CASE 2 390

China’sArmour:
Under Home Improvement
Working to Stay
Market:
on Top ofShould
Its Game
Home Depot
Enter or Will it Have a Late-
Mover (Dis)advantage?

Mark Brewer, Brandi Chauvin, Eric Mitchell,

Eric Partington, Mark Rade, Don Riddle,
Yinghong (Sara) Song, Robin Chapman
Arizona State University

Millions of people each year try to come up with a Utilizing broad-based, frequently free endorsements and
“million dollar” idea. Many believe that it requires an well-received publicity, Under Armour has also reached
“unfathomable” idea, but sometimes going back to the regular athletes, active outdoor enthusiasts, elite tactical
basics is the key. That’s what allowed Kevin Plank, the professionals, and active lifestyle consumers.
founder of Under Armour performance apparel, to find Under Armour is quickly becoming a leader in the
success. The task at hand was to simply make a superior sports apparel industry, and it could be argued that it
T-shirt and nothing more. It all began in 1996 when the is an opposing force to Nike in sports apparel, with its
former University of Maryland football player wanted to widespread popularity amongst top-name athletes and
create a shirt that would help control the temperature of sports programs and teams. This is further evidenced
an athlete’s body, not just soak up the sweat during intense by a 133 percent compound annual growth rate and an
activities. He wanted a shirt that enhanced performance equally enormous increase in operating income from
rather than detracted from it. As a result, Plank created $5.7 million to $52.5 million between the years 2003 and
a synthetic shirt made of high-tech material that had a 2007. As of 2007, Under Armour had $606 million in
snug fit designed to feel like a second skin. sales revenue, far surpassing its first year’s revenue in
The technology behind Under Armour’s diverse 1996 of $17 thousand (see Exhibits 1 and 2).
product lines for men, women, and youth is complex, Under Armour’s products are sold worldwide, with
but the message is simple: wear HeatGear when it’s hot, the company’s headquarters located in the United States
ColdGear when it’s cold, and AllSeasonGear between and support offices in Hong Kong and Guangzhou, China.
the extremes. Under Armour’s mission is to enhance the Primary sales are achieved through wholesale distribution
experience for all athletes by applying passion, science, and licensing to distributors. Products are offered through
and the relentless pursuit of innovation to create cloth- the company website and retailers, and company stores
ing with temperature control, comfort, and flexibility.1 in the United States, Europe, Japan, Canada, South
Under Armour’s stated goal is to be “a leading Africa, Australia, and New Zealand (see Exhibit 3). Under
developer, marketer, and distributor of branded Armour operates in a highly competitive industry where
performance products.” It has been able to successfully the dominant competitors have significant breadth
penetrate the sports apparel market by using the image of market coverage that it is difficult to find an entry
and influence of: domestic and international professional point. The main competitors have been advertising and
teams, collegiate teams, Olympians, and individuals. establishing distribution channels, marketing agreements,

Exhibit 1 Under Armour Net Revenue: 2003–2007

Year Ended December 31

(In thousands, except per share amounts) 2007 2006 2005 2004 2003

Statements of Income data:

Net revenues $606,561 $430,689 $281,053 $205,181 $115,419

Source: 2008, Under Armour, Inc., Form 10-K 2007 Annual Report, December 31, 26.

409

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410

Exhibit 2 Under Armour Income Growth from 2005 to 2007

Case 29: Under Armour: Working to Stay on Top of Its Game

Under Armour, Inc. and Subsidiaries

Consolidated Statements of Income
(In thousands, except per share amounts)

Year Ended December 31

2007 2006 2005

Net revenues $606,561 $430,689 $281,053

Cost of goods sold 301,517 215,089 145,203

Gross profit 305,044 215,600 135,850

Operating expenses

Selling, general and administrative expenses 218,779 158,682 100,040

Income from operations 86,265 56,918 35,810

Other income (expense), net 2,778 2,169 (2,836)

Income before income taxes 89,043 59,087 32,974

Provision for income taxes 36,485 20,108 13,255

Net income 52,558 38,979 19,719

Accretion of and cumulative preferred dividends on Series A Preferred Stock — — 5,307

Net income available to common stockholders $52,558 $38,979 $14,412

Source: 2008, Under Armour, Inc., Form 10-K 2007 Annual Report, December 31, 46.

and recognition for many years. Thus the battle for t-shirt under his jersey, so he set out to create a unique
Under Armour was much more uphill than most other product that would meet the needs of all athletes. His
new entrants to an established market. However, Under laboratory was his grandmother’s basement in Maryland.
Armour has succeeded in breaking into a mature market After many prototypes, Plank created his first shirt; it
and is no longer simply an amateur player in the sports was a shiny tight shirt made of high-tech fibers that
apparel arena. The question is: “How does the company wicked away moisture, keeping athletes cool, dry, and
stay on top of its game?” feeling “light.”2 Plank’s shirts truly did regulate athletes’
body temperatures, lending to improved performance.3
History of Under Armour Starting Small
As previously mentioned, when Plank was a football Plank believed that he could make a profitable apparel
player he grew tired of having to change his damp, heavy business with his advanced feature shirts, so he used

Exhibit 3 Net Revenue by Geographic Region

Year Ended December 31

(In thousands) 2007 2006 2005

United States $562,439 $403,725 $266,048

Canada 23,360 16,485 9,502

Subtotal 585,799 420,210 275,550

Other foreign countries 20,762 10,479 5,503

Total net revenues $606,561 $430,689 $281,053

Source: 2008, Under Armour, Inc., Form 10-K 2007 Annual Report, December 31, 68.

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$20,000 of his savings and ran up $40,000 in credit card During 2007, Under Armour increased its marketing

Case 29: Under Armour: Working to Stay on Top of Its Game

debt to launch Under Armour.4 Success was initially initiatives by opening self-owned retail and outlet stores.
slow in coming, but once Plank made his first big sale to Plank recognized that “You can’t be a world-class ath-
Georgia Tech University,5 Under Armour grew rapidly. letic brand without the ability to outfit the athlete head
Plank marketed his product by focusing on the value- to toe,”10 so Under Armour developed athletic footwear.
added concept, and now many high school, college, and As of the first quarter of 2008, Under Armour had 43
professional teams use Under Armour athletic gear. percent of the total U.S. performance apparel business
At the end of its first year of operations, Under Armour sold through sporting goods stores, versus 32 percent for
had five lines of clothing made for every climate, and the Nike and 5.1 percent for Adidas.11 A marketing consul-
company’s operations were moved out of Plank’s grandmoth- tant has said, “Under Armour is identified with perfor-
er’s basement into a manufacturing warehouse in Maryland. mance the way Starbucks is identified with better coffee,
and that is a huge advantage in entering new categories.”12
Growing into a Recognized Brand Plank attributes the company’s success to the fact that
In the late 1990s, Under Armour achieved national “[it] ha[s] grown and reinforced [its] brand name and
recognition. By 1998, it was the official supplier of per- image through sales to athletes and teams at all levels,
formance apparel to NFL Europe. In 1999, it signed a from youth to professional, as well as through sales to
contract to feature Under Armour in Warner Brothers’ consumers with active lifestyles around the globe.”13
movies. By 2000, Under Armour had become a glob-
ally recognized brand and was supplying performance
apparel to the National Football League, National Hockey
Current Product and Sales Profile
League, and Major League Baseball, USA Baseball, and Geographic Distribution
the U.S. ski team as well as other professional leagues Approximately 93 percent of sales in 2007 were in the
abroad.6 Currently players from 30 of 32 NFL teams wear United States. with the remaining 7 percent split between
Under Armour products. Canada [4 percent] and all other international markets
As of 2005, Under Armour was supplying over [3 percent] (see Exhibit 3). Under Armour sells products
100 NCAA Division 1A football programs and thirty in 13 countries, including in-house distribution in the
NFL teams, but it was still looking for other areas to United Kingdom, Germany, and France. Sales in other
branch into within the performance apparel industry.7 Western European and Asian countries are done through
Consequently, Under Armour introduced a loose-fit partnerships and third-party distributors. The limited
clothing line and added women’s clothing to its product sales outside of the North American market were primar-
line.8 Also in 2005, the company went public, seeking ily the result of an emerging international penetration plan
to sell as much as $100 million in shares of common that received new emphasis in 2006 with the opening of a
stock. Ben Sturner, president of Leverage Sports Agency, European headquarters. In an effort to increase the geo-
a New York–based sports marketing firm, said, “Under graphic diversity of sales, these headquarters were opened
Armour is no longer an up-and-coming brand. [It] [has] to manage sales and distribution channels, and additional
positioned [itself] as a real player in the industry and in experienced industry talent was brought on board in 2007
the eyes of consumers in only a few years’ time.”9 (Exhibit 4 shows where offices and stores are located).

Exhibit 4 Geographic Diversity

Location Use

Baltimore, MD Corporate headquarters

Amsterdam, The Netherlands European headquarters

Glen Bumie, MD Distribution facilities, 17,000 square foot quick-turn, Special Make-Up Shop
manufacturing facility, and 4,500 square foot retail outlet store

Denver, CO Sales office

Ontario, Canada Sales office

Guangzhou, China Quality assurance & sourcing for footwear

Hong Kong Quality assurance & sourcing for apparel

Various Retail store space

Source: 2008, Under Armour, Inc., Form 10-K 2007 Annual Report, December 31, 20.

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412

Product Segment Distribution Under Armour’s non-apparel product segments

Case 29: Under Armour: Working to Stay on Top of Its Game

Under Armour’s sales results are broken into apparel, made up the remaining 16 percent of sales: footwear
footwear, accessories, and licensed products (see Exhibits (7 percent), accessories (5 percent), and licensed prod-
5 and 6). Apparel dominated in 2007 with 84 percent of ucts (4 percent). Footwear is a new product line that was
total sales. Men’s apparel made up the “lion’s share” of launched in fourth quarter of 2006. Initially this line only
Under Armour’s business, representing 68 percent of offered baseball, softball, and lacrosse cleats designed for
apparel sales and 57 percent of total sales. The second high performance through a highly breathable and light-
largest apparel segment was women’s with 23 percent weight design. The footwear line now includes shoes
of apparel sales and 19 percent of total sales, represent- for golf, football, running, and cross-training. In the
ing a significant growth and diversification opportunity. near future it will likely introduce basketball shoes and
Youth products made up the balance of apparel sales. soccer cleats. It captured 20 percent of the U.S. football

Exhibit 5 Net Revenue by Product Category

Year Ended December 31

(In thousands) 2007 2006 2005

Men’s $348,150 $255,681 $189,596

Women’s 115,867 85,695 53,500

Youth 48,596 31,845 18,784

Apparel 512,613 373,221 261,880

Footwear 40,878 26,874 —

Accessories 29,054 14,897 9,409

Total net sales 582,545 414,992 271,289

License revenues 24,016 15,697 9,764

Total net revenues $606,561 $430,689 $281,053

Source: 2008, Under Armour, Inc., Form 10-K 2007 Annual Report, December 31, 68.

Exhibit 6 Net Revenue by Product in 2007

4.0%
4.8%
6.7%

8.0%

57.4%

19.1%

Source: 2008, Under Armour, Inc., Form 10-K 2007 Annual Report, December 31, Intro.

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 413

shoe market in the first year.14 The company’s 2009 first products are not exclusive, by implementing an effective

Case 29: Under Armour: Working to Stay on Top of Its Game

quarter earnings beat analysts’ expectations, which the corporate strategy Under Armour has been able to fashion
company attributes largely to the new running shoe.15 itself as a profitable business and remain a key player
Under Armour’s accessories category is developed and among competitors.
managed directly by Under Armour. The primary accesso-
ries products are performance gloves for football, baseball,
running, and golf aligned to the Heatgear and Coldgear
Major Competitors
product lines with unique performance features. There is stiff competition in the athletic apparel indus-
Under Armour also licenses its brand name to try with companies of various sizes employing different
independent manufacturers for other miscellaneous strategies in order to attract consumers to their product
products such as bags, socks, headwear, eyewear, and and brand. The athletic apparel industry is so diverse
watches. The company works with multiple licensees that some smaller companies may choose to target a
directly throughout the product development process to specific area such as yoga; whereas the larger companies
ensure that the products are aligned with its brand and try to capture the whole market. The larger companies
quality expectations. continuously increase the competition by spending large
amounts of money on product innovation, advertising,
Seasonality and sponsorships. Under Armour’s three largest com-
There appears to be a trend that sales are higher in the petitors in the industry are Nike, Adidas/Reebok, and
third and fourth quarters of each year, aligning with Columbia Sportswear.18 There are also smaller competi-
the football and basketball seasons and the traditional tors such as SportHill that could possibly break through
holiday gift-giving season in the United States. Under to become larger threats.
Armour has contemplated putting more emphasis on its
baseball product line to improve the sales balance and Nike19
reduce the seasonal variability in sales, inventory efforts, Nike was founded in 1964 by a University of Oregon
and distribution. track star, Phil Knight. Knight saw a need for better run-
ning shoes and began selling shoes imported from Asia
Operations and Distributions/ out of the trunk of his car. By 1972 he severed his rela-
tionships with suppliers abroad because they had become
Distributors strained and developed his first shoe branded as Nike.
Under Armour possesses an efficient operations and Nike over time became known as a high-quality, innova-
distribution network. As with any corporation, this tive product that consumers and athletes wanted to wear
requires a blend of physical-location metrics and stra- and were willing to pay a premium price to own.
tegic qualities. By 1980, Nike had captured 50 percent of the ath-
By leveraging its licensing partners (JR286, Inc. letic shoe market and in the 1980s began expanding
and USG), Under Armour can provide a wider range into other areas of the market through acquisitions and
of branded products to its customers. This broader product innovation. It produces its three main product
range of products adds value by reinforcing the brand segments (footwear, apparel, and equipment) mostly
and generating revenue without having to organically through contract manufacturers rather than operating
develop capabilities in these adjacent product categories. its own plants. Nike has relationships with some 700 fac-
Through keen selection and effective partner relation- tories in 52 countries, with most in China, Vietnam, and
ships, Under Armour has developed unique products India.20 Nike is the leader in athletic shoes, apparel, and
that consumers value. equipment and grossed $18.6 billion in fiscal year 2007.
For the first ten years of its existence, the company It sells products for every sport and climate and strives
was able to sustain operations by using “off the shelf” to be the best in every segment. Nike advertises its brand
software programs, but after it went public in 2006, Under through high-priced endorsement deals, media advertis-
Armour invested in a new SAP system. This system is ing, event sponsorships, and partnerships and alliances.
key to the company’s ability to add products to its list of Nike currently has 30,000 employees spread across six
offerings, as it allows Under Armour to manage a more continents and operates in 160 countries. Nike is an
diverse inventory and to ship directly to distributors.16 industry leader that is continually striving to stay ahead
Under Armour does not have a patent on any of the of the competition.
materials17 used in its products. Therefore, it needs to be
cautious in its licensing agreements so companies do not Adidas21
steal its know-how and introduce their own versions. Adidas, combined with Reebok (through an acquisi-
Though the materials and technology used to create its tion), is the second largest athletic apparel manufacturer

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414

in the world. Adidas was founded in 1924 in Germany new products. It is well known for quality, comfort, and
Case 29: Under Armour: Working to Stay on Top of Its Game

by Adolf Dassler. Dassler created the first running shoe reliability. SportHill’s clothing can be found globally in
made by hand without electricity in his mother’s kitchen. most major retailer stores and can be purchased online.
Dassler’s big break came in 1954 when the German soc- The success of SportHill is apparent in the number of
cer team beat Hungary in the World Cup wearing Adidas sponsorships it has, including many Olympic athletes
cleats. From that point forward, Adidas was the industry and collegiate running teams; however, it is a privately
leader in soccer shoes and apparel. held company so financial information is not available.
Changes in leadership during the late 1980s led Adidas Under Armour has been able to remain successful
to branch out into other markets, but it struggled to find among its competitors in large part due to the strength
its niche. Through acquisitions and better management of character of its founder and other leaders.
it was back on track by the mid-1990s. Adidas acquired
three smaller companies: TaylorMade, Salomon Group,
and Maxfli. These acquisitions gave it access to the golf
Under Armour’s Leaders
and winter sports market segments. In 2006, it merged Under Armour’s success may seem unbelievable at first,
with athletic apparel and equipment giant Reebok mak- but it’s no accident. Plank’s drive to keep trying even
ing it the second largest athletic apparel manufacturer during difficult times when it seemed the company
in the world. Today the Adidas product line includes might never flourish is what made it possible. In the
shoes and athletic apparel for basketball, soccer, fitness, beginning, when customers would request products that
golf, and outdoor adventure. Adidas operates globally Plank had not created, he would respond, “Of course
and has 25,000 employees worldwide with 80 subsidiar- we make that!” and then immediately go to work with
ies and reported $15.6 billion in profits in 2007. suppliers and contractors to deliver on his promise. Two
such examples were when the equipment manager for
Columbia Sportswear22 the Atlanta Falcons wanted long-sleeve Under Armour
Columbia Sportswear Company started in the 1930s as shirts, and when the equipment manager for Arizona
a family-owned and operated hat company in Portland, State wanted clothing for cold weather.24
Oregon. Founder Paul Lamfrom grew tired of working “He’s one of the hardest workers I’ve known in my
with inadequate suppliers and decided to manufacturer life,” says Plank’s mother.25 Plank’s humble beginnings
his own products. Columbia quickly gained a reputation give him valuable insight into his business. He knows
for its innovative, high-quality products. every aspect of it because at one time he actually did the
Columbia’s introduction of waterproof, breathable work himself. Many of his first employees were his col-
fabrics triggered the growth it has experienced since the lege classmates and teammates. Most of them are still with
1980s from a small family-owned business to a billion Under Armour and play important roles in management.
dollar publicly traded company. Columbia continues to He spent five months driving round-trip from
grow thanks to its innovative product development and Baltimore to Moundsville at least twice a week to help
the acquisitions of Sorel, Mountain Hardware, Pacific Ella Mae Holmes produce and ship Under Armour prod-
Trail, and Montrail. These acquisitions enabled the ucts. He left Baltimore at 4 am, arrived in Moundsville
company to branch out into other market segments. about 8 am, and worked with Holmes and her boy-
Columbia Sportswear is now one of the largest man- friend throughout the day. At 8 pm, Plank would take
ufacturers and sellers of outdoor apparel specializing in his shipment to the local FedEx office and drive back to
skiwear, snowboard gear, and hunting, fishing, hiking, Baltimore.26
camping, and casual wear. Columbia currently operates Plank effectively uses his athletic experience and
in North America, Europe, and Asia, and its products are connections to help Under Armour’s marketing and
available in 90 countries. Columbia has 3,000 employees sales teams earn new business. In the athletic world, he is
worldwide. In 2007, Columbia posted record net sales of considered by his customers to be “one of them” rather
$1.36 billion. than a CEO of a very profitable business. It frequently
takes competitors years to develop a loyal customer, but
SportHill23 Under Armour has been able to quickly earn loyalty after
SportHill was founded in 1985 by a University of Oregon a customer has had one or two good experiences with
track runner who saw the need for cold weather track their purchase. Most of the sports teams feel that Plank
gear. His athletic apparel design concept merged the best is truly helping them by providing a better product and
American fabrics with European style to make unique not simply trying to sell his brand. Plank embraces and
athletic apparel. SportHill clothing is designed for use in nurtures this connection respectfully and gracefully. He
any climate and for any sport. SportHill utilizes the regularly seeks feedback regarding existing products and
expertise of elite athletes to perfect its design and innovate the need for new products.

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Management Style itself with team sports, rather than individual sports and

Case 29: Under Armour: Working to Stay on Top of Its Game

Having been part of a sports team, Plank manages his fashion. “Everything we do is centered on performance …
company with a unique team-driven style. “Under we aren’t ever going to develop products to fill up a sales
Armour is one team and my job is to help ensure we table,” says Plank. Specifically, Under Armour will never
operate and execute as one team. Because there’s a lot use cotton to produce its clothing.31
of noise and clutter surrounding our brand, I try to sim- Under Armour’s corporate level strategy consists of
plify our story and objectives for the team to help keep a low level of diversification. While it does offer more
everyone running on the same wavelength and working than one product, 84 percent of its revenue comes from
towards the same goal: to become the world’s number athletic apparel and gear. Incorporating a shoe line is
one performance athletic brand.”27 helping the company with its diversification efforts,
To remind him of his critical role every day, Plank but it is still highly dependent upon premium priced
has written on a whiteboard in his office four things that products that are closely related. There is obviously a
define his job: (1) make a great product, (2) tell a great degree of economic risk associated with the premium
story about the product, (3) service the business, and pricing and Under Armour is feeling the effects of the
(4) build a great team. Every morning when he arrives current declining retail consumer market that is affect-
at the office and every evening before he leaves, he looks ing the broader economy. Additionally, Under Armour
at the board. Plank said, “If I don’t work toward those is exposed to a degree of risk by offering closely related,
things, I’m not doing my job …. You can overcompli- nonessential products that are, to a degree, subject to
cate your job … It’s important that you don’t allow the the fashion whims of its customers. Plank said Under
clutter to grow too loud […] and distract you from your Armour is “cautiously optimistic about 2009” and
mission.”28 is looking at the year with the “appropriate degree of
conservatism.”32
International Leadership Under Armour added new domestic sales channels
In order to facilitate its international expansion, Under by introducing its first independent retail sales outlet
Armour hired several new executives with experience in 2007 in Annapolis, Maryland. However, due to the
in international business, most notably Peter Mahrer. conservative approach to growth in 2009, no new retail
Mahrer was appointed as president and managing stores will be opened during the year.
director for Under Armour Europe, B.V. Mahrer, a sea- Under Armour has placed major emphasis on
soned industry executive, will oversee Under Armour’s international expansion. In addition to creating a
European operations headquartered in Amsterdam. broader consumer base, “Researchers have found
Mahrer previously served as head of international sales that international diversification can lead to greater
and general manager for Puma AG.29 operational efficiency, which ultimately leads to higher
financial performance.”33 Because its product transcends
cultural differences and is appealing to many athletes,
Under Armour’s Business regardless of nationality, Under Armour is pursuing
Strategies a worldwide scope via regionalization. Over the past
Ever since its inception in 1996, Under Armour’s leaders three years, revenues from foreign sales other than
have strived to achieve the company’s vision of becoming Canada have increased at a rate of 100 percent per
the world’s leading performance athletic apparel brand by year and are expected to increase even more quickly
employing a differentiation strategy through innovation. with the international growth emphasis (Exhibit 3).
Under Armour attains physical differentiation through Under Armour is fortunate because performance sports
the value chain activities of technological development apparel appears to transcend any jingoistic trends and
and procurement. As CEO Kevin Plank puts it, “The exporting does not require an in-depth knowledge of
key driver is to offer products that are better than what local customer service. Additionally, Under Armour’s
is currently in the market, best in class.”30 Additionally, products are already manufactured overseas in China;
Under Armour is able to exploit psychological differen- therefore, the new offices in Europe are primarily geared
tiation through its marketing campaign, which has hun- toward marketing and distribution and do not have to
dreds of professional athletes that not only volunteer to contend with the challenges associated with establishing
wear Under Armour gear, but actually want to wear it. manufacturing plants in foreign countries.
Most budding stars or wannabe weekend recreational
athletes want to wear the gear the pros wear. Plank is fix- Marketing
ated on maintaining differentiation from Nike, and uses Under Armour’s marketing strength is twofold. First, its
“authenticity” as his guiding principal to grow or adver- products have proven to be so effective that professional
tise the brand. Under Armour, for example, identifies athletes want to use them. Second, Under Armour has

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416

become a master of product placement in movies, TV products leads to a lower-cost, more effective, grass roots
Case 29: Under Armour: Working to Stay on Top of Its Game

shows, and video games. ad campaign. While Under Armour did sponsor its
Plank believes that word-of-mouth advertising is the first Super Bowl commercial in 2008, the company will
most effective method. Plank has said, “We always build continue to use more guerrilla tactics than traditional
a product for the athlete’s needs.” The customer is will- expensive ad campaigns.
ing to pay the price because the Under Armour prod-
uct has value in it. “Without value, our product is just
an expensive t-shirt. But we have the technology in the
Strategic Challenges
fabric [and] the design and the features satisfy what the Like most up-and-coming companies, Under Armour
athlete needs.”34 “Our model is getting to the athletes— faces several issues and challenges. These challenges
supplying them with great product that helps them include the current economic downturn, competing
perform better.”35 against major rivals such as Nike and Adidas/Reebok,
Athletes are a valuable marketing resource and the and maintaining a positive brand image despite set-
mouthpiece for Under Armour. The company signed a backs, such as the recent recall of its men’s protective
five-year partnership agreement in April 2009 with Cal athletic gear.40 In addition, some of the most critical
Ripken, Jr., a retired professional baseball player, to be issues involve protection of the differentiation strategy,
their official uniform representative. Under Armour feels improvement of production and procurement capabili-
this is a great opportunity because Ripken previously was ties, and continued implementation of a sound interna-
partnered with Nike.36 The company has reached out to tional expansion strategy.
capture much of the youth sports industry by sponsor- Under Armour’s differentiation strategy has been
ing recreational teams and major youth tournaments, successful to date; however, the lack of proprietary prod-
including the Under Armour All-America high school uct rights, intellectual property rights in foreign coun-
football and lacrosse games (see Exhibit 7).37 tries, and a heavy reliance on relatively few third-party
Under Armour has initiated other sponsorships that suppliers and manufacturers could adversely affect the
help get its name out in public, such as the Baltimore long-term sustainability of the firm. “The intellectual
Marathon, which is now named the Under Armour property rights in the technology, fabrics, and processes
Marathon. In an effort to boost the women’s clothing used to manufacture our products are generally owned
line, Under Armour sponsored the women’s U.S. field by our suppliers and generally not unique to us.”41 The
hockey team and some of the U.S. women’s softball and company’s ability to obtain patent protection for its
volleyball athletes during the 2008 Olympic Games.38 products is limited, and as previously mentioned it does
During the first three months of 2008, Under Armour not currently own any fabric or process patents.42
apparel appeared in cable shows nearly 3,000 times, Intangible assets such as trademarks are very impor-
more than any other company, according to Nielsen tant to the Under Armour brand, as are licensing
Media.39 Ironically, movie studios are asking to use arrangements and other legal agreements. The intellec-
Under Armour’s products as opposed to Under Armour tual property rights laws and regulations of countries
having to purchase product placement time. The desire in the global market vary dramatically. Under Armour
of athletes and movie studios to use Under Armour’s relies heavily on suppliers and manufacturers outside of

Exhibit 7 Sponsorship and Other Marketing Commitments

December 31

(In thousands) 2007

2008 $14,684

2009 14,660

2010 13,110

2011 10,125

2012 and thereafter 1,005

Total future minimum sponsorship and other marketing payments $53,584

Source: 2008, Under Armour, Inc., Form 10-K 2007 Annual Report, December 31, 60.

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 417

the United States. Seventy to 75 percent of the fabric used cute its international growth strategy? Going forward,

Case 29: Under Armour: Working to Stay on Top of Its Game

in its products come from only six suppliers,43 lending how can it maintain the product quality that it has nur-
to Under Armour’s weak position relative to its suppli- tured thus far?
ers. Additionally, some of its supplies are commodities Additional questions that Plank and other managers
and thus are subject to price fluctuations; for example, are pondering are: Can Under Armour maintain strong
petroleum-based materials are used in Under Armour’s relationships with its suppliers so that it becomes the
products and the petroleum industry has experienced customer of choice? Should Under Armour pursue pat-
significant swings in price and relative availability in ents or strike agreements to limit the chance of com-
recent months and years.44 petitors offering identical products? If so, will this effort
Under Armour has achieved a level of success in the actually be a defense or will counterfeit merchandise
U.S. domestic market and limited foreign markets, but undermine such an investment? Does Under Armour
is relatively small in size and financial strength com- possess appropriate supplier relationships and have an
pared to its major competitors (Nike and Adidas) with understanding of the inherent economic impacts on
similar or competing product offerings. Does Under raw materials? If not, how will Under Armour acquire
Armour run the risk of diluting the brand relative to its or develop these capabilities? What capabilities should
competitors? Is an acquisition strategy feasible due to Under Armour develop to ensure international success?
the company’s current debt situation? Although a coop- What barriers to entry exist in additional markets, and is
erative strategy may be beneficial to bridge barriers to licensing or some other method the best approach based
entry into desirable markets such as China, how likely on its current cash position? Will the international strat-
is it that Under Armour would pursue this option due egy be different from Under Armour’s overall differen-
to its emphasis on innovation and premium branding? tiation and growth strategy? As its founder and CEO has
Overall, has Under Armour done a good job in finding stated, “Under Armour’s success in 2010 and beyond
key strategic leaders with the experience necessary and will be significantly impacted by the decisions we make
does it have the right organization in place to help exe- in 2009.”45

NOTES

1. 2008, Investors Relations—About Under Armour, Inc., http://www 18. 2008, Under Armour, Hoovers, http://premium.hoovers
.underarmour.com. .com.ezproxy1.lib.asu.edu/subscribe/co/competitors.
2. 2008, Five questions with Under Armour CEO, Kevin Plank, xhtml?ID=fffrfjjfkrrrhkxsxh.
Sports Business Journal, http://www.sportsbusinessconferences 19. 2008, Nike history, http://www.nikebiz.com/company_overview/
.com/sss-pov/entries/2008/five-questions-with-kevin-plank, history, December 4.
August 15. 20. 2009, Nike company overview fact sheet, http://www.nikebiz.com;
3. Ibid. 2009, Nike pulling production from four Asian factories, Reuters,
4. Ibid. http://www.reuters.com, March 24.
5. S. Lyster, 2008, The history of Under Armour—A mastermind for 21. 2008, Adidas group history, Adidas Group, http://www.adidas
performance apparel, http://www.ezinearticles.com, December 4. -group.com/en/overview/history/default.asp. December 4.
6. 2008, Under Armour performance apparel, Funding Universe, 22. 2008, Columbia Sportswear, Funding Universe, http://www
http://www.fundinguniverse.com, December 4. .fundinguniverse.com/company-histories/Columbia-Sportswear
7. Ibid. -Company-Company-History1.html, December 4.
8. Ibid. 23. 2008, http://www.sporthill.com, December 4.
9. D. Rovell, 2005, Under Armour could offer up to $100 million in 24. M. Hyman, 2003, How I did it: Kevin Plank: For the founder of
stock, http://sports.espn.go.com, August 26. apparel-maker Under Armour, entrepreneurship is 99% perspiration
10. S. N. Mehta, 2009, Under Armour reboots: The sports apparel and 1% polyester, Inc., http://www.inc.com, December.
maker is sprinting into footwear—and trying to take on Nike—with 25. S. Graham, 2004, Kevin Plank’s drive makes Under Armour an
the help of software and science, Fortune, http://www.money.cnn industry overachiever, Sports Business Journal, http://www
.com, March 5. .sportsbusinessjournal.com/article/36213, January 19.
11. D. Kiley, 2008, Under Armour steps into footwear field: 26. Ibid.
Sports apparel maker set to do battle with Nike and Adidas, 27. 2008, Five questions with Under Armour CEO, Kevin Plank.
BusinessWeek, http://www.businessweek.com, January 31. 28. 2008, How do you define your job? Business Management Daily,
12. Ibid. http://www.businessmanagementdaily.com, November 8.
13. 2008, Under Armour 10-K 2007 Annual Report, http://www 29. 2007, Under Armour appoints Peter Mahrer as president &
.underarmour.com/annuals.cfm, February. managing director, Europe; Experienced sporting goods industry
14. D. Kiley, 2008, Under Armour steps into footwear field. executive to lead sport performance brand’s European growth
15. A. K. Walker, 2009, New shoe helps Under Armour beat strategy, Baltimore, MD, Under Armour press release, http://www
expectations, Baltimore Sun, http://www.baltimoresun.com, .underarmour.com, July 9.
April 29. 30. T. Heath, 2008, In pursuit of innovation at Under Armour: Founder
16. S. N. Mehta, 2009, Under Armour reboots. Kevin Plank says Super Bowl commercial has generated “buzz,”
17. D. Kiley, Under Armour steps into footwear field. Washington Post, February 25, D03.

CHE-HITT-09-0102-Case-029.indd 417 11/14/09 2:49:45 AM

418

31. D. Kiley, 2009, Under Armour steps into footwear field. 38. R. Sharrow, 2008, Under Armour entering an Olympic contest of its
Case 29: Under Armour: Working to Stay on Top of Its Game

32. R. Sharrow, 2009, Plank: Under Armour eyeing ‘09 “with appropriate own, Baltimore Business Journal, http://www.baltimore.bizjournals
degree of conservatism,” Baltimore Business Journal, http://www .com, August 1.
.baltimore.bizjournals.com, January 29. 39. A. K. Walker, 2008, Under Armour in public eye, The Baltimore
33. R. E. Hoskisson, M. Hitt, R. Ireland, & J. Harrison, 2008, Competing Sun, July 24.
for Advantage, Thomson Southwestern, 286. 40. J. Alper, 2009, Under Armour recalls 200,000 cups: Injuries involve
34. 2007, I am, Video interview with Kevin Plank, CNBC, http://www cutting and bruising, NBC New York Sports, http://www
.cnbc.com/id/25191722, September 11. .nbcnewyork.com/sports, April.
35. M. Hyman, 2003, How I did it: Kevin Plank. 41. 2007, Under Armour, Inc., Form 10-K Annual Report, http://investor
36. R. Sharrow, 2009, Under Armour, Ripken Baseball swing for fences .underarmour.com, December 31, 18.
with sportswear pact, Baltimore Business Journal, http://www 42. Ibid.
.baltimore.bizjournals.com, April 22. 43. 2008, Under Armour, Inc., Form 8-K, http://investor.underarmour.com, 6.
37. R. Sharrow, 2009, Cal Ripken Jr. nears deal to promote Under 44. Ibid.
Armour, Baltimore Business Journal, http://www.baltimore 45. R. Sharrow, 2009, Plank: Under Armour eyeing ‘09 with appropriate
.bizjournals.com, March 20. degree of conservatism.

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