Running head: UNDER ARMOUR’S MARKET ENTRY INTO SOUTHEAST ASIA 1
Market Entry into Southeast Asia
Final Term Paper (Team #2)
By: Joanne Tran, Leandro Firmacion, Kian Chew Khoo, & Connie Duong
International Marketing – (BUS 461-02)
Nick Imparato PhD
May 8th, 2016
Running head: UNDER ARMOUR’S MARKET ENTRY INTO SOUTHEAST ASIA 2
Table of Contents:
A. Background………………………………………………………………………………………………………3
a. History and Performance
b. Target Market
c. Background on Region
B. Positioning……………………………………………………………………………………………………….6
C. Analysis……………………………………………………………………………………………………………7
a. Company Analysis
b. Industry Analysis in Region
D. Positioning Plan in Southeast Asia…………………………………………………………………….10
E. Recommendations and Implementation……………………………………………………………12
F. Conclusion……………………………………………………………………………………………………….15
G. Appendix…………………………………………………………………………………………………………16
H. References……………………………………………………………………………………………………….17
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A. Background:
1. History and Performance:
Under Armour, Inc. is an American company specializing in athletic apparel and sports gear founded by former University of Maryland football player, Kevin Plank, in 1996.
According to their website, when Plank was at Maryland, he noticed that the cotton T-shirts he and his teammates had were always soaked and heavy with sweat. After discovering this problem he sought out to create a T-shirt that would solve this problem and created a prototype in New York. After trials and feedback he was then able to make a T-shirt built from microfibers that “wicked moisture and kept athletes, cool, dry and light” (Our
History). A year later he was able to make their first sale at Georgia Tech, then to other
Division I and NFL teams.
Under Armour is one of the three largest competitors in the sports apparel industry.
Compared to Nike and Adidas, Under Armour still measures low since it only went public in
2005. Although they measure lower than their competitors, their growth for the past 10 years has been exponential. According to Investopedia, their “market capitalization is around $15.5 billion and trailing 12-month revenues of $3.6 billion. The stock ended 2015 trading around $80 per share with a P/E ratio of approximately 40” (Investopedia). From starting out being known just selling T-shirts that protects from moisture to innovating and having a range of product categories, they continue to grow. Their products tend to appeal to younger market segments, and it often prices its products at a premium for its perceived quality of innovative materials and designs.
2. Target Market: Running head: UNDER ARMOUR’S MARKET ENTRY INTO SOUTHEAST ASIA 4
Under Armour’s target would be the younger market segments. People who are into sportswear, loves innovative materials designs, and high quality products. We also want to target those who participate in sports activities that enhance their body and social status.
We also want to target the growing middle class in Southeast Asia, since the market has a large population of consumers that are able to participate in discretionary spending and we believe that Under Armour can become the brand that consumers will relate to with sports equipment for the masses.
3. Background on Region
We decided that we wanted to target Singapore, Vietnam, and the Philippines because there is a growing market for sports apparel in these countries and we believe that with proper marketing strategy we will be able to go against the leading competitors, which are Nike and Adidas. These three countries have a high opportunity for sportswear because of health and fitness becoming a trend and because it is also seen as a fashion trend. Since there is a high trend in this market, in addition to the government instilling and allowing them access to exercise, there will be a continuous growth in this market and an opportunity to go against their competition. We will discuss the industry analysis in each of these countries more in depth later on in our paper.
Attached under is the Hofstede model comparing Singapore to the Philippines and
Vietnam. It is important to look at this model to see how a country’s value or culture can influence their workplace or their buying behavior. There are notable things to look at in this model such as if the category will have a correlation for purchasing the brand and if there are big differences in scores. The power distance in these 3 countries are high, although Philippines being scores at 92 compared to 74 and 70. This means that these Running head: UNDER ARMOUR’S MARKET ENTRY INTO SOUTHEAST ASIA 5 countries have a high degree of accepted hierarchy order. This means that there is a definite difference in social status, and Under Armour could be effective if they target those with higher social status. For uncertainty avoidance Singapore scored a lot lower at 8 compared to the Philippines at 44 and Vietnam at 30. This shows how people act with uncertainty and ambiguity. Those who have a higher degree, in this case the Philippines and Vietnam, shows that they are more likely to be concerned about the quality of the product they’re buying and if it guarantees what is stated. It is also important to look at indulgence in this case because it shows if society will just spend on anything that will bring them joy or have restraint. These countries range from 35-46; this means that they have some restraint but not fully against it. Among their different scores, it is important to note that they all have fairly low individualism scores, which makes them collectivist societies. This is something Under Armour can look at to drive their marketing efforts to make consumers indulge in their products.
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B. Positioning:
Under Armour’s leading competitors are Nike and Adidas. Since 1996 the company has grown tremendously over a 20 year time period and has become a global brand. Under
Armour is expected to reach $20 billion in revenue by 2025 and potentially the third biggest sportswear brand within the next decade (Dua, 2015). One of Under Armour's biggest challenge is to differentiate themselves from their competitors, all brands mentioned above sell the same products to the same targeted consumers. Nike has the iconic slogan of “Just Do It” and Adidas has created the slogan of “Impossible is Nothing.”
Under Armour positions themselves as the underdog with their campaign of “I will what I want.” This quote is taken from Misty Copeland who is first black woman to be promoted to principal dancer in the American Ballet Theater’s 75-year history.
Under Armour is the underdog of the sportswear industry and the word “under” is even in their name. This is especially clever because in sports film, views will undoubtedly always root for the underdogs. Before Under Armour, no other sportswear brand could even compete with Nike and Adidas. But know after reviewing the numbers of revenue, freestanding store store and sponsored athletes, it’s safe to say Under Armour is not going anywhere.
Under Armour had maintained their position as underdogs by partnering with
Golden State Warriors Stephen Curry. This move aligns with their brand image and positioning because the Golden State Warriors won the NBA Championship Finals in 2015 and before that was in 1975. For four years the Golden State Warriors have been underdogs but now they are champions. After signing the NBA MVP Stephen Curry, Under Running head: UNDER ARMOUR’S MARKET ENTRY INTO SOUTHEAST ASIA 7
Armour has experienced a 30% jump in revenue to $1.05 billion and 64% increase in footwear to $264 million (Germano, 2016).
The dynamic brand maintains their positioning through effective methods. First, they have pioneered consumer technology by acquiring exercise applications such as
MapMyFitness and the calorie counting app MyFitnessPal. There are 62 million people logging into this app at least once a month. Under Armour now owns the world’s largest digital health platform. Second, the brand heavily focuses on women. The campaign “I will what I want” comes from a female athlete so the brand has become more women-centric.
For decades the sportswear industry just make a smaller version of menswear, producing it in pink and calling it “women’s line.” But now they make products and apparel that fit women's needs and think beyond pink. Third, they have appealed to the younger demographic. Under Armour has targeted Millennials and Generation Z by using trendy pop culture lines in ads and sponsoring college athletic teams. Last, Under Armour is winning on social media. All of their social media accounts have been controlled masterfully and have millions of followers on social networks.
C. Analysis:
1. Company Analysis:
Strengths Weaknesses 1. Highly focused on innovation and use of 1. As mainly a wholesaler, they are highly new technology. dependent on third party distributors. 2. High brand recognition by utilizing high- 2. Weak global brand recognition. profile athletes as endorsers. 3. Low differentiation to other sports 3. Wide range of product offerings to men, apparel companies, such as Nike, Adidas, women, and children. and Lululemon in the mind of the 4. Increasing profitability and global consumer. presence. Running head: UNDER ARMOUR’S MARKET ENTRY INTO SOUTHEAST ASIA 8
Opportunities Threats 1. Sports apparel industry is consistently 1. Bargaining power of buyers is high, as growing globally. switching costs remain low. 2. Growing middle class in Southeast Asia 2. Trends vary from country to country and 3. Increase in disposable income in quickly change. emerging markets. 3. Threat of substitution is high. 4. Increasing interest in sports and entertainment.
Under Armour has been growing exponentially in the United States over the years, and they are expanding their company and distribution to global markets. Currently, they are committed to opening 200 new stores in 2016 after many partner retailers, such as
Dick’s Sporting Goods, Sports Authority, Foot Locker, and other brick-and-mortar stores, are experiencing low sales. They are mainly focusing their expansion efforts to China at the moment. The company has already grown faster than other athletic brands. According to
Michael Henage (2015), “Under Armour's annual apparel sales growth was more than twice Lululemon, and more than three times faster than Nike.” This just shows the amount of opportunity that is presented to them.
In order to expand to Southeast Asia, they must understand that although the region makes up of ten countries, “fitting the relevant cultural context, language and state of digital development” (Ang, 2014) are vital to their success. Since they will be marketing their existing products to a new market, they will have to consider the market development strategy (see Exhibit 1 for ansoff’s matrix). In addition, trends also vary among the ten countries. They won’t need to adapt their products; however, their communication method will have to change in accordance with the three countries we are focusing on (see Exhibit
2 for communications grid).
2. Industry Analysis: Running head: UNDER ARMOUR’S MARKET ENTRY INTO SOUTHEAST ASIA 9
● Singapore: In order to promote an active lifestyle for Singaporeans, government-
led campaigns increased the health and wellness trend in the country. In addition,
many sports and leisure parks have opened, which increases the convenience and
accessibility for individuals and families to exercise. Like in most countries, Nike is
the market leader for sports apparel and gear, and the company has established a
solid reputation among Singaporean consumers (Euromonitor, 2016).
● Vietnam: The sportswear industry in this country has continuously demonstrated
good performance due to the government policy of encouraging the people to
exercise and to live a healthier lifestyle. Overall, the country has a strong value
growth rate at 11% (Euromonitor, 2016). In addition, among young consumers in
large cities in Vietnam, sportswear has become a fashion trend. Nike currently has
15% share of the market, and they were able to attract young consumers through
creating events, such as the Nike Cup 2015 with local universities (Apparel College
and Ton Duc Thang University) to increase participation in exercise and sport
activities.
● The Philippines: More and more consumers, particularly young consumers, are
purchasing sportswear to wear as a fashion statement and not just solely for the
purpose of being active in a sport. Because of this trend, they are more attracted to
fashionably designed sports apparel, especially since their incomes are continuing
to grow. Although this is the case, more and more people are also engaging in
health-related activities. Particularly, “due to stress in work and at school, young
consumers will seek sports activities as a healthy stress eliminator” (Euromonitor,
2016). Just like Singapore and Vietnam, Nike is the market leader. In the Philippines, Running head: UNDER ARMOUR’S MARKET ENTRY INTO SOUTHEAST ASIA 10
the company used American celebrity athletes, such as Lebron James, as endorsers
to promote their brand.
D. Positioning Plan in Southeast Asia:
Since Under Armour is currently growing its popularity globally as interest in sports and entertainment is increasing (Repucom, 2016), they have to carefully differentiate themselves since Nike and Adidas are still the market leaders in Southeast Asia. They truly have to continue their strong stance as the underdog, even in a different market. Buyer power in this product category is high; therefore, gaining customer loyalty is extremely important. Instead of communicating the functionality of Under Armour’s product offerings, we will be focusing on forming alliances with the local sports community to better connect with them on a personal level. In turn, this would build brand loyalty and differentiate the brand from other sports apparel companies. There is one goal for Under
Armour to follow in order to successfully capture the attention of consumers in Southeast
Asia: Communicate their commitment to the local community.
Two main objectives are evident in this plan in order to differentiate themselves as a highly passionate and innovative brand for dedicated local athletes committed to living a healthy lifestyle:
1. Gain local sport leagues’ and national teams’ trust to increase their market
share in Southeast Asia: In Southeast Asia, marketing campaigns are “magnified
with the use of local personalities and blogger networks that speak and resonate
with the target communities” (Ang, 2014). Singapore, Vietnam, and the Philippines Running head: UNDER ARMOUR’S MARKET ENTRY INTO SOUTHEAST ASIA 11
are all fairly collectivist societies as previously mentioned. Therefore, they have
great trust in their families and organizations. The leader in these organizations
should be first targeted in order to reach the desired market of athletes.
2. Increase brand recognition and establish a positive brand image in the region:
The sports industry is currently growing on an annual basis and is producing a great
amount of revenue globally, particularly across the Asia-Pacific at 44% (Newzoo,
2016). Although the majority of the revenue in this region is coming from China and
South Korea, “growth in this region is, for a large part, fuelled by an explosive
uptake in Southeast Asia” (Newzoo, 2016). With the growing enthusiasm, Under
Armour has substantial opportunity to collaborate and connect to this industry in
this particular region to increase brand awareness and overall revenue through
sponsorships for the Southeast Asia sports industry.
They can effectively achieve their goal by utilizing three specific elements of the promotional mix:
1. Promotional Events: Localized events are a perfect way to engage the community
through exercise and increase brand awareness. Leaders, such as coaches of
successful teams, and local personalities in these organizations have great influence
in shaping the society’s desires and wants, and this include the consumer’s decision
on which brand to buy when it comes to sporting goods. The use of events would
reinforce the strong influence of experts and engage the collectivist society.
2. Social Media: As mentioned earlier, Under Armour has a strong and engaging social
media presence, and this is extremely beneficial when targeting the Southeast Asian
consumer. According to Eu Gene Ang (2014), “Southeast Asia's 155m internet users Running head: UNDER ARMOUR’S MARKET ENTRY INTO SOUTHEAST ASIA 12
are the next goldmine for digital marketing. The region contains a young base of
internet users whose time spent online is significantly above the global average, and
where social networking dominates.” In this case, Under Armour must have a strong
online presence to reach the greatest amount of people. Digital marketing will allow
the company to monitor the specific people that have great interest in sports and
entertainment, and in return, create connections between them and the brand. In
addition, they have greater trust in Google as a search engine for all their sources of
information; therefore, pushing paid search efforts revolving around the website is
crucial to their success in big countries like Singapore, Vietnam, and the Philippines.
3. Traditional Media: Although digital marketing and internet usage are quickly
growing in this region and progressively establishing itself as a primary way to
communicate, traditional media still plays a huge role in reaching consumers.
Television, radio, and newspaper can contribute a great amount of influence of the
people and increase brand recognition among the community.
E. Recommendations and Implementation:
In order to successfully enter the region we intend to not only enter the market as a strong competitor in the industry, but also as an active member in the local sporting community.
Firstly, we intend to form alliances with some of the local sports association in the region such as the ASEAN Football Association and the ASEAN Basketball Association. This Running head: UNDER ARMOUR’S MARKET ENTRY INTO SOUTHEAST ASIA 13 will help us to establish a strong foothold in the region by supporting an organization of influence.
Next we also will sponsor some of the local sports league teams in the various sports, which are included in Under Armour’s offerings. For soccer we will look for potential opportunities in the Malaysian Super League, the Singapore S. League, the United
Football League in the Philippines, and the V League in Vietnam. Finding the right teams to sponsor will be important in securing a strategic presence in the region, as the soccer is extremely popular in the region. Our strategy for basketball is similar to our approach to soccer, but due to the different league structure for Basketball in the region we will first focus our efforts on The ASEAN Basketball League which is an international basketball league which has teams Singapore, Malaysia, Thailand, Vietnam, and the Philippines. These teams are not national teams, but club teams that compete on an international level across the region with several international players competing for the teams. The three teams that we will focus our attention towards are the Singapore Slingers, The Pilipinas MX3 Kings, and the Saigon Heat. These are teams from each of the countries that we are focusing on and have the widest reach in terms of media coverage in the region. We are confident that with the success of the Golden State Warriors in the United States we can capitalize this success on spreading brand awareness in the region.
Following that we will also be looking to co-sponsor some of the larger individual and team sporting events which take place in the region, such as the Singapore Standard
Chartered Marathon which is held yearly in Singapore. We intended to replace Adidas as the official apparel sponsor for the event and to have a concurrent sales promotion to encourage new customers to purchase and try our footwear and apparel after signing up Running head: UNDER ARMOUR’S MARKET ENTRY INTO SOUTHEAST ASIA 14 for the event. The other large sporting event that we intend to co-sponsor in the region is the HSBC Rugby Sevens. Rugby being similar to American Football is a sport, which as a strong history and connection to the region and having the opportunity to sponsor one of the legs of the most intense international rugby leagues would help to spread brand awareness for Under Armour.
There are also many sports that are growing in the region, which Under Armour can contribute to such as American Football and Softball. Currently there are not many companies which can provide the equipment required for American Football and with
Under Armour breaking into the market, having a company which provides the right equipment for the sport is very important. For softball Under Armour will be an excellent competitor to the current market in the region Mizuno, which is a Japanese sports apparel company. Under Armour has already proven itself in the Japanese and Korean baseball scene and with the success in those markets with a large and strong softball community, we can see a bright future for Under Armour being a leader in helping the local Softball community to grow.
There is also a potential to sponsor several of the national teams in the region for international sporting events such as the SEA Games or Southeast Asian Games which is for the region, The Asian Games which take place in Asia, The Commonwealth Games which consist of countries with ties to the old British Commonwealth, and possibly some of the teams for the Olympic Games. This is a great opportunity for us as sales of national team apparel during the competitive season goes up dramatically as consumers want to show their support for their athletes competing for national pride and glory. Running head: UNDER ARMOUR’S MARKET ENTRY INTO SOUTHEAST ASIA 15
Lastly Under Armour will help to sponsor some of the local college and high school teams in the region, which show promise for sporting excellence. In Southeast Asia high school and college sports are viewed more as club activities instead of a semi professional sporting league such as the NCAA in the United States. Thus many of the players have to provide their own equipment when they compete. We hope that with Under Armour’s support we are able to help teams get equipment and not put a strain on themselves and their families. Also we want to promote a healthy and balanced lifestyle in the schools and a presence with the school’s teams will help to spread our message around.
F. Conclusion:
Through research we were able to discover that there is an opportunity for Under
Armour to grow their business in Southeast Asia, and we want to focus on the three particular countries Singapore, Vietnam and Philippines. In these three countries there is an exponential growth in the sports apparel industry and Nike and Adidas still remain the market leaders. We believe that through various marketing strategies, sponsorships, and engaging with the local community, we will be able to help raise their brand image and put
Under Armour in consumers’ consideration and mindset when purchasing sports apparel.
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Appendix:
Exhibit 1: Market Development Strategy
Existing Products New Products
Existing Market Penetration Product Development Markets
New Market Development Diversification Markets
Exhibit 2: Product Extension-Communication Adaptation
Strategy 2: Different Strategy 4: Product Extension Communication Dual Adaptation Communication Adaptation
Strategy 3: Same Strategy 1: Product Adaptation Communication Dual Extension Communication Extension
Same Product Different Product
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References:
1. "Adidas Vs. Nike Vs. Under Armour: Which for 2016? (NKE,UA) | Investopedia." Investopedia. N.p., 26 Jan. 2016. Web. 08 May 2016. http://www.investopedia.com/articles/markets/012616/adidas-vs-nike-vs-under- armour-which-2016-nkeua.asp#ixzz485wJkVrs 2. Ang, E. (2014, February 19). Five great ways to ace content marketing in Southeast Asia. Retrieved May 08, 2016, from https://econsultancy.com/blog/64345-five-great-ways- to-ace-content-marketing-in-southeast-asia/ 3. Dua, T. (2015, October 15). The Under Armour guide to building an underdog brand that beats Adidas - Digiday. Retrieved May 08, 2016, from http://digiday.com/brands/armour-guide-building-underdog-brand-beats-adidas/ 4. Germano, S. (2016, April 21). Under Armour Results Jump on Strength of Stephen Curry Shoe Line. Retrieved May 08, 2016, from http://www.wsj.com/articles/under-armour- results-jump-on-strength-of-stephen-curry-shoe-line-1461238918 5. Global Esports Market Report: Revenues to Jump to $463M in 2016 as US Leads the Way | Newzoo. (2016, January 25). Retrieved May 08, 2016, from https://newzoo.com/insights/articles/global-esports-market-report-revenues-to- jump-to-463-million-in-2016-as-us-leads-the-way/ 6. Henage, M. (2015, July 30). Under Armour's Strengths Can't Overcome This One Problem. Retrieved May 08, 2016, from http://seekingalpha.com/article/3376745- under-armours-strengths-cant-overcome-this-one-problem 7. Market Research Reports on Sportswear. (2016, February). Retrieved May 08, 2016, from http://www.euromonitor.com/sportswear 8. "Our History - Under Armour CWS." Under Armour CWS. N.p., n.d. Web. 08 May 2016. http://www.underarmour.jobs/why-choose-us/our-history/ 9. South East Asia's sports industry: Start-ups, Singapore and serious potential. (2016). Retrieved May 08, 2016, from http://repucom.net/south-east-asias-sports-industry/