Under Armour in India

Under Armour in India

Marketing Plan

Prepared by:

Andrew Ashleigh

Lucas Darway

Mike Rezac

Stephen Zacour

Summary

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ndia is currently the second most populated country in the world. The size of its population, coupled with India’s status as one of the four fastest developing nations in the world, makes it a target for international business (CIA). Urban areas in India have rapidly begun to develop western-styled retailed stores. These factors make India a target market for Under Armour. Under Armour is currently the leader of compression sports apparel in the United States. The United States market, however, is heavily saturated in the sports apparel industry due to big competitors such as Nike and Adidas. Since the sports apparel industry is very saturated, Under Armour has been looking to expand into new markets to help gain higher international revenues.

Under Armour is planning to enter into the Indian market for several reasons. Besides the reasons mentioned, India has a rising demand for clothing diversity, especially among men ages 18-27 (McKinsey Global Institute). Under Armour is also going to begin selling to urban areas, as income growth rate is expected to be 5.8% in urban areas as opposed to 3.6% in rural areas of the country (McKinsey Global Institute).

Under Armour is going to initially enter the Indian market by sponsoring and attaching its name to India’s two biggest sports, tennis and cricket. The company is connecting its name with sports not only because of that strategy’s great success in the United States, but also because Nike successfully employs the same strategy (Holmes). India is a relatively unknown market to Under Armour, so the company will be using Sierra Industrial Negotiations, a company that provides expertise and credibility to the entering process. In fact, Sierra was successfully utilized by Nike to enter the Indian market.

Under Armour hopes to gain a 10% portion of the sports apparel market in India by the year 2015. It plans on raising awareness of its brands initially in urban areas and then expanding into rural areas. While the cost of entering India will initially be great, if Under Armour does achieve its goal of 10% market share by 2015, Under Armour believes the outlay to be a risk worth taking (Holmes).

Company Assessment

“W

e must protect this house.” This five letter phrase is sweeping across the United States and is striking fear in the hearts of performance sport apparel retailers. This “battle cry” belongs to Under Armour. Under Armour is a company that has created a sweat wicking undershirt that all athletes can wear. Founded by Kevin Plank, Under Armour found that a blend of polyester and cotton can keep sweat off the skin unlike a typical cotton undershirt. This combination keeps fabric staying light and the athletes feeling faster and stronger (Salter). The idea behind this innovative product stemmed from Plank’s experiences as a football player. He remembered his teammates complaining about their cotton undershirts and the need to change out of them at least three times a game. Such complaints gave birth to the idea for these performance enhancing shirts. Since its birth into the performance sport apparel industry in 1996, Under Armour has been growing at exponential rates, to the dismay of competitors such as Nike. Under Armour has rattled the performance apparel ranks, and now has its eyes set on becoming the leader in this market. After 1996, UnderArmour grew quickly in the sports retail market and specifically developed HeatGear, ColdGear, and AllSeasonGear clothings lines. In 2005, UnderArmour became a publicly held corporation and today continues to expand both domestically and internationally (Phung).

The first successful tactic employed by Plank in the United Stateswas product placement. Product placement is defined as a type of advertising in which promotional advertisements placed by marketers using real commercial products and services appear in the media. This tactic was used to build brand awareness. In the football market, Under Armour has used product placement to its full advantage. Beginning in 1998, it has used the releases of Hollywood movies to promote its football line of clothing. In August of 1999, Plank established a relationship with Warner Brothers Studio in order to place his product in upcoming films (Hyman). The Under Armour symbol appeared in popular movies later that year. These movies included “Any Given Sunday” and “The Replacements.” In the past decade, Under Armour has continued utilizing movies as a stage for its clothing. Recent football movies like “Gridiron Gang” and “Friday Night Lights” have also borne the Under Armour logo. Plank says that the use of product placement in movies “is meant to educate customers so that they are not afraid of the apparel” (Hyman).

Under Armour’s product placement has not stopped with movies. The company has also been spotlighted in television sports shows andevery Saturday on the college football fields. Recently, Under Armour was a sponsor for the ESPN sports drama “Playmakers.” Its apparel can also be seen every Friday night by watching the television version of “Friday Night Lights.” In addition to television shows, Under Armour can be seen on the shoulder pads of college football teams. The most recent major programs to become sponsored by Under Armour are Auburn and South Carolina. Auburn’s switch to Under Armour apparel can be attributed to the belief that Under Armour has helped create a competitive advantage for athletes (Ryan). Highly competitive colleges are always looking for an edge over their opponents.

The direct result of both movies was to generate 1500 more hits on Under Armour’s website per week. In 2000 UnderArmour expanded from just supplying football teams to Major League Lacrosse, Major League Soccer, the National Hockey League, National Baseball League, and the U.S. Ski Team.

Furthermore,Under Armour gained athlete credibility by entering into contracts with athletes that were recognizable all over the world. The use of athletes as promoters of products has gained popularity since the beginning of the decade. Many marketers value the use of this tactic because it is becoming increasingly difficult to reach consumers using traditional ways of advertising (Gilbert). Under Armour has taken full advantage of this trend.In fact, this strategy was copied right out of Under Armour’s biggest competitors’ playbook, Nike.Every year, during April, Under Armour unleashes its new wave of potential superstars who endorse its products. This April launch is strategically timed to coincide with the NFL Draft. Under Armour has signed star rookies every year to endorse its products, including A.J. Hawk, Joe Thomas, Vernon Davis, and Julius Jones.

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n 2005, UnderArmour again expanded from just supplying sports gear tomaking “street wear” and women’s wear (Phung). In fact, the results of growth for these two lines have been outstanding. Sales of the woman’s lines jumped 112.1% in the first quarter in 2006 compared to the sales in 2005 (Carey). Further, Under Armour anticipates more growth as young women continue to participate in sports and other athletic events.

Due to this expansion and its recent public offering, which raised 112 million, UnderArmour is in direct competition with Nike(Salter).The company’s initial success continued as the stock’s value has risensince the initial public offering by86.4%(Carey). This has been spurred on by the fact that performance apparel, which is dominated by UnderArmour, is the fastest growing sector in the American market. The exact market share that UnderArmour has captured over the past year is around 78% out of a 416 million dollar market(Carey).UnderArmour continues to expand, and despite the economic downturn, UnderArmour is still on track to reach the goal of earning 1 billion dollars in revenue(Carey).

Through these strategies, Under Armour has become one of the fastest growing companies in the performance/compressionapparel market. As resources have been gained, however, Plank has started to test Nike and his other U.S. competitors in other areas of the market. He is aware, however, that in order to properly accomplish this feat, he must stick with the strategies that have made his company a success. The key to Under Armour’s continued success will be not changing its focus. If Under Armour does not lose its focus, Wachovia Securities analyst John P. Rouleau stated that it is foreseeable that Under Armour may indeed reach its goal and may become the “new Nike” of the industry(Carey).

Macro-Environment

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ndia is a country with a large and diverse population that makes up a growing consumer market. Since India’s large market is only developing, many companies see the chance for opportunities in this immature and untapped country. Despite the many benefits seen from the developing country, many issues still remain, including overpopulation, poverty and government regulations.

The government of India is a democratic republic. It is a similar in structure to the United States’ form of government. There is a Council with representatives of the 28 states, along with a House of Representatives whose members are directly elected by the people. Indian government also employs a president (currentlyPratibha Patil) who serves as head of the states. The position is largely ceremonial, but the president does choose the central government positions. The prime minister has more sweeping powers over the legislature and military. The current prime minister is Manmohan Singh. He is an ex-finance minister and has been trying to tackle India’s major economic problems (BBC). Both the prime minister and president are elected and serve a five year term. The government of India is stable, with no major revolutions since it gained power from the British in 1947. The state governments are given significant power in legislative matters (CIA)

The country of India is one of the four (BRIC) fastest developing countries in the world. More than half of the workers in India, however, are subsistence farmers. Agriculture makes up less than 20 percent of the gross domestic product (GDP) of India. India’s other main industries are textiles (29.1% of GDP) and services (53.7% of GDP). As a result of a large service industry, India has a well-trained service workforce, which brings in about half of the GDP (CIA).

Despite the recent growth, India struggles with some major problems. The overall income rating of India is lower middle income. This does little to reflect much of the poorer southern population that is under or near the poverty line. The current government is struggling with a large fiscal deficit and inflation (7.8%) (India Business). The government is also trying to remove barriers to trade to make investment and business easier. Making this task more difficult are a number of additional factors---tariffs have recently been raised on certain imports, privatization is stalled, and there is a global depression. But despite these concerns, overpopulation is India’s chief problem. As the second most populous country in the world, it is dealing with larger social, economic and environmental problems each year (India In Business).

The Banking system in India is very diverse. Because India has received attention for its large market, many foreign banks and domestically owned banks have been started. As a result, there is stiff competition in the India Banking system. The competition creates lower interest rates and easy accessibility to loans (Doing Business).

The education system in India is not very widespread. The government recognizes this and is taking measures to boost the system. Some of the measures the government is implementing include making school compulsory between the ages of 6 and 14, and also funding to insure scholarships and other support to universities. The reason for these actions is found in the accessibility of higher education to the general population---right now, only 20% of students graduate secondary school, and only 10% go on to universities. The total literacy rate is 61% of the population, and less than 50 percent of females can read (CIA).

The population of India is diverse. The country is over 80% Hindu, with the other major religions being Islam, Christianity and Sikh. Along with diverse religions, there are many diverse languages. There are 18 official languages, not including English, which usually vary by state. English is the language of all official institutions such as the government, education, and business (CIA). With such a diverse culture, along with the huge population, there arise some problems. India, while not practicing the caste system, still is recovering from lingering biases. There are also religious tensions, particularly between Muslims and Hindus in certain areas (Culture Gram)

The justice system of India is based on the common law system. That means decisions are based on past rulings. The judicial system’s organization is close to that of the United States. India’s lowest courts are district courts, with a higher tier of appellate courts and a national Supreme Court. The Supreme Court has 1 chief justice and 25 associate justices. The chief difference between Indian and United States’ courts is the special religious laws made for Muslims, Christians and Hindus (CIA).

With regard to climate, India ranges from having monsoons in south and being temperate in the north. There are 28 states, which are further broken into seven union territories. Being so large, India has many natural resources, with coal being the most plentiful. The capital of India is New Delhi, while Mumbai the most populous city. Because of the large population and geography, there are some significant environmental issues. In many cities there are problems with sanitation, garbage disposal and overcrowding. National environmental issues include deforestation, water supply and over farming. India is taking steps to curb these issues by taking part in certain environmental agreements, including the Kyoto protocol and the Ozone layer protection (CIA).

India demonstrates notable activity on both local and international levels. The country has several issues which garner world attention. One of the biggest tensions in the Indian government is its relationships with Pakistan. The largest ongoing dispute is that of the Kashmir region. The control of Kashmir is polarized between the Muslims and Hindus that inhabit the region. As a result, China, Pakistan, and India have large military presences policing the area. Another dispute with Pakistan revolves around nuclear arms tested by each country several years ago. Both countries were on the brink of war. The most recent dispute involving Pakistan and India concerns the Mumbai attacks that occurred in India with Pakistani bombers (BBC). The attacks generated a strong global reaction and further divided India and Pakistan. The attacks, however, did not seem to come as a surprise to the local populace, but seemed to just further the anger of Indian people against Pakistan (Reaction to Mumbai).

Another of India’s regional disputes involves Bangladesh. Both countries are involved with minor border disagreements involving migrations, drugs and other illegal trafficking into India. China and India have been on the news recently because of their improved relations. During the nuclear buildup between Pakistan and India, China allegedly supplied nuclear material to Pakistan. Due to India’s recent developments, however, China has sought out better political and trade relations with India. The United States and India also had relations that deteriorated when Pakistan and India were in nuclear conflict. Since that point, relations between India and the United States have improved because of better trade and other improvements made in India. India internally is being criticized by some international groups. International watchdogs have cited India as having a large and thriving sex trade. Other groups have contended that copyright laws, especially on pharmaceuticals, were not enforced properly, resulting in many drug companies copying other companies’ recipes illegally. While India is the largest producer of legal opium, many countries argue that much of the opium is being diverted into the illegal drug trade (CIA).

Competitive Analysis

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usinesses in today’s fast paced culture are facing very difficult decisions. The pressures and demands of becoming a global business are forcing companies to consider many different markets in a variety of countries in which they can export their products successfully. This predicament also applies to the American company Under Armour. Under Armour has successfully established itself as a top competitor in the athletic apparel business in the United States, but now it must compete overseas with companies such as Nike and Adidas to fully realize its potential. A market of particular interest to the Under Armour Corporation is India. In order to properly enter the Indian market, however, Under Armour must first analyze the Indian market and the strategies undertaken by Nike and Adidas in order to properly position itself and its athletic sportswear in the market.