The purpose of this plan is to describe the development strategy of the Under Armour for the next three years. According to Abraham (2012), formulating the company’s strategy is better based on the strategic plan that should include certain elements. Among these elements, Abraham (2012) identifies the followings ones: internal and external analysis, key strategic issues, strategic alternatives, and the best strategy for the company, following its success criteria.
The SWOT analysis elements such as strengths and weaknesses of the company also characterize the internal aspects of its business. The external analysis contains the description of Under Armour’s opportunities and threats. Furthermore, three areas from the SWOT analysis were chosen to formulate three main goals for further business development. The part “Strategic Goals for the Next Three Years” contains their description and evidence of their significance for the strategic plan. The method of measuring the results of achieving strategic goals is also described in the part “Measuring the Success”.
History of Under Armour
Under Armour is an innovative sport brand specialized on producing sport and casual apparel and accessories for men, women, and youth of all age groups. It was founded by Kevin Plank in 1996 (“Under Armour”, 2015). It is a U.S. company headquartered in Baltimore, Maryland.
The major idea of the company’s creator was to develop an appropriate clothes solution for sportsmen. After the extensive research, Plank designed the first T-shirt. It was made from the special fibers that repelled moisture. Due to them, that T-shirt could keep athletes cool, dry, and light in the most brutally hot conditions. Thereby, the T-shirt was named as Under Armour HeatGear T-shirt. The innovation has become so popular that after one year of launching this new product, the company earned $17,000 (“Under Armour Earnings”, 2015). During the second year of its development, the company introduced the ColdGear clothesline for cold conditions.
During the following years, the company continued to develop innovations. For example, it created a compression shirt fitted with electronic touchpoints that could track the natural biometric signals of the athlete’s body. Nowadays, the company has grown into an athletic-apparel empire. According to the Forbes, it made $3.08 billion of sales with almost $17.3 billion market capitalization, and 10,700 employees were engaged in its production processes in 2015 (“Under Armour”, 2015).
Under Armour has a diverse product assortment that can be divided into the following categories: apparel, footwear, accessories, and digital products (so-called Connected Fitness). As it can be seen from the fig. 1, company’s net revenues based on all types of products categories have grown. According to the company’s reports, it receives most of the revenue from selling the apparel (“Under Armour Earnings”, 2015).
Due to selling the apparel, the company’s net revenue was $2,291,520, which is almost 74% of the company’s net revenue in 2014 (“Under Armour Earnings”, 2015). On the second place by the value of net revenue are footwear sales, and in 2014 they totaled 14% of the company’s net revenue (fig. 1). Accessories and licensing net revenues were 9% and 3% respectively (fig. 1). Since the company began to outline the revenues from Connected Fitness only in 2015, they are not shown on the graph.
Under Armour’s apparel product are lines divided into three types based on the seasons. The differentiation occurs on the level of the material for apparel, since the company designs and develops its own fabrics for different training conditions independently. The first type of apparel products are based on the HeatGear, ColdBlack and Armourstorm technologies. They use a specially designed microfiber blend fabric for hot temperatures, which helps the body of the sportsmen stay cool and dry. The second type of apparel is based on the ColdGear technology. These special clothes are developed for cold weather. Thereby, they provide both warmth and dryness for their wearer. The third type of Under Armour apparel is based on the AllSeasonGear, UnderArmour Scent Control, and ChargedCotton technologies used for designing the fabric for moderate temperatures. Thereby such clothes keep the wearer cool and dry during and after his or her trainings.
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Under Armour’s footwear product line was launched in 2006 (“Under Armour Earnings”, 2015). UA’s footwear product portfolio consists of running footwear, training footwear, basketball footwear, hiking and trail, cleats, turf shoes, boots, slides and sandals. Accessories product portfolio consists of sunglasses, gloves, socks, belts, bags, backpacks, equipment, and protective gear. Besides that, some of these products also were manufactured under using HeatGear and ColdGear technologies. The last product category is Connected Fitness digital products. They include four apps – UA Record, MapMyFitness, MyFitnessPal, and Endomondo that are available to use on both Apple and Android mobile platforms.
Current Situation of the Organization on the Market
Nowadays, Under Armour operates across the following geographical segments: North America, Latin America, Europe, the Middle East, and Africa. Despite the wide geographical existence, the significant percent of sales comes from North America (see fig. 2). This is evidenced by the fact that according to the company’s reports, net revenues gained at the North America have varied from 90% in 2014 to 98% in the third quarter of 2015 (“Under Armour Earnings”, 2015) (fig. 2).
With the market capitalization of $14.85 billion, Under Armour has become the second largest athletic apparel company in the USA with 70% of market share (Trefis Team, 2015). However, in the footwear businesses, the company faces high competition from its main competitors – Nike and Adidas, owning only 2.5% of the U.S. sports footwear market. (Trefis Team, 2015). For example, its closest competitor Nike owns nearly 60% of the U.S. sports footwear market (Trefis Team, 2015).
SWOT analysis contains the characteristics of the internal and external aspects of the company’s business (Abraham, 2012). First two elements of the analysis are strengths and weaknesses that are the part of the internal analysis (Abraham, 2012). The following two elements are opportunities and threats that are the external aspects of the company’s development (Abraham, 2012).
Among Under Armour key strengths, the brand recognition should be indicated. The company has a simply designed logo, which allows consumers to identify its brand easily. Moreover, the company has achieved its high brand recognition by using the special strategy in signing contracts with sports stars. The basic idea of this strategy is to choose the so-called underdogs, or inspirational athletes with high potential, but who are not famous yet, and then accompany them to the top. Among such examples, it is worth mentioning dancer Misty Copeland, Golden State Warriors point guard Stephen Curry, and golf star Jordan Spieth.
The second company’s strength is its unique technology of designing fabric with features that allow athletes to feel comfortable during their training despite any extreme conditions. Starting from the day of its formation, Under Armour has continuously offered the growing number of innovative products to the market. The examples of these products vary from special clothes that keep athletes warm or cold in extreme conditions to T-shirts with electronic devices that analyze biometric date of the athlete during his or her training.
The major Under Amour’s weakness is a low level of representation around the world. As it was mentioned before, during the 9 months in 2015 over 98% of company’s revenues came from North America (“Under Armour Earnings”, 2015). Moreover, Under Armour is weakly presented on the footwear market, as the share of net revenue generated by the footwear selling is only 14% (“Under Armour Earnings”, 2015). Furthermore, the company’s product range is more focused on the male customers, while female-oriented products are not so diverse. Thereby, spreading it product range on the female auditory will allow the company to achieve the status of its main competitors – Adidas and Nike.
One of the major opportunities for Under Armour is to expand its business on the foreign markets. For example, such booming economic regions as Mexico, Brazil, Chili, etc. can become excellent unoccupied markets for the company. Another opportunity is the development of female market segment. Thereby, improving the quality and styles of the apparel and footwear collections as well as signing up female celebrities will potentially expand Under Armour’s markets. The last, but not the least opportunity for Under Armour is expanding of its footwear products line, which will also allow the company to grow its revenue base.
Sports apparel and footwear industry is highly competitive. Moreover, despite the fact that Under Armour is a relatively young company, in recent years, it has caught up with and in some cases even gone ahead of such European sports giants as Adidas and Nike. Thereby, nowadays, these three companies are competitors in the area of sports apparel and footwear. Comparison of these three companies shows a great amount of similarity – they produce sports apparel, athletic footwear, and accessories mainly for sports use. Moreover, these companies are also involved in casual clothes producing that help them to expand their markets. The companies produce products for a variety of sports: running, basketball, soccer, football, baseball, golf, tennis, surfing, skateboarding, and lacrosse. Therefore, one of the company’s threats is that it will lose its advantage of innovative technologies. Thereby, it needs to differentiate its products and to stay creative in its approach. Moreover, the lack of patents on its products can cause a high risk of substitution.
Strategic Goals for the Next Three Years
To formulate the strategic goals for Under Armour for the next three years, three areas from the SWOT analysis were chosen: international business, female products, and footwear. The importance of these areas for the company is explained by the list of benefits. To describe the potential benefits of these SWOT-analysis areas fully, three strategic goals were formulated.
The first goal is to focus on the international business and expand the company’s business on other countries. Focusing on the international markets such as Asia (China, Korea, and Japan), Europe (the U.K., France, and Germany), Australia, and Latin America (Brazil, Mexico, Argentina, and Chile) will allow the company to enhance its revenues. The second goal is to focus on the products for female athletes. Developing the female products line will elevate brand image of Under Armour among women athletes. To achieve this goal, the company needs to expands its product portfolio and alter the retail experience at its stores to suit the tastes of women. The third goal is to gain market share in various footwear categories. This goal requires launching innovative footwear technologies and enhancing the company’s footwear distribution network. For example, running and basketball shoe categories are potentially profitable areas.
Measuring the Success
There is no single form for measuring project success. The literature review allows identifying the most common dimensions of project success: project efficiency, impact on customer, business success, and preparing the future (Kylindri, Blanas, Henriksen, & Stoyan, 2012). Thereby, the method of measuring the success of implementing the main goals of the strategic plan is based on the three steps. The first step is to identify key success factors of the project efficiency (Kylindri et al, 2012). The second step is to value the level of impact on customers through identifying favorable impact on customers, their gains and needs, the level of solving customers’ problem and expressing satisfaction. The third step is to evaluate the commercial recognition of the company’s brand (Sołoducho-Pelc, 2015). Thereby, according to this approach, the main goals of the Under Armour strategic plan were measured.
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All three goals should have the detailed calculations of the project efficiency factors for the next three years. First, it is the completing budget for developing new distributing channels and building manufactures in these countries, for designing new apparel and footwear models, launching new commercials, sighing contracts with celebrities, etc. Secondly, it is the expected increase of the company’s market share, and thirdly, it is the forecasted increase of the company’s revenues during the next three years.
Since the first goal is focusing on expanding the company’s business in other countries, it should be identified that during the next three years, Under Amour needs to expand its business onto three new markets situated in Latin America: Brazil, Mexico, and Argentina. The expected impact on the customers is meeting their needs in quality sportswear and footwear. To raise the brand recognition at these countries, Under Armour needs to attract local famous athletes in its commercials. The long-term result of achieving this goal is creating opportunities for the further expansion onto other foreign markets.
The second goal is based on focusing on the products for female athletes. At the result of developing new products for women, the company’s female customers will benefit from a diversified product line. It will allow finding exactly needed clothes or footwear, which will satisfy the different needs of training in cold, warm, or extreme conditions, having thin or thick forms, etc. The long-term result of achieving this goal will be reflected in the increased customers’ loyalty in the future and, thereby, higher revenues.
Launching new footwear lines, especially for running and basketball, will satisfy customers’ need in finding the alternative qualitative footwear for their training. To achieve higher brand recognition and increase footwear sales, the company needs to use aggressive commercial strategy. The long-term result of achieving this goal reflects in capturing new markets and suppressing the company’s main competitors.
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The results of evaluating Under Armour’s business show that despite the relatively short story, this company has built a strong sports brand on the U.S. sports apparel and footwear market. Company’s strengths such as brand recognition and innovative technology of fabric designing keep its brand competitive and visible on the market. Nevertheless, Under Armour has a low level of representation around the world, especially on the footwear market and it has a poorly diversified female product line. Therefore, it opens certain opportunities for further company’s business development.
At the same time, Under Armour has strong competitors, who operate in the apparel and footwear industry, such as Nike and Adidas. Therefore, the main threats for the company are the high level of competition and the fact that it can lose its advantage of innovative approach. That is why it is essential for the company to differentiate its products and to stay creative in its designing technologies.
To identify the strategic goals for developing Under Armour’s business, three areas from the SWOT analysis were allocated: expanding business onto the international markets, develop new female products, and diversify footwear products line. Consequently, on the base of the modern strategic management studies, the success of these strategic goals was measured.