Under Armour Company’s Strategic Audit

Current Performance and Mission

Under Armour is one of the leading brands in the sports clothing industry, which specializes in the invention and distribution of athletic apparel, footwear, and various sports accessories. Under Armour was created in 1996 by Kevin Plank as a result of an attempt to solve a personal issue of having a comfortable outfit for sports activities. Since that year, the company has grown enormously, has collaborated with many famous athletes, and continues its operations globally, offering excellent solutions to their customers (Subramanian & Gopalakrishna, 2012, p. 612). The story of the company’s creation represents a personal touch to the vision of the company, its values, and its strategies.

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The current situation for Under Armour shows strong sides, and at the same time, places the challenges to maintain its success within one of the most important for the company regions, North America. The positive side of the current state of things is that the profit margin has increased, which helped Under Armour to come back to profits. Sales in such regions as Europe and Asia continue growing, which compensates not the best situation in the homeland market. The decrease in sales in North America is a serious issue for the company, and specific measures need to be undertaken to correct the situation (Wahba, 2019). Enormous work is performed with the aim of transforming the business in operational, strategical, and cultural terms. With a mission statement, “to make all athletes better through passion, design and the relentless pursuit of innovation,” Under Armour strives to make a difference in the sports sector (“Under Armour mission,” 2019). Innovation and focus on the consumers’ needs are at the core of the company’s operations.

EFAS (Opportunities and Threats)

Opportunities and threats, as essential parts of SWOT analysis, are crucial tools for the strategic development of the business. Significant opportunities for Under Armour can be seen in growth in international markets. Sales in European and Asian regions keep growing, which implies that the company has an opportunity of getting more of new customers and generating more sales. Another crucial opportunity for Under Armour can be a collaboration with new retailers. Currently, the brand is present in different retailers, including Dick’s Sporting Goods, The Sports Authority, and Modell’s Sporting Goods. Still, the company can go further and collaborate with other retail shops, especially on the territory of North America. Increasing the number of partnerships and showcasing Under Armour products on the shelves of other popular retailers is a great opportunity for the company (Subramanian & Gopalakrishna, 2012, p. 610). Besides, Under Armour focuses on innovation, which implies that the brand can work on creating new products for the sportswear industry, and introduce them to the consumers in the global market.

The external environment positions many threats for the businesses, and to operate successfully, the company should be aware of possible dangers and analyze them. The primary issue for Under Armour lies within the competition. Two major competitors of the brand are Nike and Adidas that have very high brand recognition, collaborate with world-famous celebrities, and generate higher profits. Under Armour’s case indicates, “Plank himself set the aggressive tone for the company by never considering UA to be too small to take on giants such as Nike” (Subramanian & Gopalakrishna, 2012, p. 616). Nevertheless, it is still challenging to compete with brands that have occupied a stable position in the market. Moreover, the current drop in sales in the North American region, in combination with the stiff competition is a big challenge for UA. A fast-changing environment, shifts in consumers’ preferences, and lifestyles also present potential threats for the company.

IFAS (Strengths and Weaknesses)

Internal analysis of the company will highlight the strengths and weaknesses of Under Armour, which will help to observe possible strategic alternatives for future development. One of the major UA strengths is an emphasis on innovation, and consequently, product portfolio. Consumers have a wide variety of products in different product lines, including accessories. The fact that the company is investing in research and development and focuses on innovation is a great strength of UA. Despite the severe competition, Under Armour is a worldwide recognized brand, and it has a strong foundation of loyal customers, who will always choose UA as a sportswear option around the world. Another strength of the company lies within its distribution channels. A significant part of the revenues comes from wholesale, whereas a certain percentage comes from direct sales to the costumers (“Under Armour SWOT,” 2019). Presence in the international market and various retailers plays a big role in the company’s success.

There are also certain weaknesses in Under Armour that should be taken under careful consideration. One of the crucial gaps is that UA wants to implement a restructuring plan that will cost more than $200 million. The long-term outcomes of these plans are favorable, but currently, such great financial investments can influence the company’s liquidity (“Under Armour SWOT,” 2019). Another weakness is that Under Armour is reconsidering its wholesale policies, which might have an impact on the current situation in North America, where total sales are decreasing. Thus, high investment expenditures can be viewed as a weakness of the company.

Porter’s Five Forces

Porter’s five forces analysis is a very useful tool for strategic planning. Five significant aspects require careful review: the threat of new entrants, the power of suppliers, the power of buyers, the threat of substitutes, and industry rivalry. The threat of new entrants is relatively not high for Under Armour because the company already has its strong position in the industry, along with other major sportswear brands. However, potential new brands can offer lower prices, provide valuable propositions to the consumers, and reduce the costs, which can impose a threat to UA (“Under Armour, Inc,” 2018). Thus, besides a firm position and reliable brand, there is still a threat of new entrants present for Under Armour.

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The power of suppliers is also not very high, because there are numerous suppliers of material for the clothing industry, which implies that the manufacturing company will always have a choice. The power of suppliers for UA lies within the fact that current suppliers might increase the prices, which can lead to lower profitability of the company. Still, as far as there are numerous suppliers within this industry, there is no big threat for UA in those terms.

The power of buyers is relatively strong for Under Armour. Buyers can be very demanding, and with having such a vast selection of various brands in the market, the company has to offer something truly valuable to attract customers. With a decrease in sales in North America, the power of buyers for UA has increased, implying that customers will be in a more active search for valuable deals ((“Under Armour, Inc,” 2018). Therefore, now there is a challenge for the company to maintain the customer base that they currently have and get new ones.

The threat of substitutes for Under Armour is quite low because the company operates within the sportswear industry, which means that there are no significant substitutes for those products. There is still a chance that some outstanding substitutes will emerge in the market. The fact that UA highly invests in innovation and strives to create the best products that respond to the emerging consumer needs, substitutes do not represent a real strength for the brand.

Industry rivalry, or competition, is very tough within the industry that Under Armour operates in. As it was mentioned above, there are huge competitors in the sports clothing industry, which imposes serious threats of lower profits in the long-term. Industry rivalry is a force that drives the company to implement new strategies that can have a positive impact on the company’s development and will help to prosper under competitive circumstances.

Key Strategic Factors (SFAS)

Brief internal and external analysis of the company identifies some major strengths and future opportunities for Under Armour, as well as certain weaknesses and potential threats that can place a burden on the company’s success. Porter’s Five Forces analysis provides additional information to the possible strategies that the company can undertake in the future. Together, those analytical tools imply strategic possibilities for Under Armour. The table below shows TOWS analysis:

Internal factors
Strengths Weaknesses
External factors Opportunities High brand recognition + collaboration with the new retailers: possibility to expand the customer base and increase sales High investment expenditures + international growth: investing in international markets can generate extremely high sales overseas
Threats Distribution channels + competition: proceeding with the existing strong distribution strategy can help to prosper within competitors High investment expenditure + drop in sales (competition): crucial to generate high sales for the profitability of the company

TOWS matrix, according to internal and external factors analysis, along with Porter’s five forces analysis, indicates several key strategic factors for Under Armour. According to the company’s CEO, Kevin Plank, “with a distinct strategy around a uniquely defined consumer supported by a go-to-market process and data-driven demand, we have never been more inspired and capable of achieving goals” (“Under Armour presents,” 2018). UA strategy lies within the high competition in the industry, in the emphasis on innovation that requires high investments, and in the current need to sustain and increase the sales in North America.

Strategic Alternatives

Besides strategies that the company is undertaking in the meantime, there are possible strategic alternatives that might be beneficial for Under Armour’s future operations. One of the strategies that the company can commit to is being more service-oriented rather than product-oriented. Offering some special services to consumers, like professional consulting, encouragement, and taking those services to the high customer satisfaction level, can help to revive the sales in North America. Another possible strategy for Under Armour can be making limited collaboration with the competitors. Instead of fighting for the share of the market, major sportswear brands could collaborate and create something unique for the benefit of all of them. Limited edition clothing lines, special offers for loyal customers in intensive mutual collaboration can produce positive results for the players within this industry (“Under Armour Inc,” 2018). Under Armour is an active player in the sports clothing field, and despite certain challenges, with the right strategy and the right leadership, it will conquer new heights.

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References

Subramanian, R., & Gopalakrishna, P. (2012). Under Armour. Business Case Journal, 19(2), 609–619.

Under Armour, Inc. Porter five forces analysis. (2018). Web.

Under Amour mission statement 2019: Under Amour mission & vision analysis. (2019). Web.

Under Armour presents 2023 strategic growth plan; Updates 2018 And Provides Initial Full Year 2019 Outlook. (2018). Web.

Under Armour SWOT analysis 2019. (2019). Web.

Wahba, P. (2019). Under Armour still has to fix its North American business. Web.

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