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CASE 24
Under Armour
I. CASE ABSTRACT
CEO Kevin Plank, “As a growth company, our success is not only defined
by the results we achieve today but how we position the Under Armour Brand
for sustainable long–term growth. We remain dedicated to building our large
scalable businesses and see tremendous opportunities beyond our current
business drivers. We are relentless in our pursuit to better leverage the
Under Armour Brand across broader categories such as footwear and deeper into
international markets. The strength of our Brand, the commitment of our team,
and our ability to invest give us great confidence in our future.”i While
“We have tremendous opportunities in our apparel category, particularly
in the international markets. We haven’t sold a single t–shirt in China,” he
reflected. “But to be a leading player in the field of sports, shouldn’t we
have a major presence in athletic footwear? That’s the key decision that I
and my team have to make immediately. How best to manage the balance among
our three categories of products so that UA continues to be a force to be
reckoned with in the industry?”
Decision Date: 2010 FY Sales: $1 billion
FY Net Income: $68 million
II. CASE SUBJECTS AND ISSUES
Blue Ocean Strategy Sports Apparel& Footwear
Strategy Formulation Competitive Advantage
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III. STEPS COVERED IN STRATEGIC DECISION–MAKING PROCESS
IV. CASE OBJECTIVES
1. To discuss product differentiation.
2. To discuss global competition.
V. SUGGESTED CLASSROOM APPROACHES TO THE CASE
1. This is an excellent case for instructor–led discussion.
VI. DISCUSSION QUESTIONS
1. What advantages did UA get upon its entry?
VII. CASE AUTHOR’S TEACHING NOTE—
UNDER ARMOUR IN 2010
TEACHING NOTE
CASE SYNOPSIS
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Under Armour (UA) pioneered the performance apparel category in the sporting
goods industry. The company, founded in 1996 by Kevin A. Plank, owned 78
percent of the market share in its category and had revenues of $856.4
million in 2009. Around 94 percent of the company’s revenues, however, came
from the United States and Canada. In 2006, UA took industry giant, Nike,
KEY ISSUES
The case identifies several key issues that a consumer products company
faces:
• Managing a company’s growth.
PLACEMENT
The case is ideal for an undergraduate or graduate course in strategic
LEARNING OBJECTIVES
The case deals with a company that has a very identifiable brand name in the
United States and one that deals with a consumer product that college
students are very familiar with. As such, the nature of the product and the
brand name are likely to draw considerable interest in the case from
students. As a corporate strategy case, “Under Armour in 2010” has specific
learning objectives:
1. The implications of entry into a “blue ocean” market.
2. The need to consider both differentiators and the economic logic of
KEY THEORETICAL CONCEPTS
The case illustrates the use of various corporate strategy concepts. These
concepts are covered in a variety of reading materials. What follows below is
CASE 24
Under Armour
a list of the key concepts used in the case and the relevant reading material
for that concept:
• Under Armour created a new segment in the sports apparel part of the
sporting goods industry. In effect, it identified a “blue ocean”
• The resource–based view of strategy is covered in a number of strategy
textbooks and articles. While there are several articles or books that
describe the resource–based view, the following are two good examples
of short articles:
(1) David J. Collis and Cynthia A. Montgomery, “Competing on
Resources: Strategy in the 1990s,” Harvard Business Review, July–August
(2) Pankaj Ghemawat and Patricio del Sol, “Commitment versus
Flexibility,” California Management Review, Volume 40, No. 4, Summer
1998, pp. 26–42. This offers a useful framework (with ample examples)
Perspective, 2nd edition, Pearson Prentice Hall, 2009.
DISCUSSION QUESTIONS
1. Examine Under Armour’s entry into the performance apparel industry. What
advantages did UA get upon its entry?
2. What is UA’s competitive position in performance apparel at the time of
the case? Can it sustain its position?
SUGGESTED DISCUSSION FLOW
Given below is a diagrammatic representation of a possible pattern of
discussion. The pastures correspond to the questions listed above.
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Pasture 1 Pasture 2 Pasture 3
•UA’s entry into
performance apparel
•Concept of “blue ocean”
•First mover advantages
•UA’s differentiators
•UA’s economic logic
•UA’s activity system in
apparel
•Comparison of
performance apparel and
footwear
•UA vs. Nike, Adidas in
footwear
SUGGESTED ANSWERS TO DISCUSSION QUESTIONS
1. Examine Under Armour’s entry into the performance apparel industry. What
advantages did UA get upon its entry?
UA, in effect, created the performance apparel industry. Using the Kim and
Mauborgne framework, Kevin Plank identified a blue ocean market space. He
started with the basic cotton t–shirt, found it ineffective to combat sweat,
experimented with different types of fabric, and finally, created one that
could wick away sweat and thus keep the athlete’s outerwear light. Students
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2. What is UA’s competitive position in performance apparel at the time of
the case? Can it sustain its position?
Once UA’s first mover advantage is clear to students, the instructor should
move the calendar forward to the present and pose the question: what is UA’s
competitive standing now that Nike and Champion (among others) have entered
the performance apparel industry? As a backdrop to this discussion, the
instructor can steer the students to examining UA’s valuable resources as a
way to reinforce the resource–based view concepts.
The instructor should encourage students to identify UA’s key
resources/capabilities and have them take each resource through the VRINE
(valuable, rare, costly to imitate, non–substitutable, exploitability)
framework. This will allow the students to see the link between UA’s
differentiators and its economic logic. Resources/capabilities such as the
At the end of this pasture of discussion, students should come away with a
clear understanding of what gives UA a sustainable advantage in the
performance apparel market. As a segue to the next question, the instructor
can pose the question: is UA’s competitive advantage limited to performance
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apparel or can it extend to other segments of the athletic equipment
industry?
3. Compare the performance apparel and footwear industries. Examine UA’s
motivation for entry into this market.
The key point to be brought out in this pasture of discussion is that, while
UA created the performance apparel industry, there are entrenched competitors
in the athletic footwear industry at the time of UA’s entry. While Nike and
The bulk of this discussion should center on the nature of two important
resources that UA has—its brand name and its moisture wicking technology—and
the issue of their transferability to athletic footwear.
In their article, Ghemawat and del Sol examine resources from a key
perspective: usage specificity. Some resources are valuable but their usage
is limited to specific contexts. These are in contrast to “usage flexible”
resources that do not have the same constraint. Usage flexible resources
The debate should then move to the transferability of moisture wicking
technology. How does moisture wicking help in shoes? Is UA featuring moisture
wicking as a major element of its footwear? Neither is supported by case
facts. While moisture wicking is integral to an undergarment, it appears to
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be less integral to footwear. Also, it does not appear that UA is making
moisture wicking a major element of its footwear advertising.
4. What would your recommendation be to Kevin Plank about UA’s future?
Explain your rationale.
The discussion in the above pastures should set the stage nicely for the
“action” question. The decision has to do with UA’s entry into the athletic
A good way to look at the footwear industry entry question (in addition to
the usage specificity issue raised earlier) is to go back to the
“differentiators” and “economic logic” issues discussed in Question two. Do
the same differentiators work equally well in athletic footwear as they do in
performance apparel? Is the link between differentiators and economic logic
as sound here as it is in performance apparel? Evidence in the case seems to
suggest otherwise. The case points out that: there was a decline in gross
margins in 2009 because of “less favorable footwear and apparel mix,”
liquidation of unsold footwear, the failure of the running shoes launch, etc.
Are these to be taken as “teething” troubles and are typical of a new market
entrant?
Summary and Key Takeaways
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The instructor should summarize the discussion at this point so that the
students leave the class with key takeaways. UA is a successful company that
created a new market—a blue ocean market—and established a 78 percent U.S.
market share in it. It has a number of key resources supporting its
competitive advantage in performance apparel. The entry into footwear is
VIII. STUDENT STRATEGIC AUDIT
I. Current Situation
A. Current Performance
1. History: Founded by Kevin Plank in 2003, he took UA to
go public with IPO of $13 in 2005.
2. Economic Performance:
• In 2009, UA earned revenue of $837 million. However,
B. Strategic Posture
1. UA’s current mission, objectives, strategies, and
policies are both clearly stated and can be seen from
its performance.
2. UA is in the sports clothing and accessories business.
Its mission is “TO MAKE ALL ATHLETES BETTER THROUGH
3. The corporate business and functional objectives are to
1) achieve both growth in sales and profits, 2) provide
technological leadership in the field of performance
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4. The corporate, business and functional strategies are to
pursue: 1) growth through innovation and increased
performance apparel technologies with development and
sale of the footwear line is to create higher demand and
revenue; 2) product differentiation with focus on a
5. The policies are to focus on utilizing microfiber
technologies, and on producing high performing apparels.
6. UA’s current strategic postures reflect its
international expansion plan. Despite declining footwear
sales in 2009 and 2010, Kevin Plank believes that UA
II. Corporate Governance
A. Board of Directors
1. The eight members of BOD are Kevin Plank, Byron Adams
Jr., Douglas Colthrap, Anthony Deering, A.B. Krongard,
2. In total, the BODs own in total around 30 percent of its
shares, with Kevin Plank owning 25 percent of the
shares.
3. The stock is publicly traded.
4. The directors have diverse work experiences in
industries such as design, manufacturing, finance,
5. Most of them have been Under Armor directors since its
IPO in 2005.
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6. These board members are actively involved in Under
Armor’s strategic management. They actively participate
and suggest its future directions.
B. Top Management
1. The top management consists of Kevin Plank (Chairman,
President and CEO), Byron Adams (CPO), Brad Dickerson
2. The ten executives have diverse work experiences, with
backgrounds in different industries including
3. The top management has been responsible for Under
Armor’s performance over the past few years. They helped
Under Armor to strive in sport apparel industry.
4. It has established a systematic approach to strategic
5. The executives have been heavily involved in the
strategic management process.
7. Strategic decisions are made ethically in a socially
responsible manner. Being socially responsible is part
8. N/A
9. Top management is sufficiently skilled to cope with
III. External Environment—EFAS refer Exhibit 1
A. Societal Environment (PESTEL Analysis)
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a) General performance apparel and footwear industry is growing and is
huge globally (O).
i. Regarding athletic footwear industry, UA is
b) The economic recovery has created more demand for higher–priced
products (O).
c) UA’s pricing strategy is very competitive, similar to Nike, and much
higher compared to the rest of apparel industry (T).
2. Technological
Industry–related technology is always advancing in sporting
goods industry. Some are available for general use,
3. Political—Legal
As most of the sporting goods companies outsource their
4. Sociocultural
a. The women’s segment of the sports apparel category is the fastest growing
industry segment. Women are now spending more of their income on sporting
apparel (O).
b. Apparel made from synthetic products is the fastest growing segment in the
sports apparel market. More and more people want lighter and better
performing sports apparel (O).
(T).
B. Task Environment
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2. Bargaining Power of Buyers: High
a. Saturated industry, customers are highly influenced by trend and have a
3. Threat of Substitute Products: Low
4. Bargaining Power of Suppliers: Low
a. Products manufacturing are sourced to many suppliers and contractors.
5. Rivalry Among Competing Firms: High
a. Primary competitors are Nike, Adidas, Champions, New Balance, Reebok,
Puma, Fila, Le Coq Sportif.
6. Power of Other Stakeholders: Low
a. Labor unions are constantly protesting against the industry regarding the
companies’ actions towards their labors. However, they are not very much
affected as labor laws are not as strict abroad, where they manufacture
their products.
C. Summary of External Factors
Based on the PESTEL Analysis and Porter’s Five Forces, Under Armour, as an
incumbent, is in an attractive performance apparel and footwear industry. Due
to intense competitive rivalry, UA needs to always differentiate itself and
IV. Internal Environment—IFAS refer Exhibit 2
A. Corporate Structure
1. UA’s current corporate structure is centralized, with all the decisions
made in the HQ. UA also relies heavily on its intellectual property and
its patents. It is organized on the basis of functions which can be
clearly seen from the role of the top–level executives (S).
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B. Corporate Culture
1. Despite operating in a considerable rigid industry, there is a shared
belief of employing innovation in works and operates as a football team;
its environment is fast paced (S).
2. The culture of innovation and hardworking is consistent with its corporate
strategies (S).
3. The culture holds the central role in solving problems faced by the
corporation (S).
C. Corporate Resources
1. Marketing
a. Under Armour brand is heavily tied to the high–performance apparel, which
started with providing athletes with what they need. Marketing strategies are
guided by its brand mission as well (S).
b. Under Armour’s current marketing outreach is focused on the performance
apparel industry. The marketing mix (4Ps) is targeted on individuals in the
fifteen–to–twenty–five age groups. UA focuses on a narrower segment of