Strategy Analysis on Under Armour

Student: Neha Jadhav (21201702)

Current Strategy
The current strategy of the firm is broad differentiation. It wants to grow by offering products for men,
women and the young generation with a variety of sports and other commodities. The company wants to
increase its sales in the footwear segment along with an increase in market share. The strategy of the
company is to open a large number of stores and outlets to enhance its distribution. Promotional
techniques and new product lines are also part of the growth strategy of the company.
Key Issues
 Unstable Financial Performance
The operating income of the company was declined by 6.1%. The company’s revenue was increasing in
the fourth quarter but the company’s performance was affected by other financial situations. The
lowest annual growth rate of the company was 11 to 12 percent.

 Reduction in Sales
The management of the company announced that there is a reduction in sales and earnings for the
fourth quarter of the company in North America. Quarter 1 showed 25.7%, quarter 2 showed 21.5%
and quarter 3 showed a 15.6% decrease in sales.

 Decreasing Stock Prices

A major issue for the investors is a decrease in stock price. A major challenge for the company was to
rebuild its brand image in the market. Kevin planks class C shares were sold to raise funds for the
creation of the Plank industry.

Financial Analysis
Ratios 2017 2016 2015 Analysis
Asset Turnover Ratio 33% 37% 40% Asset turnover ratio is in better
condition. The company is generating
income with its assets.
Inventory Turnover 66% 76% 78% The inventory turnover ratio is
ratio approximately 70%. Inventory
contributes majorly to sales of the
company.
Debt to Equity Ratio 39% 40% 40% The debt-to-equity ratio for 3 years is
close to 40%. This means that there is a
visible change and the company is
growing
Debt to Asset Ratio 20% 22% 23% The debt to asset ratio for 3 years is
21%. This shows that the company is
not that stable to let go of its liabilities
from its assets
Value Chain Analysis
Primary Activities
 Inbound Logistics
To maintain inbound logistics well, Under Armour had built a close relationship with its suppliers. It
created a system to supply the goods to its customers by working with its suppliers. To deliver products
on time to the customers, they had to closely work with suppliers.

 Operations
Under Armour developed a highly competent operations and distributions network to produce and
distribute its products effectively in the market. A wide range of network partners to distribute the
branded products was developed for the customers.

 Outbound Logistics
To explore competitive advantage sources and to achieve its business growth objective, Under Armour
can analyse and optimize the outbound logistics. Customer satisfaction can be maximized by timely
managing outbound activities and putting a minimum negative effect on quality. It also helps increase
growth opportunities for the firm.

 Marketing and Sales

The biggest strength of Under Armour is industry-leading marketing and sales activities. Wholesale
distribution and Licensed distributors were used for sales and distribution of its products. Under
Armour maintained a good rapport with teams by helping them resolve queries faster.

Secondary Activities
 Procurement
Under Armour is dependent on outside suppliers for fabrics required for manufacturing its products. It
relied on just eight suppliers for the raw material. Under Armour should diversify its suppliers to
eliminate the threat of bargaining power of buyers.

 Technology
Under Armour’s products are a little expensive as compared to its competitors. Technology, which is a
crucial component of the value chain helped Under Armour achieve physical differentiation for its
products. Consumers were majorly drawn towards T-shirts that could control temperature. To stay
ahead of its competitors, Under Armour needs to constantly work on developing its technology.

Recommendation
 Increase Sales
For increasing sales, the company needs to incorporate promotional strategies to increase demand. A
new product line must be introduced by the company to attract customers. To gain positive returns,
the company needs to consider promotional opportunities.

 Technological Advancement
Inventory cost can be reduced by implementing technological advancement but it would require a huge
investment. Currently, the company is not in a position to raise funds. Also, Under Armour needs to
work on different technologies to stay ahead of its competitors.