Under Armour’s Turnaround Strategy in 2018: Efforts to Revive North American Sales and Profitability Harvard Case Solution & Analysis

Under Armour’s Turnaround Strategy in 2018: Efforts to Revive North American Sales and Profitability Case Study Analysis

Appendix B- SWOT Analysis

Strengths: Armour has a strong talent management system with skilled employees working in various parts of the organization. Armour has an extensive mix of products that caters to various customer segments;hence increasing its customers and revenues. The company also has strong brand recognition along with solid supply chain management, organizational culture, leadership, and growth strategy. This enables them to charge a premium as compared to its competitors. Even though Armour is facing downward pressures related to profitability; it is still ranking a higher profit margin as compared to its competitors. The company does have a diverse revenue model, as it has ventured into several other businesses apart from its organizational development sector. Hence enabling the company to generate diversified revenues.

Weakness: Due to an increase in the usage of the internet andartificial intelligence; the business model of Armour has been significantly altered. There is a requirement of making changes in the in the supply chain, organizational culture, negotiations, leadership, entrepreneurship and growth strategy, which would cost a lot of money. Armour has to work on its operating and gross margins as they may put pressure on its financial statements. Armour is also facing an intense of pressure from the competitive brands, which is making the profitability chart go down as per-unit revenue is reduced. Along with this, Armour has a higher turnover of employees at lower levels, which might lead to raising the salaries to restrict talent within the firm.Armour has a low level of loyalty amongst the suppliers, this will result in losing potential suppliers to competitors. Moreover, Armour has very little investment made in customer-oriented services. This might result in customers gaining the market in the future.

Opportunities: Armour can collaborate with the local players providing growth opportunities in the international markets. The company can also lower the cost of a new product launch by seeing the response first, and then scaling up to the emerging trends. This would largely save up on the launching cost, which can be utilized in something better, later on. Along with this, a proper understanding of the government can further ease out the situation of expanding and marketing locally. With the passing time, the customers are migrating towards the high-end products, and since Armour has strong brand recognition, it can use this situation to its advantage. Along with this, there is an increasing opportunity in the online space, which Armour can grab to expandits offerings.

Threats: Due to the lack of infrastructure in rural markets and the vast distance; it is difficult to serve rural customers and so is costly.Moreover, the trade war between the US and China along with Brexit impacting the European Union and the Middle Eastern instability can impact Armour both in local as well as in the international markets. Armour is also facing stiff challenges from local and international competitors. Competitive pressure is increasing, with Nike and Adidas trying to launch better products.

Appendix C- Financial Analysis

Gross Profit Margin

Gross Profit Ratio = GP/SALES

Gross Profit Ratio for the company for 4 years shows that the gross profit ratio has been near to 45% during these four years. This is a high percentage of gross profit for the company and its financial growth.

Net Profit Margin:

Net profit Margin = NI/Sales

Net Profit Ratio of the company is not good as in 2017 the company incurred loss and in the past years; the net profit of the company is around 5% to 6%. This means that the company is earning 5 to 6 percent as a net income from its revenues.

Operating Profit Margin:

Operating Profit Margin = OP/Sales

Operating Profit Ratio for Under Armour for 4 years is worst as it generated 1% operating income in 2017 and the previous years were also bad in terms of the financial position of the company.

Assets Turnover Ratio:

Asset Turnover Ratio = Sales/avg Assets

Assets Turnover Ratio is in good condition. This means that the company is generating its income with approximately 30% to 40%of its assets.

Inventory Turnover Ratio:

Inventory Turnover Ratio = COGS/Avg Inventory

Inventory Turnover Ratio for the company is around 70% to 80%. The company has a large part of inventory contribution in its sales.

Debt to Equity Ratio:

Debt to Equity Ratio = Total Liability/Total Equity

The debt to equity ratio for four years 40%. There is a visible change in the debt to equity ratio of this company that means it is growing itself.

Debt to Asset Ratio:

Debt to Asset Ratio = Total Liability/Total Assets

The debt to asset ratio for 4 years is around 20%. This represents that the company is not that stable to retire its liabilities from its assets but this ratio increasing.

Appendix D- Current Strategy

The company wants to grow with a strategy of continuing the company’s product with a broader offering for women, men, and the young generation with the vide variety of sports and other goods to buy. The company also wants to increase its market share and sales in the footwear segment. The distribution strategy of the company in 2018 is to sell goods by opening a large number of Under Armour’s stores, outlets and online shopping.New product line and promotional techniques are also included in the growth strategy of the company....................................

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