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Under Armour SWOT & PESTLE Analysis

ID : 52342653 | Jan 2018

COMPANY PROFILE - Under Armour

Business Sector : Retail

Operating Geography : USA, North America

About Under Armour : Under Armour Inc. is a multinational firm found in 1996 by Kevin Plank. They sell sports shoes, accessories and apparel. In 1998, they moved to a new headquarter and warehouse in Baltimore. Under Armour Inc. went public in 2005. In 2007, they opened their first branded retail store in Annapolis, Maryland. They have acquired many fitness companies like MapMyFitness, Endomondo, MyFitnessPal, etc. which have strengthened their presence in fitness training domain. They have a workforce of about 15200 spread across North America, Asia and certain countries in Europe.

Under Armour Revenue : $4,825,335,000 (2016)

Competitive Analysis of Under Armour

The SWOT analysis for Under Armour is presented below:
Strengths
Weaknesses
1. Broad product portfolio
2. Multiple distribution networks
3. Growth in revenue and bottom line
1. Limited operating experience
2. High investment expenditure
Opportunities
Threats
1. Growing Markets in Asia-Pacific region
2. E-commerce popularity
3. Positive outlook in the US athletic footwear market
1. Threat of substitutes
2. Bargaining power of suppliers
3. Rise in wages in Asia

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Detailed SWOT Analysis of Under Armour

 

Strength

1. Broad product portfolio: Initially, Under Armour offered a variety of products in clothing product line, but currently they offer a wide range of products across apparel, footwears, accessories, etc. The broad spectrum of products minimises the risks of being dependant on a particular product category. Third-party companies in collaboration with product development teams produce these products. This methodology helps them to direct their efforts towards product development, fit, climate and end use. In the FY 2016-17, revenue from apparel, footwear, accessories, licencing and connected fitness was 67%, 21%, 8%, 2% and 2% respectively.

2. Multiple distribution networks: Under Armour sells its product through various distribution networks. About 65% of the revenue came from wholesale distribution whereas 31% was from direct-to-consumer sales. This trend has been associated with 19% growth in wholesale revenues and 27% growth in direct-to-consumer sales. The sale via licensing and connected fitness is 4% for past financial year. In countries where Under Armour does not have operations, they sell their products via licensing. The multiple distribution networks help the company to expand its market presence.

3. Growth in revenue and bottom line: Under Armour has recorded revenue of $4,825,335,000 with CAGR of 27% for last five years. There has been 21% growth in 2015 revenue. The income from operations has grown at CAGR of 21% over past five years with an income of $417,471,000 in 2016. To continue the growth, they are planning to restructure the company around category management to streamline the operations. This integrated global model will lead to shared accountability between categories, regions and functions.

Weakness

1. Limited operating experience: About 83% of the revenue comes from North America region, hence there is need to expand in other parts of the world to reduce over-dependence on North America region. Under Armour has limited experience in markets outside North America because they have not expanded much since the inception of the company in 1996.

2. High investment expenditure: The company’s investment expenditure has been more than its cash from operating activities. The investment expenditure for last three years has been $381,139,000; $847,475,000 and $152,312,000 respectively. The investment will be considered as positive if it can generate revenue for the company. The huge investment expenditure may limit Under Armour’s ability for any new acquisition. The restructuring plan announced in August 2017 will further increase expenses for the company thereby reducing available cash with them.

Opportunity

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Threat

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The PESTLE/ PESTEL analysis for Under Armour is presented below:
Political
Economical
1. Policy changes under Trump Administration
2. Political tensions in Asia
1. Uncertainty due to Brexit
2. Increasing labour costs
Social
Technological
1. Shift in masses towards healthy lifestyle
2. Increasing scope for women athletes items
1. Internet penetration
2. Value chain digitalisation
Legal
Environmental
1. Tax laws in the countries of operation1. Water pollution due to textile production
2. Move towards environment protection
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Detailed PESTLE Analysis of Under Armour

 

Political

1. Policy changes under Trump Administration: Trump administration has planned a number of changes in the policies which would increase uncertainties in sports apparel and accessories industry. One of those possible changes is withdrawal NAFTA (North American Free Trade Agreement). This would increase the cost of products produced in Mexico and Canada in the USA. As Under Armours major share of revenue comes from North American region, this change will have a massive impact on their business.

2. Political tensions in Asia: There are political tensions in between North Korea and other countries which tend to destabilise political situation in Asia. As most of the raw material of Under Armour comes from Asian countries, this instability may affect their supply chain.

Economic

1. Uncertainty due to Brexit: The growth in the European Union in 2018 is expected to be hindered by unknown effects associated with Brexit and increasing unemployment in Europe. After Brexit, other countries like Germany, France, etc. have also taken a protectionistic stance. There is a need for Under Armour to expand, but expanding their business in Europe can be very risky.

2. Increasing labour costs: According to market research firm Euromonitor, the labour costs have increased in China in the year 2017, with the wages being about $3.60 per hour. The wages are more on par with countries like Portugal and South Africa. As most of the raw material and manufacturing is outsourced to Asian countries including China, this increase in labour cost will result in increased raw material and production cost.

Social

1. Increasing consumer awareness: According to the Nielsen Global Health and Wellness Report 2017, about 49% of the respondents consider themselves overweight and want to take measures to stay healthy. People are slowly shifting towards a healthier lifestyle, mainly due to awareness through TV, internet, magazines, health forums and other mediums. This awareness has led to increasing public participation in sports activities which is expected to continue in the coming years.

2. Increasing scope for women athletics items: Rio Olympics 2016 witnessed the highest women participation ever with 45% female athletes. In an article in “The Wall Street Journal” by Rachel Bachman, the author points out that Women’s world cup drew 25 million viewers in the USA. These numbers indicate that there is growing participation and popularity of females in sports. As the popularity for female sports increases, more female participation will be seen which will drive the demand for sports apparel and shoes in the upward direction. Under Armour can generate more revenue by adding more female sportswear and shoes to its offerings.

Technological

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Legal

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Environmental

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Copyrights and Disclaimer

Under Armour SWOT and PESTLE analysis has been conducted by Siddhesh Suhas Salkar and reviewed by senior analysts from Barakaat Consulting - an Ezzi IT and Business Consulting venture.

Copyright of Under Armour SWOT and PESTLE Analysis is the property of Barakaat Consulting. Please refer to the Terms and Conditions and Disclaimer for usage guidelines.