The Strategic Differences Between Under Armour and Lululemon

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Executive Summary
Athletic apparel has come a long way from the era of pairing a dowdy gray cotton sweatsuit with tennis shoes. Now, athletic apparel promise to hug the body with materials that insulate the wearer from cold weather, while wicking away sweat to boost performance. Running shoes can be synced with computers to measure performance. Other advances in sports apparel include tagless T-shirts and fabrics that manage odors. Technological advancements allow manufacturers to maintain or increase prices and keep consumers loyal to their brands. Consumers have responded to the high-tech offerings, with athletic apparel sales reaching $60 billion in 2008, according to NPD Consumer estimated data. In this report, we analyze two apparel companies, Under Armour (UA) and Lululemon Atletica (Lulu). UA is an American sports clothing and accessories company founded in 1996 by former football player Kevin Plank. UA is the originator of performance apparel – gear engineered to keep athletes cool, dry and light throughout the course of a game, practice or workout. In 2011, UA experiences net revenue increase of 38 percent, and achieved total revenues of 1.44 billion in 2011. Lulu is a self-described yoga-inspired athletic apparel company founded in 1998, which produces a clothing line and runs international clothing stores from its company base in Vancouver, Canada. The company believes that its consumers associate the brand with innovative, technical apparel products. Lulu’s heritage of combining performance and style distinctly positions the company to address the needs of female athletes as well as a growing core of consumers who desire everyday casual wear that is consistent with their active lifestyles. The company’s net revenues have increased from $40.7 million in 2004 to $1.0 billion in 2011, representing a 58% compound annual growth rate (CAGR) . As we can see, both UA and Lulu are relatively new and fast growing companies in the in the U.S. athletic apparel industry, with individual focuses. Lulu concentrates on women’s fitness while UA is primarily a men’s sporting apparel company. In this paper, we analyze the strategic differences between the companies and develop two scenarios about likely states of the world relevant to the environment in which Lulu and UA compete and analyze how each of the companies will respond based on their strategic differences.

Industry Overview
In recent years, there has been a rising surge in the demand for performance athletic apparels and footwear in the United States (U.S.) due to the increasing number of athletes and growing health awareness among consumers, which has led to increased participation in fitness activities including running, training, and biking amongst others. According to a study conducted by the Lucintel Group, the global retail sports apparel industry has grown rapidly over the last five years and is expected to continue that trend as it reaches approximately US $125 billion in 2017 with a CAGR of six percent over the next five years. The U.S controls the largest share of the global retail sports apparel industry (41 percent of sales), followed by the European Union (EU), which accounts for 38 percent of sales. With respect to both manufacturing and retailing, the US athletic apparel industry is large, mature, and highly fragmented. Athletic apparel sold in the U.S. is made both domestically and internationally. Apparel worth $12.7 billion was imported into the US in 2011, up 8.8 percent from $11.7 billion in 2010. Imports from China rose 5.1 percent and accounted for 38 percent of all imports.

Industry Trends
Most trends affecting the athletic apparel manufacturers today are driven by consumer demand and relate to the size of the various demographic groups and their particular wants, shopping patterns, and spending power. Changing styles in athletic apparel also are influencing retail and manufacturing operations.

Consumer Discretionary review - We...
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