The Sweat-Driven Story of Under Armor's Founding: Essay Sample

Introduction

The story of Under Armor began in the late 90s when its founder Kevin Plank was playing football. Kevin was the captain of his university's soccer team, and every time he trained he ran into the same problem. It turns out that the shirt he wore under his team was soaked after each workout. In American football, some shoulder pads are worn that make the wearer very hot, and Kevin had to change his clothes several times a day due to sweat. On some occasions he had to go to the locker room in the middle of training because of the discomfort it caused him, and one day he realized that his teammates also had a problem. Noting that his compression pants were not sweaty, he thought of creating t-shirts that sweat perspiration with the same material. And so, the idea came up with which Kevin would start his company (Business Strategy Hub, 2019). Under Armor began in 1996. Kevin distributed some of the first shirts among his teammates, who liked them a lot and offered suggestions with which he improved them. The breathable T-shirts Kevin had created began to be a success, and in the future big brands like Nike, Adidas, or Reebok would imitate their designs. Other football teams began to be interested in the clothes he had created and began to buy them for their members. Gradually, Under Armor would become carried out by increasingly famous athletes, and expand from the niche of professional athletes to the rest of the people.

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Under Armor has drawn up a strategic plan called Protect this house, which will be developed between 2020 and 2023, with which it expects its turnover to exceed 6,000 million dollars (5,287 million Euros). In fact, despite the 2% drop in sales in North America in 2018, Under Armor has positioned the region as its main stronghold to lead the international expansion. According to the transformation plan outlined, sales in this territory must grow, but they will decrease their contribution from 73% to 56% while growth in the rest of the markets, which already represents 27% of turnover. By product, the focus will be on the fitness unit, whose growth is expected to remain at around 2% year-on-year, while technical clothing and footwear for women will be the divisions where the investment will be reinforced. The strategy, defined from surveys of 22,000 people from the US, China, the United Kingdom, and Germany, is committed to direct sales based on the diversification of product lines and storytelling. That is, on the one hand, the multinational will segment its sporting goods in the categories of running, fitness, and outdoor fashion, the three textile areas with the highest growth rate in recent years.

External Situation Analysis

The company operates in a very competitive industry in which the most important competitors occupy a large niche market, making third-party entry very complicated. Its main competitors have invested heavily in their brands and also in the establishment of distribution channels and marketing agreements (MBASkool, 2019). The main competitors of Under Armor are Adidas and Nike. Both manage to maintain their position in the preference of consumers. However, they are not perfect companies. Both have been severely affected by low sales and scandals with their spokespersons.

Under Armor depends much more than its sales rivals in the United States and Canada. Nike, by comparison, gets about 44 percent of its revenue from that region, while Adidas barely 21 percent. The biggest challenge for Kevin Plank's company is still returning to growth in the United States and Canada. The possibilities are many: in this market (as in much of the world), more and more buyers acquire sports clothes and shoes instead of informal presses, but Under Armor fails to remove the label closely related to high competition activities. That is something that Nike and Adidas have already overcome, but the Plank brand is still closely linked to the demand of the extreme sport, and in that market segment, obviously, there is a growth ceiling.

The Baltimore-based company has said it wants to improve its performance among female buyers, but Nike is very strong in that space. Besides, new companies such as Outdoor Voices, Bandier, and the Athleta de Gap brand also play, and they do it successfully. Although Plank says that the brand is focused on long-term marketing strategies, the truth is that markets react with the results in the short term, and that is the reason the company's value in Wall Street fell by 12%.

Under Armor has a current restructuring plan presented in 2017, but has already modified it several times. The program is based on controlling its high costs with smaller inventories, accelerating the time in product launches, adjusting them to demand variations. This is the same technique that Zara and H&M have been doing for years. The key, once again, is in the United States. If Armor manages to improve in the market where it sells more than 70% of its clothes, it will grow strong again, as it did until 2016.

The story of the brand is developed through a marketing campaign focused on building shopping experiences around its products. The objective is to give life to the articles through a story, which begins with the presence on digital platforms and culminates with the purchase at the points of sale. The company has established engagement and network interactions social as the new success metric. However, the growth engines that will lead the company's sales will be the female audience and footwear, which in 2018 exceeded the barrier of 1,100 million dollars (slightly less than 1,000 million Euros), although it is still far from textile (3,270 million Euros) (MBASkool, 2019). In the development of these business areas, the presence of Under Armor through athletes and sponsored competitions will be key.

The brand has taken root in multiple sports disciplines such as gymnastics, golf, judo, boxing, and motorsports. However, the biggest counterparts report to Under Armor is North American competitions and football. Since 2016, it has been the main sponsor of the MLB and has dressed the teams, but after the economic difficulties of recent years, it lost the place in favor of Nike (Palmer, 2019). In basketball and American football, however, it has achieved the recognition of the hands of stars such as Stephen Curry and Tom Brady, although neither of the sports ends consolidating itself as a reference.

Finally, the physical sale is another of the highlights of the new strategic plan, since although one in three consumers made some purchase through the internet giants like Amazon and Alibaba, most still travel to the physical stores to Buy the brand's products (MBASkool, 2019). Until now, Under Armor has opted to have a presence through a network of points of sale, but in 2023 it expects to reach 2,600 single-brand establishments and represent 25% of the total. Electronic commerce, meanwhile, will rise four percentage points, to exceed 16% of turnover (Palmer, 2019). Thanks to its digital strategy and the international recognition of the brand through sponsorships, Under Armor has created its own identity and has forgotten that shadow that for years has pursued its name, labeling it as the new Nike.

Marketing Mix

Under Armor knew that it had very good products and that its key to growth was going to be in marketing. If enough people started to get to know it and bring their products, it was a matter of time before they preferred it over other brands, and their customers recommended it. The company began collaborating with producers such as Warner Bros to include their garments in movies, or with magazines such as ESPN Magazine to capture the attention of more people.

However, there was a particular form of marketing that Under Armor had already experienced and had given good results. The company knew that people bought from other people and that the best way to lead their industry was to be through influencers. In the business world, the perception that people have of a brand is one of the greatest strengths that any company can have (MBASkool, 2019). The image that a company's products project is saying something about the identity of those who wear it, and this is something that especially affects clothing brands. Under Armor knew that people usually buy from people they like and admire, and would do everything possible because they would wear their clothes.

This is how the company began signing dozens of contracts with sports teams and elite athletes to promote their brand. From football teams in leagues like the NFL to runners or even golfers, Under Armor wanted anyone interested in sports to get close to their idols thanks to their clothes. The company would sign deals with celebrities like basketball player Stephen Curry or actor Dwayne Johnson, and would even sign millionaire agreements for universities across the country to use their equipment. Under Armor would also acquire sports applications, among which was the well-known "MyFitnessPal," an app that came to acquire for $ 475 million. Later, the company would partner with IBM to analyze data from all these applications, and thus create a personal health consultant to help people in their sporting goals.

Under Armor is also committed to sustainability. Sustainability is integral in their core values. The company also adds value to the society and the community that they serve. They also enhance the materials they use ensuring that they are environmentally friendly. Under Armor is very efficient in terms of its operations and its distribution network. As in any other company, physical location issues and quality-related issues need to be managed at the same time (MBASkool, 2019). In this sense, the company exploits its relationship with its licensing companies very well to offer its consumers a greater variety of branded products. This greater variety adds value and reinforces the company's brand by generating revenue without the need to organically develop specific capabilities in the products it sells.

References

Business Strategy Hub (2019). Under Armour SWOT Analysis 2019 | SWOT analysis of Under Armour. Retrieved from https://bstrategyhub.com/swot-analysis-of-under-armour-2019-under-armour-swot-analysis/

MBASkool (2019). Under Armour Marketing Mix (4Ps) Strategy. Retrieved from https://www.mbaskool.com/marketing-mix/products/17310-under-armour.html

Palmer, B. (2019). Porter's 5 Forces on Under Armour (UA). Retrieved from https://www.investopedia.com/articles/markets/020316/analyzing-porters-five-forces-under-armour-ua.asp