Under Armour Case Analysis

Under Armour was founded in in 1996 by a guy who previously played collegiate football at the University of Maryland, his name was Kevin Plank. Essentially, Under Armour is sports gear that is engineered to either keep athletes cool or warm, although it was originally engineered to help athletes stay cool in the dog days of summer football. How Under Armour does what it is advertised to do is by wicking off any moisture that an athlete may have accumulated during a workout, thereby regulating that individuals body temperature and rendering that sweat absorbing cotton stuff obsolete.

Originally named KP Sports because of his initials, the name was changed in the year 2005 to Under Armour. Under Armour truly is a pioneer in the athletic apparel industry, and in 2012, Under Armour amassed a sales number of $1.8 billion dollars with a B. Furthermore, Under Armour is continually growing in the $60 billion dollar industry and is almost as identifiable as the athletic apparel giant, Nike. Some may consider sneakers, as their weakest segment of business, yet the company is growing even in that sense, up 7 percent in 2012 from 2011.

So that was a little on the background and history on Under Armour, now let’s get into the case analysis itself.

1). How strong are the competitive forces confronting Under Armour, Nike, and The adidas Group? Provide a five-forces analysis to support your answer.

The sports apparel industry is filled with competition and is extremely fierce. The barriers-to-entry are low which makes it even more competitive. Moreover, Under Armour’s rivals Nike and Adidas have an abundance of capital when compared to UA itself, so that puts UA at a disadvantage right away.

New entrants can be abundant in this industry. As the world gets healthier and fast food chains try to become healthier, then more and more people will also start trying to achieve a healthy lifestyle. This will therefore make this type of apparel more valuable than ever.  And considering the ease of getting apparel manufactured, I could definitely see new competition. However, it would still take whatever new entrant a long time to be on the level of Nike, Under Armour and Adidas.

The threat of substitute products is extremely high and I think this makes it even harder for just the main 3 companies to compete. And as technology keeps advancing, I believe that it will be easier for smaller brands to create substitute products that will be able to compete with the larger brands.

When it comes to the bargaining power of the buyer I think that it is decently high when it comes to Adidas, yet a little bit lower for Nike and Under Armour. I say this due to the fact that when it comes to this certain type of cold weather or warm weather gear, consumers are going to turn to Nike or Under Armour most times. Therefore, they can control the price points because the consumers are still going to buy their products. Conversely, Adidas is arguably the worst in this category of the big 3 therefore might be more inclined to adjust prices to please the consumer.

The bargaining power of the supplier is lower than the bargaining power of the buyer but it is still pretty good. The reason this is true is because of how many suppliers there are in this industry. The more suppliers there are, the better prices that these companies (Nike, UA and Adidas) can command.

2). Does Under Armour have any core competencies and, if so, what are they? Does Under Armour have any resource strengths or competitive capabilities that qualify as a distinctive competence?

I think one of the strongest core competencies that Under Armour has is producing athletic apparel with unmatched quality. Sure, Nike has good products, but everyone knows that Under Armour rules the tight-fitting, moisture-wicking athletic apparel industry. I believe that their Vice President of Licensing said that performance apparel was their true core competency.

Another competency that Under Armour has is that of innovation. They truly are innovators in that they are always engineering ways to make athletes more comfortable and able to perform at the highest level.

One more core competency that UA possesses is its resources with the main one being their CEO, Kevin Plank. I think he is of the utmost importance to the company not only because he created UA, but also because he was an athlete himself; and as an athlete, he knows what other athletes across the world want and need.

3). What does a SWOT analysis reveal about the overall attractiveness of Under Armour’s situation?

The overall attractiveness for Under Armour is there. They have been experiencing exponential growth for many years. But here is how I would break down a SWOT analysis for the company…

STRENGTHS

• The financial strength of the company

• Under Armour has been growing in not only revenue, but net income as well. This has been true for the last 5 years dating back to 2008 according to the chart provided in the case.

• Differentiation of products

• Under Armour has been trying to gain reach through introducing new products and product lines. It can also be seen in the financial data that they are increasing those offerings by the numbers. They have increased revenues in not only their apparel, but their footwear and accessories too, something which Nike has a strong hold on as of now, but Under Armour is quickly catching up when you look at when they entered the market.

• The ingenuity and uniqueness of the brand

• They were the first movers when it came to this type of apparel. They invented this moisture-wicking clothing that is now made by virtually every single sports apparel company in the world. That in itself speaks volumes on how respected the company is within the industry.

WEAKNESSES

• Lack of respect when it comes to footwear

• They only entered this market in 2006, whereas Adidas and Nike have been doing it for a much longer period of time. This can be seen as a weakness because it means they have a steeper and bigger hill to climb to catch up.

• Lack of brand awareness globally

• Nike and Adidas are well-known brands in many different countries. Under Armour on the other hand has not been around as long and therefore reasonably does not have the global reach that its competitors do. But this is a weakness because it means they are not getting the revenues that they could be within those countries that their competitors thrive in.

OPPORTUNITIES

• Increasing the brand awareness

• Also gaining respect in the footwear market by continually improving their products.

• Technology Advances

• I am doing a project on the Nike Fuel Band in my Innovation class for marketing, and I see this as an opportunity for Under Armour to enter that market with some sort of wearable device. I believe they just purchased MyFitnessPal, which is an app I use everyday. So if they integrate that with a wearable device that tracks fitness, then there is a ton of opportunity for revenue growth there.

THREATS

• The ever increasing cost of goods sold as well as rising labor costs
• New companies can come into the apparel industry very easily due to the fact that there are low barriers-to-entry in this market.

4). Which one of the five generic competitive strategies discussed in Chapter 5 most closely approximates the competitive approach that Under Armour is employing? Why do you believe this?