The Rise & Fall of Under Armour

Modern MBA
20 Aug 202339:15

Summary

TLDRThis script explores the rise and fall of Under Armour, a once-promising sportswear brand that challenged giants like Nike and Adidas. It delves into the company's strategic missteps, including overemphasis on tech and big data, lack of a flagship product, and founder-led governance issues, ultimately leading to a loss of market relevance.

Takeaways

  • 🏃 Nike dominates the sportswear market, selling the most athletic footwear and apparel globally, with Adidas struggling to compete effectively.
  • 💸 Adidas made costly mistakes like the Reebok buyout and overinvestment in retail, leading to a loss in market position and profits.
  • 🌟 Under Armour emerged as a strong competitor in the 2010s, growing sales in North America and taking market share from Nike with endorsements from notable athletes.
  • 🚀 Under Armour's success was attributed to its focus on quality, premium pricing, and a passionate fan base, positioning it as an underdog in the industry.
  • 📉 Despite initial success, Under Armour's performance declined, falling behind not only Nike and Adidas but also other brands like New Balance, Puma, and Lululemon.
  • 🔍 The company's downfall is tied to poor governance, failed technology bets, and the challenges of being a founder-led company.
  • 💼 Founder Kevin Plank's leadership played a significant role in both the rise and fall of Under Armour, with his decisions impacting the company's direction and culture.
  • 🤖 Under Armour's pivot to technology and data with its Connected Fitness initiative failed to deliver expected results, diverting resources from core product development.
  • 👟 The lack of a flagship shoe or defining product made it difficult for Under Armour to compete in a market where brands were increasingly defined by their footwear.
  • 🌐 International expansion was challenging for Under Armour, with sales in key markets like Europe, China, and Latin America failing to meet expectations.

Q & A

  • What is the dominant position of Nike in the sportswear market?

    -Nike is so strong and dominant in the sportswear market that it sells the most athletic footwear and apparel in the world, leaving its rivals, including Adidas, far behind.

  • What were the major mistakes made by Adidas that set them back in the market?

    -Adidas made expensive mistakes such as the $3B buyout of Reebok, overinvestment in retail, and overexposure to international markets, which eventually cost the CEO his job and set Adidas back years in profits and popularity.

  • How did Under Armour manage to grow sales in North America and become a significant competitor to Nike?

    -Under Armour grew sales in North America by focusing on quality over price, having a passionate fanbase, and securing endorsements from generational athletes, which allowed them to leapfrog past Adidas and become the new No.2 sportswear brand in the United States.

  • What were the key endorsements that helped Under Armour establish its brand?

    -Under Armour secured endorsements from notable athletes such as Tom Brady, Steph Curry, Michael Phelps, Lindsay Vonn, The Rock, and Captain America, which significantly boosted their brand recognition.

  • How did Under Armour's product aesthetics affect its market position?

    -While Under Armour's products like SpeedForm Fortis and Apollos were highly praised for their quality and performance, their aesthetics were criticized, which affected their overall market appeal.

  • What was the primary challenge Under Armour faced in its transition from a specialized brand to a mass-market brand?

    -Under Armour's primary challenge was balancing its premium positioning with the need to appeal to a broader audience, which required them to lower their prices and make their products more accessible.

  • How did Under Armour's approach to innovation and technology contribute to its downfall?

    -Under Armour's heavy investment in big data and IoT, particularly through the acquisition of fitness tracking apps, diverted resources and focus away from core product development and design, leading to a lack of competitive products in the market.

  • What was the impact of the Apple Watch on Under Armour's Connected Fitness strategy?

    -The Apple Watch, with its superior features and form factor, dominated the wearable market, effectively crushing the demand for fitness trackers, smart apparel, and connected shoes, which were part of Under Armour's Connected Fitness strategy.

  • How did the leadership changes at Under Armour affect the company's direction and performance?

    -The leadership changes, particularly the appointment of Patrik Frisk, led to a shift in focus back to apparel innovation and selling shirts and shoes, away from the failed Connected Fitness strategy. However, the company's growth remained solid but unspectacular.

  • What are the key lessons from Under Armour's experience for other companies in terms of corporate governance and strategic focus?

    -The key lessons include the importance of maintaining a balance between innovation and core business focus, the risks of over-reliance on founder-led decisions without proper checks and balances, and the need for a clear and consistent brand identity in a competitive market.

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SportswearNikeAdidasUnder ArmourInnovationMarketingAthletesRetailTechnologyCEO
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