Under Armour Company’ Analysis and Strategic Alternatives

Words: 2482
Topic: Business & Economics
Updated:

Current Situation

History

In 1996, Kevin Plank, a former football player from the University of Maryland, founded Under Armour (UA), to the world. Plank was disappointed because of the inability to find appropriate clothing for sportsmen under which accumulated sweat would not be a problem anymore. He used the recommendations of players, who were able to prove the quality of clothing on practice. The results of his work were amazing. Nowadays, UA headquarter is in Baltimore, Maryland. UA is popular, and its founder earns 25% of UA shares with its market cap of almost $3 billion.

Mission

“To make all athletes better through passion, science and relentless pursuit of innovation” (Subramanian and Gopalakrishna 20-7).

Objectives

US aims at producing footwear, sportswear, casual apparel, and accessories for men, women, and youth that makes people regarding fashion and quality, developing strong relations with distributors, and promoting its apparel products through different markets.

Strategies

  • Constant actions to gain sales by means of new design, interesting features, and good quality products.
  • The necessity to achieve a competitive advantage makes each member of the team to work harder and use enthusiasm to its full extent.
  • Attention to the organizational growth (to broaden UA apparel), marketing (use its reputation to promote a variety), distribution (independent distribution should not be time consuming), and creation of new lines (diversity of products is an integral part of the company’s success).

Policies

  • Quality is an integral part of the company.
  • The explanation that sport is the sphere of life that touches upon human health.
  • Attention to fashion and current changes in the market.

Corporate Governance

A top management team consists of eight executives with Plank as the President, Chairman of the Board, and Chief Executive Officer, Wayne Marino, and Brad Dickerson. Each sector has its leader, who is responsible for the results of the work done.

External Environment: Opportunities and Threats

Natural Environment

  • Climate change (UA has to refuse one type of clothing/footwear and think about new opportunities);
  • Weather-related events (storms or floods may negatively influence the company as people cannot go in for sport under poor weather conditions.

Societal Environment

  1. Unstable economy (inability to spend much money on sportswear or footwear).
  2. International economic relations (Chinese relations may be under a threat as labor cost is constantly changing requiring more improvements).
  3. Technological innovations (the production of footwear and sportswear within shorter periods of time is necessary).
  4. Political forces are not mentioned in the case.
  5. Personal interests and preferences (cultural background may become a predetermined factor in a decision-making process).

Task Environment

Threat of new entry is low

UA is a not too old company and may be considered as an entrant as well. All entrants have to offer the ideas that differentiate the company among the rest and consider the latest technological aspects to make sure the entry is successful.

Buyer power is high

Within a short period of time, UA has introduced itself as a company with a variety of choices. The company offers a number of options of sportswear, footwear, and accessories to its consumers considering such factor as personal comfort. Another important factor is the presence of low switching costs. Finally, buyers bargaining power may be explained by the UA decision to sell its products in popular shops like Dick’s Sporting Goods.

Supplier power is medium

The rate of this kind of power is explained due to the presence of numerous producers of the necessary materials in the world, and UA likes to cooperate with companies from different parts of the world. The diverse base of suppliers is not a challenge but a chance to choose the best options. The inability to stay constant with its one particular choice makes the company vulnerable.

Substitute product is low

People prefer to use the same type of footwear and sportswear, when they are going to do some sports activities. It is hard to find another powerful alternative to sportswear in case a person is looking for some appropriate and comfortable clothes. People may substitute sports apparel with casual clothes not for long because special clothes are important for people, especially sportsmen, who are the regular customers of UA.

Intensity of rivalry is high

A high level of competitiveness demonstrated by the company is explained by the presence of a number of powerful and reliable competing companies with famous brands such as Adidas or Nike.

The competitiveness is based on the fact that almost all companies set the same prices and offer the same products. The difference may be in the quality and a general look of a good. The weakest point of the company in this particular aspect is Nike or Adidas’ high popularity in many European countries (not only those that are developed but those that are developing).

In comparison to Nike that holds about 7% of the market and Adidas that holds about 5.5% of the market, UA has only 2.8% of the market. Still, the company has been already recognized in the sports industry, this is why the main challenge has already overcome. It is not an easy task to gain customers’ attention, and UA made an impossible thing – became noticeable among such sports giants like Adidas and Nike.

Internal Environment: Strengths (S) and Weaknesses (W)

Structure

  • UA has a functional structure with several product lines (S).
  • The structure is based on the functions (financing, human resourcing, designing, etc.) and projects (male and female apparel, footwear, accessories) (S).

Culture

  • Sport defines the culture of the company (S).
  • There are no departments in the company. There are the teams, and this idea inspires many employees (S).
  • Short statements around the offices are the slogans that each member of a team repeats from time to time (S).
  • Plank’s attempt to combine sport as a passion with business (S).

Resources

Marketing

  • The campaigns are usually attention-grabbing (S).
  • Cooperation with and focus on young people, who are ready for changes and experiments in clothing (S).
  • A variety of marketing devices like TV, printing, and sponsorship (S).

Finance

  • Finances depend on seasonality (W).
  • UA does not break down revenues geographically (W).
  • Net revenue has increased in 24.6% during the period between 2011-2012 (S).
  • Net inform has increased in $32.1 mln (S).
  • Growth of revenue is about 38% (W).
  • Growth profit is the same during several years (W).

R/D

  • Process-orientation (S).
  • Inability to move forward and close connection with one distributor (Dick’s Sporting Goods) (W).

Operations

  • All manufacturers are chosen in regards to quality systems (S).
  • Expansion of product line is poor (W).

Human Resources

  • Relations between employees (S).
  • Attention to employees’ inspiration leads too minimization of control (W).
  • Information system has not been mentioned in the case.

Tangible Resources

  • Management team
  • Coordinating systems
  • Consumer demand

Intangible Resources

  • Reputation
  • Quality
  • Strong relations with suppliers

Capabilities

  • Effective promotion
  • Innovating technologies
  • Strategic management

Core Competencies

  • Quality centricity
  • Innovation
  • Inspiration

Analysis of Strategic Factors

  • Employer relations are good, and the idea to divide all workers into teams but not departments is powerful and underlines the real essence of the company, sport (Strength).
  • Process-orientation is slow, and the company cannot demonstrate fast reaction to the necessity of new demands and expectations of customers (Weakness).
  • Quality culture is the key to the company’s success because sportswear should be free from fake products (Opportunity)
  • The presence of powerful competitors like Nike is evident (Threat)

Strategic Alternatives

The necessity of differentiation and a new line offering

The company has to think about more new products and ideas for sports. It is not enough to focus on clothing and footwear that are characterized by a high quality (Pros). The chosen accessory strategy has to be constantly improved, as people, especially women, want to have more opportunities and choices (Cons).

There are many interesting ideas for men, who are involved into sports activities. However, it is necessary not to forget that women turn out to be the major half of population. This is why, to make UA more attractive to consumers, it is possible to think about some sports ideas for women. What can be more important for women than a family?

This kind of alternatives presupposes the possibility to design and develop products for families in general, still, the main advertising target should be females as they are usually those, who want to add something new and extraordinary to their family relations. Men should be attracted by the possibility to have goods of a high quality, and children, in their turn may be attracted by the idea to be closer to their grown up parents.

Global expansion

The idea to promote UA products globally is a possibility to maintain profitability in the future (Pros). It is necessary to gain a considerable market share in different countries and prove that the quality does not change from country to country – UA offers the same opportunities to people regarding their ethical, racial, or other differences (Pros). Attention to its competitors (Nike or Adidas) is necessary (Cons).

These companies have already offered their goods and services to the countries worldwide. The point is that UA has high ratings in North American only. Other countries know a little about a possibility to have special high quality sportswear for a reasonable price because of rather limited distribution channels on a global level.

Though football (as the main kind of sport that is supported by UA) is a well-known kind of sport in Europe, not many Europeans know that UA is a successful substitution for Nike or Adidas. At the same time, this alternative does not focus on consumer awareness of the services. It is also very important to develop a partnership aspect for UA. The company has to look for some distributors and sponsorship abroad with a brand name to rely and make use of the already gained popularity.

Focus on technology

To stay competitive in the field of sports industry, UA has to pay more attention to the technological aspect of its work (Pros). Online research of consumers’ demands and expectations, a direct contact with regular and potential customers, and 24/7 support are the main opportunities that can be available to the UA team with new ITs (Cons).

There are many ideas on how to use ITs and promote UA sportswear, footwear, and accessories. Still, one of the most easiest and effective ways is to high more qualified IT specialists and make sportswear offered by UA popular via the Internet. Nowadays, people have a number of ideas on how to avoid spam and ads which are not interested to them.

Still, UA has to be noticeable. This is why it is possible to cooperate with such online attention-grabbing companies like Groupon and start the promotion of goods with certain sales (this particular strategic alternative may be connected with the already defined alternative of goods’ differentiation within the frames of which goods for families will be offered with a solid discount).

Recommendation

On the basis of the strategic alternatives given above, the idea of product differentiation seems to be the most crucial and does not require much time for its implementation. UA has already demonstrated its ability to focus on female and male products separately. Still, the demands of men and women are different indeed. And it is possible to offer a new line of products that is based on a family and unites both, male and female, interests.

Of course, this kind of possibility to unite a family by means of similar sportswear, footwear, or accessories is more interesting to women. Still, it is possible to attract men by means of identification of a high quality of products. The same footwear and sportswear may be offered to all members of a family in one package. The benefits of this offer are evident: lower prices of separate items for customers, and abilities to sell more at once for UA.

People have to realize that sports may be not only of a professional kind. Sport is a means to unite families and make them stronger. UA should demonstrate its ability to deviate from football and use some other kinds of sport that is more interesting to women and even children.

For example, the differentiation of UA products and the development of a new line may be based on a variety of sport in everyday life. It is possible to differentiate sportswear and footwear focusing on the demands to tennis players or volleyball players. These kinds of sports may be of a family type; this is why special clothing may be necessary.

Implementation

  • Engage the marketing research department into the process of gathering information, organizing surveys, and analyzing different groups of people in order to clear up what people know about UA and its products.
  • Find out what kind of sportswear people are eager to buy for a whole family.
  • Ask customers about the possible effectiveness of the idea “Family Package” and the chances they buy the offered product.
  • Evaluate possible profits and incomes of the companies if several items are sold at the same time and start the strategy as soon as its advantage is defined.
  • Introduce the most appropriate prices for the products in case they are sold in a complex.
  • Offer a powerful advertisement touching upon female needs (to stay in fashion and appreciate family priorities), male interests (to benefit from attractive prices and a high quality), and children activities (to get involved in activities together with their parents).
  • Attract customers with special programs by means of which they can learn more about “Family Package” as a new line of products (it is possible to use the services of Groupon and offer the potential customer an opportunity to combine the purchase of UA product with another opportunity).

Evaluation and Control

People want to find something new in the already known things. It is a captivating idea for UA to unite sport with family ideas. UA introduces itself as a company that does care of quality and its customers’ satisfaction. Devotion to sport and the spreading of its essence through the company should encourage the employees to compete and demonstrate the best results in the chosen activities. A specially trained team of workers should follow whether the idea to sell sports footwear, clothing, and accessories is financially justified.

According to the case study, UA undergoes considerable challenges on the basis of the existing competitions. The idea of the recommended strategy seems to be offered in time because the company needs to re-evaluate its possibilities and offer something new and attractive to people.

Sport is not only a profession. Sport is a family that unites people according to their interests, abilities, and demands. UA underlines the importance of quality and passion in its products. Family sport is also about safety, and UA as no one else can provide its consumers with this demand. The differentiation of sportswear, footwear, and accessories by UA is a successful alternative that may considerably improve the current financial situation of the company.

Work Cited

Subramanian, Ram and Pradeep Gopalakrishna. “Under Armour.” Strategic Management and Business Policy Globalization, Innovation and Sustainability. 14th ed. Ed. Thomas L. Wheelen, J. David Hunger, Alan N. Hoffman, and Charles E. Bamford. Upper Saddle River, NJ: Pearson Education, 2014. 20-1 – 20-12. Print.