Under Armour Strategy in 2016 case study

Under Armour Strategy in 2016 Case Study
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Executive summary
Since its foundation by Kevin Plank, a former football player at the University of Maryland, under amour has undergone tremendous growth in the production, marketing, and distribution of performance apparel, footwear, and all-gender accessories. The company’s products are engineered in such a way that they fit in all spheres, and they, therefore, become an alternative to the traditional products. The athlete-driven innovation is an indication that the principal goals of the company are to reach a global level while maintaining the old targets. Footwear and apparel manufacturing companies have a similarity of outsourcing manufacturing and the under amour company has not been left out. The company has built its competency around the moisture wicking fabric design which also generates approximately 30% of the growth revenue. This report discovers that the prospects of the under amour company in its current position are positive and the number of sponsorships from universities and colleges in athletics has increased. From the analysis, it can be concluded that the key areas that the company needs to focus on product innovation, market diversification, as well as the development of different sizes of apparel that meet the needs of a larger population.

Company’s background
The under armor company was founded in 1996 by an ex-football player from the University of Maryland in 1996. The then 23-year old Kevin Plank was struck with an idea of providing t-shirts and footwear that would later change the dressing code of athletes around the globe.

Over the years, the company grew to be an international supplier of casual apparel and sportswear. The under armor company pioneered the engineering of performance apparel that provided a cool, dry, and light environment to athletes during a game, workout or practice. Although the company utilizes complex technology to diversify its products, the benefits are reaped rather more easily and using a simple program which is defined as wear HeatGear when it is hot, ColdGear when it when it is cold, and the AllSeasonGear when the weather is extreme. The company’s mission is to offer athletes with advanced products with superior fabric construction, exclusively manage moisture, and prove innovation.
In the early years, plank began the company’s marketing strategy by offering t-shirt to forty of his former high, school college, and university teammates. He further proceeded to distribute the t-shirts by visiting schools and camps to promote the products. After a short period, he convinced some of his former schoolmates including Fulks to join his enterprise. Fulks’s financial ability enhanced the operations of the two partners. They were also able to get the financial assistance from family members, and by 1998 the business had secured enough security to borrow a loan of $250000 (Thompson 2018). From then, the company revenues increased tremendously, and in 1999, Ryan Wood joined the company. The under armor company by then attempted to compete with the already well-established companies such as Nike, Adidas, Patagonia, and Columbia. To increases, it competitive advantage Plank’s company began making high-performance apparel and distributed it to the retail market, and by 2000, the company’s products were available in approximately five hundred retail stores. The enterprise also began distributing its products to Japan, Canada, and the United Kingdom. In 2005, Plank and his partners had managed to open 6000 retail stores in the US and 2000 stores outside the US. Its name was changed from KP Sports to the Under Armour Company in the same year, and it became a public company.
Analysis
Competitive advantage and core competencies
One of the core competencies that under Armour Company have is the manufacturing and supply of differentiated athletic apparel. Although the other competing companies also have good and high-quality products, under armor dominates in offering tight fitting and moisture wicking athletic apparel. The products offered by the company are divided into headgear, cold gear, and combine and by contrasting the names of the garments; it is evident that the company offers products that favorable in all weather conditions, unlike the other competitors. Furthermore, one of the outstanding traits of the company’s athletic apparel is the design of the outfits. Apart from the differentiated athletic apparel, innovation is the other competency portrayed by the organization. The products offered by the under armour are engineered in such a way that the athletes feel comfortable. The company has never stopped innovating its products since the production of the #0039compression T-shirt in 1996.
Research and development is also a key factor that has contributed to the success of under Armour Company. The company has invested heavily in research as to out-compete its business rivals. Since the products offered in the market are close substitutes, the company’s research and development strategies have helped it develop superior products and subsequently attract more users. In fact, Hitt et al. (2014) suggest that the quality of the products attracts more of the professional athletes than products from Nike and Adidas.
The enterprise has also developed good marketing and promotion strategies which help it compete with Adidas, Nike, and Columbia. The company’s marketing and advertising campaign are designed by a competent in-house marketing team. The marketing extends to sponsoring athletes from televised competitions to youth programs without minding the number of resources used. In fact, the marketing expenses have been rising from $108.9 million in 2009 to $418.8 million in 2015 including the endorsement of players ( Thompson 2018). As a result of the strategic marketing, the demand for under armor’s products continues to grow despite the steep competition.
PESTEL analysis
Political: each country has a set of policies that govern it. As a global enterprise, under armor is affected by these policies. For instance, the FDI policies in some countries prohibit full ownership of retail store thereby posing a threat to internationalization. Furthermore, the international tax competitive system is a political threat that affects the running of the under armor company.
Economic: although the company has been performing well, a considerable degree of economic risk results from the premium pricing. The same impact stands in the apparel sector. The economic downtowns disadvantage the company to compete competitively with the rivals such as Nike and Adidas. Also, increased labor costs and inflation in some countries have an economic impact on the company. Over-reliance on outsourcing, increased shipping costs of the finished products, as well as the raw materials, are also a challenge to the company.
Social: the company’s mission is to create a favorable experience for all athletes by passionately and relentlessly pursuing innovation to develop clothes that are endorsed by all members of the society. Under armor has sponsored numerous sports groups and reached active outdoor enthusiasts as well as active lifestyle consumers of their products. They have extended their gratitude to the society by providing unique items for women athletes who according to the Nicholl (2016) have increased their participation in sports by 47.5% since the 2016 Rio Olympics.
Technological: technological advances have enhanced the operation of under armor significantly. Previously, the company utilized the off the shelf software to sustain its operation. Later, the system was upgraded to the SAP system which handles a more diverse inventory, adds product list more efficiently, and allows direct shipping to the distributors (Morkel 2014). The advancement in technology has ideally contributed to the growth of the market size by 22%, 10%.
Environmental: the company faces key environmental issues as a result of the growing raw material scarcity, pollution, and degradation, as well as ethically doing business. Consumers are demanding products that are less harmful to the environment. The under armor comes to the center of the issue as the production of most of the sportswear involves textile production that is a major water pollutant.
Legal: under armor, the company works with multiple licensees during the production stage to ensure that their products meet the required quality. The company does not have any patent on the materials used to produce its products, and therefore it has to be cautious as to ensure that it’s know how protected from other companies when making the licensing agreements. This is particularly important in the apparel industry as the intellectual property laws and regulations vary from one state to the other. Furthermore, the tax laws also vary and therefore the company has to be cautious not to act against them.
Five Force Analysis, and Its Driving Forces
Suppliers bargaining power: The suppliers bargaining power is low as the company manufactures most of its products overseas. By 2012, its products were being manufactured by twenty-seven manufacturers located in Asia, South and Central America as well as Mexico (Under Armour Inc. n.d). The founders of the enterprise integrated all their suppliers into one team as to decrease the supplier’s power as well as provide more initiative of the under armor management level. A large number of suppliers enable the company to avoid supply shortages and also enhance the efficiency of delivering of an order.
Buyers bargaining power: On the other hand, the business enjoys medium buyers supply powers as it has wholesale, retail, and direct to customer outlets particularly in North America. The multiple supply channels enable the company to maximize its sales and also diversify access to the products. For instance, in 2013, the enterprise a 68% wholesale supply of sportswear to sports chains and retail businesses such as Nordstrom and footlocker (Soni 2014). Thus, from the supplies, it is clear that the company dominates a significant portion of the market as a result of the buyers’ bargaining power.
The threat of new entrants: The barriers to entry into the industry are strong mainly because of the brand loyalty. The under armor’s competitiveness has been supported by the fact that few businesses can manage to get into the industry. The products offered by the company are highly differentiated and therefore for new entrants to invest in the same field, they have to invest heavily in unique products that surpass those offered by the under armor company. Also, the business requires large capital to start and run, and therefore very few businesses can afford to get in the industry. Furthermore, the cost of switching from the products offered by the company is high such that new entrants may not afford. The combination of these factors create a barrier to entry into the sportswear business, and thus the under armor company reaps most of the benefits.
The rivalry among the competitors in the industry has also enhanced the success of the under armor company. Currently, the main competitors are Nike, Adidas, and Columbia. Although the three manufacture and distribute sportswear, the under armor company has managed to identify athletic activities that the Americans perform well and subsequently invest heavily in manufacturing the sportswear used in these activities. For instance, the company signed a deal with the Ballerina Misty Copeland and the Gisele Bundchen to manufacture women sportswear thereby increasing their gains through athletic specialty.
The threat of substitute products: The pressure from the competitors who offer similar products is high. This has resulted from the high demand for performance apparel. The high demand is, therefore, attracting more entrepreneurs into the business thus making it hard for under armor to focus on its key rivals who are Nike and Adidas. Although the replication of the company’s hot and gold gear technology is yet to occur, it is possible that the high demand for such products will reduce the competitive gap between the rivals. Consequently substitutes to armor’s products will be availed to the market by any of the rival manufacturers.
SWOT Analysis
Strengths: under armor leads to the supply of advanced undergarments athletes who compete in adverse weather conditions. They offer high-quality performance apparel. The company also manages to deal with the pressure resulting from the changing conditions within the industry and the steep competition from its rivals such as Nike and Adidas. The company also enjoys higher market shares compared to its competitors (Hellman 2015). The product differentiation is also a strength that has enabled the enterprise brand loyalty.
Weakness: the main weaknesses that affect the company are lack of patent, heavy investment spending, high prices of their products, over-reliance on domestic markets, low total sales income compared to rivals and fewer distributors and stores compared to Nike. According to Chapman (2017) under armor prioritizes rapidly increasing their revenue rather than developing long-term sustainable strategies.
Opportunities: Since the company is dependent on innovation, it can extend its product line to attract more customers and consequently increase the profits. The company can also exploit the opportunity of the growing population that needs to stay in shape by engaging in sporting activities and going to the gym. Since children are the most significant consumer markets in sports apparel and team gear, the company can partner with NBA league as to increase brand visibility
Threats: the high brand recognition from competitors is a significant threat to under armor. Also, the company is only a few years in the market, and therefore brand awareness remains to be a major challenge. Furthermore, the poor endorsement decisions and bets on upcoming athletes have cost the company.
Key elements of under armor strategy, competitive strategies and strengths compared to Nike and Adidas
Inventory management: the company keeps its inventory for 156 days which is by far much higher compared to Nike at 92 days.
Revenue generation: although the company’s revenue generation has increased rapidly over the past several years, it stills fall below Nike’s revenue. In 2014 under armor generated $ 3 billion while Nike made $27 billion.
Product sizes: the products offered by the company tend to make people think that it offers products for professionals and adults. Often, reviews depict that female customer complain about the sizes provided by the company. Unlike under armor, Adidas and Nike offer all sizes of the footwear and sports clothes in their stores.
Product distribution: under armor has not reached a wide market globally when compared to Adidas and Nike. For instance, in 2015, Adidas sold its products to virtually every country on the globe (Thompson 2018). Similarly, Nike has diversified its markets to every corner of the world while under armor concentrates on the North American markets.
Conclusion and recommendations
From the report, it is evident that under armor has undergone significant growth within a relatively short period. It has achieved an annual revenue growth exceeding 30% and outplaced some of its competitors. Their success can be attributed to innovation, good marketing strategies, and the differentiated products they offer. However, the company still faces steep competition from rival competitors such as Adidas and Nike. Despite the challenge, the company has room for improvement as to sustain healthy growth. Thus to push the company to a better level the following recommendations should be implemented. Firstly, the company should focus on diversifying its market. Under armor should focus on international sales as the domestic market is already stable. Secondly, under armor should revamp its supply chain as it is currently dependent on third-party manufacturers and suppliers. Thirdly, the company should appreciate its past. The company should stay true to itself, and their philosophy of providing innovative products should not be sidelined.

References
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Chapman L. (September 2017). “Putting under Armour in the “SWOT-light” The Motley Fool. Retrieved (February 28, 2018) https://www.fool.com/investing/2017/09/15/putting-under-armour-in-the-swot-light.aspxHellman Justin (July 13, 2015). “Under Armour: A Short SWOT Analysis” Value Line. Retrieved (February 28, 2018) http://www.valueline.com/Stocks/Highlights/Under_Armour__A_Short_SWOT_Analysis.aspx#.Wpb0td_Oa00Hitt, Michael A., Ireland, R. Duane., & Hoskisson, Robert E. (2014). Strategic Management + Mindtap Management, 1-term Access: Concepts and Cases: Competitiveness and Globalization. South-Western Pub.
Morkel S. (2014). “Sports and Fitness Clothing Market-Global Industry Analysis, Size, Share, Growth, Trends, and Forecast, 2013-2019” Transparency Market. Retrieved (February 28, 2018) https://issuu.com/shanemorkel/docs/sports_and_fitness_clothing_market_Nicholl L. (2016). Gender Balance in Global Sports Report. Women on Board Uk, 20-23.
Peterson H. (October 2014). “Under Armour Is Becoming A Viable Threat To Nike.” Business Insider. Retrieved (February 28, 2018) http://www.businessinsider.com/under-armour-is- a-threat-to-Nike-2014-10?IR=T Soni P. (December 10, 2014). “Under armor revenues and retail presence.” Market Realist. Retrieved (February 28, 2018) https://marketrealist.com/2014/12/under-armour-revenues-and-retail-presenceThompson, A. A. (2018). Crafting and executing strategy: The quest for competitive advantage:concepts and cases.
Under Armour Inc. (n.d). Sustainability: “Who makes our products?” Retrieved (February 28, 2018) http://investor.underarmour.com/company/products.cfmBottom of Form