Under Armour essay

Introduction

Under Armour dates its history back in the year 1996. The whole thing started with the owner of the company, Kelvin Plank who was a footballer then. He was tired of using the sweaty t-shirt every time he went to the field to play. Therefore, he came up with a t-shirt enhancing performance through the use of moisture wicking fabric. This would regulate the temperature. Kelvin Plank started his company in his grandmother’s basement. Currently, the company is the largest supplier of the sportswear commanding 79% of the market against its competitors. Its headquarters are beside Maryland. It also has its European headquarters based in the Amsterdam Olympic stadium. Also it has other of its subsidiaries in Colorado, Denver, Hong Kong, China, Toronto, Canada and Guangzhou in China. The company got its first big step in growth in the year 1999. It started receiving orders of the sportswear in bulk. The video industry also approached it and it made several wears for the movie actors and producers. In 2008, the company started to go international, which most of the companies are doing nowadays. The reason why many of them go international is to increase their customer base as well as growing themselves (Kurtz 2009). The company started subsidiaries in other states of America like in Illinois. In total it is in operation in a total of 34 states in the United States. The company is also popular in Scotland. Under Armour has a variety of products on the basis of sportswear. The company also has partnered with a number of individuals who are athletes, as well as teams and associations in their activities and also in activities of giving back to the society.

 

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Under Armour Accounting and Economic Measures of Competitive Strategy

It is the business of all companies to strategize on how to deal with competition in the market. Marketing greatly affects the sales of company products. It is said that the business of a business is business. This means that any business is in business to make profit. It’s known that it is impossible to make profit without sales. Thus sales and profit are directly related. This is why the companies are paying so much attention to marketing. They do this to fight for a larger market share.

Under Armour has not been left behind. As said above, the company commands 79% of the market share against its competitors. The major competitors are Nike, Adidas and Columbia sportswear.  With the 79% market share, the company’s marketing strategies can be said to be doing very well. It has adopted accounting measures of competitive strategy, whereby they set the prices of their products considering the customer, and not only the profit the company wants (Gorgenla%u0308nder 2010). This has made the customers trust the company and be maintained within their products. This has led to increasing support of the company products since its formation in 1996. The price as compared to the competitors is low and thus the customers opt for the Under Armour products. The company having being formed by the former footballer gives motivation to other footballers and the feeling that they want to support their fellow. Thus they buy products from it and also believe that he has the knowledge of exactly what they need. The owner is one of them, that is why they trust his products.

Under Armour also has economic competitive measures whereby it does not concentrate on one economical strategy. Therefore it has started subsidiaries in different countries. This ensures that the going concern of the company is in existence. They are the monopoly in terms of customers (Hiriyappa 2009). They also ensure that they are equal employers as any other company in the world. They provide employment opportunities to the people in their area of operation and also they give back to the community through their subsidiaries and help the youths develop themselves.

These competitive measures seem to be working very well for the company, since they are leading their competitors and as said earlier they command and control 79% of the customer base in the areas, where they operate together with others. They have been making very large sales which have boosted their growth. It has also contributed greatly to the company being known internationally.

Under Armour Emergent or Intended Strategy

The company should not sit back and relax simply because it is ahead of the competitors. They should be aware that the competitors are working really hard to be ahead, too. This is thus clear that they should always be having something that the competitors do not have. They should also do their business in a unique way to keep the customers trusting them all the time. In the recent years Under Armour has launched new products. The products include among them Under Armour scent control. This product that was released in year 2012 is meant to prevent the scent of the player from being smelled. It has made the company unique since it is not produced in any other one. Under Armour has also come up with new styles for football uniforms. The uniforms by the name the Wounded Warrior Project for football uniforms, was worn and revealed last year.

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The company is also planning to release new products this year under their coldgear product line. They will be called Infrared (Hill, 2009) and designed to disseminate the heat from the body using ceramic powder and re-circulate the heat around the wearer’s body. It will thus ensure that the players can play even in extremely cold conditions since they are not going to be losing their body heat. Under Armour is also inventing another product by the name Cold Black. It will be able to reflect the heat from the sun and thus the players can play comfortably.

The company wants to maintain their customer base by ensuring that there is always something new for everyone. This way the customers will always be anxious to know what is the next new product and they will be maintained by the company. This will ensure that the company maintains its customers and thus make large sales each year. It also propels the growth of the company.

Threat of new entrants to a market

Porter’s argument was that the competition will be increased when there is a threat of new entrants into the market. The new entrance will also be under different factors such as the capital needed to start the business (Abrams 2003).  In case the capital required is less than its means then the competition is likely to be more severe since the entrance of new competitors is simple and not costly. Keeping up with brand standards is also another factor and that is why Under Armour is doing all it can to produce unique products. It is coming up with products that the competitors will find hard to keep up with. This will make it difficult for the already existing competitors and also the new competitors to compete with them.

Bargaining power of suppliers

Porter argued that the more bargaining power the supplier of the products has the more is the price they can sell the product for. He said that the more power they have the more chances there are to keep the customers loyal to the company and thus reduce the competition. This is what Under Armour has been doing since formation by its aggressive marketing strategies in place. This way they have been able to keep up with the pace of the competitors and even go beyond them by the new brands they produce each year.

Bargaining Power of Customers

Porter stated that the more the customers are bargaining the more stiff the competition is, since the competitors may decide to completely lower the price of the products. However, Under Armour is trying to avoid such a scenario by always ensuring that it is the leader in price and new brands production. This has helped them to have the loyalty of the customers and thus maintain high sales and profits all the time.

Threat of Substitute Products

As discussed above, the formation of Under Armour was through coming up with a substitute product for the already existing sportswear that time. To be specific it was t-shirts. The threat of substitute is where there is a possibility of another company coming up with a product that can be used in place of an already existing one. If this happens then it would mean that the company will lose its customers and the competition will be stiff. Under Armour tries to avoid such a scenario by producing unique products every year, improving and coming up with new brands of the already existing products, thus making the company’s products always look new. This way they maintain the customers’ loyalty.

Degree of Competitive Rivalry

In the situation whereby there is an intense rivalry in the industry the companies will engage in activities of sale promotion and reduction of prices. This will increase the cost of production and the cost of advertising. It will reduce the profits since the price will be lowered. This will even include the price wars and creative innovations by each company to ensure that each company is the best in producing the product as they try to win the loyalty of the customers. The intensity of the rivalries will be based on a number of factors among them. In the sportswear industry, for instance, there are four major competitors: Under Armour, Nike, Adidas and Columbia sportswear. Under Armour Company is trying to have the customer loyalty and thus reduce the intense. They are trying to do that by ensuring that they always have new brands of the existing products as well as new products.

Analysis of strengths and weaknesses vs. the competition   

 Under Armour as discussed above has been moving onward to the top since its formation. The innovation in the company has helped it to maintain the loyalty of the customers. This is one of its major strengths; the customers trust their products and this has made the customers stick to them. It has given them an advantage to the company towards the competitors. The company also has an advantage in competition since it has great products. Its innovative culture has also given it a competitive advantage. The company comes up with new brands all the time. The company uses unique technology and this has also put it at a competitive edge as compared to the other brands.

Under Armour, however, has a number of weaknesses that the competitors are looking at to raise themselves. One of them is limited product range. They only produce sportswear and in the beginning they only produced t-shirts. The company is also not in the Internet intensely, as compared to the competitors. It is good to note that in the recent past the issue of online business has become so important to any company and thus it is a factor for the company to sell and reach the customers online. The competitors who are fully offering their services online have an added advantage over Under Armour. The company lost the military market. This definitely was to its competitors and this was a blow to the company since their customer base reduced. The company is not very large; it has a small relative size. This is a weakness that competitors with large size utilize.

Analysis of the Company Using VRIO Framework

This framework of analysis is used to analyze and examine the internal environment of a firm. The analysis involves four questions on the capability of the company to determine the kind of the potential it has. The first question that the company should ask itself is whether the capability is valuable. And if the answer is yes, then the company has a competitive advantage. We would say that Under Armour innovativeness is valuable. The second question should be about the rarity. It is about whether the resources are currently controlled by a few competitors. We cannot really say that the resources used by Under Armour Company are limited to a number of companies and thus it does not have advantages in competition to the other brands.

The third question of imitability. It is about whether the firms without the resources face the cost disadvantages to obtain them or develop them. Under Armour Company, as said earlier, does not have resources that are limited to the competitors. The fourth and the last question is about the organization. It is about whether the firm’s policies are organized in a way that supports exploitation of the firm’s valuable capability. The Under Armour Company policies are in support of exploitation of the capabilities the company has. This can be seen in the innovativeness and also the new brand of the products.

What Is Their Cost of Leadership and Competitive Advantage?

Under Armour has been known for its unique products. This has led to the customers’ loyalty to its products. The company has been on the lead in production of sportswear and leading in competition. It has thus been the price leader as a result. The leadership has been gained because the competitors wait for the company to set the price so that they can follow it having in mind that it is the most trusted in sportswear. It is at a competitive advantage having in mind that the company uses high technology and it has high customer loyalty.

What Is Their Product Differentiation and Competitive Advantage?

As discussed above, the company has been known for the innovativeness. It has been improving its brands on a yearly basis. This has brought about the differences in the products of the company and those of the competitors. It has given the company a competitive advantage. The company ensures that there is a new product each year and this also helps in ensuring it maintains its customers. This has contributed greatly to the 79% of the customer base the company commands. For instance, it is intending to release new products this year. One of the products is the wear that can be worn by players even under very cold environment. The wear is going to keep the heat generated by the body of the wearer and thus the player can comfortably play in extremely cold environments. The company also intends to release a product that will enable the players to play comfortably in sunlight. This wear will be reflecting the sun and thus reduce the heat. It will make their products more unique and different from those of their competitors. This will also give them a competitive advantage.

Corporate Diversification Strategies Based Upon; Product, Geography, Product-Market Diversification

We have talked about the products of the Under Armour Company in details above. It has been mentioned that the products are unique with the new brands each year.  This has given the company a competitive advantage and has led to its growth. It has also increased the company’s profits. The company has branches all over the United States of America and also some parts of the world. This has given them an advantage of the bigger customer base. The company has also started a branch just next to an Olympic stadium in Europe and that is very strategic, having in mind that the company produces sportswear. It is a way for advertising. With the increased sales the company is able to invest more and to develop them. Examples of Management Controls That Facilitate Strategy Implementation

Under Armor Company has implemented a number of various strategies that helped it to gain the customer loyalty they currently have. It does not concentrate too much of the profit. The company has been focusing on the needs of the customer. That is seen in the products they release each year. This is why it has maintained the customer loyalty. They have also ensured that they engage themselves in the corporate social responsibility. The company has a foundation to help the community, in association with the individuals who are sportsmen and athletes, and also some companies and sports associations. Under Armour has made the customers see that it is not only concerned about its welfare but also the welfare of the customers and the communities. They have also created jobs for the youths in the area. It is all this that helped the company grow very fast having in mind that it was started only 1996.

Recommendations

Under Armour Company can be said to be doing well in the industry with the 79% of the market they are commanding. However, there is more to be done. There is an opportunity for them to exploit even more. For instance, it concentrates too much on the United States of America. The company needs to know that if they focus on the international business they will grow even more and their sales can be estimated to be more than $20,000 million. It should utilize that opportunity of going international. They should even engage other foreign countries to penetrate in the foreign market. The company has been producing the sportswear only. I would recommend it to diversify its business by engaging in other ones. This will bring more sources of income and when their current business is not doing well they will still be getting profits from other businesses. For instance, they can start companies that make the sports materials like balls, playing bats and sticks, and so on. This is related to what they are currently doing and thus it will attract even more customers to the company. It will thus ensure a maintained net consolidated income of not less than $25,000 million.

The company has a weakness whereby the range of brands they produce is small. It should work on that and increase the range. They should at least ensure that they are producing sportswear for almost all the available games. Under Armour should also ensure that they incorporate having their own teams and stadiums for leasing, for instance. This will increase the sales and also the customer base. It will bring the diversified the sources of income. Under Armour Company is not intensely working online. The recent research has shown that online business commonly known as e-business is on the rise and the companies that are not in it have a competitive disadvantage. Thus it should heavily invest in the e-business to ensure that they are either at the same level or above the competitors. The company should also work on marketing strategies. This is because the competitors are all focusing on what the company is doing since it is the leader in the industry. The company thus should consider tough and more aggressive marketing strategies since sporting is done all over the world. It should also consider other strategies of international market entry like licensing and joint venturing. This way they are going to grow internationally and also learn from partners on what they do in their field to succeed. The company will also stand a position to share expertise with the partnering companies.

If it implements the above mentioned recommendations then it is going to see the increase in sales. The company is thus going to see an increase in its profits. It will go international and is going to be in a position to maintain its customer base and loyalty. It will also be able to stabilize in terms of income, since it is going to diversify. They are thus going to be secure, since even if one field of business fails to make profit, then the other one will; therefore they are going to use its proceeds to grow and maintain the other (Plunkett 2009). They are always going to remain in business. The company going international will even reduce advertisement costs, since it will become popular and on improving the products, the quality will be selling. By using and improving its strengths like the innovativeness and technology, they are going to be at a position to compete fairly with the other brands and even be at an added advantage.