External Opportunities and Threats for Under Armour - Assignment Example

Under Armour’s: Unique Market Position, Challenges and Entrepreneurial Options Under Armour: Introduction In the modern corporate world, operations have been streamlined with a management perspective that internalizes both the internal and external factors to achieve an optimized niche. Global leaders in corporate practices are usually studied in an attempt to understand the business environment that they operate in for stakeholders to have informed inference making. In the following discourse, one of the leading and versatile performance apparels and accessories producers is studied with respect to various aspects of its market presence (Whally 120). Under Armour as briefly discussed in the immediate following segment is a model company that can be used to illustrate the various market approaches used in the corporate world. On the first segment, external opportunities and threats for Under Armor are weighed and the second part is devoted to its internal strengths and weaknesses. A third part exploring the significance of entrepreneurial tools such as strategic actions is also incorporated with respect to Under Armour. This discourse ends with the sections detailing on appropriate recommendations and plausible conclusions. A mention of Under Armour to sports outfits and the field’s wide array of accessories leave a special reservation for the company since its inception in 1996. The founder, Kevin Plank had captured the attention of the sports apparel industry by a rare sweat wicking quality fabric which made a sudden mark in the market. Since then, a high tech tag has always remained on the company’s growing range of products to such an extent that its competitors have had to severally reconsider their market presence strategies. This was because the competitive nature of the market was transformed with its arrival. The success story of the company can be used trace rare opportunities and how they can be transformed into a lifetime asset for an organization. External Opportunities and Threats For Under Armour The analysis of the external environment assists in the detection of the threats and opportunities facing the company. The external analysis provides possible areas that the company can act upon. In such an analysis, the influences of the external environment of the company are very vital in the planning of the strategies the company desires to adopt. The analysis of the external environment elements assist in the understanding and uncovering of the threats and opportunities and also assist in the revelation of the company’s strategic options (Pahl and Richter 13). Opportunities are mostly considered to be external factors available to the business. These are the changes, needs or trends can improve the business’s strategic position or become beneficial to it. They may generate high performance of the business (Griffin 68). Threats are also considered to be external. Threats are usually not within the capability of the business; this means that the business has little control over them. They directly affect the business, for example, when starting a new business, factors such as the local regulations may adversely affect the business negatively (Risk Management Agency). The threat factors can damage, restrict or put some sections of the business at risk. Opportunities Under Armour faces several opportunities and these can be an eye opener for the advancement of the business’s strategic position. There are possibilities that Under Armour can raise its profits through the export opportunities available for them. There are many markets around the world that have not been exploited and Under Armour can take that opportunity to diversify its products and services. The trend of the consumers spending and purchase of the products is changing and this is a unique opportunity for the company to meet the desires of these customers (Adam 1). More new markets are opening up around the world and this is a chance for Under Armour to go forward. These markets offer a chance for Under Armour to sell its products and services and also develop products that are situated to particular regions. The product and service line of Under Armour can also be expanded and this can assist them a lot in raising of the sales. Rise in the sales translates to more profits. The expansion of the product and service line of Under Armour can also enhance their product portfolio (Adam 1). There are other markets that have not yet been exploited and venturing into such markets can expand the market for the Under Armour’s products and services. The possibility of such a venture becoming a success is very high. Strategic alliances and joint ventures have proved to be successful in many companies. Formation of joint ventures and strategic alliances by Under Armour can assist them in the maximization of their profits and achieve new businesses. Other than maximization of the profits and achievement of new businesses, the joint ventures and strategic alliances can assist them in the development of better products (innovation) and research and development (Adam 1). It is presumed that the prices of the products in Under Armour are high; the number of sales can be maximized by reducing the price of the products. This is a better chance for Under Armour to compete effectively with its competitors. The current number of retail outlets cannot serve Under Armour customers effectively. There is a chance for Under Armour to increase the number of retail outlets (Adam 1). Threats Under Armour faces several threats. Tax increase is placing Under Armour in additional financial burden and this could be threat to Under Armour. Increase in the interest rates places Under Armour in a financial position that can be burdensome to the company. The trend of the consumer shopping, spending and the consumers’ patterns are changing and this could be a threat to the performance of Under Armour. The competitor actions can also be a major threat to for Under Armour; this can be well illustrated when a competitor such as Nike increases their workforce to meet the demand or brings in new technology. This is a big threat to Under Armour because of the fact that its competitors will have great advantage in the market (production of quality products and meeting the desires of different segments of the consumer market) (Shreshtha 1). There are products that are in the market and substitution of those products with other products may become a threat to Under Armour. There is stiff competition from major competitors such as the Nike and Adidas. These companies sale the same products as those of Under Armour and they are a threat to the success of Under Armour in the sportswear industry. Recession is set to affect the volume of sales of the company; the effect might be negative and this will adversely affect the volume of sales. Low prices from the importers will affect the business because the importers will have a big market share than the one Under Armour is currently holding. The focus of many products and services is on the male; the female are partially neglected. This is not a good sign for Under Armour if other business will put into consideration the plight of women (Adam 1). Internal Strength and Weaknesses For Under Armour In order to develop and implement the best strategy for the business, internal analysis of the company should be done and in that case the evaluation of its weaknesses and strengths is done. Internal analysis of the business gives a practical sense of the company’s strategies and goals that are more realistic and promising (Pahl and Richter 7). Weaknesses in a business are the internal factors and they are usually considered when the business has to be run successfully (Risk Management Agency). The business weaknesses are those skills and abilities that obstruct the business in its choice and implementation of strategies that support the mission of the company. The weaknesses are addressed in two was. The first way is to make investments that acquire the required strength to implement the strategies that support the mission of the business or the company. The second way is the modification of the mission so that it fits the abilities and skills of the business for its accomplishment. Many businesses have a difficult time in the evaluation of their weaknesses because they are not willing to admit that they lack the necessary skills and capabilities required (Griffin 68). The business strengths are the abilities and skills that assist the business to formulate and implement the strategies formulated. Distinctive competence is a strength that is in possession by a number of competing businesses. The strength (distinctive competence) is very rare among the many competing companies. Businesses that are capable of exploiting distinctive competencies at most times they have the ability to acquire competitive advantage and perform better in terms of the economy (Griffin 68). Strengths The major strengths of Under Armour include the following: the company is financially strong and this has assisted Under Armour to deal with most of its problems and also get more profit. The strength has enabled Under Armour to outperform its competitor. Its major competitors are Nike, Columbia Sportswear and Adidas. Under Armour has a strong brand and this brand has enabled Under Armour to be respected and recognized. A strong brand is very vital for the success of any business. This is a major strength for Under Armour because its consumers are well conversant with the brand (Shreshtha 1). The distribution chain of Under Armour is considered as one of its strength and the link to its success. In the year 2009, the company had a high net income of approximately 32 million United States dollars in its third quarter of that year. The company offers a wide range of sportswear and casual apparels. Under Armour boosts itself of having high ratio of profits to earnings. This has enabled its success in the sportswear industry despite stiff competition from its major competitors. The customer response is remarkable and it is positive response indicating that the company has already gained customer loyalty. Under Armour is the official outfitter of majority of the universities and schools teams (Shreshtha 1). Weaknesses The major weaknesses of Under Armour are few and mainly entail the lack of focus, cost and poor business strategies. The company fails to reduce the cost of its products when the competitors do so and that is an indication that Under Armour is losing more of its profits. It is a major weakness to have high costs than the competitors. The company lacks a proper and effective marketing strategy and this is obstructing the success of Under Armour. The Under Armour online presence is very much limited and for any business to succeed in this era it must increase its online presence. The company deals with a particular line of product; this is a major weakness because consumers have different product preferences. The focus of Under Armour is very narrow. The company is considered to be a male targeted brand; this is a major weakness and it is likely to hamper the success of Under Armour (Adam 1). What importance does entrepreneurship hold for the company? By acknowledging the basic entrepreneurial insights that the model organization in the current corporate needs, the management at Under Armour has just what it needs for success. In such a market as the one Under Armour deals in, competition is a major hindrance to full potential that the company has. In a well calculated move to stamp authority over the market by controlling a significant and sustainable market share, the management at Under Armour will be in a position to take care of the most challenging business scenarios. According to Whalley (36), business operations under the guide of entrepreneurial practices respond to business needs in a market responsive manner using the appropriate and responsive business philosophy offered. As observed earlier, competition is rife in the sports apparels industry and the creation of a competitive advantage as inspired by entrepreneurship is the way to win. According to the author, strategic approach is perhaps the strongest entrepreneurial tool in use and will be needed at Under Armour. Strategy Success Functional strategic victory that Under Armour can boast of is in the company’s innovation secret that caught the market unawares. The founder, Kevin Plank, was a passionate consumer of performance apparels since his occupation was playing professional football for Maryland (Phung, 1). Innovation was guided by the accurate identification of consumer needs and class since professional level of sports needed advanced attention from the production line. The identification of a passionate clientele base as a strategy acted as a major booster for the initial market entrance by Under Armour. Apparently, the creation of undisputed quality attachment in the product line of supply at the Company presents is second to none in the quality sensitive market. Despite the existence of a slight setback in the effective pricing strategy to complement the quality aspect, the Company has made a lasting impression of a winning strategy via quality. Using suitable synthetic raw materials of a petroleum nature places the Company in a good functional position in that the cheap and readily available production resources ensure continued operation. Internal operations at the Under Armour can be pointed at as a major functional strategy that would be the envy of many organizations. According to Oyewoke (3), the leadership and organizational culture that Kevin Plank instituted at the organization since inception portray a rare motivational reference for modern management. According to the author, Under Armour was capable of instituting core competence in operations due to establishment of a winning formula from the initial stages of operations. For instance, the author isolates specific motivational leadership skills employed by the founder that have facilitated the establishment of the current day performance apparels giant. Competitive strategy at Under Armour has a defined scope of the winning product mix and quality. In a market where competition is rife, competition advantage is usually sought with a clear scope of operation with definite product line that can assist in creation of a brand presence. To this end, Under Armour has been successful in that it initially dealt in a few manageable product lines. Under Armour initially established its operations on three basic product lines namely the HotGear, ColdGear and AllSeasonGear which was favorable under the operation level that the company begun at. With continued expansion and advancement, the company is now capable of handling two more product more products to keep at pace with the ever growing demand. LooseGear and TurfGear have since been incorporated in the product mix (Phung 1).To facilitate the appropriate operation in the context of a clear product line, the company has over the years specialized in a winning market segmentation dealing with sportsmen and sportswomen as well as the young generation (Whally 74). Through the creation of a good network of consumer loyalty responses, the Company has been able to secure supply deals with leading teams. By achieving such level of recognition as the main supplier of national teams across the continents, the status of the Company was propelled, perhaps even higher than, to that of long established performance apparel suppliers. According to Phung (1), the achievement of supplying the globe with over 8,000 outlets globally by the year 2000 had enabled covering supplying major sports events with its products. Innovation has continued to be the striking feature on any item produced at Under Armour since inception. Coincidentally, the arrival of the company was paralleled by the use of athletes’’ sweat handling technology that only the company had applied in its initial product. This implies that the vibrancy in innovation with which its entrance into the market was marked with shows the competitive element that the company introduced into the industry. This is for instance illustrated by the originality of the idea that Kevin Plank had in the initial product which is capable to wick out sweat without tampering with the body cooling system. Corporate strategy at Under Armour cannot be overstated by any valuation due to its impact in the establishment of the current band that the company has managed to be. By establishing efficiency standards to achieve along its operations proves to be a rare corporate winning position for the Company. Under Armour formulated the Enterprise Resource Planning to facilitate the integration of industry oriented operation. Under the Apparel and Footwear Solution model that the Company adopted, it was capable of reducing major delays in operation under the efficiency improvement plan. According to Oyewoke (4), it is clear that the role of the CEO in establishment of a long lasting customer experience has been pivotal in establishing the success story. The author cites the attempt by Kevin Plank to directly involve sports superstars in the company’s promotional campaigns has bore fruits. Creation of a consumer experience that goes beyond the ordinary promotion goes a long way in defining the operation success of a company such as Under Armour. A personal relationship between the clients and the top corporate officials in a company generates desired gesture from the clientele. Under Armour has been able to use this as a strategy and attract as well retain customers. Strategy Loopholes By identifying synthetic raw materials as the major source of raw material for the Company shows insensitivity to the global intolerance for petroleum products. Diversification of raw materials to include other forms of natural materials would perhaps change the image of the Company. Locking out a significant market segment due to the raw material inflexibility is rather insensitive. The limitation of product line sticking to the only a few product lines blocks alternative success areas of operation for the company. Apparently, the actual diversification of product line should also take in to consideration the possibility of expanding the product line to other areas. While sports seem to be a key area in creation of an effective market niche, exploring other areas such as the military has been long overdue. Pricing strategies that the company applies in the determination of the cost of their products actually acts in release of customers while they ought to be retained. By application of a constricted array of product scope, it becomes increasingly difficult for the Company to employ a favorable pricing strategy that would sustain unlimited expansion. Recommendations The Company must revisit its global market strategy for a better positioning on the international arena. With a higher edge in technology at some of the leading markets that the United States of America presents, an aggressive global campaign should be possible with slight improvement on the current level of operation. Competitive niche of sports world mainly in America should not be enough since the European soccer market proves to be an ever growing scene that can equally be tapped despite the strong presence of key competitors. Martial arts in Asia could likewise be a market of unparalleled opportunity the company needs to explore. Aggressive marketing campaigns should be launched for a better positioning by the Company at the global market with every chance on the way. With major European sports ventures seemingly looking to improve their stadia naming and other branding rights, it is imperative that the company rises to the occasion and presents interests in such mega-money projects likely to transform it completely. Conclusion The sports industry cannot be matched by any other for its vibrancy and growth opportunity that it presents to the corporate world. Under Armour cannot rest in complacency due to the unlimited opportunities lying ahead of its objective of becoming a leading global sportswear solutions supplier. In light of the market situation against the strengths possessed by Under Armour, it is possible for the Company to turn its fortunes around and navigate to greater corporate glory in the coming days. Revitalizing the marketing strategy with an aim of increasing the market share will facilitate the needed growth and sustenance. Bibliography “SWOT Analysis of Under Armour.” MANAGEMENTPARADISE.COM. Shreshtha, Abhi, 24 Nov. 2010. Web. 9 April 2011. “Under Armour SWOT Analysis.” Free SWOT Analysis. Adam, 7 June 2010. Web. 9 April 2011. Griffin, Ricky, W. Fundamentals of Management. Belmont, CA: Cengage Learning, 2007. Print. Oyewole, Rotimi Under Armour. INMB 400 Seminar, 2010. Web. http://www.docstoc.com/docs/67258046/Under-Armour-Business-Strategy-Case-Study (accessed 9 April 2011) Pahl, Nadine & Richter, Anne. SWOT Analysis – Idea, Methodology and a Practical Approach. Germany: GRIN Verlag, 2009. Print. Phung, John “The History of Under Armour- A Mastermind for Performance Apparel,” 2006. Web. http://searchwarp.com/swa33442.htm (accessed 9 April 2011) Risk Management Agency. SWOT Analysis: A Tool for Making Better Business Decisions (Google Ebook). U.S. Dept. of Agriculture. Whalley, Andrew Strategic marketing. Frederiksberg, Denmark: Ventus Publishing APS, 2010. Print (Your full name) (Mailing address) (Street, apartment number, city, state, and zip code) Read More