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International Business of Under Armour

Angela Kaiboni

Chris Lambert

Francisco Sanchez

Kyoung Choi

Randall Martin

Raymond amisi

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!"ecuti#e Summary

Under Armour Inc. is a clothing apparel company that sells sports merchandise. Under

Armour (UA), founded by Kevin Plank in !!", features innovative apparel #hich uses

moisture$#icking microfibers. %hese microfibers keep athletes feeling cool, dry, and light during

the most brutally hot conditions. In !!&, Under Armour introduced the no# famous 'oldear

fabric, #hich keeps athletes #arm, dry, and light in cold conditions. Planks groundbreaking

apparel has gro#n the company into a recogni*able and reliable brand. Under Armours

continued success in the United +tates has prompted the company to epand their business

internationally. +ince becoming an established entity, Under Armour has gro#n their first years

revenues from -&, in !!", to a / billion dollar company in 01.

%his report eamines Under Armours epansion into the 2ra*ilian market and evaluates

the methods used to increase the revenue and sales that are currently gro#ing in +outh America.

3ur research has brought to our attention the necessity of ans#ering certain 4uestions in order to

further develop our report. In this report, #e #ill focus on 2ra*il as a foreign market as #ell as

three 4uestions concerning Under Armours reasons for international business in 2ra*il5 6hy the

company initially epanded in 2ra*il7 6hat marketing and financial benefits come #ith having

international operations7 6hat difficulties may ensue in doing so7 Along #ith our results, #e

have provided +63% analysis and calculated recommendations to fi specific issues that need to

be addressed.

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S$%& Analysis

Strengths'

8 Professional athlete endorsements, such as 9ordan +pieth, %om 2rady, +teph 'urry, and 'anelo

8 Uni4ue technology8 2rand recognition

$ea(nesses'

8 :imited foot#ear line $ lack of competitiveness in shoe market8 Price8 ;o maeplacement for less epensive apparel $ =5 'hampion8 :a#suits and patents8 =ndorsing an irresponsible athlete

Analysis of Brazil

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*+, *ro-th

+ince the 0s, the 2ra*ilian economy, the largest in :atin America, has gro#n at a

robust clip, #ith gro#th in 0 reaching &.@. %he country has rebounded from the global

recession in 0! as the government announced a primary surplus target of .0 percent of BP

in 0@ and at least 0 percent of BP in 0" and 0&. A high BP is very important because it

can be used to gauge the health of a countryCs economy. Investors al#ays #orry about a negative

BP gro#th so 2ra*il is on the right track (:agarde).

Brazil.s +emogra)hics

,o)ulation

2ra*il remains a hotbed of opportunity city for those interested in doing business

internationally. %he population of 2ra*il is estimated at 01,0@!,D0as of 9uly , 0@. 2ra*ilCs

population is e4uivalent to 0.&! of the total #orld population. 2ra*il ranks number five in the

list of countries by population. %his provides a greater domestic market for foreign investors.

Median Age/0123

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%he mean age for 2ra*il is /.& years. %his is also good for the economy because they

have many young people that can energi*e the economy and provide labor for multinational

companies.

Legal system/Ci#il la-

'ivil la# systems, also called continentalorRomano-Germaniclegal systems, is part of

the 2ra*ilian legal system. %he la# is based on concepts, categories, and rules derived from

>oman la#, #ith some influence of common la#. %he civil la# tradition is good for business

because it places more focus on individual freedom, promotes cooperation bet#een human

beings. It is a la# that #ould foster international trade because it clears epresses rights and

duties

Urbanization

2ra*il is blessed to have many urban areas #ith a high population. %he maio de

9aneiro 0.D0 million and 2elo ?ori*onte has a @."" million. A lot of multinational companies

can benefit from the increase of population gro#th in urban areas. Population gro#th and

urbani*ation go together and economic development is closely correlated #ith urbani*ation

('IA).

Member of BRIC

2ra*il, >ussia, India and 'hina$commonly referred to as 2>I'$command more attention

in the #orlds economy because as a group, they generate & of the #orlds eports, absorb

" of EBI inflo#s and contribute 0D of #orld BP. %hey also generate D of the #orlds

EBI outflo#s. As emerging economies, the 2>I' nations are investors dream markets (Peng, &).

$orld !#ents

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%he country is kno#n as a sport loving nation.%hey hosted the 01 6orld 'up and are

hosting the 0" +ummer 3lympics. As 2ra*il hosts the #orlds biggest sporting events. A

multinational enterprise (F;=) entering this market #ould get a chance to get into the #orld

stage. 2ra*il #ould provide them #ith an opportunity to market their products to sports fans and

teams around the #orld. %hey have a great chance to sho#case their goods and services to a

larger audience, a high$ upside international market opportunity for brand eposure.

Informal Institutions

Culture of Soccer

%he 2ra*ilian culture is passion about soccer. +occer clubs in 2ra*il play a significant

role in football becoming a cultural passion for 2ra*ilians as #ell as spreading the flair and

electric style of play that has become a symbol of the countrys everlasting impact on ho# the

game is played on pitches all over the #orld. A partnership #ith a soccer club by a foreign

investor could have a big impact on their sales. %his partnership #ould help push their products

deep into the 2ra*ilian market.

Social Culture

2ra*ilians are considered to be friendly, informal and easygoing. %hese characteristics

apply to meetings, schedules and negotiations. An initial meeting #ill be the most formal.

Eoreign Investors should be a#are that it is not uncommon, nor inappropriate, for times and

schedules to change unepectedly. Feetings and appointments often begin @ to / minutes late.

%his is not impolite or disrespectful. +ome 2ra*ilians #ho find no harm in being tardy for social

meetings #ould never arrive late to a business obligation. In general, the 2ra*ilian people are

friendly and vibrant.

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Language

2ra*il is the only :atin American country #here +panish is not the official language.

2ra*ilians speak Portuguese and can be offended by outsiders #ho assume they speak +panish. A

useful recommendation for foreign companies is to learn 2ra*ilian Portuguese, although many

business professionals kno# and use =nglish, learning the Portuguese language #ould be very

helpful ('ommunicaid).

Formal Institutions

2ra*ils reforms on the privati*ation of key state$o#ned enterprises brought a profound

change in 2ra*il. It #as the ne# transition that the 2ra*ilian government brought in !!s. It

implied Gthe creation of ne# pro$market regulations, the abandonment of state intervention in the

form of special subsidies and incentives, the lift of trade barriers and the integration of the

country into the global economy, and the elimination of barriers against foreign investorsH

(Kormann, 0!). +ince 2ra*ilian la# provides the same protection and regulation to foreign

capital investment, the surge in foreign direct investment (EBI) has been gro#ing foreign

investors o#ned local companies of 2ra*il as #ell as the local supply chain. In the !Ds, the

average import rate reached @ ho#ever, in the !!s, tariffs on import goods reached average

levels inferior to @. +ince the !!s, multinational corporations in 2ra*il has been gro#ing

#hich leads to the Gne# emergence of a radical ne# business scenario in the 2ra*ilian economyH

(Kormann,D).

$hy did Under Armour enter Brazil4

As part of a strategic plan to double its sales revenue by 0", Under Armour epanded

their operations internationally into 2ra*il in Fay of 01. 2ra*il is a highly populated, soccer$

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cra*ed nation #ith a reno#ned athletic history. Its rich history has created a culture that embraces

sports as a vital part of their daily lifestyle. %he founder and '=3 Kevin Plank vie#ed the

epansion as a market$seeking opportunity and a key building block in establishing Under

Armour as a global brand. Plank stated, G%he countrys passion and commitment to sport is

incredible, and #e look for#ard to empo#ering 2ra*ilian athletes and bringing them game$

changing apparel, foot#ear and e4uipmentH (uabi*.com). ?is vision along #ith 2ra*ils

emerging economy provides vast opportunities to capture part of the countrys sports market

share currently dominated by ;ike and Adidas.

If Under Armour plans to replicate its successful domestic business foundation in 2ra*il,

it #ill need to rely on their resources and capabilities to help build brand recognition in the +outh

American region. Einancially, Under Armour has the ability to generate funds and raise capital

for epansion. %he company has posted remarkable gro#th rates consistently. G%he first 4uarter

of 0@ #as the 0thstraight 4uarter of 0 or higher revenue gro#th rates for the companyH

(+oni). %his bodes #ell for a foreign direct investment or other business strategy the company

may employ in the future.

%he companys ability to develop and release ne# innovative athletic apparel, as #ell as

the diversity of their product offerings, has generated a steady gro#th in business over the years.

It has resulted in the brand remaining competitive and relevant in the sporting apparel

marketplace in ;orth America. As of 01, Under Armour surpassed Adidas for the number t#o

spot in sales revenue in the United +tates, behind ;ike. ;o#, Under Armour must use this

momentum to help launch international marketing campaigns and establish some high profile

endorsements to increase brand loyalty.

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%he timing of Under Armours entry into 2ra*il coincides #ith the upcoming 3lympics

in >io de 9aneiro in 0". %his #ill be a great opportunity to capitali*e on an aggressive

marketing strategy to gain eposure #ith millions of vie#ers #orld#ide. GAs the nation prepares

to host the #orlds biggest sporting events, this is an eciting opportunity for Under Armour to

identify #ith the passion 2ra*ilians have for active lifestyles and provide them #ith the most

innovative performance products in the marketH (uabi*.com). Under Armour has recently

announced the sponsorship of +ao Paulo, 2ra*ils most decorated soccer club, and isele

2undchen, a 2ra*ilian supermodel. %hese high profile endorsements are epected to give Under

Armour eposure into soccer and #omens apparel.

Eor Under Armour to become a viable international brand, it must overcome the

deficiencies in their business operations. Eirst, UAs entry into 2ra*il signals its effort to

establish a strong presence outside of ;orth America. G3ver ! of its 0/ revenues came

from ;orth AmericaH (+oni). 2ecause the company #as founded as an American football brand,

the ma

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Boing business in 2ra*il is complicated and rather challenging. %he bureaucratic

systems la#s and regulations have caused difficulties for international businesses. Eor eample,

it can take an average of / procedures and ! days of #ork to start a business in 2ra*il (%FE

roup). %his makes it difficult for F;=s to overcome liability of foreignness. Bue to 2ra*ils

bureaucratic challenges, Under Armour must combat the formal and informal institutions to

continue success.

Understanding the challenges of entering a foreign market, Under Armour decided to

enter 2ra*il as a non$e4uity mode. 'urrently, UA distributes their merchandise in 2ra*il directly

through eports sold by local distributors. %his type of entry into the 2ra*ilian market is less

costly and eposes less risk #ith better control over distribution. %his type of entry mode

ho#ever, can cause challenges such as trade barriers and protectionism from 2ra*ils formal

institutions. %here are import and eport barriers that Under Armour may be confronted #ith due

to complications of eporting and importing goods. Fost imported goods are held in port$of$

entry for some time, #hich are the correct procedures implemented by 2ra*ils government.

Also, the average cost per container is rather steep. =ports can epect similar treatment, taking

an average of / days

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Inflation has pushed up prices meaning that doing business in the country is not cheap.

GIn 2ra*il consumer prices increased D.D! percent year$on$year in 9une of 0@. %he inflation

rate accelerated for the sith straight month to a ne# t#elve year high. Inflation rate in 2ra*il

averaged /D/.1& percent from !D until 0@, reaching an all$time high of "D0./ percent in

April of !! and a record lo# of ."@ percent in Becember of !!D. A high inflation #ould

depreciate the 2ra*ilian currency and this might affect the price of Under ArmourCs products

Inflation >ate in 2ra*il is reported by the Instituto 2rasileiro de eografia e =statJstica (I2=)H

(%rading =conomics).

%he ta burden is /1 of all revenues in 2ra*il, not as in other countries #here ta is

charged on profit. In 2ra*il all revenue is sub

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:abor unions have a lot of influence in 2ra*il. %hey have improved the labor market but

the business sector needs to be a#are of union operations. %here are ! labor articles #hich are

difficult to navigate. 'ompanies have to kno# them and be compliant. ;oncompliance may

result in bad reputation of the company.

Recommendations

2y epanding into the 2ra*il, Under Armour can establish a head4uarters for the gro#ing

+outh American market. Under Armour can leverage its resources and manufacturing facilities in

2ra*il to further epand into other +outh American countries. Using the success of UAs

2ra*ilian football club sponsorship #ith +ao Paulo, it #ill give UA an opportunity to epand to

other football teams. Under Armour can capitali*e on the 0" +ummer 3lympics as a method of

increasing its brand a#areness. %o gain market share in 2ra*il, UA can implement a penetration

pricing strategy by pricing belo# competitors. As the #omens apparel market continues to gro#,

UA can take advantage of the gro#ing middle class in 2ra*il. Under Armour can epand current

factory o#ned locations to supplement third party outlets, providing customers #ith greater

options to access UA products. Additionally, UA can partner #ith local companies as #ell as

local supply chains to reduce corporate ta liabilities. :astly, as a mode of entry, UA can increase

foreign direct investment (EBI) through e4uity mode. %his #ill establish an independent overseas

organi*ation, committing UA to the +outh American market.

Learning %utcomes

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Under Armour has been in 2ra*il since 01 as they continue to gro# their brand

internationally. At this point, it is too early to predict the success in the country. As a late$mover

in the 2ra*ilian market, UA has had to face competitors that already have an established position

in 2ra*il. %hough UA faces some disadvantages as a late$mover, the company is in a better

position than ;ike and Adidas to adapt to market changes and uncertainties. Under Armour is

also in a position to learn and take advantage of its first$mover competitors investments in 2ra*il.

%o ensure future success, UA must commit to foreign direct investment in 2ra*il to establish

control over operations and sustain a competitive advantage. aining a foothold in the 2ra*ilian

market #ill allo# UA to further epand into +outh America, aligning #ith the goal of becoming

the global leader in sporting apparel.

References

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Communicaid2 6+oing Business in Brazil 5 Brazilian Social and Business Culture72

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Mirabella? Lorraine =March >3? 91>@2 Under Armour -ill s)onsor Brazils most decorated

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,eng? Mi(e $2 =91>G@2 Global Business rd Edition.Mason? %hio' South/$estern

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highs5

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