Under Armour Case
There are a lot of performance apparel companies out on the market, which has created a wide variety of product options for customers. With different brands out on the market, each one has its own specific style and designs, which allows the customers to choose who has the best quality and price. Substitute Products: Low Having a lot of performance apparel companies out on the market causes competition and this will provide similar products at a lower price. Although, since the majority of Under Armour’s customers are athletes they must create high quality products.
Under Armour must set their prices high because the product provides the best comfort and use for athletes. Supplier Bargaining Power: High Having a lot of raw material readily available gives suppliers a big advantage. Many companies in the performance apparel industry have several suppliers to choose from so they can make sure that what they are getting is the best quality and quantity of the material for a reasonable price. Potential New Entrants: Moderate The potential of new entrants entering into the performance apparel industry is moderately low because of the big companies that already exist in the market.
It is very unlikely for loyal customers of the big companies to switch to the new entrants. For the new entrants to steal these loyal customers away they need to create a product that has a better design, better quality and a more competitive price. Rivalry: Very High Rivalry in the performance apparel industry is very high because each company is creating similar products for performance apparel and shoe apparel. Not only is the product very similar but the prices are very similar and this will create heavy rivalry in the marketplace. 2. SWOT Analysis
Strengths: UA has a wide variety of performance apparel products with high quality material and their main focus is how their apparel performs for the user. With Under Armour being sponsors for high school, college and professional level athletes, they have created their image as a strong brand with a high quality product. Weakness: With their product being high quality, it unfortunately comes with a high price. The high prices of UA’s products can cause a decrease in their sales and lose customers to other brands that offer lower prices.
Opportunity: UA could apply some strategies to lower prices on their products, which would allow more customers to buy their products. Also, with sports becoming more popular in Europe and Asia, UA could expand their products to those countries. Threats: Being in competition with Nike and Adidas will cause major threats in the performance apparel industry. With the advancement in technology, companies can create new designs or improve their workforce by getting their products out faster than UA. Also, substitute products are easily available on the market, which will also cause major threats to UA.
Seven key elements of UA’s strategy: Growth Strategy: UA hopes to achieve $4 billion dollars in sales revenue by 2016, which is two times as much as what was estimated in 2013. UA wants to continue to broaden their product line up to men, woman and even children in a variety of sports. Targeting more consumer segments by widening their distribution channels, more advertising, creating more retail stores and expanding their marketing program. UA wants to be able to penetrate the athletic footwear where Nike has been the leader in the global market.
Widening their product sales in foreign countries and becoming a global competitor in the performance apparel industry. Product Line Strategy: UA performance apparel products are designed for hot weather, cold weather and all seasons gear. UA has accomplished this by applying up to date technology and innovation to create their performance apparel products. UA hopes to continue to gain a strong foothold in the footwear market by offering footwear to many sports such as football, baseball, lacrosse, softball, soccer cleats, slides, performance training footwear, running footwear, basketball and hunting boots.
Marketing, Promotion, and Brand Management Strategies Budgeting for marketing, promoting, and brand management has increased over time and has helped the company develop to what it is today. The budget has been distributed to the following areas: Sports Marketing, Retail Marketing and Product presentation. Sports Marketing: UA believes that if their product is being worn by high performing athletes and teams on high school, collegiate, and professional levels, then they are promoting their company’s authenticity and also increasing their exposure to potential customers.
The way UA has done this is by offering contracts to sport teams and athletes on both the professional level and semi-professional to secure endorsements of rising sport stars. Retail Marketing and Product Presentation: The primary objective of this strategy is to increase floor space of UA products in stores, inform consumers about their products, and creating a more engaging and sales productive way for consumers to shop for their products. UA was able to do this by working with retailers about having their products more visible and also reinforcing the message that UA’s brand was distinct from those of its competitors.
Media and Promotion: Just like their competitors, UA uses multimedia and many other promotional outlets to highlight their company and the differences in their products compared to the competitors. Distribution Strategy Wholesale Distribution: During the years of 2011-2012, 70 percent of UA’s net revenues were from selling their products to retailers. There are two big retailers that promoted UA’s products and they are Dick’s Sporting Goods and The Sports Authority. Direct-to-Consumer Sales: This distribution channel includes discounted products through the retailer, at the store and on UA’s website.
Management at UA plan to use their website as a growth vehicle for years to come. Product Licensing: 2. 4 percent of UA’s net revenue came from licensing agreements to manufacture and distribute their products. To be able to manufacture and distribute UA’s products, companies have to first be pre-approved by UA and all the products have to be approved by UA’s assurance team before the products can go out into the market. Distribution outside North America: In 2006, UA opened a European headquarters located in
Amsterdam to conduct and oversee sales, marketing, and logistics activities across Europe. Product Design and Development UA often upgraded its products as next-generation fabrics became available, which helped design their products with visible technology, utilizing color, texture, and fabrication that would enhance customers’ perception and understanding more about UA products. Sourcing, Manufacturing and Quality Assurance In 2012, more than half of UA fabrics that were used came from five suppliers in China, Malaysia, Mexico, Taiwan, and Vietnam.
A majority of the materials that were used to produce UA’s products were petroleum-based synthetics. Since the price and the future of petroleum are highly unstable, UA began changing their fabric materials to cotton-based fabrics, which is more stable in price and supply. UA started outsourcing their manufacturing process in order to reduce cost. About 53 percent of UA’s manufacturing processes are located in Asia, 19 percent are in Central and South America, 18 percent in the Middle East and 8 percent in Mexico. Distribution Facilities and Inventory Management
Distribution Facilities: UA’s packaging and shipping process was mostly completed by a third party logistics service provider whose responsibility was to distribute products to foreign markets and a few domestic markets. Inventory Management: UA’s inventory strategy focused on two things to manage the amount of inventory they had on hand. Having sufficient inventory to fill incoming orders promptly Putting strong systems and procedures in place to improve the efficiency with which it managed its inventories of individual products and total inventory.
Evaluation of UA’s financial performance UA has seen positive growth each year starting from 2008-2012 on their income statement. Almost every year they have nearly doubled their net income after taxes, which show that they are doing something right in reaching customers with their products. On UA’s quarterly revenue statement we again see that their revenue is increasing every quarter and year. Also, during the third quarter, it looks like UA generates more revenue during the summer months. 5.
Strategic issues that Kevin Plank and UA’s management need to address. Also, management actions and recommendations I would advise to UA. The three strategic issues that Kevin Plank and UA’s management need to address are global strategy, distribution problems, and advertisement. First, UA needs to address their global strategy. Global strategy is important because it can help UA increase the amount of revenue it generates in foreign countries. A way for UA to increase their revenue is to study other businesses that are operating successfully in foreign countries.
Second, UA has a distribution problem that needs be fixed before it causes more issues. UA needs to try and focus more on their footwear products so they can better compete with Nike and Adidas. Finally, UA needs to focus on providing more advertising. There are very few commercials of UA products being advertised on TV. From the reading, UA only seems to be promoting their products to athletes. There is nothing wrong with this, but what about the people who are not athletes? If you have a celebrity who promotes UA products then non-athlete consumers will go buy those products.
My recommendation to Kevin Plank and UA’s management is to continue with successfully running their company, but to focus more on running their business overseas. If UA would allow foreign countries to license their products then those companies overseas can produce those products cheaper and in return gain more revenue for UA. The last thing I would recommend is to invest more money into advertising. The main focus for UA is to promote their products towards athletes, but they should also start focusing on non-athlete consumers.