Under Armour Case Analysis
Under Armor is a company that produces sports apparel, shoes, and accessories. It differs from its competitors by the focus on innovative materials and technologies in its products. The products sell all over the world, and the main customers are professional athletes and sports teams. The company actively cooperates with them to promote its apparel. The last trend shows the stable growth of sales and revenues of Under Armor. Thus, the strategic issue is how to continue that growth and improve it. The possible alternatives are:
1) To continue the current strategy;
2) To focus on professional products and continue improving their quality;
3) To establish a line of products for common users.
The best solution is the third option, because it will enable the firm to find potential customers and increase its market share.
The industry, where Under Armor operates, is sportswear market. Three largest firms provide the competition in the industry: Under Armor, Adidas ad Nike.
Porters Five Forces
The brief five forces model is shown in Appendix 1.
Competitive rivalry within the industry has high power. The few competitors are large multinational companies. They can produce a wide variety of high quality goods, which are similar to Under Armor products.
Bargaining power of customers in the industry is high, because sportswear companies focus on customers, who can be both professional athletes and amateurs. The businesses respond to customers desire. Products are usually expensive; thus, customers demand high quality, convenience and the use of innovative materials. For instance, each firm tries to apply modern materials because they are convenient and desired by customers, although they may be more expensive.
Bargaining power of suppliers in the industry is medium. On the one hand, firms depend on suppliers because they use unique materials delivered from limited number of businesses. Thus, it is hard to find substitutes. As a result, suppliers can charge high prices. On the other hand, prices for sports products are high, too. The producers can cover costs of materials with premium prices of finished goods.
The threat of substitutes is medium. On the one hand, competitors produce substitute goods that have similar features. On the other hand, the features of the products and the prices can be different, and it is possible to make the products unique. For instance, Under Armor produces high-quality expensive products from innovative materials.
The threat of new entrants is low. The industry for sports goods includes large multinational companies, and it requires money and resources to establish similar enterprise. The consumers know and trust the old brands. Moreover, they implement research and development widely use unique innovative materials, which are hard to copy for a new competitor.
Strategic Group Map
For the industry, three main competitors include Under Armor, Adidas and Nike. The map is shown in Appendix 2.
Nike and Adidas have similar features. Thus, they share one position in the map. Firstly, their product lines are large. Secondly, the two businesses produce sportswear, sports shoes, sports accessories and other sport products. Thirdly, all products target professionals sportsmen or amateurs, as well as common people, who periodically use the goods for sports. Different product lines are oriented on the aforementioned groups. In terms of price and quantity, Nike and Adidas are on medium level as they produce goods of high quality and prices for professionals. Also, their product line includes gear and wear of lower quality and prices for common customers. On the contrary, Under Armor has a medium product line, because it produces mostly for professional athletes. At the same time, price and quantity of its products are high, because it uses innovative materials, which are excellent in quality and expensive.
Key Success Factors
1) A wide assortment of products is important because it helps the company to attract more customers with different needs and requirements, as well as to compete successfully in the market.
2) Products for different sports and activities are a success factor because of the increased market interest. Moreover, it is beneficial because the popularity of different sports changes periodically.
3) The selection of products for both professionals and amateurs gains a bigger market share to compete with other companies. Products for amateurs are cheaper, but the number of customers is higher.
4) Use of innovative materials and technologies is important because sports goods develop and change and customers demand new, better and innovative goods. Moreover, it helps to receive a competitive advantage.
5) Spending on marketing and promotion is necessary to have higher number of loyal customers, improve consumer awareness and compete with other companies that also use unique marketing and promotion strategies.
6) Cooperation with sports teams and professional athletes is necessary because sportspeople are the main customers for sports goods. Moreover, they promote the preferred goods among customers, especially sports fans who want to look like sports stars.
Under Armor is successful company in its market, and it is oriented on the growth of its assortment, sales and revenues. The main issues for the company include tight competition.
Value Chain Analysis
The value chain of Under Armor is represented in Appendix 4. In general, it is similar to the value chain of most sports goods producers. Some differences exist in the marketing and sales stages of value chain. Unlike competitors, Under Armor mostly provides promotion via cooperation with sports teams and athletes, who use its products. The share of other types of advertising is lower. In addition, pricing differs because the products are made of expensive innovative materials; thus, the cost of input contributes to final output price.
Competitive Strength Assessment
Under Armor is similar to Nike and Adidas. In general, they differ by several KSFs. Under Armor has lower strength in producing items for amateurs because they focus on professionals. Moreover, Under Armor is an expensive brand. At the same time, Under Armor is more developed in the use of innovative materials and technologies
Under Armor operates in the industry of sports goods. The competition is strong as there are many substitutes. Thus, Under Armor competes mostly through cooperation with sports teams and athletes, as well as by using unique materials and new technologies. It allows the company to have a stable growth.
The strategic issue is the following. As the company is already successful, the issue is how to continue the current success. Thus, the question is how to continue the firms success in the market and, if possible, improve it?
1) To continue the same strategy;
2) To focus on professional products and continue improving their quality
3) To establish a line of products for common users.
The current strategy seems to be the worst strategy because the market situation may change when competitors improve their activities. The focus on professional products and improving them is a better solution. However, the products are likely to become more expensive. Thus, the best alternative is to establish a line of products for common users with lower prices. It will help to find more potential customers and take a larger market share.