Module 3 - Under Armour Case PDF

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Sharon Watson...

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BUAD 441-011 January 18, 2021 Module 3 - Under Armour Case 1. Choose TWO of the value chain activities and discuss their contribution to Under Armour’s competitive advantage. Be sure to note how Under Armour performs that particular activity in a way that contributes to either lower costs to the company or increased value to the customer. ➔ (1) Marketing & Sales/Procurement(marketing contracts/agreements) ~ primary activities, creates value for customers through marketing and sales, which creates demand for their products. ◆ Promotion of their products through high performing athletes/teams at the high school, collegiate, and professional levels became of utmost importance. ● This was executed through outfitting agreements, sponsoring events, entering into endorsement agreements with athletes, and selling UA directly to teams and athletes. ● This greatly increased UA exposure out on the field and at different sporting events, which helped to establish “on-field authenticity”. ◆ Going into 2018, UA was the official outfitter of close to 100 collegiate teams (men and women), and numerous high school teams as well. They also supplied equipment/apparel for many US teams in multiple Olympic games. ● They also struck deals with multiple large professional sports organizations, including the NFL, MLB, NHL, and NBA. They continued this same idea while selling internationally and sponsoring several Canadian, European, and Latin American teams. ◆ In the United States, UA’s main strategy was to secure the endorsement of hugely popular, and also newly emerging individual athlete stars. This included people like Michael Phelps, Julio Jones, and Tom Brady. ● They have also begun signing celebrities outside of the sports world to continue the promotion of their products. An example of these celebrities are Dwayne “The Rock” Johnson, A$AP Rocky, and ballerina Misty Copeland.

● They also signed hundreds of international athletes in a wide variety of sports as well. ◆ In the retail space, UA focused on increasing floor space for exclusive dedication to UA products. They designed “concept shops” that granted them prime floor space, and made for a more shop-in-shop feel. ● In stores without this concept space, they worked with retailers to employ different elements (fixtures, mannequins, displays, etc.) to draw in and highlight the UA logo and products. This was used to help drive sales and grow consumer awareness. ◆ UA also advertised in many national digital, broadcast, and print media outlets (along with social media). They often included important athletes that were wildly popular. Conclusion: The Marketing & Sales (with Procurement elements) primary activity was crucial in helping Under Armour gain a competitive advantage in the marketplace. Because they invested so heavily in endorsement deals, sponsorships, and outfitting agreements, they were able to create a strong presence in the athletic sphere, where their brand received constant exposure to consumers. Furthermore, their endorsement deals with huge star athletes further improved their advantage, as these figures were continually marketing UA’s products to their fanbase/viewers, which further solidified the brand’s favorable image and increased exposure. UA was incredibly aggressive with their endorsement deals, which helped them to acquire many big stars across a variety of sports, and even many outside the sports world (with other celebrities). This further increases value to the customer by a large margin, because if they see their favorite athlete or celebrity wearing UA all the time, they will then associate the brand with a positive feeling/image, and want to purchase the products even more for themselves. This also drives home the notion that if these huge stars are using UA products, that they must be top-notch and the best of the best, which further exemplifies an increase in perceived value by the consumer. Additionally, UA improved upon their positioning in the retail space, in order to acquire the best floor space while simultaneously drawing consumers into the UA shopping experience. This also helped to improve their competitive advantage, as they secured some of the best floor space in retail settings which helped to highlight the UA logo (and build brand awareness), which helped to boost sales and consumer awareness. UA was also aggressive in their advertising, both through social media and across multiple national outlets. This helped to highlight their brand and products even more, especially with their celebrity endorsements. We can clearly see then, that the actions undertaken by the UA marketing team helped to dramatically increase value to the consumers. Simultaneously, they built a stronger competitive advantage by signing huge star athletes for many years to help exclusively market the

brand and its products for years to come (among their hundreds of other brand deals that helped to boost their brand image and awareness). Their competitors simply cannot keep up with UA’s endorsement deals (both with quality and the sheer number of them), and the amount of exposure that it brings with it. ➔ (2) R&D/Technology Development ~ support activity, supports all of the other value chain activities ◆ Top executives firmly believed that product innovation (technical design & aesthetic design) were key to boosting sales growth and creating a strong brand image. ◆ Product development team stepped up to make changes and enhancements… ● Began working closely with fabric suppliers to ensure materials were top notch in terms of performance and fit attributes. ● Began regularly upgrading products as better fabrics became available, and needs changed for athletes. ● Began to broaden product offerings in brand new and existing product categories/market segments. ● New effort was developed to use “visible technology” to enhance consumers' perception of the benefits of the UA brand. ◆ UA’s product development team had extensive prior industry experience leading fabric/raw material suppliers, branded athletic apparel, and footwear companies around the world. ● They worked very closely with the Marketing and Sales teams, along with professional athletes, in order to capitalize on product trends and understand market needs. ◆ Due to the collaboration from the product development and marketing/sales teams, UA released the product lines/fabric technologies... ● CHARGED COTTON™ products, natural cotton but performed like synthetic fibers (dry faster, moisture away from body). ● STORM products, unique water-resistant finish. ● COLDBLACK® technology fabric products, repelled heat from the sun to keep the athlete cool. ● ColdGear® Infrared, a ceramic print technology put on the outside of products to provide lightweight warmth.

Conclusion: The R&D/Technology development support activity was clearly crucial in helping Under Armour gain a competitive advantage in the marketplace. Because they invested so heavily in creating top quality and innovative products, they were able set themselves apart by introducing state of the art technology into their existing/new product lines. By doing so, they were able to dramatically increase their value to the customer, as customers were able to see the “visible technology” at work, which is something that the UA team wanted to drive home as something that was exclusive to their brand, and could only be found on their products. We also saw how many of their innovations were further backed by patents and other forms of intellectual property, making this technology exclusively unique to the Under Armour brand, and therefore creating increased demand from consumers knowing that UA is the only brand that can offer those different forms of technology in athletic products. They further enhanced their competitive advantage by working closely with the marketing and sales team, by exclusively highlighting this technology with their endorsed professional athletes, that would further showcase their unique products/offerings to an even larger audience. We can clearly see that through the actions of the product development team which focused on technology innovation, and especially coupled with the support of the marketing/sales team, how Under Armour was able to dramatically increase their value to consumers, and how that further gave them a larger competitive advantage, as other brands simply could not replicate what they were offering. 2. Using the VRIN model, do you believe Under Armour has a sustainable competitive advantage in its industry? Why or why not? We do believe that Under Armour has a sustainable competitive advantage in its industry. Their products, marketing and distribution strategies have been developed and fine tuned through years of industry experience with a very reputable brand name and image. Through looking at the VRIN Model it is clear they have qualities that make them valuable, rare, inimitable, and non substitutable. The biggest threat they have faced, especially after struggling in 2017 is that while there are only a small number of firms that compete on their level, their biggest two competitors: Nike and Adidas have stood out to be extremely strong. In each of these tests we have recognized areas that Under Armour has to give it a sustainable competitive advantage compared to so many other brands in the industry. Even after a period of decline, their strategy and strength of their business model will allow them to continue growth and brand awareness to compete with their strongest competitors. VRIN Model: Valuable, Rare, inimitable, non substitutable -tests for sustainable competitive advantage 1. Is the resource or capability competitively valuable?

As their mission statement, “Under Armour Makes You Better” focuses on making their customers better on a wide scale of products and a wide range of athletes at all levels and ages. Their products are very valuable in making moisture-wicking apparel engineered in many designs and styles for wear in nearly every climate to provide performance alternatives to traditional products. This directly relates to their main strategy initiatives to expand these products, strengthen their brand awareness and consumer connection, increase sales, create a growing footprint across the globe and growing the connected fitness app. This business model aims to improve customer value proposition and increase profits after a decline in 2017. 2. Is the resource or capability rare? Something rivals lack? UA has a rare quality of products and significant experience in the industry that are manufactured by third parties with technically advanced speciality fabrics. They closely work with their suppliers to continually upgrade as the next generation of fabrics adjusts to needs of athletes. The products have visible technology, utilizing color, texture and fabrication that would enhance customers’ perception and understanding of the use and benefits of UA products. This industry is fragmented among 25 brand name competitors with diverse product lines and varying geographic coverage and numerous small competitors with specialized use apparel lines. The biggest rivals who have even outperformed UA in recent years are Nike and Adidas. They have very high quality as well as brand and consumer connections that remain as a threat to UA’s competitive advantage. 3. Is the resource or capability inimitable -is it hard to copy? UA product development team has extensive experience in the industry at leading fabric and other raw material suppliers and branded athletic apparel and footwear companies throughout the world. Their knowledge and fabric technologies is a tremendous resource they have which allowed them to launch four new patent product lines: CHARGED COTTON, STORM, COLDBLACK, and ColdGear. This allows their products to be unique and special to customers. The product design and development they have has been key to their success and future growth to their brand name. The social complexity they have through suppliers is key as their products are developed by 5 third party suppliers. Their brand name is also a major resource and very difficult to imitate. Through promotion and brand management they sponsor various events, sports teams and celebrities such as Stephen Curry, Jordan Spieth, Michael Phelps, The Rock, A$AP Rocky and more. They also specifically sponsor many major league sports, college and high school teams in creating uniforms and sportswear specifically for them. 4. Is the resource of capability nonsubstitutable -is it invulnerable to the threat of substitution from different types of resources and capabilities UA has extensive resources, and reputation that has been able to build them up as a major sports apparel company. For athletes, these products are very valuable and they are constantly changing and adjusting to the needs of athletes. If that is continued there will not be a huge threat of

substitution from different types of resources and capabilities. Their main threat does remain the huge competitors they have in their market; Adidas and Nike...