Introduction
Under Armour is the brainchild of Kevin Plank who initiated the company in 1996, which has grown to a multi-billion business venture operating in the American market and producing accessories and sports clothing. It is among the largest suppliers of casual and sportswear apparel in the Americas. The company is headquartered in Baltimore, Maryland with franchises across Houston, Austin, Denver, Texas, New York and other major states in North and South America. Further, Forbes notes that Under Armour’s core business is the manufacture, marketing, and distribution of branded sports apparel including footwear, accessories for men and women and footwear. The technology that pushes the Under Armour brand is the need to continue producing diverse product assortment for men and women and maintaining market leadership (Lussier et al., 46). However, its grip in the market takes a lot of considerations from its stakeholders and comparative advantages. The essay discusses the company’s mission and vision, stakeholder analysis and the competitiveness of the company in a dynamic market.
The impact of the Under Armour mission and vision statements
Under Armour’s mission is to “to make all athletes better through passion, design and the relentless pursuit of innovation.” The impact of the mission statement is that the company is obliged to continue producing the best performance apparel using technology. The mission explains to the customers the commitment of the company to produce customer-responsive products that are driven by innovation. In essence, the company’s mission is driven by Kevin Plank’s persistent pursuit towards developing sportswear that remains drier and lighter during play. The creation of performance apparel as a brand is the mission statement asserts the company’s commitment towards providing its customers with a superior product that absorbs sweat during play and keeps the player dry.
The vision statement for Under Armour is “to empower athletes everywhere”; essentially, by using technological innovations to produce revolutionary designs and fabrics that enhance the ability of sportsmen and women to enhance their athlete performance (Brown 38).
Primary stakeholders impact on the company’s success
Under Armour have five primary stakeholders. The fabric manufacturers form part of the company’s main stakeholders. The relationship between the company and the fabric manufacturers is mutual. In particular, Under Armour produces a wide range of products including men and women apparel, cold and heat gear and accessories. In case, the designs or quality of the material is not impressive or unpopular to consumers; the fabric manufacturers may influence a change in the designs. In this regard, the company and the manufacturers enjoy a functional linkage. The other primary stakeholder is the employees. Employees are the greatest asset of the company because they are the hallmark of its success. However, they share a mutual relationship with the company since they depend on the company’s finances for the support in exchange of their skills. In this regard, the company must consult and consolidate the opinions of the employees before making major decisions since the functional linkage is founded on the human resource. Thirdly, the consumers possess a huge stake in the company. They are a deciding factor in the company’s products and design. Their support of the business is what drives Under Armour’s success in the performance apparel. Further, the company uses endorsers as a product promotion strategy. Most of these endorsers are celebrities such as Michael Phelps, Gisele Bundchen and Tom Brady, who endorse the company’s products in the market. The names of these celebrities may give the company’s brand a positive or negative reputation, which may affect the company’s market share and profitability. Finally, the media takes a huge stake in the company. Through advertisement or news, the media relays information about Under Armour products. The media may shine the company’s brand in the bad or good light. As such, the company has a responsibility of pursuing a positive relationship with the media in order to maintain a worthwhile reputation and hold onto its market position (Rassman, Damion and Jack 75).
The impact of Five-Porter Forces on Under Armour
In terms of competitive rivalry in the performance apparel industry, the company faces the competition of Adidas and Nike. Both Nike and Adidas control a huge market share in the sportswear market, which makes the competition in the industry move from medium to high. In particular, Nike has a market share of about 7%, while Adidas controls 5.4% of the market share and Under Armour owns a paltry 2.4%. The greatest undoing of Under Armour in this competitive market is the fact that it lacks patent rights on the cooling shirt. The lack of patent exerts undue competitive pressure on the company due to effects of reverse engineering and imitation of its products. Further, the demand for breathable sports gear is growing tremendously, and Under Armour’s competitors have taken advantage of the innovation, yet Under Armour invests less on the technology.
The second Porter’s force is the bargaining power of suppliers. In this regard, the company’s suppliers have a very low bargaining power since Under Armour can produce its products and fabric from many other countries that provide better prospects in terms of production costs. In particular, the company beginning 2001 has been procuring its fabric from at least 16 countries. This fact offers Under Armour a diverse supplier base; therefore, giving the company an edge to decide on who supplies thereby weakening the capacity of individual suppliers to bargain.
In terms of buyer bargaining power, the buyers enjoy relatively medium bargaining power because the buyers may easily substitute the company’s products. However, the medium buyer bargaining power is rife for Under Armour because the technology used to produce its performance apparel is new thereby triggering high demand. Besides, Under Armour has its products retailing in major outlets such as Dick Sporting and Sports Authority; outlets that generate 26% of its revenues.
The fourth force is the threat of new entrants. The performance apparel industry enjoys a significant brand loyalty. Therefore, there exist imminent barriers to entry. Further, new entrants may require huge amounts of sunk costs in order to compete in the market owing to the fact that investment in the industry requires huge initial capital outlays, brand advertisement costs and endorsements.
Finally, the company faces an imminent threat from close substitutes such as Adidas and Nike. Further, replication of Under Armour’s product designs by small players is also a major concern, especially in the emerging markets. Due to the great risk of substitutability of Under Armour products by other clothing manufacturers, the company is only left with the option of continuous innovation and patenting of its unique designs (Mwendwa 21).
Under Armour’s SWOT Analysis
Strengths
A high-quality assurance of Under Armour devices, performance apparel, and products
The company has a robust marketing strategy involving the use of brand ambassadors, sponsoring sports, publicity and product promotion
The company has a strong commitment to offering their customers with high-tech products
The company has a high brand value due to sustained production of high-quality products
Brand loyalty gives the company an edge to continue holding onto its market share
Weakness
Their products are high-priced compared to those of the competitors
Their e-commerce platform is not customer-responsive compared to popular brands such as Nike and Adidas
The company only focuses on regional and national markets instead of going global
The company’s manufacturing base is located in Asia, Europe, Africa and North America, which may be expensive in the long-run as the company pursues the high-quality objective
Sustained internal wrangles by the top management
Opportunities
The company has an opportunity of expanding its business through robust product promotion, joint ventures, franchising and opening new outlets globally
A strong focus on international market and sponsoring sporting clubs is an opportunity to venture into new markets
The company may give potential retailers new offers and privileges in order to increase the company’s presence and customer base
Utilize research and development to develop new product designs and patent the designs to protects its products against reverse engineering and imitation
Should venture on other sports such as football and cricket
Diversify to other related products such electronics and gym products
Threats
Strong competition from Adidas and Nike is the greatest threat facing Under Armour
Its pricing model makes its products expensive in comparison to the same line of products supplied by competitors
Price fluctuation influenced by prices of raw materials due to environmental changes often affect the company’s pricing model
The business can potentially be affected by natural disasters such as heavy rains, cyclones, and earthquakes
The stability of the business is affected by government policies, unfair tax regimes, and inflation (Rassman, Damion and Jack 79).
The following strategies can help Under Armour capitalize on its strengths and opportunities
Deepens its investment in research and development in order to come up with unique technologies that can propel the company to a greater competitive advantage
Expand to global markets to take advantage of emerging markets
Obtain patents for its unique products and designs
Diversify and differentiate its products to appeal to more customers
Shift their goals from a focused niche to a wider market segment
Diversify products targeting non-athlete markets
Factors that Under Armour should consider to maximize its competitiveness and profitability
Cost leadership strategy
The cost leadership strategy is employed by businesses to enable them to create a low-cost operation within its core business and niche. Under Armour may apply cost leadership strategy as a measure to take advantage of the competition by working towards cutting its operation costs. Should Under Armour succeed in the cost leadership strategy, it will have increased its competitive advantage and positioned itself for profitability.
Differentiation
Under Armour should develop its competitive advantage by offering the market with products that are different from those of the competitors either by design, quality or nature of service. If differentiation is developed successfully it gives the company an edge due to reduced prices and increased brand loyalty.
Focus strategy
Under this strategy, Under Armour is expected to focus or concentrate its resources towards expanding its presence in other market niches or industry segments. Ideally, the focus strategy forms part of the generic marketing strategies that helps organizations identify the specific needs of a niche, interests, dynamism of customers and uses the analysis to customize products and services to meet those specific market characteristics (Hitt et al., 17).
Communication strategy
Under Armour needs to develop a communication strategy that will help it reach all its stakeholders and inform them about the strategic decisions that the company is taking to increase its competitiveness. More importantly, the company should consistently focus on the non-traditional consumers such as hunters and women niche and expand to international markets. It is recommended that Under Armour uses segment, targeting and positioning strategy to reach more segment and target audiences such as athletes by their age, gender, interests, sport and geographical location. The archetypical Under Armour consumers are the young male athletes aspiring to achieve intense training for greater success. The demographic is media savvy and more likely they follow the ESPN. For this reason, Under Armour should dampen its global marketing strategy by employing tools such as TV, social media and online platforms as a primary goal for consolidating its customer base and building brand awareness. To other stakeholders, the company needs to engage them more using newsletters, publications and other traditional means to inform them about the turnaround strategies. In this regard, it is recommended that the company explores the 3p’s, which include profile positioning, pull-positioning and push-positioning in order to develop relationships with the distribution networks, target purchase driven communication and more importantly build its new reputation (Hitt et al., 87).
Corporate governance mechanisms used by Under Armour
The first corporate governance mechanism used by Under Armour is low-level diversification because the company is still in its infancy. Put in perspective, the company’s 84% of its business is from the sale of apparel and 93% of the products are sold in the U.S market. What this means is that the company has a heavy reliance on the performance kits. This is unlike their closest competitors-Nike which has a distinct and separate business investment in different sports. The second corporate governance strategy involves the acquisition of partners with pro teams and colleges because they are always seeking to get rights for sponsorships. The sponsorship rights may give the company a pronounced product promotion and brand presence. In this regard, the company is following the footsteps of Nike by continuing to sign endorsements with rising athlete and sports team such as Tottenham Hotspur, which is a huge milestone towards introducing the Under Armour brand in the European market (Lussier et al, 50).
Effectiveness of Under Armour’s leadership
The company adheres to a simplified organizational leadership structure. The CEO, Kelvin Plank is the face of the company and sits at the top of the pyramid. Further, the Board of Directors is responsible for oversight and strategic decision making. In order to make the board effective, it is evaluated on annual basis by the responsible committee to ensure that it attains its strategic and decision making role. The company has an established “Lead Director” role, responsible for convening board meetings. The lead director is appointed upon a vote by non-executive directors. Notably, all directors of the company enjoy rights that give them privileges to attend board meetings, scrutinize financial records, represent the interests of the shareholders in the board, endorse strategic plans from the CEO and ensure the company fulfills its corporate responsibility. It is recommended that the board of directors’ approves a budget that dedicates sufficient funds for research and development. This recommendation is given owing to the fact that the company faces substantial competition from close substitutes. Therefore, the company must invest sufficient resources in research and development to come up with designs and products that differentiate the company’s products from those of competition (Rainer and Casey 19).
Impact of Under Armour’s corporate responsibility
Under Armour prides itself on being an eco-friendly company especially in using plastic bottles to create replaceable cleats and other performance products. For example, evidence shows that in 2011, the company saved 2million water bottles from being dumped in landfills. Besides, the company recycles worn out sports garments by converting them into usable products. Further, it takes legal responsibility seriously and for that reason, the company has emplaced a large number of codes to enable them to operate legally and entrench openness in hiring employees within the communities they operate in. Ethically, the company maintains the strong prohibition against partnering with unethical business or individuals such as those that use forced labor, practice child labor, have tendencies of harassment and discrimination. As a corporate citizen, the company gives back to the local communities such as participating in fundraisers and hosting charities (Hitt et al., 14).
Conclusion
Under Armour is a company started by Kevin Plank as a leading producer of performance apparel. The company began its operations from the basement but continues to grow and demonstrates strong prospects for future growth. However, the company needs to consider revising its pricing models and diversify in order to overcome the strong competition from close substitutes.
Works cited
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Hitt, Michael A., R. Duane Ireland, and Robert E. Hoskisson. Strategic management cases: competitiveness and globalization. Cengage Learning, 2012.
Lussier, Robert N, David C. Kimball, and Robert N. Lussier. Applied Sports Management Skills. Champaign, IL: Human Kinetics, 2009. Print.
Mwendwa, Hillary. "Strategic Plan of an Athletic Apparel Label: Under Armour." (2011).
Rainer, R K, and Casey G. Cegielski. Introduction to Information Systems. Hoboken, N.J: John Wiley & Sons, 2011. Print.
Rassman, Franz, Damion Rashford, and Jack Williams. "Marketing Plan for Under Armour." (2013).
