For Perceptual Mapping of UNDER ARMOUR

Anglo-American University Graduation Thesis by Otar Bedoshvili
Mentor: Simon Gordon-Smith, MBA
Under Armour Inc.
A thesis submitted to the Anglo-American University for the degree of Bachelor of Business
Administration
Spring 2011
OTAR BEDOSHVILI
SCHOOL OF BUSINESS ADMINISTRATION
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DECLARATION
No portion of the work referred to in this thesis has been submitted in support of an
application for another degree or qualification of this or any other university or other institute
of learning.
I hereby also declare that this thesis is my independent work. All sources and literature are
cited and included.
*Please sign here
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Table of Contents
1. Abstract ............................................................................................................................................... 4
2. Introduction ......................................................................................................................................... 6
3. Product Lines ....................................................................................................................................... 7
4. General Current Strategy .................................................................................................................... 7
4.1 Growth Strategy ............................................................................................................................ 8
4.2 Differentiation Strategy ................................................................................................................. 8
4.3 Innovation Strategy ....................................................................................................................... 9
4.4 Corporate Strategy ........................................................................................................................ 9
4.5 Product Positioning ..................................................................................................................... 10
5. External Analysis ................................................................................................................................ 11
5.1 The Athletic Apparel and Footwear Industry Review.................................................................. 11
5.2 Porter’s Five Forces ..................................................................................................................... 13
5.3 PESTEL Analysis............................................................................................................................ 25
5.3.1 Political Analysis ................................................................................................................... 25
5.3.2 Economic Analysis ................................................................................................................ 27
5.3.3 Social Analysis....................................................................................................................... 28
5.3.4 Technological Analysis .......................................................................................................... 30
5.3.5 Environmental Analysis ........................................................................................................ 31
5.3.6 Legal Analysis........................................................................................................................ 33
6. Financial Analysis ............................................................................................................................... 34
7. Internal Analysis ................................................................................................................................ 38
7.1 Competencies .............................................................................................................................. 38
7.2 Value Chain .................................................................................................................................. 39
8. SWOT Analysis ................................................................................................................................... 46
Strengths ........................................................................................................................................... 46
Weaknesses ....................................................................................................................................... 46
Opportunities .................................................................................................................................... 46
Threats............................................................................................................................................... 46
9. Recommendations............................................................................................................................. 50
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1. Abstract
This thesis is about a relatively new company operating in the athletic apparel and footwear
business. The company is registered and branded by the name Under Armour ® (UA). The
mission statement says that the company serves “to make all athletes better through science,
passion and the relentless pursuit of innovation.” The analysis of its strategic, external,
internal and financial standings is aimed to discover in how successfully is Under Armour
serving its mission statement, followed by recommendations for improvement.
By using the Porter’s Five Analysis and Pestle Analysis tools, the thesis examines all external
factors that affect the company’s performance. The Porter’s five is aimed at discovering the
forces that pressure and drive Under Armours business and how the latter chooses to interact
with them. The Pestle analysis shows what global factors, independent from the company
itself, have affect on its progress. All operating enterprises need to deal with the external
environment. The analysis offers the way UA’s management handles it.
The financial analysis goes through Under Armours Financial statements of the recent years
to discover the company’s standing. Covering a number of important financial ratios, the
analysis illustrates that Under Armours success has shown itself in its financial condition.
The internal analysis covers the core competencies and the value chain of Under Armour. It’s
aimed to find out what contributes to the company’s recent success and whether they’ll be
able to continue on with it. The value chain analysis covers the nine sections that create the
value of the product Under Armour sells.
After the internal analysis, the company’s strengths, weaknesses, opportunities and threats are
evaluated using the well-known SWOT analysis tool. This is aimed for deeper evaluation and
making obvious what foundation Under Armour has and where it can go with it, also what
needs improvement and caution. The SWOT shows that the company is in a promising
condition today, with its innovative products and well planned marketing, but further
expansion is vital to sustain the progress. The thesis recommends UA to cover more markets
geographically and be more aggressive in marketing; also, to look out for the aggressive rivals
like Nike and Adidas, who won’t make Under Armours global struggle easy.
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The last part of the thesis is a number of recommendations suggested for the continuance of
the success and the achievement of global success in the industry. After the investigation of
its external, internal and financial stances, some areas have been found where improvement
and changes are necessary for the enterprise if the management is looking forward to continue
business in the industry and achieve global success.
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2. Introduction
The world today has established itself as a complex place full of various kinds of people,
living in various kinds of ways; they all have different needs and wants. A concept that was
shaped a while ago to satisfy and benefit these needs exists and it’s called business.
According to the Bible, after Adam and Eve sinned they found out what “shame” was and
were filled with the need to cover their bodies. One way or another, clothing has been one of
the demanded needs by most of the societies and communities we find in today’s world; as
these societies developed and diversified, tastes and trends in clothing went along. Today,
many companies provide clothing for these diversified sectors, one of these sectors is athletic
sportswear. This thesis is about a company named “Under Armour” – an enterprise that
produces and markets athletic apparel and footwear.
According to their official website, “Under Armour” was founded by Kevin A. Plank on
January 29, 1996, with a simple goal – to create “A shirt that provided compression and
wicked perspiration off your skin rather than absorb it; a shirt that worked with your body to
regulate temperature and enhance performance” (Kevin A. Plank, 1996). The headquarters of
the company is situated in Baltimore, Maryland and the quantity of overall employees it has is
about 2200 (by the year 2008). As time went on and the company expanded, this simple goal
diversified and today the company develops and markets branded performance clothes for
men, women and kids; but, the primary and unique goal of the product is still sustained.
In 2005 November 18, “UA” went public and since then is sold on the New York stock
exchange under the code UA. Share prices have been as low as 12$ in 2009, but since then the
prices have been increasing and haven’t fallen under 50$ since the beginning of year 2011.
“Under Armour” products are worn by men, women and youth ranging from professionals on
the field to people who love sports and live an active life. It uses innovative technology to
create apparel focused on whisking away moisture, regulating body temperature, and
improving comfort. The company has four main trademarks – UNDER ARMOUR,
HEATGEAR, COLDGEAR and ALLSEASONGEAR, and also the “Under Armour” UA
Logo.
Since 2008, the brand started offering footwear to its consumers and 2 years later it made a
bold move, entered a market already dominated by its rivals, and offered its first line-up of
basketball shoes. “Under Armour” products are available for sale online and in over 20,000
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retail locations all over the world. It has only several stores itself, which were opened in 2007-
2008 years in North America, and only one outside the continent in Edinburgh, Scotland.
3. Product Lines
As mentioned in the introduction, “Under Armour” has four main trademarks under which it
markets the product. This section will briefly describe the main product lines which the
company offers.
HEATGEAR ® – Products under this category are made from the original fabric, microfiber,
for hot weather; helps the body breathe and get rid of moisture swiftly, keeping the athlete dry
and light. This product was also used by US Army forces operating in Iraq and Afghanistan.
COLDGEAR® – Made for cold weather, this is the most expensive product line offered by
“Under Armour”. It also uses the microfiber that HEATGEAR® does, keeping the body dry,
however its unique characteristic is that it’s designed to keep the body warmth trapped. The
introduction of COLDGEAR® dramatically increased revenues for the company.
ALLSEASONGEAR® – This product line is made from different material, it does not use
microfiber at all, and it uses various technical materials suitable for all kinds of weather.
Recovery Gear® – In mid 2009, the company introduced the “Recharge compression suit”. It
was designed to be worn after physical activity, helping the body to recover, decreasing
soreness time and relieving pain and aches after workout. Gear with similar goals and
construction are lined up in the Recovery Gear®.
Catalyst ® - Recently, UA started a new product line that is made only by recycled plastic.
The line is marketed under the slogan “Green + Performance = The UA Catalyst T” and holds
a very small portion in the business today.
Under Armour also sells products in various other categories but the above mentioned five are
the main lines that contribute to the popularity and sales of the company.
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4. General Current Strategy
4.1 Growth Strategy

Currently, “Under Armour” has to deal with its competitor giants such as “Nike”, “Adidas”,
“Puma”, etc. The strategy they’re implementing is primarily derived from this factor;
expansion and growth is their main goal. They are a relatively small enterprise compared to
the listed rivals, and if they don’t show constant growth, chances of survival are low. “Nike”
already tried to buy the company in 2008, but the offer was refused; if things don’t keep on
progressing, they might have to surrender next time. The presented rivals operate worldwide;
however “Under Armour”-s main revenue stream is from North America. They began the
expansion on other continents a few years ago and still continue investing in that direction.
For example since 2002, a license agreement has been made with Dome Corporation in Japan,
which produces, markets and sells UA branded products in the area.
4.2 Differentiation Strategy

Since 2005, when the company went public, they’ve been concentrating their investments on
five main areas: Men’s & Women’s Apparel, Footwear, International and Direct-to-Consumer
(Annual Report 2009, Section: “To Our Shareholders”). Year 2009 showed that their
investments have not been in vain; net revenues have grown 18% and net profit has grown
22%. This is partly due to the fact that the company started to differentiate its product line
since 2008, introducing basketball shoes, mountain gear, etc. The main revenue stream does
come from Men’s and Women’s Apparel, but Footwear also holds a significant 12% in
overall.
Net Revenue by Product Category

4% 4%
12% Apparel
Footwear
Accessories
80% License Revenue
(Scoreboard in Annual Reports 2010, page 5)
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4.3 Innovation Strategy
Another key component in “Under Armour”-s strategy is innovation. As Kevin A. Plank,
Chairman and CEO of the company, says “Cotton is the Enemy”
(http://www.cnbc.com/id/25191727/). The company offers the market products that are “best
in class”; the main focus is on uniqueness of the material used in production. The goal is to
create apparel that will make the athletes better and to deliver the product in such fashion that
makes the benefits more visible to the consumer. The primary innovation of the company is
PolyArmour, a combination of polyester and elastane, which benefits the athletes in many
ways. Throughout its existence, the company continues to offer new cutting edge technology
products to its wide range of consumers. The product development group functions with the
following motto: “We design products with “visible technology”, utilizing color, texture and
fabrication to enhance our customers’ perception and understanding of product use and
benefits” (Annual Reports 2009, Product design and development, page 14)
Innovation is the key to the company’s success; otherwise the rivals would easily drive it out
of business, due to their advantage in size.
4.4 Corporate Strategy

Starting from the beginning, “Under Armour” was established to serve athletes. The company
considers signing contracts with the teams these athletes represent in many different sports as
its strategic goal. In different sports “Under Armour” goes for different kinds of contracts.
On their own continent they dominate the market in some sports, and share the plots with their
competitors in others. In College Football league, they sign contracts as there outfitters with
many teams, like the Auburn University, Texas Tech University, the University of Maryland,
Boston College, etc. They also signed a deal with NFL to be the official supplier of footwear,
creating a good basis for sales revenue and also marketing to consumers outside the athletic
community.
Another approach demonstrated by “Under Armour” is signing individual athletes. The

mostly try to find the stars of the next generation and sign contracts with them, like
Milwaukee Bucks rookie Brandon Jennings, U.S. professional skier and Olympic gold medal
winner Lindsey Vonn, first round NFL draft prospect Dez Bryant, etc.
The company has increased international activity through the past years. The approach is
similar to the domestic market one. They sell their products to Rugby and Soccer teams, such
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as Hannover 96 football club and Welsh Rugby Union. They recently signed a contract with
the English Premier League team Tottenham Hotspurs as their official playing kit producer,
replacing a rival brand “Puma”; this multi-million pound deal is the biggest in Europe for a
US based company.
4.5 Product Positioning

Product positioning
High Prices
NIKE
Low Innovation and advancement High Innovation and
3 Advancement
1
Adidas Under Armour
Low Prices
What the graph above shows is that currently “Under Armour” keeps average prices and high
innovation in products. The market leader “Nike” keeps a more expensive profile and prices
its products higher. So, in terms of product positioning, “Under Armour” keeps a profile of a
brand affordable for many classes and offering a large range of innovative products.
The products are priced form the least 15-20$ items, such as T-shirts and go up to 250$, coats
and full body outfits. 250$ isn’t exactly a low price for a coat, but with the quality and
features provided by “UA”, the product is certainly not overpriced; it also has a relatively
lower price compared to some of its rivals similar products.
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5. External Analysis
5.1 The Athletic Apparel and Footwear Industry Review
The industry “Under Armour” operates in is referred to as the athletic apparel and footwear
industry and represents a pretty huge business environment. The market is enormous,
considering the popularity and diversity of sports we have in the community we live in, added
the ordinary people who enjoy a healthy life and use sportswear. The competition is fierce and
the market has players of all sizes. The biggest among them, who dominate the today’s
sportswear industry, are “Nike”, “Adidas”, “Puma”, “Reebok” (also managed by “Adidas
Group”), etc. The other brands involved in this business with less market share and revenues
would be “Umbro”, “Asics”, “Kappa”, “New Balance”, etc. “Under Armour” is among the
second list, having a petite market share in the overall industry, still fighting its way to the top
(see market shares on charts below, “UA” is under the “Other” section). The worldwide sales
of athletic apparel and footwear were about $278.4 billion in 2007, proving the huge size of
the industry “UA” competes in. Despite the changes the world experienced through the
following 4 years, the market still stays huge and very competitive. The average gross margin
shown by companies operating in this business sector is also impressive, and shows the
competitiveness of the market – 45,6%.
To divide the market geographically and make an analysis in terms of market opportunities
and trends would be a logical way to go. Three main sectors can be identified – North
America, Europe and Asia (mainly China). First, let’s discuss the continent “UA” started and
still remains to concentrate on – North America, mainly the USA. Regardless of the slow-
growing economy, the US still showed the highest growth rate in the sports market (3% gain
overall) among the top six developed countries, which sounds like a hospitable environment
to do business in. Basically, what’s important to see is that “UA”-s making a safe bet, when
mostly operating and expanding in the US.
On the other side of the globe, we have the fastest growing market – China. The high growth
rates include the athletic apparel market, increasing by 27% from 2003 to 2007. Events, such
as the Beijing 2008 Olympic Games, highly contributed to the following growth after year
2007. The Chinese athletic apparel market has doubled in size to $10 Billion, what is a very
significant number, and it’s supposed to attract attention of companies such as “UA”.
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The other parts of the world showed either flat or very small growth rates overall, in the
athletic apparel markets through 2007-2009. Despite that, “UA” still has ground to gain in
Europe. As stated before, the company recently signed an English soccer team, the Tottenham
Hotspurs, and is planning to invade the continent with more deals in the future. Europe is
continent in love with soccer, and it was a strong move by “UA” to start its “invasion”
through this sport, and then if logical proceed on to other also popular ones.
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5.2 Porter’s Five Forces
(Source: Notesdesk.com)
Industry Rivalry – Pressures created from existing sellers in the Industry
From the five forces that Porter suggested that companies deal with while operating in any
industry, competitive rivalry is the strongest one. The greater importance is also underlined in
the picture above, and the reason behind it is very logical; it all starts from competition with
rivals, that is mostly why the other four forces matter, and in the end it all comes down to who
overcame whom in the race to success. The reason why it’s important to keep the supplier
relationship on track and have a good strategy implemented for dealing with buyer
satisfaction is to have a strong foundation to effectively compete with your rivals. The reason
why companies are somewhat afraid and careful about new entrants and substitute products is
that the latter two create more pressure in the industry in terms of competition, not the most
comfortable news for already operating enterprises.
Competition among rival companies is important for all kinds of businesses in all kinds
industries, but for “Under Armour”, the current situation gives an even bigger reason to stay
focused on this subject. The latter would be that the difference in size is very noticeable and
can have a very negative effect on “UA”-s business operations in the long-run if not handled
properly. Under Armour management realizes all this and they are aware of the dangers,
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“Many of our competitors have significant competitive advantages, including greater
financial, distribution, marketing and other resources, longer operating histories, better brand
recognition among consumers, and greater economies of scale.”(Under Armour Annual
Report 2009, page 14)
The two biggest rivals “UA” has are “Nike” and “Adidas”. The products offered by all three
mentioned brands are widely differentiated; you can see this by simply looking at their online
stores, which offer many different kinds of athletic apparel and footwear. The first big
difference is that both “Nike” and “Adidas” operate worldwide, while “UA” does business
mainly on its home continent. This provides the mentioned rivals with a bigger market, giving
them the chance to have bigger economies of scale, what gives a significant competitive
advantage. To clearly see the difference in size of these corporations, look at the chart below
showing global annual revenues of “Nike”, “Adidas” and “Under Armour”.
Company Revenues (in Thousands)
(Company Code) 2010 2009 2008
Nike (NKE) 19,014,000 19,176,100 18,627,000

Adidas (ADS.DE) NA 10,381,000 10,799,000
Under Armour (UA) 1,063,927 856,411 725,244
(Source: yahoo.finance.com)
The second important difference is that “UA” s big rivals produce under various brands, i.e.
“Nike” has subsidiaries like “Converse” and “Umbro” and “Adidas” has “Reebok” and
“Rockport”, which contribute significantly to the success of the companies. This approach is
called the multi-branding strategy; it “refers to a marketing strategy under which two or more
than two similar products of a firm are marketed under different brand names” (Sak Onkvisit
and John J. Shaw, International marketing: analysis and strategy, year 2007, page 323). To see
what the advantage is for “UA”-s rivals simply imagine a buyer, that is willing to pay 100$
for a pair of athletic shoes. On the market he sees, for the sake of argument, 10 different
brands, including “UA” and those marketed by “Nike” and “Adidas” brands, offering 5
products each, which are in his acceptable price range. Depending on his taste and some other
factors, he’ll choose one of the 10 and make a purchase. While “UA” offers only 5 products,
its rivals offer much more because they use multi branding and provide the market with
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several brands having several products each fitting various consumer tastes and preferences,
but are in the same category. Basically, “UA”-s main rivals opt to multi brand, along with
product differentiation, while “UA” does not, giving them a competitive advantage in the
long-run. Today, it might not show a huge difference with Under Armour gaining popularity
and market share swiftly, but if something goes wrong and some difficulties arise, this might
become a more important issue. This advantage is particularly important because of the nature
of the industry these enterprises compete in, it’s mainly based on differentiation and consumer
preferences, and not price competition. As shown above in the product placement chart, the
price difference in products produced by the three companies that were discussed before, are
not that different. And because we’re talking about a price difference of about $10 to $30, it’s
logical to assume that the buyers would be willing to add that amount, if they prefer for
example “Nike” to any other brand with a slightly lower price. In other words, differentiation
is a key factor in this market, and multi branding being another way of differentiating brings
“UA” under more pressure from the various brands its rivals have.
To analyze the intensity of the athletic apparel and footwear industry we should look at some
key factors that define it. Rivalry is generally fiercer “as it becomes less costly for buyers to
switch brands, when one or two companies employ powerful, successful competitive
strategies and the number of rival’s increases and competitors are equal in size and capability”
(“Crafting and Executing Strategy”, page 64-65, Thompson/Strickland/Gamble, Seventeenth
edition, 2010). These are the most relevant reasons in the discussed industry.
The first factor is obvious; the costs for switching brands are as low as possible, a buyer just
has to go to a different selling point: a store, a web-site, etc. Therefore, this contributes to the
establishment of a fiercer competition.
The second mentioned reason is firstly due to the discussed above – Multi Branding Strategy
and global market coverage by “Nike” and “Adidas”. These two factors are parts of the
“powerful, successful competitive strategies” that make competition in general much stronger.
Another huge contribution in making this market a harder place to compete is marketing, also
falling under the second reason taken from the book “Crafting and Executing Strategy”. Both
of the main rivals “UA” has are involved in major campaigns attracting a lot of customers.
“Nike” and “Adidas” both spend huge resources on endorsements of famous athletes. The
experience gained in many years of business taught them well and they know this kind of
marketing goes far. “Nike” knows that when they sign a huge star like LeBron James, his
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whole fan base, a huge amount of people, will buy basketball shoes that come with his name.
As mentioned before, “UA” has implemented this strategy too. They chose to take a bit
different from its competitors and somehow analogical approach to their enterprises’ current
image. They are considered a rising star brand, most likely to establish a strong position on
the market; they sign rising stars that are most likely to replace players like LeBron James in
the future. This is a logical strategy; it would’ve been much harder for them to go for athletes
already signed by other brands or requiring very high salaries according to their high class.
So, they sign “more affordable” athletes and provide them with great athletic apparel and
gear, hoping for their loyalty in the future.
The third incentive of strong market competition is the fact that many enterprises compete in
the athletic apparel and sportswear industry. The more teams in the tournament, the harder it
is to win. The same logic applies to our situation; the more brands try to offer various kinds of
products and satisfy customer needs, the harder it is to attract customers to your brand.
Showing overall revenues of $274 billion is a good basis to consider this a huge market.
Taken as a whole, there are probably more than 20 noteworthy brand names on the market
today trying to achieve supremacy in the athletic apparel and footwear industry.
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Potential Entrants - pressures form threat of new entrants
The athletic apparel and footwear industry is one with a long history. The companies in it
have been functioning for decades. Nike was incorporated in 1972, Adidas in 1949 and
Reebok in 1958; Under Armour though is a relatively new organization established in 1996.
Many of the organizations that lead the industry today in terms of market share and global
competitiveness have worked their way to the place they are today; with good marketing and
corporate strategies they’ve managed to establish a healthy foundation and gather valuable
experience in this field. The long history also benefits their image and provides advantages in
terms of brand loyalty.
In general, many factors affect the threat of new entrants, making it stronger or weaker. While
discussing the athletic apparel and footwear industry the main issues that should be
considered to define the strength of the threat of new entrants are the following: number of
entry candidates, entry barriers, current situation of the operating organizations in terms of
profitability and buyer demand growth rate and the global coverage of the market (“Crafting
and Executing Strategy”, page 67, Thompson/Strickland/Gamble, Seventeenth edition). The
number of entry candidates is low; the industry is mature and has been functional for decades,
therefore the market is less likely to expect new players. The entry barriers are quite complex;
they are discussed in detail below. The currently operating firms are profitable and stable, and
the demand growth rate is petit due to the recent recession, although China’s market shows
positive demand growth rates, it still isn’t exceptional. While taking in consideration these
factors, it is safe to say that the threat is not high.
The entry barriers for this market are the following:
 High capital requirements

 Highly competitive environment
 Strong brand preferences and high degrees of customer loyalty
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High capital requirements
As pointed out before, the athletic apparel and footwear market is large and global. The
operating companies cover the whole world, thus serve millions of people and must produce
in high quantities to meet the demand. This gives them the advantage of economies of scale,
meaning the more they produce, the cheaper it is for them. So, the market isn’t attractive to
newcomers; they would have to invest high amounts of capital to produce products of
equivalent quality in large quantities to somehow compete with the existing sellers, like
Under Armour that already supplies the market with high quantities. Basically, the potential
entrants would have to invest billions in order to somehow create harm for UA or the other
existing players, and there are just not many who would take the risk to compete in this
environment. But, there always exists a possibility that someone else might come up with an
innovative idea for a new product technology, design, etc. and decide to start up a new
business and enter the market, instead of selling the idea to any operating firm. Therefore, the
high capital requirements do decrease the pressures from potential new entrants, but don’t
make it impossible. If UA could do it, so could someone else.
Highly competitive environment
Another important barrier for entry in this industry is the highly competitive nature of it.
Generally, poor market conditions are what drive away businesses from investing, but the
athletic apparel and footwear industry doesn’t exactly offer these poor conditions. In contrary,
it is a healthy and competitive environment. The latter is exactly what discourages the
potential entrants, it’s too competitive. The existing players have created an environment that
requires a great ability to compete, which is very hard to achieve and requires not only large
investments, but also years of performance experience.
Strong brand preferences and high degrees of customer loyalty
This barrier of entry is particularly important for the athletic apparel and footwear industry.
It’s all about brand image that in its part majorly contributes to customer loyalty. Nikes
historical example illustrates the point more clearly: the transition from an average seller on
the sportswear market to the global market leader started when Nike signed a deal with
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Michael Jordan in the 1980’s which primarily helped establish a brand image. This deal
marketed Nikes products perfectly, and the great Michael Jordan enabled the company to
become the “great Nike” it is today. Jordan turned out to become a basketball legend, and
along with him so did Nike create an extraordinary brand image with supplying the living
legend with his primary equipment – athletic shoes. All this resulted in customer preference
and eventually a huge customer base was created for the company who stay loyal even after
Jordan’s retirement. Today, the company has been maintaining this buy endorsing existing
stars. In this context, Under Armour is on its way. As mentioned before, the management
team chose a suitable strategy which is helping a great deal in brand image and loyalty
establishment.
Basically, brands like Nike, Adidas, K-swiss, Under Armour, etc. have managed to create
strong brand images through marketing and excellent corporate performance of many years,
what is a very hard barrier for potential entrants making them think twice before trying to
enter the athletic apparel and footwear market.
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Substitutes – Threat of substitute products
The third force in Porter’s five forces of competition is the threat of substitute products. This
issue has been becoming more and more relevant to many businesses today. The reason
behind that are mostly technological advancements and innovations. For example, 20 years
ago newspapers were far more popular, but as cable TV became cheaper and more accessible,
people started to substitute newspapers with news broadcasts as ways of being up-to-date with
what’s going on around them and instead of reading the morning paper they watch the
morning newscast; this resulted in a huge revenue decrease for the newspaper businesses
because they lost a huge customer base.
By definition, substitute goods are products that appear to be different but satisfy the same
needs, for example the internet and fax are substitute goods. In case of athletic apparel and
footwear it’s hard to define whether substitute goods exist at all for such products. It’s hard to
imagine anything that can substitute clothing and footwear for an athlete. So, Under Armour
is safe in terms of substitute products and the management doesn’t need to worry about this.
But this logic only applies for the customers that are athletes; indeed they make up the
majority of Under Armours consumers, but the other part is also important. Those who wear
athletic clothing for comfort or any other reason can easily change their preference. The main
goods that qualify for substitutes of athletic clothing and footwear are casual and formal types
of apparel and footwear. The reasons of substituting could be a preference, trend or lifestyle
change in consumers. The factors that identify the threats dangerousness are the substitute
products accessibility, attractive pricing, advantages and switching costs. In these terms, it’s
obvious that the threat is rather high. Both casual and formal clothing fit all these factors
making it highly possible that some consumers switch to them.
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Suppliers – The supplier bargaining power
The following competitive force of Porter’s five analyses is about suppliers of the business
enterprise. This part is particularly significant for Under Armour. In the sports apparel and
footwear industry, fabric is a very important component; it’s simple - no fabric, no product.
Therefore a whole lot depends on the suppliers of fabric. Under Armour products are made
mostly from polyester and elastane, which themselves need petroleum for production. The
chain is fairly visible, petroleum prices go up and Under Armours fabric prices go up. This
can have a negative impact on the profitability of the company. But, this only applies to the
majority of UA products, but recently the company has launched a new product line called the
“Catalyst”, which only uses recycled material for production. That product line is discussed in
more detail below in the Environmental analysis. Although, what should be mentioned in this
section is that UA uses only plastic bottles for this line, and therefore the supplier bargaining
impact on that particular line is minimal.
Under Armour management is fully aware of the risk they carry today: “We rely on third-
party suppliers and manufacturers to provide fabrics for and to produce our products, and we
have limited control over these suppliers and manufacturers and may not be able to obtain
quality products on a timely basis or in sufficient quantity” (Annual Report 2009, page 14).
The company also has no long-term contracts and currently has more than 10 primary
suppliers. If the company will lose a supplier or feel the need to replace one, switching costs
will be costly and time consuming. 60% of these manufacturers are located in Asia and the
countries they are situated in carry risk of political unrest, economic instability, etc.
potentially risking its abilities to function properly, thus creating the need to look for new
suppliers. The new suppliers will need training in Under Armours methods, and all this will
most likely negatively affect the overall performance of Under Armour.
Another issue is that the fabric Under Armour uses for its production is practically
irreplaceable. No substitute fabric is available for polyester or elastane to alternate in case of
need. Therefore the suppliers have more power over the buyer, because the latter’s business
fully depends on the fabric. Despite the fact that the fabric was invented by Kevin A. Plank,
the owner and CEO of UA, the company doesn’t produce it, they order the fabric to
subcontractors, so the dependence is visible.
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In conclusion, it’s safe to say that the bargaining power of suppliers is significant on Under
Armours competitiveness. The listed factors give a reason big enough to worry about this
potential problem and actively pursue methods of minimizing the risk. The company is
working towards the risk reduction in this area by trying to diversify the fabric and find
substitutes to relieve the pressure from suppliers by funding research in using recycled
materials for production, while keeping the benefits PolyArmor has.
Buyers – The bargaining power of buyers
The final competitive force comes from competitive pressures stemming from buyer
bargaining power. Under Armours products are offered in over 20,000 retail locations
worldwide, out of which almost ¾ are located in North America. They also sell through
Under Armours factory stores, specialty stores, website and catalogue. In this industry,
bargaining power of buyers come from retail stores mainly, especially for Under Armour,
considering that, in 2009, nearly 80% of Under Armours net revenues were generated from
wholesale distribution. This trend still continues. The main buyers are “Academy Sports and
Outdoors, Dick’s Sporting Goods, Hibbett Sporting Goods, Modell’s Sporting Goods, and
The Sports Authority; also, hunting and fishing, mountain sports and outdoor retailers such as
Bass Pro Shops and Cabela’s; and The Army and Air Force Exchange Service” (Annual
Report 2009, page 13). Since the launch of the footwear line, the chain was expanded to
national footwear retailers such as Finish Line and Foot Locker. In general, having a large
number of wholesale buyers is always positive for brands like Under Armour, especially
when this section of sales sums up to a huge portion of overall sales; no particular one has too
much power. The risk is reduced, because if relations worsen with one of them, the general
affect is minimal, therefore the bargaining power of buyers is decreased. Under Armour
management is being smart about this; along with differentiating the retailers selling UA
products, they also choose those with acceptable prestige. The stores that carry the product
reflect on the brand image.
Despite the fact that UA management has been trying to reduce the bargaining power of
buyers (Wholesale distributors), it still is high. Again, the risk is analogical to the one with
suppliers. The stake of these resellers is too high in the business, without them UA will lose a
huge amount of sales, because their own selling locations are not sufficient in number, so all
together resellers pressure the business.
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The second segment of buyers is the direct consumers; they add up to 18% of overall net
revenues. This segment is less dangerous for Under Armour, because they don’t have much
influence on the business in general.
Porter’s five forces summery
According to the conducted analysis of Under Armours external environment using Michael
Porter’s five forces analysis tool, the company has managed to create a stable external
situation and remains competitive. Its current market standing as a producer and marketer of
athletic apparel and footwear rising star is safe and if managed efficiently and effectively
stands a chance of a good future.
While analyzing Under Armours competitors, the source of the strongest pressure, it’s clear
that the company has chosen the best strategy to operate today. The fact that its rivals are
massive and operate globally created a competitive pressure that required careful and clever
management, while trying to expand and grab more market share. Product placement and
marketing strategies executed by UA have shown positive results and the business is
progressing and expanding in the tough rivalry; the net income indicators of its main
competitors and Under Armor are shown below to simply prove this point.
(All numbers in thousands)
Company 2007 2008 2009 2010

Nike 1,492,000 1,883,400 1,486,700 1,906,700
Adidas 551,000 642,000 245,000 N/A
Under Armour 52,552 38,229 46,785 68,477
(finance.yahoo.com; hotstocked.com; Under Armour Annual Report 2007, page 26)
As shown on the chart, Nike and Adidas have been struggling with unstable net income
streams through the past, while Under Armour has been showing stable increases in these
terms in the past 3 years. What is implied under this logic is that despite the pressure from its
main rivals, Under Armour has succeeded to operate not only profitably, but also continued to
grow and expand. Although, this does not mean that the company has time to relax, the
management must continue working towards the future. Under Armour has only made the
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statement that it wishes to take market share and profits from Nike and Adidas, which
definitely won’t please them and will only alert them to fight back.
Under Armour should also be aware of pressures from the powers behind the manufacturing
process and the ones who help in bringing the product to the market. Those two segments are
variables that can’t be directly controlled and require very careful handling. Risk reduction is
the key strategy for reducing the tension produced on this district. As stated before, the
company’s suppliers are limited and hard to replace, and, in addition, vital for the
manufacturing process, therefore the burden is high on them. UAs management should
somehow try to increase the quantity of suppliers, or strengthen the relationships with existing
ones, thus reducing risk them and relieving pressure associated with them.
Retail is the key in this business and while not having a strong retail chain of its own, Under
Armour highly depends on the retailers buying and distributing its products. This indicates
that the pressures derived from buyers are also significant. The management acknowledges
this problem: “we must compete with others for purchasing decisions as well as limited floor
space at retailers” (Annual Reports, 2009, page 17). Under Armour has started to build a retail
chain of its own and should definitely carry on with building it, because it is vital for
expansion and growth. Having a retail chain of their own will open new opportunities for
marketing, brand image establishment, etc., relieve the pressures from buyers and strengthen
their overall competitiveness on the market.
The industry and product itself relieve Under Armour from the next pressure Porter suggests –
substitute products. As explained before, this factor is the one UA has to worry the least
about. The products nature provides it with a monopoly having no possible substitutes for
most of the targeted market representatives. And the last pressure is produced from new
possible entrants on the market, which also is minimized by the industry itself. Currently, the
huge size of the athletic apparel and footwear industry creates such high barriers of entry that
existing sellers don’t feel the pressure of potential ones. No major new competitor has entered
the market in the past decade. So, Under Armour should be more concerned with existing
pressures coming from four other fields, then from potential new entrants.
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5.3 PESTEL Analysis
5.3.1 Political Analysis

Another tool used to analyze Under Armours external environment is the PESTLE analysis.
The first part of it is the political analysis of the countries the company operates in. This is a
very important aspect of any business; any kind of political disturbance or instability can
cause serious damage to companies and put their operations at risk. Plus, the local regulations
in terms of tax policies, tariffs and trade restrictions, environmental regulations, etc, can also
affect a business and its stable growth.
Under Armour headquarters are situated in Baltimore, Maryland, USA. The company mainly
operates on its homeland, which is ranked 8th out of 82 countries as evaluated by the
Economist Intelligence Unit in 2010, April 4th. The standing US holds is fairly strong and
says that the political environment is safe and secure to operate in. The democratic
government and strong legal system work in favor of business in general and help create a
safe, competitive environment. Basically, Under Armour doesn’t need to worry about any
internal political disturbance that can get in the way of its business operations in the US.
Externally, the US might pose a threat to Under Armour. Even though not on its own soil, the
country is at war, which might be a political issue threatening the company in the future.
Since 2006, Under Armour opened a new office in Amsterdam, Netherlands, from which the
company conducts its marketing, sales and logistics functions in Europe. The Netherlands is
ranked even higher by the Economist Intelligence Unit; on the grounds of having a stable
political environment and a friendly policy towards foreign investment and a stable political
environment, with no unrest in the relevant past and no grounds to suspect any in the future.
The latter two mentioned countries were those where Under Armour conducts all business
except product manufacturing. As many others, Under Armour has outsourced its
manufacturing processes, as stated in its Annual Reports 2009, “our apparel and footwear
were manufactured by 22 primary manufacturers, operating in 17 countries. Of these, eight
manufactured approximately 55% of our products, at locations in Cambodia, China, the
Dominican Republic, Honduras, Mexico, Nicaragua and the Philippines” (Annual Reports
2009, page 23). 60% of Under Armour branded products was manufactured in Asia, 18% in
Central and South America and 17% in Mexico, making these locations crucial to Under
Armours business. The company’s management also recognizes the risk by writing the
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political risk of these countries und the Risk Factors section in the Annual Reports of 2009,
page 23. “Political unrest, terrorism and economic instability” (Annual Reports, 2009, page
23) can cause disruptions in the manufacturing process, which will most likely result in loss
of manufacturing deals or delays in shipments, thus, have a negative result for Under Armour.
The risks connected to international manufacturing also raise threats like new labor condition,
quality and safety standard guideline in the listed manufacturing host countries. Also
import/export quotas and tariffs, new tax laws, restrictions on transfer of funds etc.
Overall, Asian countries have many problems with political stability. The continent being a
major manufacturing location for Under Armour has a critical role in its business. Political
problems between North and South Korea can affect China, because it’s a neighbor country
and has its interest in these circumstances. The US also engaged in the situation and despite
the fact that, today, stability has been reached, no one knows what will happen in the future.
Tensions between the US and China can build into tensions between the businesses, resulting
in problems for Under Armours manufacturing operations.
The other mentioned countries holding minor manufacturing operations for Under Armour
also have instability problems of their own. Cambodia has political problems with Vietnam,
organized crime rates are very high in Mexico, the Philippines government has major
problems with the budget etc. Maybe these countries don’t pose big threats if something goes
wrong, because of their petite share in the manufacturing process, but they are certainly worth
mentioning.
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5.3.2 Economic Analysis
The economic situation also has its say in the athletic apparel and footwear industry. After the
global financial crisis of that hit the economic world a few years ago, the economies affected the most,
still struggle to find their way back to a stable economic environment. The USA was the host of the
whole financial world downturn and the US Dollar was affected the most. The USA being one of the
world largest economies and the USD being a global currency quickly globalized the problem and the
crisis spread all over the globe. Shortly after that, consumers started losing trust in the USD, a clear
indicator of it being the price of gold increasing with such swiftness in such small terms. The crisis
also affected the consumers’ willingness to spend money and the overall demand fell on many
consumer goods, including the athletic apparel and footwear industry, therefore, affecting Under
Armour, Nike, Adidas, etc. Under Armour management stated the following in the Annual Reports of
2009 under the Risk Factors section: “We have limited experience operating a business during a
recessionary period and can therefore not predict the full impact of a downturn in the economy on our
sales and profitability, including how our business responds when the economy is recovering from a
recession.” This means they were aware of the possible problems, and the decline in overall sales
resulted in a decrease of net income from $ 52,558,000 in 2007 to $38,229,000 in 2008. This was the
only year with a decline though, the recovered efficiently and showed increases in the following years
(discussed in more detail in the financial analysis below).
Another question that needs to be addressed while analyzing the economic environment of a company
operating globally is the currency fluctuation. As mentioned before, the company operates on many
continents, manufacturing, and marketing and selling the goods all around the world, therefore, it must
deal with many currencies. The Under Armour management also acknowledges the risk of currency
fluctuations talking about it in the Annual Reports 2009 in the Risk Section, mentioning that
unrealized gains or losses might arise through international transactions generated by worldwide
subsidiaries. (Annual Reports 2010, Risk Factors, page 18). The USD being in a very unstable
situation today raises the chance of such problems.
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5.3.3 Social Analysis
The world is full of various cultures, nationalities, races, etc. and businesses which operate
worldwide should acknowledge the difference between lifestyles, traditions and preferences
that vary among these cultures. Each of these societies have different perceptions of many
issues; what might be acceptable for some cultures, can be even offending to others. Even
everyday ones that might seem to produce no difference for companies like Under Armour
can be decisive for its success in a certain marketplace.
Socio-cultural aspects affect several parts of the overall business; Under Armour finds them in
the following:
 Marketing and advertising

 The manufacturing process
 International workspace
Marketing and advertising is one of the most important parts of the Under Armours business.
The socio-cultural affect is substantial, to say the least. Brand image and the target markets
perception depend on correct and effective marketing of the product, and the details of the
advertising strategy should vary from culture to culture. When a person feels the need to buy a
new pair of sports shoes for example, the brand image plays a vital role in his decision, so
Under Armour has to watch out for the advertising it puts out in the market. The brand image
and slogan can inspire a person to buy an Under Armour produced shoe, but can also deny
him the desire to do it. Therefore, the company must consider that the adverts that suit one
culture and produce positive results in it can turn out to be catastrophic in others. One of the
most common differences can be the regional difference. For example, endorsing a famous
Major League Baseball player for a training suit advertising campaign could prove very
effective in the US, but far less effective in France, because the French simply don’t watch the
MLB like the Americans do and don’t perceive the athletes as celebrities.
Another social factor that needs consideration and affects Under Armour advertising is the
fast changing trends. Sometimes it only takes a new team in the NBA to win the
championship and all basketball fans will want the shoes with the logos the champion’s ware.
Whoever signed the contract with the team gets all the sales. Also, advertising methods
change. Two decades ago, the internet was not at all important, but today it is one of the most
effective methods for advertising. If the company manages to keep up with the changing trend
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in consumer preferences, it should also manage to keep up with the new methods of reaching
the consumers.
So, in conclusion, the two main ways social factors have affect on marketing are the
differences in various cultures the advertisers must take notice of and the fast changing
consumer preferences.
The second business sector in Under Armours operations affected by social factors is the
manufacturing process. The sports apparel business already witnessed the negative effects that
mistreating this section can bring; Nike encountered this problem a decade ago, when people
started to refuse buying Nike products because of the under-aged and highly under-paid labor
its subcontracting manufacturers used. So, despite the fact that Under Armour manufacturing
is outsourced, it can still affect the company’s position. Therefore, the management must
assure that no illegal and socially unacceptable actions are performed in the subcontractor
manufacturers’ locations. According to their corporate website UAbiz.com, to tackle this
problem, they implemented a “Code of Ethics and Business Conduct” that states that Under
Armour is against and acknowledges as breach of the Manufacturing Agreement if any of the
following are detected in progress: forced labor, child labor, harassment or abuse,
discrimination (on the basis of gender, race, religion, etc.). In addition, the wages provided
should be reasonable, the hours of work should be acceptable and health and safety must be
ensured by the subcontractors or else the company will not cooperate in the future.
The third important environment where Under Armour will find cultural and social
differences noteworthy is the international workplace; meaning offices out of the US, located
in Europe and Asia. These offices have local employees, which require different treatment
and have different traditions from the ones that work in the US offices. For example, religion
differs in USA and Japan, meaning that religious holidays differ in these two countries.
Therefore, if Under Armour does not acknowledge that the Japanese office employees should
manage these factors locally and coherent to the local traditions, they might lose morale and
efficiency; the lack of morale might lead to overall negative results and loss of
competitiveness.
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5.3.4 Technological Analysis
Most big companies in the athletic apparel and footwear business have R&D departments that cover
the technological advancements and innovations needed to stay competitive in the market. This
department carries a huge part in the company’s overall success, especially for Under Armour. When
UA entered the market in 1996, it was already dominated with big companies like Nike and Adidas.
The brilliant innovative fabric components and exciting design held major parts in its success. It would
be very hard, if not impossible, to compete with Nike and Adidas without these two.
Constant technological improvements are necessary for producers in order to keep up with each other
and the quickly changing trends in consumer preferences. UAs competitors acknowledge this fact too.
In fact, Nike’s one of the biggest organizational units is the R&D department, “We believe our
research and development efforts are a key factor in our past and future success.” (NKE 10-K filed Jul
28, 2008.)
Still, Under Armour continues to introduce new products full of exciting new trends. For example, the
Recharge Suit ™ was a product with breakthrough qualities and design which achieved admirable
success and turned, what appeared to be a niche market at first, into a whole industry (cnbc.com,
“Under Armours new Recover Suit®, Published: Wednesday, 15 Jul 2009)
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5.3.5 Environmental Analysis
The 21st century brought new tendencies and trends to the business world. One of them is that
today many companies strive to be environmentally friendly. The reason behind this might be
that they started caring about the world, or it might be that it’s a competitive advantage –
being “green” attracts customers. This way or that, many started following the trend. As the
concept progressed, new ideas and visions started emerging from the bright minds of the
business world today. One of the biggest is Michael Porters idea about the sustainability of
business being dependant on the shared value it possesses, value shared by the business and
society (bbc.co.uk radio, In Business a new Capitalism, 2011, 23rd January.). This idea
includes being environmentally friend, if possible. The value produced from a business that is
“green” isn’t just profit for the business itself; it also is preservation of earth and its valuable
resources and creating benefits for the community. Therefore it’s shared by the society as
well.
Under Armour has joined the “movement”. It started producing merchandise made from
recycled materials; for example, the T-shirt below is made 100% from recycled bottles and
still has the positive qualities Under Armours products have and it’s also very affordable –
about 35$.
The company offers a whole series of products that are made only from recycled material in
its online stores and retail locations; the product line is called “Catalyst”. Basically, what the
product development team in Under Armour has achieved is combining the advantages
offered by their UA with being eco-friendly.
To prove that they’re an environmentally friendly business, Under Armour also participates in
various events organized to promote the idea. Its biggest success was the 2009 “Baltimore’s
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Green Marathon”. On October 10th 2009, Under Armour and the City of Baltimore hosted the
event with 20’000 participants from all over the world. It was managed by and came from UA
GREEN, the company’s environmental sustainability program, which also includes the
Catalyst product line. The results of the “green marathon” were respectable: the runners
donated large quantities of clothes and footwear to the organization Souls4Souls (a non-profit
establishment helping those who are in need), UA employees and residents of the city planted
more than 100 trees around the race course, “but most importantly, the message that reached
more than 50,000 runners, friends and family was clear: Under Armour and the City of
Baltimore believe in the green economy” (Baltimore city Annual Sustainability Report, 2009,
page 44). The race has become an annual event in Under Armours home city.
Under Armours management chose an excellent strategy that will improve the brand image
permanently. As mentioned before, the society is starting to understand the shared value
concept, and joining the cause with such persistency and meaning is a brave and smart
strategic step for the company. The environmental factors that might concern the company in
the future have been inserted in their strategy and will most likely show results soon.
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5.3.6 Legal Analysis
The legal analysis of a business is about all the aspects of the business associated with the
laws of the countries it operates in. While most other points covered were not obligatory, the
laws must be followed, or else the company might find itself facing legal prosecutions, high
financial penalties and in most cases bringing huge damage to reputation and brand image.
For Under Armour, it’s important to follow the laws in the countries it operates. During its
history, the company hasn’t faced any serious legal problems, which gives ground to assume
that Under Armours management operates in accordance with the legal systems it faces. The
2009 Annual Reports clarify this by stating – “From time to time, we have been involved in
various legal proceedings. We believe that all such litigation is routine in nature and
incidental to the conduct of our business, and we believe that no such litigation will have a
material adverse effect on our financial condition, cash flows or results of operations”
(Annual Reports 2009, Item 3. Legal Proceedings, page 28).
Despite the fact that during its 15 years of existence no serious legal problems have occurred,
Under Armour should be careful about and ready to address the following potential legal
problems:
 Customers unsatisfied with the merchandise or service,

 Discrimination amongst employees, of customers or between companies. The latter
problems most frequently come from inappropriate advertising,
 Employment matters, such as wage tensions, etc. These might occur with sub-
contractors. Nike had similar problems with sweatshops, as mentioned earlier,
 Intellectual property.
 Problems with trade partners, for example, contract breaches, cuts in profits, etc.
33
6. Financial Analysis
This section is dedicated to analyzing Under Armours financial situation, progress or regress
through the past 3 years. The data given is selected from Under Armours official Annual
Records of the past 3 years.
(Annual Reports 2010, Consolidated Statement of Income, page 54)
It can be easily observed on the Consolidated Statements of Income above, that the company
has been improving its financial performance over the past 3 years. The revenues and income
have been constantly increasing with also increasing growth rates. Below is provided an
analysis of these statements using various ratios to prove that these figures also provide a
strong financial background, not just a lucky streak.
The first figure on the income statement is the revenues of the company. For the past three
years significant increases can be seen. From in year 2009 revenues grew for about 18% and
in 2010 the increase rate was about 24%. Increasing revenue in a situation when unit price and
34

costs remain approximately the same means increase in quantity of sales; it’s safe to say that
Under Armour is becoming more popular.
Another important indicator of a company’s strength is the gross margin, showing the
difference between sales and direct costs needed to produce the product or service. The gross
margin numerical strength differs from industry to industry. Under Armour has had a gross
margin of about 50% in the past 3 years, with minor changes +/- 1%. This is a fairly strong
gross margin and the fact that its stable growth in the years while revenues were increasing
significantly means that Under Armour has been able to keep costs under control, increasing a
stable 19% yearly.
The next step in the analysis is the turnover of inventory. This ratio shows how many times
UA’s inventory is sold and replaced over a period of time and it’s calculated by dividing Sales
Revenue of the income statement by the Inventory account in the Balance Sheet of the same
period of time. For UA’s case, the following is the Inventory Turnover for the past year, 2010,
was 4.9. This indicator should also be evaluate by comparison to industry rivals; in the same
year Nike’s inventory turnover was 9.3 and Adidas’s was 7.0. The comparison of UA’s
inventory turnover with its rival’s inventory turnover shows that the difference is large. A
logical assumption is that UA sells far less products than its competitors, and this is true
because it controls less market share and still is less popular then Nike or Adidas; plus
operates in a smaller section of the world.
Overall, looking at the income statement a very positive pattern is visible. The company’s Net
Income has totaled over $68 million in 2010 from about $47 million in 2009, therefore its
earnings per share are also increasing establishing the company as a very interesting
investment to many. Since its record low on March 2, 2009 of $ 12.33 per share on the stock
exchange, it’s been increasing regularly and has reached $ 73.87, also a record for the past
five years, and this time a record high (Yahoo Finance, Stock exchange data, 2011)
To carry on with the financial analysis of Under Armour, the balance sheet should be the next
item to look at. The debt equity ratio “indicates what proportion of equity and debt the
company is using to finance its assets” (Investopedia.com, Debt Equity Ratio, 2011). The
ratio is calculated by simply dividing the total debt by the total equity. In Under Armours
case:
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Debt equity ratio for 2010 - Debt equity ratio for 2009 -
178,412 / 496,966 = 0.35 145,591 / 399,997 = 0.36
(Annual Reports 2010, Consolidated Balance Sheets, page 53)
In general, the debt equity ratio’s analysis differs from industry to industry. In the athletic
apparel and footwear industry, enterprises tend to be less capital intensive, therefore, mostly
show low debt equity ratios. For Under Armour, a 0.35 D/E ratio with only a petite difference
from last year’s ratio means it finances most of the operations with equity, and finds it
efficient, since the company’s yearly performance results have been improving over the years.
The current ratio of the company shows its liquidity; how well the company is able to pay
back its short term debts. This is also important for investors; it somehow protects them, in
case anything goes wrong and it’s necessary to sell out the company. Under Armours current
ratio, Current Assets / Current Liabilities = 555,850 / 149,147 = 3.7 (Annual Reports 2010,
Consolidated Balance Sheets, page 53), looks promising and provides a strong incentive to
invest.
The last ratio used in the financial analysis of Under Armour is the Return on Equity ratio. It
provides a measurement of the company’s profitability in terms of how much profit it has
yielded from the shareholders investment. The calculations are the following:
RoE = Net Profit / Average SE for period
RoE = 68,477 / (496,966 + 399,997) / 2 = 68,477 / 448,481.5 = 0.15
(Annual Reports 2010, Consolidated Balance Sheets, page 53, Consolidated Statements of
Income, page 54)
To define the strength of RoE, again a comparison should be made with other companies
operating in the same industry. With Nike’s Return on Equity of 5% and Adidas 1% (Yahoo!
Finance, Annual Reports Adidas Group Financial Statements Balance Sheet), Under Armours
15% looks very strong and promising. The reason behind this is that Under Armour is still in
the fast growth stage, while the other two have already established themselves in the industry.
Still, Under Armour management should try to keep the high RoE and stay very attractive to
investors in this industry.
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Overall, Under Armours financial analysis shows us that the company is standing strong. As
shown in the Financial Statements, cash is stably growing along with the profitability of the
enterprise, while debts and expenses are held under control. It’s becoming more and more
interesting for customers and investors. As referenced before, UA management pointed out
that they are not used to operating in times of economic recessions, but they managed to
power through and stay financially healthy and very competitive on the market.
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7. Internal Analysis
The internal environment of a business is the part on which the management has direct control
over; the events and processes ongoing in the internal setting can be influenced primarily by
the managers of the firm. The internal analysis is about assessing the strengths and
weaknesses of the company which are managed by the executives and staff in order to achieve
efficiency and effectiveness in running the business. While trying to analyze, different aspects
of the business should be taken in consideration.
7.1 Competencies
The first point is the competencies of a business enterprise, which are the activities it
performs or the fields it operates in with more precision and success than others. Mostly,
resources and their capable use are admitted as competencies of a business, but not all of
them; only those that the business acquires a competitive advantage with, and that contribute
to its success.
Core competencies are the actions fundamental to the businesses success, very hard or
impossible for others to copy. The core competencies must be distinctive, meaning they must
be done better than the rivals. As mentioned, this usually occurs by implementing resources at
hand capably. The most important core competence of Under Armour is innovation. The only
reason the company was able to enter a market, which was already dominated with
experienced players like Nike and Adidas for many decades, was the innovation that the
current CEO Kevin A. Plank showed. He was innovative in many ways; the most important
was the cutting edge technology Plank came up with - a unique textile, a combination of
polyester and elastane that offered the customer advantages the rival brands did not. The
company manages to keep this core competence alive and provides the market with
innovative products. The CEO was also innovative in market penetration (Product-Market
Growth Matrix, Igor Ansoff). He started with direct marketing, selling the products directly to
equipment managers of college sports teams, what offered him the advantages of personal
marketing and made it easier to communicate the benefits of Under Armour products and
helped in winning over the market share needed to grow the business. The management was
able to develop a successful strategy built on these competencies.
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7.2 Value Chain
The next point in the internal analysis is the value chain analysis. As the father of the theory
Michael E. Porter explained, “The value chain is a systematic approach to examining the
development of competitive advantage” (Michael E. Porter, Competitive Advantage, 1980).
(Source: themanager.org)
The competitive advantage Porter talks about derives from the activities on the image above.
The functions of the company are broken down into 9 pieces that contribute to value creation.
Generally, all companies should use this tool to analyze the internal situation in detail and try
to manage with more efficiency; it’s much more valuable to understand the importance of the
value chain analysis for companies who operate with a Low-cost or Best-cost generic
strategies. If managed correctly, it would be a helpful tool to view the details of each part and
try to cut costs and reduce expenses.
Under Armour has chosen the broad differentiation strategy and has been able to keep up with
the expectations of the definition. They provide a broad market with a wide range of products
that are differentiated in many ways. However, the management should stay mobilized and
continue with the improvement of value creation processes, which will in no doubt help the
company in further expansion. It has a very important role in the future development of the
enterprise. Under Armour operates in a very competitive market and cost-cutting can go a
long way. It should seek such opportunities in all the activities, primary and secondary, listed
in the value chain. Despite the fact that in the near past Under Armour has showed great
39

financial success, if the management intends to maximize profitability and continue this
positive trend, they should pay a great deal of attention to the value chain and try to seek the
problems, after all, there’s always room for improvement.
As illustrated above, the value chain of a business consists of two main sections: the primary
and secondary activities. Each single process adds value to the end product; the ‘margin’ on
the image is equivalent to the sum of these individual values.
Primary Value Chain Activities of Under Armour
Inbound Logistics
There are five main primary activities in each organization. The first one is the inbound
logistics section. The latter is the management of the goods received from suppliers,
warehousing, material handling, inventory control costs, etc. As discussed before, Under
Armour outsources most of its production in Asia and South America. The outsourcing
strategy is very common and implemented by most of Under Armours rivals. The reason is
lower production costs; therefore, if Under Armour missed out on these tactics, they would
lose competitiveness in terms of having higher manufacturing costs. Fortunately, they did not.
Shipments received from outsourced producers must have space to accommodate until their
final retail locations. In Baltimore, Under Armour holds about 700,000 square feet of
inventory space; therefore, the management should acknowledge the importance of correct
handling in the business’s success. They also have a large facility in Netherlands and sign
third-parties for more capacity. The management team doesn’t miss the significance of this
issue, “Inventory management is important to the financial condition and operating results of
our business” (Annual Reports 2010, Distribution and Inventory management, page 15). The
inventory strategy is focused on meeting customer demands and improving long-term
efficiency by implementing new inventory management systems and procedures. Shipping
and Handling costs was about $14 million.
Operations
The second primary activity in the value chain is the operations of taking inputs from inbound
logistics and transforming them into final products. They both are activities connected to
relations with suppliers. The operations section carries significant importance as well. This
process mostly includes processing raw materials into finished products, sports apparel and
40

footwear and is handled by the manufacturers. These processes need careful evaluation;
correct planning can save up valuable production time and costs.
Outbound Logistics
The third activity in the value chain is the first one that is in relevance to the relationships
with buyers – Outbound logistics. This section includes activities like product distribution and
store space arrangements. Under Armour distributes its products from several locations: two
of its own facilities are located close to its headquarters in Baltimore, another in Netherlands
and they also use a third-party distributor for North America whose facilities are located in
California and Florida (Annual Reports 2010, Distribution and Inventory management, page
15). It can also be costly and if not managed correctly can produce avoidable expenses.
Sales and Marketing
Next in the chain is Sales and Marketing. This part is probably the most important one for
Under Armour and companies in the same industry. While in the previous sections value was
being added to the product, marketing and sales doesn’t only contribute to the value, it’s the
part where the latter is delivered to the end consumers. The marketing of brands in the athletic
apparel and footwear industry plays a vital role in the consumers’ decision. Managers of such
companies should pay extra attention to Sales and Marketing of the company. In this industry,
only an excellent end product is not enough, it’s vital to promote and market the products in a
customer appealing way.
The fact that marketing is very important in this industry isn’t a secret. All major players in
the industry achieved success through marketing. Nike and Adidas have been paying huge
amounts of money for endorsement deals, promotion campaigns, etc. Under Armour has also
engaged in this some sort of brand image war. The campaigns offered by UA are designed
and planned in an in-house marketing and promotions department that designs and produces
most of the advertising campaigns and works on the endorsement deals. The way UA operates
its sales and marketing activities is the following: “Our marketing and promotion strategy
begins with selling our products to high-performing athletes and teams on the high school,
collegiate and professional levels” (Annual Reports, 2010, Marketing and Promotion, page
10). They also sell directly to team equipment managers, thus outfitting the whole team.
Through these sales, UA products are seen on the fields receiving exposure to various
consumer audiences through internet, TV, magazines, sporting events, etc. At this stage, it
41

adds value through the deals with famous athletes and teams, and also delivers it to the
customers. The teams and athletes UA sells to were discussed before, but some great deals
should be mentioned again, such as the deal with Brandon Jennings - Milwaukee Bucks star
player, Lindsey Vonn – U.S. Olympic gold winning pro skier, NFL stars Tom Brady,
Brandon Jacobs, etc. International deals include official outfitter deals with the Tottenham
Hotspurs, a Premier League grand, Hannover 96, a German soccer team, the Welsh Rugby
Union, etc. (Annual Reports 2010, Marketing and Promotion, page 10). They all promote
Under Armours catchy and, some might say, powerful slogan: “Protect the House”.
Advertising costs for year 2010 were $128.2 million, $20 million more than 2009.
If marketing is defined as one of the main drivers of success in this business, then Under
Armour has been implementing a great marketing strategy; their success in the past few years
is not one that the business world often witnesses.
Service
Service is the last of the primary activities in a company’s value chain. Its quality is almost as
important as marketing for the brand image and overall company reputation and isn’t the
place that management should save money on. Basically, the aftermath of the value creation
and transfer to the customers is as important as the rest; the business should offer a place
where the consumers can express all kinds of claims and receive answers to questions. Under
Armour operates a customer service phone line and the web-site offers a separate section for
this topic. The company offers a service experience where customers receive timely answers
to their questions and experience no discomfort. This helps keep the company value alive and
raises brand loyalty.
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Secondary Value Chain Activities of Under Armour
The word secondary doesn’t mean less important in this case. The secondary value chain
activities of a company basically create the fundament for the primary value chain activities
and support their successful execution. Without healthy contribution from these sectors, the
whole process will most likely be confused and it will make the value creation a whole lot
harder, if not impossible. The general administration, human resource management, product
and technology development and procurement are the four parts of the value chain that
provide crucial assistance for the primary value chain creation process.
General Administration
The first of the four secondary activities of the value chain is the general administrative part
of running a business, in other words, the infrastructure of a firm that handles the general
management, future planning, organizational structure, company culture, legal factors,
governmental affairs, finance management, etc. This sector supports the value creation
process in both short and long terms. The general administrative structure should be organized
in an efficient way and manage the ongoing processes.
There are six main players in the company’s top management team run by CEO and founder
of the company Kevin A. Plank. These are the people who inspire the whole company, form
the strategy and make sure of its execution. Kevin A. Plank has been a remarkable figure in
Under Armours history and backs most of its innovative product developments. He’s also an
inspirational and charismatic leader with an active role in the day to day routine of the
company. Anyone who watches any of his many performances can easily verify this.
As for the financial management part, UA gathers an Audit Committee who is in charge of
relations with the external auditors and evaluations of internal financial reporting and risks
associated to these matters. For the past years, UAs Audit Committee has been opting to work
with one of the most successful and reliable audit companies PricewaterhouseCoopers LLP
(Proxy Statement 2011, Independent Auditors, page 42)
The Annual report shows that the Selling, General and Administrative expenses have been
increasing in the past years. In general, these are fixed costs and their constant increase might
mean that problems are in order; profits might stop rising and if these fixed expenses
continue, net loss might occur. UA Selling, General and Administrative costs for the past year
have increase by 28%, which is a rather significant increase. But, in Under Armours case it’s
43

logical that the business’s selling, general and administrative costs are rising, the business is
in a growth stage and the company is expanding day by day. As mentioned before, it even
expanded to a new region, building a company branch in Amsterdam. Therefore, building
maintenance, new salaries, etc. costs that are associated with a new branch are added.
Advertising costs are also included in this section. Along with its expansion, advertising also
needs to grow and become more effective, therefore larger budgets are required. Also,
Product innovation costs and corporate service costs are included in this section; they both
increased in the year 2010, again due to the growth of the company. Consequently, it’s logical
and necessary that Selling, General and Administrative costs are growing for the past years.
Human Resource Management
Human resources is a vital part of the support activities. It adheres to recruiting, hiring,
training, development and compensation. Management is key factor in manufacturing.
Sometimes, one decision can change the whole process in a very efficient manner. A
company must have trustworthy people employed for inbound logistics, operations and
outbound logistics. These are the three main areas where the product is manufactured and
value is added; if something goes wrong in these processes, the whole value chain is
worthless. Sales, marketing and service staff should be compiled with friendly and positive
individuals who will be able to create value outside the company. Their role is big in
bargaining with buyers, without buyer satisfaction, the whole business will collapse.
“As of December 31, 2010, we had approximately thirty nine hundred employees, including
approximately twenty two hundred in our factory house and specialty stores and six hundred
at our distribution facilities” (Annual Reports 2010, Employees, page 17). Most of Under
Armours employees are located in the US and the company believes that their relationships
between each other are good.
The company has been able to hire employees that show a very high quality and highly
innovative range of products.
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Product R&D, Technology and System Development
The next supporting activity is one partially covered in this thesis - Product R&D, technology
innovation and development. As mentioned before, innovation is a key element in this
business, especially for a relevantly new enterprise like Under Armour. The company is
technically driven to provide the world with high quality performance apparel and footwear
that are engineered with superior fabric construction called PolyArmour, characterized with
exclusive moisture management and proven innovation. Profit is also maximized in this
supporting step of the value chain; the better the technology, the more interesting and
appealing for customers the product - the more effective the outcome is and the more
efficiently it is made.
Under Armour is investing more and more in product development and innovation. They
understand that only with new innovative and appealing products can they grab more and
more market share from rivals. “Product innovation and supply chain costs increased $25.0
million to $96.8 million in 2010 from $71.8 million in 2009 primarily due to higher personnel
costs for the design and sourcing of our expanding apparel, footwear and accessories lines”
(Annual Reports 2010, Results of Operations, page 33). The UA management understands the
importance of this section and funds it appropriately.
45
8. SWOT Analysis
SWOT analysis stands for strengths, weaknesses, opportunities and threats analysis; it’s a tool
used to identify a company’s current position in terms of the four listed categories. Managers
can answer questions like what needs reassessment, what can be capitalized on, what needs to
be prevented, etc. based on a healthy SWOT analysis.
For Under Armour, below is the chart for the SWOT analysis:
Strengths Weaknesses
 Innovative Technology  Small market coverage
 Diversified products  Weak company-owned retail chain
 Fast Growing Profits, financial  Higher costs than competitors

stability
 Room to Grow  Limited product lines
 Reputation and Brand Image  Mainly targets males
 Well built supply and distribution

chain
Opportunities Threats
 Emphasize variety of sports o Huge competitors, holding major
market shares
 Expand in other regions
 Expand in other related industries o The unstable US and global
economies
 Reduce Prices
 Strategic alliances and partnerships o Unstable currencies
o Changes in the business world
o Transform consumer tastes and

lifestyles
46

Strengths
At this stage of development Under Armour has a quite strong background. The financial
achievements discussed above are what give credibility to other strengths listed in the SWOT
chart. Without this, the rest wouldn’t be considered at all. Therefore, one of the main strengths
UA has today is its well-built and stable financial position. The latter gives sustainability to
the other strengths of UA. The innovative technology and design that UA offers is a major
strong point of the company. The greatness of UAs innovations was mentioned many times
before in this thesis and not by chance, it is the most obvious reason of the company’s
success. The management should capitalize on the strength to deliver more innovation and
carry on with the success. It’s obviously on track; a couple months ago on February 15, 2011
opened a new innovation center in Baltimore focused on new creative and cutting edge
technology performance apparel.
After more than a decade of functioning in the athletic apparel and footwear business, UA has
obtained a reputation on the market of a quality goods manufacturer offering a wide range of
products diversified in many ways along with a number benefits for athletes and all
customers. The brand image also serves as a current strength for the company; through
effective marketing and endorsement deals Under Armour managed to build up a brand image
appealing to more and more customers. Another benefit and strength of a healthy reputation is
that it helps create a loyal customer base. Its name also says that it’s an ethical and business
oriented company, allowing business conduct to be easier for them; UAs management team
has a clean sleet in the business world and companies should be glad to work with them. This
strength allows the company to easily seek out partners needed for any activity.
The last strength listed in the chart above is a well built supply chain. Cost efficiency and
good customer service are the two benefits of the latter, and it’s convenient to consider this
strength of UA. Management must keep all these strengths in tact and continue capitalizing on
them, because they provide the foundation of growth and survival in this competitive industry.
47

Weaknesses
The main weaknesses of Under Armour are small market coverage, a weak company-owned
retail location chain and higher production costs than competitors. The first of the three is a
weakness because it denies UA the chance to interact with a vastly higher number of
customers and thus increase sales and contribute to the enterprises growth. UAs main
competitors cover a wider market and have higher economies of scale, resulting in lower
costs. If UA doesn’t think more globally, soon the markets it occupies might run out of
growth capacity and the business won’t be able to progress. No growth and non-competitive
production costs create a weakness which might have severe results, and while playing with
experienced players like Nike or Adidas, the chances of bad exposure are much higher.
The fourth weakness UA has is a weak company-owned retail chain. It would add sufficient
strength to the company to have its own ground to market and sell on. Despite the fact that the
management is planning to expand its retail chain, today, this is a weakness where UA gives
away a portion of its competitiveness. Nike and Adidas have well organized retail chains all
around the world making their production more reachable.
Opportunities
As visible on the SWOT chart, the opportunities section mainly contains prospects connected
to expansion and growth. Under Armours nowadays situation is excellent for conquering new
markets and stealing market share from its rivals. Europe, Asia, South America and Australia
are four vast continents full of potential customers of UAs production. Unfortunately, only
minorities are aware that this brand even exists. UAs success in the home continent brings the
opportunity to attract investors and expand as fast as possible. The brand holds potential to
become very popular in the four listed regions. Of course, marketing will be essential to
achieve positive results in these markets, but assuming it will be as effective as it is in North
America, many should volunteer to “Protect This House ®” (UA slogan).
Along with regional expansion, the campaign should involve emphasizing on suitable sports
in each region. For example, India is a huge market for cricket apparel and equipment; it
would be more logical to enter the Indian market with a line of the latter than with Under
Armour produced basketball shoes. Despite the fact that UA has no experience in the field,
until they’re in a healthy financial position, they should try new markets and new fields to
achieve even bigger success and reach their goals.
48

Another opportunity for the company would be to differentiate in an even higher level and
enter different industries, somewhat related to the athletic apparel and footwear industry. For
example, along with its line of sportswear, Adidas produces shower gels. It’s an opportunity
to sell these types of related products with the primary goods, because the new offered
product will receive exposure just by being available on store shelves. If the company will
show half of the innovation in this field as it shows in its primary activities, success is highly
likely.
The last opportunity listed is strategic alliances and partnerships. The management has a
limited amount of resources, and won’t be able to finance all the listed opportunities along
with those not on the list. Therefore, by creating alliances with other business units more
accustomed to the conducts in other fields might benefit the company. For example, if UA
forms an alliance with a common shower gel producer, adds value and benefits to the
products, brands it with its logo and puts it in the retail locations of UA, might achieve more
profits than by starting up a whole new business unit to produce these goods themselves. In
addition, the overall risk is less, because the potential partner would be more experienced and
accurate in the manufacturing process.
Threats
Under Armours major threat is the number of rival companies with more experience and
global exposure. These companies have the potential to pressure UA and threaten its success.
They spend millions of dollars on marketing and enjoy high brand loyalty and awareness.
The importance of the economic environment surrounding the business was already
mentioned in the external analysis. It should also enter the list of threats that Under Armour
has today. The commodity prices are inflating and the national currency is unstable, therefore
it’s hard to predict what might happen in the future. Some ways the problem might develop
can seriously hurt UAs profitability, so the management should keep an eye for such threats.
The rest listed threats are the changing business environment and consumer lifestyles and
tastes. This is something that every business with multiple sellers should be afraid of. It’s
always possible that someone else predicts the shift in consumer tastes and becomes the first
to satisfy the demand. So, the company should be ready to convert to new tastes and stay
appealing to the customer. Under Armour also should stay an up-to-date business unit by
keeping up with the constant changing business world. Otherwise, they threat to become
49

uninteresting to partners and this can damage their progress as a whole and the strategy
they’re implementing might be at risk. The latter is that UA has been trying to keep good
relations with all b2b affairs. The buyer and supplier bargaining pressures have been
discussed above in the “Porter’s five” analysis and for UA, it’s very important to keep the
relationships strong and healthy because of their practically non-existing own retail chain and
limited suppliers of merchandise.
9. Recommendations
Recommendations on regional expansion
Since Under Armour went public in 2005, the company has seen nothing but growth and
success. Even in the tough recession year, it showed strength and stability and went on
growing in the problematic market of North America. Today, it’s time to grow. The industry
demands for Under Armour to expand and “invade” new regions. If handled efficiently and
effectively, the results are bound to be good. The company has a high quality product and has
the capabilities to market it around the globe. In case they decide to stay put and continue
operations only on one continent, their future might be at risk. They’ve been testing the waters
of Asia and Europe recently, by licensing and contracting third-party logistics organizations,
and the products showed promise. Now, maybe it’s time to enter the new markets by
themselves. As mentioned in the External Analysis section, China is a market showing great
promise for relatively small producers and marketers such as UA, therefore, as a
recommendation the thesis suggests to the company to attempt to enter the Chinese market
with its products.
Expansion will also raise the quantity of production, thus enabling Under Armour higher
economies of scale; this way, they could lower costs and raise their competitiveness.
UA has an ambition to be first in the “performance apparel” business, and to achieve this
goal, they should grow out of the North American market and aim for the globe with a clear
focus on market coverage and supply of sustainable products.
The latter are “those products providing environmental, social and economic benefits while
protecting public health, welfare, and environment over their full commercial cycle, from the
extraction of raw materials to final disposition” (Sustainable Products Corporation, 2001).
The world is becoming more conscious to the concept of sustainability, and businesses will
50

find it hard to operate in the future if not cohering with the concept. While expanding
globally, Under Armour should also consider the sustainability factor and try to make its
products benefit the surroundings.
Recommendations on retail stores
While analyzing the company, it’s obvious that a company-owned retail chain would be a
great addition that would support the whole organization. The retailers selling UA’s products
receive all the benefits from holding the product on their store shelves. Despite the fact, that it
might require large amounts of capital, a company based retail chain would increase the
profitability and credibility in the long-term. It would enable UA to study customer behavior
and taste with more understanding; also, it would relieve the company from a large part of
pressure from buyers. Today, if something goes wrong with the relationships between Under
Armour and Dick’s Sporting Goods, for example, the company will face a crisis, because the
latter accounts for a huge amount of sales for UA. If they’d own a retail chain, these kinds of
problems won’t be possible.
The retail chain will also bring more exposure to Under Armour. Today, we can see their
products on the internet and in local athletic stores, and in very few specialty shops. There is a
possibility for them to establish a strong retail chain and lure customers in with their smart
and tactful advertising. Many might find it appealing to see what “Protect this house ®”
means and enter the store, thus resulting in a sale. Also as mentioned before, the rivals chose
to multi-brand, and when a buyer sees 20 different brands in a store and only 1 brings profit to
UA and 5 to Nike, the odds are against them; some might choose another brand for its price,
some for its appearance, etc. More specialty stores will deny this possibility, and increase the
chance for sales.
Recommendations on Marketing and Endorsements
Despite the fact that this thesis states the cleverness and success of UA’s marketing, it is never
enough in this business. When companies like Nike and Adidas sign deals so often and
endorse stars so effectively, it’s hard to compete with less activity. Endorsement has become a
necessary and vital part of the way companies advertise in this business. Under Armour
should continue on and sign more stars. Every cent invested in a proper endorsement will pay
off in the future with sales and revenues; this is a fact proved by time.
51

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Anglo-American University Graduation Thesis by Otar Bedoshvili

Mentor: Simon Gordon-Smith, MBA

Under Armour Inc.

SCHOOL OF BUSINESS ADMINISTRATION

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4. General Current Strategy

4.1 Growth Strategy

4.2 Differentiation Strategy

Net Revenue by Product Category

(Scoreboard in Annual Reports 2010, page 5)

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4.4 Corporate Strategy

Another approach demonstrated by “Under Armour” is signing individual athletes. The

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4.5 Product Positioning

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5.1 The Athletic Apparel and Footwear Industry Review

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Industry Rivalry – Pressures created from existing sellers in the Industry

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Company Revenues (in Thousands)

(Company Code) 2010 2009 2008

Nike (NKE) 19,014,000 19,176,100 18,627,000

Mentor: Simon Gordon-Smith, MBA

Mentor: Simon Gordon-Smith, MBA

Mentor: Simon Gordon-Smith, MBA

The entry barriers for this market are the following:

 High capital requirements

Mentor: Simon Gordon-Smith, MBA

Highly competitive environment

Strong brand preferences and high degrees of customer loyalty

Mentor: Simon Gordon-Smith, MBA

Mentor: Simon Gordon-Smith, MBA

Mentor: Simon Gordon-Smith, MBA

Mentor: Simon Gordon-Smith, MBA

Buyers – The bargaining power of buyers

Mentor: Simon Gordon-Smith, MBA

Porter’s five forces summery

(All numbers in thousands)

Company 2007 2008 2009 2010

Mentor: Simon Gordon-Smith, MBA

Mentor: Simon Gordon-Smith, MBA

5.3.1 Political Analysis

Mentor: Simon Gordon-Smith, MBA

Mentor: Simon Gordon-Smith, MBA

Mentor: Simon Gordon-Smith, MBA

 Marketing and advertising

Mentor: Simon Gordon-Smith, MBA

Mentor: Simon Gordon-Smith, MBA

Mentor: Simon Gordon-Smith, MBA

Mentor: Simon Gordon-Smith, MBA

Mentor: Simon Gordon-Smith, MBA

 Customers unsatisfied with the merchandise or service,

Mentor: Simon Gordon-Smith, MBA

(Annual Reports 2010, Consolidated Statement of Income, page 54)

Mentor: Simon Gordon-Smith, MBA