Under Armours Strategy in 2014: Potent Enough to Win Market Share from Nike and Adidas - Case Study Example

Under Armour’s Marketing Strategy Case Analysis

Introduction

Under Armour, Inc. (UA), a notable player in the intensely competitive sports apparel and accessories industry, traces its origins from a promising idea developed by the founder, Kevin Plank, on a football field, in 1996 (Thompson, 2013). Previously serving in the position of a special teams’ captain affiliated to Maryland University, Plank devised a concept that sought to maintain athletes’ fitness in either cold or hot conditions by developing sports apparel that keeps them dry and cool in hot situations besides maintaining lightness. Originally known as KP Sports, the company envisioned the potential of its growth in the sports apparel industry before dropping the name for Under Armour, Inc. in 2005, as part of its marketing strategy (Thompson, 2013). Essentially, the move denoted the management’s intention of making UA a remarkably powerful brand in the industry within a relatively short period.

Therefore, regarded as a forerunner of performance apparel, UA seeks to enhance its competitiveness in the sports apparel and accessories sector as demonstrated by its 2014 strategy to combat rivals such as Nike, Adidas, The North Face, and Columbia Sportswear. In doing so, UA depicts its intention of expanding its operations in the highly competitive sports apparel sector. Thus, this paper analyzes the UA’s current situation by assessing the strategic management challenges it encounters through an evaluation of its internal and external environmental factors. Further, the paper identifies the strategic approaches UA ought to implement by providing recommendations for each strategic step.

Under Armour’s 2014 Strategy and Current Situation

A company’s strategic plan entails the execution of an action plan that pursues the outperformance of its rivals and realizing superior profitability through initiatives that bolster sales and market share. In most cases, strategic actions entail the introduction of additional performance features to the products or services a company provides besides the enhancement of quality as well as widening the product variety among other strategic actions (Hitt, Ireland, & Hoskisson, 2012). In this regard, UA’s 2014 strategy focuses on the aspects of expansion, marketing, promotional, brand management, and distribution (Thompson, 2013). The areas covered by UA’s growth strategy reveal its intention of securing a competitive edge over its rivals including Nike and Adidas.

Currently, the Under Armour brand has achieved the top position in the quality rank regarding sports apparel and accessories. Notably, the current advertisements that seek to improve the image of the UA brand have reached a wider number of customers beyond North America, and thus, facilitate the execution of the 2014 strategy that seeks to accelerate the company’s growth and development in the industry (Mahdi, Abbas, Mazar, & George, 2015). Due to the quality assurance aspect, guaranteed by the company, customers, especially athletes, are willing to acquire the products at higher price points compared to other similar products offered by rival players. As such, the quality of the sports apparel provided to different athletes has played an integral part in fostering the success of UA’s strategy actions (Hitt, Ireland, & Hoskisson, 2012).

As noted earlier, UA’s strategy incorporates the elements of growth, product lines, distribution, and marketing. With regards to the growth aspect, UA currently concentrates on widening its product offerings and reaching more consumer segments besides acquiring greater distribution of its products. The diverse product line established by the company thus far denotes the extent to which the company pursues the different and unique needs of its customers (Thompson, 2013). UA’s marketing strategy incorporates outfitting agreements signed with professional sports teams and collegiate teams, sponsoring various sports events besides selling the sports apparel to individual athletes and team equipment managers, directly (Fetchko, Roy, & Clow, 2012).

Moreover, UA’s retail marketing strategy gets boosted by the enlargement of its floor space in the major outlets. In doing so, the company has fostered product visibility and heightened brand awareness. In a bid to enhance the marketing prospects of UA, the company focuses on the maintenance and increase of its product sales not only in the North American market but also in other foreign markets (Thompson, 2013).

Analysis of the Mission Statement

The mission statement of an organization guides it towards the realization of its objectives and goals that denote the purpose of the organization’s endeavors. In this case, UA’s mission statement reads “to make all athletes better through passion, design, and the relentless pursuit of innovation” (Thompson, 2013). The mission statement reveals that UA seeks to provide quality apparel to sports personalities and professional sports teams through innovative ways. However, for the realization of its mission, UA ought to consider some driving forces that have changed the sports apparel industry owing to intensified competition in the industry.

The unprecedented popularity performance-related apparel and sports gear globally prompts UA to innovate new products that fulfill the needs of customers. Notably, due to the heightening demand for footwear, athletes want different products that competitors such as Adidas and Nike offer. Additionally, the increasing number of youth engaged in sports activities today provides UA with opportunities for growth as the demand for quality products rises. However, Adidas and Nike have also put in place strategies that seek to secure new customer segments including the youth by developing products that suit the needs of the young athletes. Therefore, the need for further enhancing the quality of sports apparels through innovation.

Besides, the heightening customer preferences directed towards differentiated products compared to the rest is a key concern for UA's sustainability. Additionally, the proneness of detrimental economic tides has prompt customers to reduce their spending creates market tensions (Mahdi, et al., 2015). Therefore, UA needs to offer unceasingly quality products that would convince customers regarding the value of their brand besides the high standard of the products they pay for. In this light, UA ought to continue convincing its customers that it offers the best brand equity to its customers in the industry as a fundamental aspect of its marketing communications (Fetchko, Roy, & Clow, 2012).

Moreover, the incorporation of technological advancements in the sports apparel industry, as a current trend, requires UA to make changes that would foster the realization of its mission. In the sports apparel industry, different players including Adidas and Nike integrate technology in the manufacture of sportswear to be in line with the current trends in the industry. Evidently, companies in the modern corporate world employ technology and innovation to facilitate the delivery of their products and services. Notably, UA’s footwear division, led by the Senior Vice President, carries out its undertakings at a functional level, and thus, the innovation aspect of operations has gets fostered in line with the mission of the company (Mahdi, et al., 2015). Therefore, the realization of UA’ mission relies on the functionality effectiveness of each department of the sports apparel industry player. In this regard, analyzing the internal and external environment that affects the functionality of UA is necessary.

Under Armour’s Internal and External Environment

The environmental aspects that affect it either internally or externally have a significant influence on its success in the competitive market. For this reason, the strategy adopted by the company in 2014 considered the internal and external elements that have implications for the success of the business. In this regard, the introduction of analytical tools such as Porter’s five forces, SWOT analysis, and the value chain analysis would be integral for fostering an understanding of UA’s competitiveness. However, before integrating the mentioned tools, UA reveals several aspects of its environment that provide a hint of its current situation. Thus, highlighting the elements that influence the operations of UA is appropriate in the context of this paper.

Internal Environment

Notably, the UA’s internal environment demonstrates the company’s heightened momentum towards the provision of quality sports apparel and accessories, maintenance of affordable production costs, considerable brand awareness, and key opportunities for growth. Therefore, such aspects would facilitate an evaluation of UA’s internal environmental factors that directly affect its functionality with respect to the strategies and competencies adopted and implemented by rivals such as Nike and Adidas (Hitt, Ireland, & Hoskisson, 2012).. In doing so, one would also understand the company’ strengths, weaknesses, threats, and opportunities besides identifying the strategies that it could implement to gain a profound competitive edge over its major rivals. Therefore, applying the value chain analysis and the SWOT analysis would foster an understanding of the internal factors that influence the competitiveness of the player against opponents such as Nike and Adidas.

Value Chain Analysis

The value chain assesses the extent to which an organization offers products or services of the greatest value to its customers. A comparison of UA’s value chain with that of its rivals portrays slight differences. However, UA has streamlined the efficiency of its value chain by engaging its suppliers in the supply chain aspect of its operations where the latter facilitates the completion of at least two or three phases of the process (Mahdi, et al., 2015). In this regard, streamlining the supply chain operations in a cost effective way gives UA a competitive advantage in the sports apparel and accessories industry. Notably, the designing aspect of UA’s products concentrates on the use of quality inputs including natural and synthetic fibers for the manufacture of standard sporting products. Similarly, the manufacturing processes employ a network of textiles that create high-performance apparel, irrespective of the conditions, to enhance the fitness of athletes.

The marketing element of UA’s retail stores also demonstrates the company’s intention of adding value to the customer experiences while shopping for sportswear and accessories (Fetchko, Roy, & Clow, 2012). Furthermore, in a bid to foster its distribution channels, UA has partnered with contractors and subcontractors in North America and beyond, like in the case of China, to facilitate accessibility of its products to new market segments. For instance, UA collaborates with Mexican and Caribbean subcontractors to streamline its activities in the mentioned regions as a way of its expanding strategy. Moreover, UA’s distribution channels focus on the efficiency of its retail outlets comprising of discount chains, specialty stores, departmental stores, and merchandise chains among other outlets. Therefore, UA is keen on fostering its distribution efficiencies, but it should expand its distribution network in other regions to meet the competition levels of its rivals.

Additionally, UA maintains a profound Corporate Environmental Code of Conduct that ensures that the activities of the company take into consideration the relevance of environmental sustainability. The Code of Conduct states that UA upholds values that include innovation, inspiration, integrity, and reliability. Essentially, the company observes the Code of Conduct while engaging with stakeholders such as contractors and subcontractors (Thompson, 2013). In doing so, the company demonstrates its concern for protecting the earth from degradation, and thus, underline the essence of corporate responsibility.

Moreover, the sports apparel and accessories player have established a chain statement that recognizes the Universal Guarantee of Performance (UGOP). In this regard, UA ensures that it engage in the manufacture of products that surpass the quality of the currently available products in the sports apparel and accessories market. Thus, the company tests its products severally to ensure that they meet the expectations of customers (Fetchko, Roy, & Clow, 2012). Therefore, to a considerable extent, UA’s value chain facilitates the marketing strategy of the company against its competitors by fostering providing exciting customer experiences, offering support and appropriate distinction, and providing downward experience in a way that enhances the visibility and familiarity of the company among various athletes globally.

SWOT Analysis

A SWOT analysis concentrates on the provision of a summary that denotes an organization’s strengths, weaknesses, opportunities, and threats. Interestingly, the SWOT analysis facilitates the realization of an in-depth understanding of the company’s internal atmosphere as well as the external environment. Therefore, analyzing UA’s strengths, weaknesses, opportunities, and threats is crucial in this context.

Strengths

Under Armour demonstrates sound leadership spearheaded by the founder, Kevin Plank, who unceasingly influence the management to integrate innovation into their offerings to heighten the company’s competitiveness (Thompson, 2013). Additionally, UA has secured the leading spot in offering quality and great standard apparels and accessories to athletes participating in different climates through the application of innovative technology. Furthermore, UA can adapt to the changing trends in the market that prompt it to use technology that facilitates the creation of more opportunities amid the stiff competition from Nike and Adidas. As a result, the company continues to secure a considerable market share in the industry. Moreover, UA’s brand awareness fostered by team sponsorships and endorsements are a major advantage to the company thereby, leading to customer loyalty (Hitt, Ireland, & Hoskisson, 2012).

Weaknesses

Notably, compared to its major rivals, Nike and Adidas, UA faces an array of challenges ranging from the absence of a patent, limited presence in the international market, a small female market segment, few distributors, absence of individual customizations, to a feebler product line (Mahdi, et al., 2015). Notably, the lack of a patent for its cooling sportswear undermines UA’s competitiveness by offering Nike and Adidas to offer similar products thereby, benefit from such patenting. For these reasons, UA realizes smaller total sales resulting in a lower net income compared to its rivals, Adidas and Nike. Furthermore, the high prices of UA’s products and the absence of synergistic marketing initiatives provide its rivals with a competitive edge in the sports apparels and accessories sector.

Opportunities

Amid the challenges, UA has several opportunities that would bolster its growth. The opportunities include individual customization of sportswear, the increasing number of customers, innovation, increasing retail sales, customers’ focus on quality instead of price, the basketball, shoes market potential, and corporate social responsibility engagements (Hitt, Ireland, & Hoskisson, 2012).. Besides, UA’s unceasing participation in the sports activities in the emerging markets provides the company with numerous opportunities for growth. Moreover, consumers’ increasing health consciousness prompts the company to innovate products that do not harm the athletes and the environment.

Threats

In the highly competitive market, UA faces several challenges ranging from high substitute products risk, the high cost of raw materials, to a considerable reliance on few third-party suppliers (Thompson, 2013). Further, the absence of UA’s proprietary product rights in the market undermines its competitiveness by providing its rivals with opportunities for growth. Moreover, the volatility of foreign markets like the up surging inflation in economies such as China affects its sustainability.

External Analysis

The external environment also influences the operation of a company is a given industry. Essentially, the external analysis would facilitate an understanding of the industry’s attractiveness, threats, and opportunities since it provides the relevant information regarding the sector. In this light, employing Porter’s Five Forces model is appropriate for understanding UA’s external environment.

Competitive Rivalry

Under Armour experiences stiff rivalry from its main competitors, Nike and Adidas, who enjoy a significant proportion of the market share. In 2011, Nike and Adidas secured 7.0% and 5.4% of the market share compared to UA’s 2.8%. (Mahdi, et al., 2015). Besides, numerous players in the sports apparel industry pose stiff competition to UA heightened by low switching costs. Furthermore, UA’s lack of patent right on its cooling shirt undermines its competitiveness in the market.

Threat of New Entrants

The threat of new entrants in the industry is relatively high due to the emergence of new trends in the industry including the focus on healthy products. However, the entry barriers facilitated by the strong brand equity of the main industry players and customer loyalty secures the position of UA. Additionally, the quality of UA’s apparels fostered by innovation enhances its brand equity, and thus, it would require new entrants to beat its standards. Additionally, the high capital requirements discourage new players from entering the apparel market (Mahdi, et al., 2015).

Suppliers’ Bargaining Power

Suppliers have low bargaining power since UA manufactures its products in various countries. For instance, the 23 primary contractors situated in at least 16 countries where UA operates, discourage the suppliers from dominating the bargaining aspect of operations actions (Hitt, Ireland, & Hoskisson, 2012). Thus, similar to Nike and Adidas, UA has a stronger bargaining power compared to its suppliers.

Buyers’ Bargaining Power

Buyers of the sports apparel and accessories have a medium bargaining power owing to the availability of UA’s products in various retail outlets in North America. The technology incorporated by UA is relatively new in the industry, and thus, buyers have limited bargaining power due to the quality that accompanies the products. Notably, UA’s distributors including Dick’s and The Sports Authority in the North American market facilitate the accessibility of the company’s products thereby, generating 27% of its total sales (Mahdi, et al., 2015).

Threats of Substitute Products

The heightening demand for performance apparel has created a vast array of substitute products. Thus, the increase in the number of sporting activities amid the growth of the youth population globally, customers have reduced their focus on Under Armour, Nike and Adidas brands. Therefore, the industry is characterized by high substitute threats.

Under Armour’s Current Situation

The internal and external analyses regarding UA demonstrate its current situation in the highly competitive sector. Notably, Under Armour’s key strengths include sound leadership, innovation, quality apparel products and minimum production costs besides customer loyalty. However, for its sustainability in the industry the player ought to gather resources, experience, and reputation similar to the one enjoyed by Nike and Adidas. Further, to enhance its competitiveness, UA ought to secure patent rights for its cooling sportswear, widen its distribution channels, and enter emerging markets (Hitt, Ireland, & Hoskisson, 2012).

The external analysis reveals that UA experiences stiff competition and a considerable threat for substitutes. Additionally, the growing necessity for product differentiation prompts UA to engage in further innovation to fulfill the diverse needs of its customers. The external environment reveals that UA has a strong and unique brand and room for growth owing to its specific marketing strategies, continued sponsorships and endorsements among other factors. Thus, currently, the company has high growth potential in the sports apparel and accessories sector.

Alternative Strategies and Recommendations

After analyzing the forces that influence UA’s marketing strategy, providing a strategy and recommendations that would foster its competitiveness is necessary. In this regard, UA ought to consider strategic steps that include securing proprietary product rights, diversify its market segmentation, widening its operations in the international market, and focus on differentiation strategy. The following recommendations would facilitate the efficient execution of the mentioned steps considerably.

Due to the hurdles associated with securing proprietary rights, UA should create a firm relationship with its producers and suppliers that influence the quality of the final product. The effort requires regular monitoring and evaluation of its production and distribution processes.

Under Armour ought to consider equitable segmentation of its market by manufacturing products that meet the diverse needs of athletes especially, women. In doing so, UA would secure new customers, and thus, gain a substantial market share like Nike and Adidas.

Under Armour should consider acquiring more distributors besides The Sporting Authority and Dicks. Such a move would broaden the company’s distribution network thereby, reach more customers. Additionally, more distributors would enhance the company’s prospects of streamlining its value chain.

The player ought to bolster efforts towards penetrating the international market for sports apparel and accessories. The move would entail the establishment of retail outlets in foreign economies, advertising, increase sports teams and events sponsorships, and partnering with other players in the sector.