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M.A.R.Y. CONSULTINGSituation AnalysisUnder Armour and the Lack of International PresenceMegan Wark, Alyce Brown, Ronlet Thomas, and Yessica Calderon5/20/2013

Situation AnalysisM.A.R.Y. Consulting was tasked with determining Under Armour’s position interms of international presence. We have found that Under Armour lacksinternational presence; currently only 6% of revenues come from internationalsales (Under Armour Annual Report, 2012). Nike and Adidas are the topcompetitors in the international sports apparel market—both are consideredinternational companies due to the fact that over 50% of revenues are earnedoverseas (Nike Annual Report, 2012) (Adidas Annual Report, 2012). Due to UnderArmour’s youth, the company has more opportunities to expand internationallywhile Nike and Adidas will begin to stagnate as they have already saturated themarket. While Under Armour has only 6% of the market share, they showpotential to capture more of the market over the next two years.Company and IndustryIn comparison to its international competitors, Under Armour is currently in aweak market position. The following analysis is provided to give a basis that willbe beneficial to understanding Under Armour’s current company and industrystatus. Under Armour is in the sports apparel industry which is alreadydominated by Nike and Adidas. In order for Under Armour to expand its marketinfluence and gain more market share, the company has contracted agreementswith international sports teams and clubs. By doing so the company has alreadyseen a 35% increase in international sales and revenues since it signed withTottenham football club alone. Also by increasing their brand awareness, UnderArmour has been able to better position itself in one of its weaker marketsegments, footwear. It is important that the recent action by Under Armour becontinued so that international sales continue to develop. It is only bydeveloping its international market that Under Armour will be able to takemarket share from its competitors, Nike and Adidas.Under Armour is Lacking International PresenceUnder Armour is relatively new to the industry having only been started 17 yearsago. With the 2012 annual report showing sales of 1.47 Billion, it would seemthat Under Armour is a large competitor in the sports apparel industry. If lookingat the United States market alone this assumption would be accurate however,international sales account for only 6% of 2012 sales (Under Armour AnnualReport, 2012). The company’s youth can be attributed to its’ lack of internationalpresence—coming into the market after Nike and Adidas had already becomeinternational sensations made for an almost impenetrable market.

Industry Competitors Dominate International MarketAccording to Nike’s 2012 annual Report, 58% of their 24 billion in sales camefrom the international market. The 2012 annual report for Adidas shows an evenlarger international presence with 77% of the 20 billion coming from theinternational market. Since Adidas has captured approximately 3/4 ofinternational sales, and Nike has the remaining 1/4, Under Armour is going tohave a hard time penetrating the international market.Under Armour is Working to Increase International BrandAwarenessAlthough Under Armour’s current presence abroad is miniscule, they are beingproactive about the matter. Specifically, Under Armour has replaced Puma as theofficial kit supplier for the North London Club Tottenham Hotspur. Senior VicePresident Matt Mirchin of global brands at Under Armour, says “We’re at thepoint now where we feel that we can go out and really aggressively widen themarket to that European Consumer and not only sell them on Tottenham butalso sell to them on the Under Armour Brand” (Sebastian). By signing theTottenham Hotspur, Under Armour has created an opportunity to get brandrecognition and thus showcase their presence abroad. Tim Woods, former Nikeand Puma marketing and management expert, noted that “within a short time,for every game of football, rugby or cricket you watched, at least 25% of theplayers wore an Under Armour branded base layer poking out above theneckline of their playing shirts” (Benjamin). Furthermore, according to an articletitled “Under Armour Flexing Its Muscles Overseas” by Fred Dreier, theTottenham contract has been largely responsible for the gained presence abroadas it alone increased sales by 35%. Evidently, Under Armour has established itselfas a competitor to Nike and Adidas. Though they are fairly new to thesportswear industry they are proving themselves to be equally capable of gainingbrand recognition and international presence.Under Armour’s Full Product Line Offered in 85 CountriesAccording to Under Armour’s website the entire ever‐expanding product line isoffered in and able to be shipped to 85 Countries. The 2012 Annual report statesthat Under Armour sells to distributors in countries where they do not have anydirect to consumer channels and that they also license their products to increasedistribution. By using a variety of methods to get the products to the consumer,the brand has achieved a great deal of international awareness and presenceduring its short time in the international market.New Apparel InnovationsUnder Armour has always been an apparel‐based brand and continues to expandits apparel offerings with items such as Charged Cotton, Heat Gear, Cold Gear,Cold Black and Bottoms Bar. Most of the new products being offered arespecifically designed to protect athletes from different elements of nature. Heat

Gear is specifically designed to be used to extreme heat conditions by beingmoisture resistant and lightweight. The fabric is not only absorbent, but quickdrying making workouts more comfortable. Cold Gear is also lightweight andmoisture resistant however, designed to hold heat for winter workouts.Under Armour has always specialized in lycra/spandex material and stayed awayfrom cotton. The new line of Charged Cotton allowed the company to enter intoa new market by taking one of the oldest and most popular fabrics and giving itproperties of lycra. The Charged Cotton line is designed specifically to not absorbliquid—liquid beads up on the products surface giving the user time to brush itoff before any is absorbed by the fabric. This is an extremely unique concept ascotton is usually extremely absorbent.For years Under Armour failed at entering into the women’s market as itattempted to “shrink it and pink it.” The new Bottoms Bar line Consists of severaltypes of pants specifically designed for a woman’s body. The new efforts toappeal to women will certainly help Under Armour’s global expansion efforts asit doubles the target market. As the variety of products being offered expands,Under Armour is able to appeal to more customers making the internationalmarket more penetrable.Under Armour Dwarfed by Footwear CompetitorsUnder Armour has been making attempts to become a bigger player in thefootwear industry and has recently released two new footwear lines: Toxic Sixand Under Armour Spine Footwear. The new products have brought footwearofferings to 106—57 men’s options and 49 women’s options.The industry average for footwear options is 10 times the amount Under Armourcurrently offers. Nike Currently sells 487 men’s options and 287 women’soptions on Nike.com. Adidas is the big player in the footwear market currentlyselling 906 men’s options and 387 women’s options on adidas.com. One of thelargest factors in both Nike and Adidas’s market dominance in footwear is thatboth companies offer completely customizable footwear options. Althoughcustomizable options are expensive consumers are willing to pay more forsomething unique that they can design themselves which Under Armour doesnot offer on UA.COM.NIKE and Adidas Soaring Over SeasIn the international market Under Armour’s competitors are NIKE and Adidas.NIKE and Adidas are both out performing Under Armour because they are moreestablished companies, with higher net sales and brand recognition than UnderArmour. NIKE directly sells their products in North America, Western Europe,Central and Eastern Europe, Greater China, Japan, and emerging markets. NIKE’sfluctuation in product sales varies upon seasonal and geographic demand for a

certain kind of footwear, apparel and equipment. Since NIKE is a consumerproducts company, they sell what consumers demand, so their inventorydepends on which physical activities are common to the geographic area thatthey are selling to.Industry Average of International Sales is 67.5% of Total SalesWhen comparing Under Armour to the industry average of 67.5%, Under Armouraccounts for 6% of the average (Trefis, 2013). Under Armours’ main competitorsthat make up this industry average are NIKE and Adidas. In 2012 NIKE’sinternational sales accounted for 58% of total revenues (NIKE 10K Report, 2012).NIKE has several ways in which they deliver their products to their consumers.NIKE operates 16 distributions centers in addition to several independent andsales representatives (NIKE 10K Report). Future ordering programs for retailersexist in numerous countries and regions which includes Canada, Asia, LatinAmerican countries, and Europe. During fiscal 2012, 11% of sales came fromNIKE’s three largest customers (NIKE 10K Report). Internationally, NIKE has 306factory stores and 65 NIKE in‐line stores, including NIKETOWNs and employee‐only stores (NIKE 10K Report). Their international branch offices and subsidiariesof NIKE are located throughout the seven continents.In 2012 Adidas Group still managed to perform well financially regardless ofmacroeconomic challenges in many regions. Adidas international salesaccounted for 77% of international revenue (Adidas 10K Report, 2012). Theirvision is to be closest to every consumer by providing the right product toconsumers through Group’s channels and brands. Adidas supply chain has beenable to maintain a competitive edge and are the partner of choice forconsumers. Material and color consolidation efforts between Global Operationsand Global brands for footwear and apparel were a success in 2012. Adidasstores and factories are located in Canada, Germany, France, U.S, theNetherlands, Spain, Italy, Russia, Japan, Korea, China, Columbia, and Brazil.Adidas international sales increased by 6%, in euro terms their revenues grew12% from 2011 and whole sales gross margin increased to 40.3% due to thestrong growth at Adidas (Adidas 10K Report).Nike and Adidas Prove to be in the LeadNIKE, Inc. is a worldwide leader in design, marketing, and distribution of athleticand sports‐inspired footwear, apparel, equipment, accessories and services.They are the largest seller of athletic footwear and apparel in the world. NIKEfocuses their product offerings in running, basketball, soccer, men’s training,women’s training, NIKE sportswear, and action sports (Nike 10‐K Report, 2012).In addition, NIKE markets products designed for children and other athleticsports such as baseball, cricket, golf, lacrosse, outdoor activities, football, tennis,volleyball, walking and wrestling. Although NIKE’s products are designedprimarily for athletic use, a large percentage of the products are used for