Under Armour PESTEL Analysis - The Strategy Story

Before we dive deep into the PESTEL analysis, let’s get the business overview of Under Armour. Under Armour, Inc. is an American company founded in 1996 by Kevin Plank. It specializes in designing, developing, marketing, and distributing branded performance apparel, footwear, and accessories.

The brand is known for its moisture-wicking synthetic fabric, which revolutionized sportswear. Their product range spans multiple categories:

Apparel: This is the core segment, with products for men, women, and youth. The apparel line includes shirts, leggings, shorts, jackets, and other sports-related wear designed for various climates and conditions.
Footwear: Under Armour produces athletic shoes for a variety of sports, including running, basketball, and training.
Accessories: This includes hats, bags, socks, gloves, and more.
Connected Fitness: Under Armour has shown interest in digital health and fitness through its apps like MyFitnessPal, MapMyRun, and Endomondo (though they’ve divested some of these platforms).

Under Armour has a worldwide presence with products sold in North America, Europe, Asia-Pacific, and Latin America. They operate through direct-to-consumer channels, such as brand houses, factory houses, and wholesale distribution partners.

Under Armour has positioned itself as a premium sports performance brand. Their marketing campaigns often focus on inner strength, resilience, and pushing limits.

Financial Performance 2022:

Revenue was up 3 percent to $5.9 billion. Apparel revenue decreased 1 percent to $3.9 billion. Footwear revenue increased 16 percent to $1.5 billion. Accessories revenue declined 7 percent to $409 million.
Gross margin declined 470 basis points to 44.9 percent compared to the prior year, driven primarily by higher promotions, supply chain impacts including higher freight and product costs, mix impacts related to higher distributor and footwear revenue, and adverse impacts from changes in foreign currency.

Here is the PESTEL analysis of Under Armour

A PESTEL analysis is a strategic management framework used to examine the external macro-environmental factors that can impact an organization or industry. The acronym PESTEL stands for:

Political factors: Relate to government policies, regulations, political stability, and other political forces that may impact the business environment.
Economic factors: Deal with economic conditions and trends affecting an organization’s operations, profitability, and growth.
Sociocultural factors: Relate to social and cultural aspects that may influence consumer preferences, lifestyles, demographics, and market trends.
Technological factors: Deal with developing and applying new technologies, innovations, and trends that can impact an industry or organization.
Environmental factors: Relate to ecological and environmental concerns that may affect an organization’s operations and decision-making.
Legal factors: Refer to the laws and regulations that govern businesses and industries.

In this article, we will do a PESTEL Analysis of Under Armour.

PESTEL Analysis Framework: Explained with Examples

Political

Trade Policies: Under Armour is heavily influenced by international trade policies as a global company. Tariffs, trade wars, or protectionist measures can impact the cost of raw materials and finished products, affecting profit margins. For example, the U.S.-China trade tensions in the late 2010s had implications for many American brands, including Under Armour.
Political Stability: Political stability in countries where Under Armour operates can influence business operations. For instance, unstable regimes or potential conflicts can disrupt supply chains or retail operations.
Regulatory Environment: Governments’ policies on labor, health, safety, and manufacturing can impact how Under Armour produces its goods. Strict regulations might increase production costs or necessitate changes in manufacturing practices.
Taxation Policies: Tax policies in countries where Under Armour operates or sells its products can influence profitability. Changes in corporate tax rates, sales taxes, or import/export duties can have direct financial implications.
Foreign Relations: The relationship between the home country (U.S. for Under Armour) and other countries can influence the brand’s perception and operations. Positive relations can open up new markets or facilitate business operations, while strained relations might lead to boycotts or reduced sales.
Governmental Support and Grants: Some governments provide support or incentives to promote local manufacturing or business development. The availability of such support can influence Under Armour’s decisions on where to set up manufacturing units or invest in research and development.

Under Armour SWOT Analysis

Economic

Economic Growth: The overall economic health and growth rate of countries where Under Armour operates can directly impact its sales. A booming economy often means higher disposable income, increasing spending on luxury and non-essential goods, including premium sportswear.
Currency Fluctuations: Under Armour deals in multiple currencies as a global brand. Changes in exchange rates can impact the cost of raw materials, manufacturing, and the company’s profits when converting sales from international markets back to USD.
Interest Rates: The interest rates set by central banks can influence consumer spending and borrowing. Higher interest rates might decrease consumer spending on non-essential items, impacting sales. Additionally, the company’s own borrowing costs for expansion or other activities are influenced by prevailing interest rates.
Inflation Rates: Inflation affects both the cost of production and consumer purchasing power. High inflation can lead to increased production costs and, if not matched by a rise in wages, can reduce consumers’ ability to purchase goods.
Employment Levels: Employment rates in key markets influence disposable income levels. High unemployment can minimize spending on premium brands as consumers prioritize essential needs.
Supply Chain Costs: Economic factors, like fuel prices or labor costs in manufacturing hubs, can influence the cost of producing and distributing Under Armour’s products.

Sociocultural

Changing Consumer Values: As health and wellness become more central to many consumers’ lives, there’s a rising demand for athletic wear and performance gear for sports and everyday wear.
Demographic Shifts: Age distributions, such as the proportion of millennials or Gen Z in key markets, can influence preferences. These generations may have different purchasing behaviors or brand loyalties compared to older ones.
Gender Norms and Roles: As gender norms evolve, there’s a growing emphasis on inclusivity and diversity in product offerings. This shift can affect Under Armour’s product design, marketing campaigns, and overall brand image.
Cultural Trends: The popularity of certain sports or fitness routines (like yoga, CrossFit, or e-sports) in different regions can impact demand for specific types of apparel and footwear.
Fashion and Lifestyle Trends: Athleisure, for instance, which blends athletic wear with leisure clothing, has become a dominant fashion trend, driving demand for stylish yet functional clothing.
Ethical and Sustainable Consumerism: Consumers increasingly consider ethical factors, such as sustainable production, fair labor practices, and corporate social responsibility, when purchasing.
Cultural Sensitivities and Localization: In global markets, understanding and respecting local customs, values, and traditions is crucial. A successful product or ad campaign in one region might not resonate or be offensive in another.

Technological

Innovation in Materials: Technological advances can lead to the developing of new, high-performance materials. These might offer better moisture-wicking properties, greater durability, or improved comfort. Staying at the forefront of material innovation is crucial for a brand emphasizing performance.
Wearable Technology: As the line between tech and apparel blurs, there are opportunities for Under Armour to integrate smart technology into its products. This could be in fitness tracking, temperature regulation, or even biometric monitoring.
E-Commerce and Digital Retail: A robust e-commerce platform optimized for desktop and mobile users is vital as more consumers shop online. This also involves logistics tech for efficient order processing, shipping, and returns.
Artificial Intelligence (AI) and Big Data: AI can be used to analyze customer preferences, forecast trends, and optimize supply chain operations. Moreover, with platforms like MyFitnessPal under its wing (at least until 2021), Under Armour has the potential to harness user data to tailor product offerings or personalize marketing efforts.
Virtual Reality (VR) and Augmented Reality (AR): These technologies can enhance the online shopping experience, allowing consumers to “try on” products virtually or view them in 3D before making a purchase.
Automation and Robotics: In the manufacturing sector, automation can increase efficiency, reduce costs, and ensure consistent product quality. Robotics might also play a role in warehousing and logistics.
Connected Fitness Platforms: As mentioned, Under Armour ventured into digital fitness with platforms like MyFitnessPal and MapMyRun. These platforms use tech to track workouts and nutrition and provide fitness insights, creating a potential synergy between tech and apparel.

Environmental

Sustainability and Eco-Friendly Products: Consumers’ demand for sustainable products is growing. This includes recyclable materials, products that use less water in their production, and products that have a lower carbon footprint.
Waste Management: Production processes generate waste. Efficient and responsible waste management not only helps conserve the environment but also resonates positively with environmentally-conscious consumers.
Resource Scarcity: Certain natural resources used in production can become scarce, leading to increased costs. Brands like Under Armour need to consider alternative materials or innovative production methods.
Supply Chain Sustainability: It’s not just the end product but the entire supply chain that needs to be sustainable. This includes ensuring that suppliers and partners also adhere to environmentally friendly practices.
Carbon Footprint: The carbon footprint of production, distribution, and even corporate operations has become a metric of interest for stakeholders and consumers. There’s pressure on brands to reduce their carbon emissions.
Regulations and Compliance: Many countries are introducing stricter environmental regulations to combat climate change. Companies need to ensure compliance to avoid legal ramifications and potential reputational damage.
Water Usage: The textile industry is a significant consumer of water. Technologies and methods to reduce water usage in production, or the use of polluted water, are crucial, especially when operating in regions facing water scarcity.

Legal

Employment Laws: These regulations pertain to working conditions, minimum wage, overtime, workers’ rights, etc. Non-compliance can lead to significant penalties and tarnish the brand’s reputation.
Intellectual Property (IP) Rights: Under Armour, like many other brands, invests in product design and innovation. It is crucial to protect its designs, logos, and technology through patents, trademarks, and copyrights.
Consumer Protection Laws: These laws ensure that consumers are not misled or harmed by-products. Under Armour must ensure its products are safe and that all marketing and advertising claims are accurate.
Trade and Tariff Regulations: Being an international brand, Under Armour is subject to various trade agreements, tariffs, and customs regulations. These can affect import and export costs, influencing pricing strategies.
Data Protection and Privacy Laws: With e-commerce and digital platforms, Under Armour collects consumer data. Regulations like the General Data Protection Regulation (GDPR) in Europe mandate strict data collection, storage, and usage guidelines.
Environmental Regulations: As discussed under environmental factors, many governments impose strict environmental standards on production processes, waste disposal, and more. Adhering to these legal requirements is essential.
Regulations on Advertising and Promotions: Advertising claims, especially those related to product performance or health benefits, can be subject to regulations to prevent misleading consumers.
Import and Export Restrictions: Certain countries might restrict importing certain goods or raw materials. Under Armour must be aware of these when strategizing its global supply chain.