Analysis of The Microeconomics of Under Armour

Under Armour, Inc is an American based company that developed, manufactured, and distributed casual wear, sports, and footwear for women, children, and men, and the Under Armour products will sell worldwide. The information gathered and outlined with this executive summary will show that despite the company’s small revenue over the last few years Under Armour will continue to be a go-getter company and will be the first choice for customers in the workout apparel. Will also be supplying an in-depth analysis about the microeconomics of Under Armour by looking at many benchmarks to look at its standing with the high-end athletics sportswear market. The analysis will not only focus on the demand and supply conditions, but also on the price elasticity, overall market, and the costs of productions. Will be providing my recommendations with the information I have gathered through my research and analysis.

History of the Company

Under Armour became a company in 1996, by Kevin Plank who was a 24-year old former special team captain of the Maryland Football team. He founded the company because he was tired of always changing out sweat-soaked shirts while working out. Like any athlete, they will agree that having to change out of their sweat-soaked shirt while trying to train and perform at their highest peak is very aggravating. He changed this and restructured the game by making his own product. His products helped athletes stay cool and dry in all types of conditions, and it allowed the athlete more time to train and less time changing out of sweat. Kevin created this impressive product in his grandmother’s basement in the District of Columbia. His first sale brought him $17,000 was at the end of 1996, and it would help him accumulate the success of his product and setting up his company Under Armour.

Supply and Demand Conditions

The coronavirus (COVID-19) pandemic has negatively affected the U.S. and international economies, disrupted supply chains and financial markets, and brought about substantial travel and transportation regulations, together with obligatory closures and orders to 'shelter-in-place'. Amid this global pandemic, Under Armour is targeted on protecting the health and safety of their teammates and consumers, at the same time as working with their customers and suppliers to decrease potential disruptions and assisting our community to deal with challenges posed by way of this pandemic.

'During the first quarter, our results in January and February were tracking well to our plan. since mid-March, as the pandemic accelerated dramatically in North America and EMEA and retail store closures ensued, we have experienced a significant decline in revenue across all markets.' Frisk continued, 'As a result, like so many businesses, we've had to make very difficult decisions, including temporarily laying off teammates in our U.S. retail stores and distribution centers along with other actions to ensure we protect under Armour's financial stability.'

Sales has gone up this year at the same time as women’s apparel sales have been up, Under Armour, like many different companies and industries, has felt the wrath of the coronavirus pandemic. The company on March 31 pronounced Q1 revenue was down 23% to $930 million with 15 percentage points associated with COVID-19 pandemic impacts within the quarter. revenue was down 41% to $708 million in Q2, the company announced on July 31. under Armour announced on September 8 it is going to lay off 600 personnel from its global staff as part of cost-cutting measures due to the pandemic.

Price Elasticity of Demand

The price elasticity is elastic with reference to supply and demand for Under Armour and all different major sporting goods manufacturers. for example, I can evaluate Under Armour’s and Nike’s New York city shops. each brand has large stores and clothing, shoes, and accessories with prices starting from $50-$200. that is where the comparisons end and in which Under Armour is hurting itself. At the same time as Under Armour’s store is big it is not always properly marked, and they do not have a whole lot of variety in colors and have been very repetitive for both men and women’s apparel and footwear. Nike however, had a properly marked store with apparel and footwear in every style, color, and fabric conceivable. The additionally had athlete trying out facilities in which you may try out the running footwear on a treadmill or basketball shoes on a basketball court. Would say that the price elasticity is much less for Nike than it is for Under Armour. If Under Armour genuinely wishes to regain its momentum and compete with a giant like Nike they want to be as revolutionary with their store designs and apparel and shoe colorings as they may be when they are designing the fashion technology in addition to looking to be much less repetitive.

For this instance, the customer responsiveness to price modifications for Under Armour’s products is going to be, at the least in North America, more on a negative side than a positive side. If Under Armour’s prices continue to be like Nike’s or goes up and the customer’s income stays the same or drops, people will go along with Nike as they market themselves better in their stores in addition to being the longer tenured brand and the more depended on brand. If Under Armour’s prices drop or Nike’s upward push and the customer’s income stays the same or is going up I might say that Under Armour’s domestic sales will move up a good bit, however, to honestly take a pound of flesh out of Nike they may need to maintain prices lower for several years and they may need to market themselves better with greater variety to take dependable Nike customers away for the sporting goods giant. For any sporting goods company you want to stay on top of the amount of demand you are receiving on your product and alter your supply and prices for that reason.

Cost of Production

Cost of production is specifically essential in any company. while they are running on the statistics generally if the cost of production is lower than the higher the profit will be. Under Armour’s cost of goods has stayed consistent for the last few years. The cost of goods includes a few things which includes transportation costs and manufacturing costs. Under Armour's cost of goods sold for fiscal years ending December 2017 to 2019 averaged $2.601 billion. Looking back at the last five years, Under Armour's cost of goods sold peaked in December 2018 at $2.832 billion. Under Armour's cost of goods sold reduced within the first two quarters of 2020 Under Armour had losses of (-1.638million), 2019 (2.797 billion) and 2018 (2.832 billion), 2017 (2.733 billion). Their numbers this year have been dropping due to the coronavirus pandemic. Sense like they may be doing wonderful things with their company as a long way as make the most of the products they sell. Below is a chart of the growth of the company within the last three years.

Overall Market

The general market of Under Armour is looking upward. The brand itself is not always having any problems in profit. Making this company one to look out for. After they manage a few items I feel this company may have a remarkably successful company. There are many studies that show Under Armour to be an upcoming company. After they get a few, matters on the right track they may be or even larger threat to the NIKE or ADIDAS business enterprise.

Recommendation

It is my recommendation that they might improve on operating costs. Sense that they need to widen what are some of the matters that they may be selling to get more people to be interested and will want what is being made available. They have a focal point and that is the activewear which means the leggings, shirts, shorts, and underwear. They want to widen this market focus on the footwear and broaden those to make for a better shoe that is attractive. I additionally think that they ought to focus on an app for them. Making shopping less difficult for the customers, one to help with the monitoring of steps. They do have one that is on there. That just needs a bit adjusting. when they try this, they may have a higher profit.