Introduction
The entrance in the sport apparel and footwear arena of Under Armour, a relatively young sports brand followed its founder, Kevin Plank’s mission to provide athletes with fabrics that would prevent the accumulation of sweat, allowing them to focus on their games. This is still the company’s mission today: “Our mission. To make all athletes better through passion, design and relentless pursuit of innovation” (Thompson 53; Under Armour official website). Mission statements should answer the question why the company exists, it should be short, memorable, inspiring, market focused, indicate what the company wants to be remembered for and to be measurable (Russo & Swan 9). UA’s mission statement explains why the company exists: for making athletes better. It is short and memorable, because it includes strong words like “passion, design and innovation”, which also makes it inspiring. It is market focused, as it targets athletes and it implies that the company wants to be remembered for passion, design and innovation in the athletic environment. Finally, it is measurable because it targets all athletes.
Aligned with this mission, the company’s current vision is to “Empower athletes everywhere”, hence pursuing a global expansion and a continuous growth of its market share in the sports world (Under Armour official website). A good vision statement should describe the desirable future indicating the organizations’ responsibilities and reflecting how the company wants to be seen (Dowd, Tilson & Carlton 89). UA’s vision statement does present the desirable future in three words, and its responsibility of empowering athletes and it also implies how it wants to be seen: as a supporter of the athletes everywhere. Therefore, its vision statement is valuable and meets the criteria of a good vision statement.
For attaining this vision, the company has established a strategic objective that include strategic directions: absorbing its main competitors’ market share (Nike and Adidas) and achieve $4 billion by 2016 by increasing its footwear performance and seek out more international exposure and expansion (Thompson 53-55). This goal is specific, as it indicates a what the company wants to achieve and how. It is measurable, because it mentions the $4 billion performance target, it is achievable and realistic, considering the growing potential of the sports apparel, and it is time focused, as the financial target needs to be reached in 2016.
2. External Analysis
Political factors refer to the employment protection agreements for world third countries that create the threat of higher manufacturing costs as the workers receive higher wages. Also in the political arena, the international tensed relations between India, China and other Asian countries poses the threat of higher transport taxes and unstable currency rates. Lastly, the political unrest in manufacturing countries can impact the delivery and quality of the end products.
Economic context affects the company through the fluctuations of petroleum and cotton prices. Considering that these are prima resources used by UA, these fluctuations threaten the production costs, which further impact its sales performances. Economic recession and instabilities threaten the company’s plans to reach the sales growth targets.
Sociocultural context implies a growth in the population, which represents the opportunity to attract more market share. It also implies an increased concern for health and feeling good through sport activities, which poses the opportunity for market growth.
Technological factors refer to increased global awareness, meaning that more people around the world can have access and know-how of using internet. This shapes the opportunity to develop e-commerce in remote countries. Furthermore, the continuous technological development creates the opportunity to sophisticate UA products through R&D.
Ecological factors include the increased concern for environmental sustainability for both legislators and consumers. This creates the threat co comply with regulations and the opportunity to save resources, hence money.
Legal context highlights different employment regulations that the company needs to consider in its inbound and outbound locations, which creates the threat of inconsistent entry-modes on new markets. Strict environmental regulations pose the threat of hampering the production, but also the opportunity to reduce main resources like water or energy.
Porter Five Forces
Threat of New Entrants - The entry barriers are low, but the industry is dominated by reputable players, making it difficult to grasp from their market share. Hence this force is low.
Bargaining Power of Buyers – There are many sports brands that allow buyers to choose the best price or quality, influencing organizations to adapt their offers to suit the customer expectations. Nevertheless, the technology and brand value dictate and consumers pay for these assets, making this force a moderate one.
Bargaining Power of Suppliers – Most manufacturing assemblies are in Asia, which makes the company dependent on the economic conditions (workers’ rate, fabrics’ prices, cotton price fluctuations, etc.) from that region. Manufacturers performing multiple tasks allow the company to effectively control activities. No long term agreements with suppliers implies the advantage of avoiding increased expectations from suppliers and the disadvantage of wasting time in accommodating the work process for new suppliers (Thompson 62). Therefore, this force is moderate high.
Threat of Substitutes - For the sport apparel industry, substitutes may refer to cheaper sport garments or counterfeit products. With an increased concern for quality and performance of the sport clothing, cheaper substitutes become less popular, as technology advances. The counterfeit is currently a problem for the top two sports clothing companies, but not so much for the examined organization, hence this is a low force.
Intensity of Rivalry - Nike and Adidas (and Reebok) are the top performers in the sport clothing industry and UA’s main rivals, competing for the same market (athletes) and promising the same values: quality, performance, technology, design (Thompson 66-70). Their market share is tremendous, with Nike registering $25.3 billion in 2013 and Adidas €14.5 billion in the same year (Thompson 50). Other competitors include Ralph Lauren, Lacoste or Timberland, Salomon, North Face, Puma, Asics, etc. (Thompson 65). Therefore, this force is very high.
Internal Assessment
Resource - Based View Analysis
RBV framework stipulates that organizations need to find the resources for competitive advantage internally and reorganize them in order to fit the changing competitive environment (Cunningham & Harney 201). According to Johnson, Scholes and Whittington (95) organizational resources are divided into:
threshold resources (industry specific), which can be tangible and intangible
unique resources - specific to the organizations that competitors cannot easily imitate.
The threshold tangible assets are industry – specific and to not create competitive advantage, because other players have the same operation model: manufacturers in developing countries in Asia and South America, available liquidities and dealer network distribution. The threshold intangible resources are also industry specific, because many sport apparel companies create innovative designs, enjoy a good reputation, have industry-know – how and make use of effective marketing strategies. However, UA’s mix of intangible resources may differ of its competitors’. The unique resources represent the source of competitive advantage. The technology integrated within its fabrics that keeps away moisture and keeps the body cool during athletic activities differentiates the company from its rivals. Adjusted fabrics for different weathers and sports (Charged Cotton Products, Storm Armour fleece products, ColdBlack, ColdGear Infrared) is a sport apparel asset specific to UA (Thomson 63-64).
Value Chain Analysis
General Administration – holds a visionary business focus, looking to improve athletes’ performances through sophisticated technology integration and by that increasing its market share. It continues to adapt on new market requirements, optimizing the environmental changes.
Human Resource Management – supporting the direct sales force and the design, R&D or marketing teams, aligns the company’s objectives with individual performances.
Technology Development – UA started as a technology innovative company, testing fabrics that could ensure a higher athletic performance. It maintains its commitment to technology in athletic apparel, targeting to reach higher performances through technological developments into the footwear sector (Thompson 50).
Procurement – is significantly dependent on Asia and South America.
Inbound Logistics - UA relies on limited number of third party providers that assure specialty fabrics, changing them when it needs to boost the performance in its fabrics (Thompson 63)
Operations - are handled in China, Hong Kong, Vietnam, Mexico, and other Asian and South American countries.
Outbound Logistics - end goods are distributed in the countries where UA sells its products: USA, Canada, United Kingdom.
Marketing & Sales - marketing strategies include: celebrity endorsement, sponsorship athletic teams and events, retail marketing & product presentation, media & promotion.
Sales include direct sales in specialty stores, retailer stores or outlet factories and e-commerce.
Services - In-store customer service, decoration, presentation and information constitute relevant services for the customer experience. Similarly, its website and social media are sources of interacting with customers and enhancing the customer experience.
Core competencies
One significant organizational capability is UA’s technological innovations integrated in its apparel. This is a unique resource, specific to UA and along the inbound logistics and technology development activities of the value chain it creates superior athletic performance, which generates its value proposition. It is a rare capability because there are not many companies that have this resources and it is in fact inimitable, as it has been tested inside the company, leaving rivals with no access to its technology. It is also non-substitutable, as other products cannot replace UA’s apparel and deliver its performances. Therefore, the technological innovations creates sustainable competitive advantage, representing a core competency for UA and a key success factor for the organization.
Industry know – how is an threshold intangible resource, using procurement and general administration as value chain activities for creating value through differentiation. It is a rare capability because it capitalizes on its founders’ insightful knowledge of the athletes’ needs. However, it is imitable, as other companies have industry know – how also and it is substitutable for the same reason. This capability creates a temporary competitive advantage, but it is still a key success factor.
Marketing strategies represent an organizational capability. It is an intangible resource that uses marketing & sales plus services functions of value chain. The marketing mix creates value and it is a rare capability because it focuses on a niche – sport marketing. It is imitable, as other companies in sport apparel have the capability of sustaining effective marketing strategies. However, it is non-substitutable, because UA’s marketing has created a uniquely recognized brand. This is a source of sustainable competitive advantage and a core competency, which makes marketing strategies a KSF for UA.
The financial liquidities represent an organizational capability that highlight a tangible resource, using the general administration value chain activity. It creates value because it allows the company the flexibility to invest in R&D or expansion and grow. It is not rare, because other companies in this industry have this potential, non – imitable and substitutable for the same reason. Financial liquidities create competitive parity and it is not a core capability and not a KSF.
SWOT Analysis
The company’s strengths consist in its unique technology and innovation in sport apparel, in its inbound in developing countries, which imply smaller production costs, and in its direct sales and e-commerce mix.
As weaknesses, UA scores far below its competitors, reaching $299 million in 2013, versus Nike’s $16 billion or Adidas’ €14.5 billion for the same year (Thompson 50). The company also has insufficient stores and outlets and it relies too much on Asian and South American suppliers.
UA’s opportunities imply pursuing technology innovation in sport footwear, exploring new countries for expansion or searching to diversify in non – athletic apparel. The populations’ inclination towards healthy habits (including practicing sports) also represents a market growth opportunity.
As threats, international expansion is exposed to currency fluctuation and inflation. The over – dependence on developing economies for manufacturing purposes can impact the company’s cost: increase in workers’ minimum wage or increase prices for raw materials such as oil or cotton. Social and political unrests negatively affects the company’s production in developing nations, hence its performances;
Generic Strategy
(Porter, 1985)
UA targets the athletic segment, proposing unique and performing features for its products, hence its competitive strategy is the differentiation focus. Approaching a cost leadership or a cost focus strategy would not fit with the company’s mission and fitness statement and such a strategy would result into UA failing to deliver its high performing standards. The general differentiation scope is something to consider if UA plans to extend beyond the athletic market. However, this approach would also take the company in a different direction than the one stipulated in its mission and vision statements. Nevertheless, it might increase its market share and the company could leverage on the fact that perspiration and moisture occur not only in athletic environments, but also in office jobs or daily activities (Patton, 2015). As people’s growing interest is to look good and feel good, approaching the mainstream fashion market with moisture free technology included in the garments will assure sustainable growth for the organization.
Works Cited
Cunningham, James & Harney, Brian. Strategy and Strategists. Oxford: Oxford University Press. 2012. Print.
Dowd, Steven, B., Tilson, Elwin, R. & Carlton, Richard, R. Quality Management Exam Review for Radiologic Sciences. New York: Thompson. 2002. Print.
Johnson, Gerry, Scholes, Kevan & Whittington, Richard. Exploring Corporate Strategy. Eight Edition. Edinburgh Gate: Pearson Education Limited. 2008. Print.
Patton, Katie. The Best and Worst Fabrics for Sweaty People because Everybody Sweats but We Don’t Have to Like it. [Online]. 11 June 2015. Available from < http://www.bustle.com/articles/89224-the-best-and-worst-fabrics-for-sweaty-people-because-everybody-sweats-but-we-dont-have-to>. 23 June 2016.
Russo, Christina, T. & Swan, Cathy. Your Library Is the Answer: Demonstrating Relevance to Tech – Savvy Learners. Santa Barbara: AMC-CLIO, LLC. 2015. Print.
Thompson, Arthur, A. Under Armour’s Strategy in 2014: Potent Enough to Win Market Share from Nike and Adidas? Alabama: University of Alabama. 2014. Print.
Under Armour official website. [Online]. No date. Available from < http://www.underarmour.jobs/why-choose-us/mission-values/>. 23 June 2016.
