founder (S).
i. UA manages its HRM as a football team.
ii. Strong company culture will increase employees’ sense of
ownership to the company.
c. N/A
d. N/A
e. N/A
6. Information Systems (IS)
There is very limited information on usage of IS as a strategy for Under
Armour. The case does emphasize the role of technology in UA’s products,
however, there is not enough information to imply on IS role.
D. Summary of Internal Factors
CASE 24
Under Armour
24-19
Currently, marketing is Under Armour’s core competency. With strong
“influencers,” UA could effectively market its products to “athletes” or
V. Analysis of Strategic Factors (SWOT)
A. Situational Analysis—SFAS refer Exhibit 3
Please refer to Exhibit 3, the Strategic Factors Analysis Summary.
VI. Strategic Alternatives and Recommended Strategy
A. Strategic Alternatives
1. The current objectives can be met if UA continues to focus on its
technology improvement to create high–performance products. UA also has to
2. The major alternative strategy that is available to UA is to just focus
on the performance apparel and accessories, momentarily stopping its footwear
segment. Under this strategy, UA will have more time to experiment and
improve its footwear technology. UA needs to produce higher performance
footwear then create a new segment in footwear industry, similar to what it
did in the apparel industry. UA then would not be affected by the financial
burden of the footwear segment.
a) Cost leadership would be a difficult strategy for UA to implement
due to the high costs associated with improving high–performance
CASE 24
Under Armour
24-20
c) A clear functional strategy that would fit well with current
business and corporate level strategies at UA would be a technological and
B. Recommended Strategy
1. I believe that UA should pursue a differentiation business level
strategy. This will allow UA to maintain its leadership status in performance
apparel industry. UA will be able to create high quality product and charge a
2. The differentiation strategy is made possible due to the strategic
factors related to technology advancements and strong marketing initiatives.
It will address short–term problems such as decrease profit margin for
3. The way that the company is shaped currently is mostly in line with the
4. The proposed revised strategies would coincide well with the existing
corporate environment and distinctive competencies. UA would continue to
leverage its strong culture to focus on R&D on both technology and marketing.
VII. Implementation
A. N/A
B. The proposed strategies are financially feasible. If done properly, it
would only increase UA’s cost to certain extent as these improvements will
reflect on overall sales and increase brand recognition.
CASE 24
Under Armour
24-21
VIII. Evaluation and Control
CASE 24
Under Armour
Exhibit 1—External Factor Analysis Summary (EFAS)
Key External
Factor
Weight
Rating
Weighted
Score
Comments
Opportunities
Huge Global
Market
Trend of
Synthetic
Apparel
0.15
0.15
0.15
2
5
4
0.3
0.75
0.6
UA dominates the performance
apparel industry and competing in
the gigantic footwear industry.
UA competes in the fastest growing
segment in sports apparel market.
Threats
Competitively
Priced
0.10
0.15
3
3
0.3
0.45
UA competes in the higher price
segment along with giants like
Nike and Adidas.
Total Scores
1
3.3
CASE 24
Under Armour
24-23
Exhibit 2—Internal Factor Analysis Summary (IFAS)
Key Internal
Factor
Weight
Rating
Weighted
Score
Comments
Strengths
Centralized
Corporate
Structure
Technology
Driven
Lower Overall
Manufacturing
Costs
0.05
0.10
0.10
3
3
3
0.15
0.3
0.3
UA’s strategic decision–making
is handled by executives that
truly understand the industry.
UA’s main drive of growth is
through innovative technologies
such as the microfiber and
“Lockertag.”
UA outsources its manufacturing
operations, but at the same time
have multiple manufacturers.
Weaknesses
No Technology
Transfer
0.10
2
0.2
UA keeps its technology at its
HQ, So technology sharing with
manufacturing plants.
CASE 24
Under Armour
Exhibit 3—Strategic Factor Analysis Summary (SFAS)
Key Strategic
Factors
Weight
Rating
Weighted
Score
Duration
Comments
Short
Inter
Long
External
Environment
Huge Global
Market (O)
0.08
2
0.16
X
X
X
UA dominates
the
performance
apparel
industry and
competing in
the gigantic
footwear
industry.
CASE 24
Under Armour
24-25
Apparel (O)
market.
Advancing
Technology (O)
0.08
4
0.32
X
X
X
UA owns one of
the best
technologies,
especially in
performance
apparel
industry.
Uprising
Exercising (O)
0.05
2
0.10
X
X
Labor–related
Outsourcing
Issues (T)
0.08
3
0.24
X
X
UA has to
constantly
monitor its
contract
manufacturers
to avoid legal
labor–related
issues.
Unpredictable
0.05
4
0.20
X
X
X
Customer
Perceptions (T)
0.05
3
0.15
X
X
UA has to
constantly
monitor its
contract
manufacturers
CASE 24
Under Armour
24-26
Exhibit 3—Strategic Factor Analysis Summary (SFAS)
to avoid legal
labor–related
issues.
0.04
3
0.12
X
X
handled by
executives that
Competitive
Pricing (T)
0.05
3
0.15
X
X
X
UA competes in the
higher price segment
along with giants
like Nike and
Adidas.
Strong
Corporate
Culture (S)
0.06
3
0.18
X
X
X
Strong corporate
culture and values
have guided UA to
where it is today.
Well–planned
Marketing
Strategies (S)
Lower Overall
Manufacturing
0.10
4
0.40
X
X
X
UA has extensive
marketing
strategies, such as
the use of
‘influencers’ to
better target
customers.
CASE 24
Under Armour
24-27
Exhibit 4—Financial Ratios
Ratios
For the Fiscal Period Ending
12 months
Dec–31–2007
12 months
Dec–31–2008
12
months
Dec–31–
2009
Profitability
Return on Assets %
15.9%
10.9%
10.3%
Return on Capital %
20.9%
14.3%
13.4%
Return on Equity %
21.2%
12.5%
12.8%
Return on Common Equity %
21.1%
12.4%
12.7%
Margin Analysis
Gross Margin %
50.3%
48.7%
47.9%
SG&A Margin %
27.9%
30.0%
29.6%
EBITDA Margin %
16.6%
13.6%
13.3%
EBITA Margin %
14.5%
10.8%
10.2%
EBIT Margin %
14.2%
10.6%
10.0%
Earnings from Cont. Ops Margin %
5.3%
Net Income Margin %
5.3%
Net Income Avail. for Common Margin %
5.2%
Normalized Net Income Margin %
6.0%
Levered Free Cash Flow Margin %
(7.6%)
4.8%
13.7%
No Technology
Transfer (W)
0.06
2
0.12
X
X
X
UA keeps its
technology at its
HQ, so technology
sharing with
manufacturing
plants.
Total
1
3.28
CASE 24
Under Armour
24-28
Unlevered Free Cash Flow Margin %
(7.5%)
4.9%
13.8%
Asset Turnover
Total Asset Turnover
1.8x
1.7x
1.7x
Fixed Asset Turnover
14.7x
Accounts Receivable Turnover
7.3x
8.3x
Inventory Turnover
2.4x
2.1x
2.7x
Short–Term Liquidity
Current Ratio
3.4x
3.0x
3.7x
Quick Ratio
1.4x
1.4x
2.2x
Cash from Ops. to Curr. Liab.
NM
0.5x
1.0x
Avg. Days Inventory Out.
Avg. Days Payable Out.
Avg. Cash Conversion Cycle
Long–Term Solvency
Total Debt/Equity
5.1%
13.8%
5.1%
Total Debt/Capital
4.9%
12.1%
4.8%
LT Debt/Equity
3.5%
4.0%
2.7%
LT Debt/Capital
3.3%
3.5%
2.6%
Total Liabilities/Total Assets
28.2%
32.1%
26.7%