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 Running head: UNDER ARMOUR’S MARKET ENTRY INTO SOUTHEAST ASIA 3 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. Running head: UNDER ARMOUR’S MARKET ENTRY INTO SOUTHEAST ASIA 6 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.