Under Armour: External Situation, Essay Example

There are several factors based on the case study that discuss the Under Armour’s success, including their increased social factors surrounding their product designs. They have branched out from just catering to men, but to women and children, which has kept them in close competition with Adidas and Nike. The company provides a variety of sizes, and features different distributions based on ages including; babies, toddlers, youth, and etc. The company has also capitalized on the opportunity to branch out to more sports than just football. Although they were founded on the catering to football players, they have branched out to include additional sports including Track and Field, Volleyball, Soccer, and other sports. Under Armour achieved early success in the niche industry of compression performance. This success has allowed them to have opportunities to expand and experience increased growth rates in the sports apparel industry, which has been otherwise saturated. Continued growth and sustainability are the company’s main goals. Under Armour wants to continue their record growth rates, and sustain their competitive advantage.

Competitors such as Adidas and Nike are the two primary companies that have long established brand awareness and customer following. According to the case study, NIKE sold, “$10.332 billion worth of footwear, $5.037 billion of apparel, and $1.035 million of equipment in 2010.” (Subramanian and Gopalakrishna 20-3) Nike’s diversified portfolio allows them to target a broad range of consumers that helps to increase revenues in their international markets. For Adidas, “each of the company’s subsidiaries created brands that catered to specific target markets, such as Taylor Made for golf, Rockport for the metropolitan professional, and Reebok Classic for the lifestyle consumer.” (20-2) Their next competitor Champion, has led the way in sports apparel, and performance sports segments. Both Adidas and Nike have created their own compression performance lines that have increased the competition between the companies. Since Under Armour has the advantage of being the first to introduce the product, they have more customer loyalty with the product. However the company’s inability to secure intellectual property opened up the market to Adidas and Nike to capitalize, which enabled the threats of substitutes. The problems in the external environment are the high competitive prices that impact the company’s stagnant sales in their footwear sales. It is important that Under Armour is able to adapt to the changing economy, and allow for price adjustments when needed.

There are many opportunities that are presented to Under Armour in their external analysis including the increase in global demand for sports apparel. The need for development of online shopping and e-commerce in which Nike has taken advantage of. The improving economy allows for Under Armour to play with their prices to be a more competitive company against their competitors in which they have similar pricing strategies. The rising popularity in no-traditional and lifestyle sports leaves opportunities in the sports apparel besides football and basketball. In addition to the increase in women’s participation in sports creates a viable market in which women are growing in their consumer purchasing of sports apparel, accessories, and footwear. The threats to Under Armour includes being solely dependent on sportswear retailers, that decreases their lack of bargaining power, and face competition in the sportswear industry. Under Armour is producing their own items currently in different countries (outsourcing) which creates issues with international trade laws and etc. Under Armour has also been reliant on athletic endorses and brand image, and sports seasons where they see the bulk of their sales. This creates fluctuations in the costs of their inputs. They must begin to expand into the Asian markets where growth is the highest, and capitalize on the demand for sportswear globally.

Evaluation and Control

Under Armour has made a great investment in their SAP software that has helped in providing clarified distribution and logistics. Their intangible resources as well as popularity and reputation has contributed to their sustain success presently. However as mentioned in their external situation, the company has been overly reliant on outsourcing their production, which has provided them a lack of bargaining power, as well as reducing their flexibility for pricing. The company needs to also increase their patents, in which has contributed to larger companies undercutting Under Armour competing power. The company evaluate their current strategic objectives and goals that helps keeps the company in line with the market wants, as their standards in providing the products that will yield the greater sales. The current values, vision, and mission of Under Armour provides direction both strategically and operationally for the company. Their reasons for achieving long-term growth are based on their CEO, as well as their advantage in filling a niche market.  However, Under Armour needs to utilize the leadership of the company to create a corporate level strategy and potent business strategy to compete with Adidas and Nike outside of their niche market. In their foray into footwear, the must invest more in their R&D, as well as tap into the feedback from employees, customers, and athletes.

Additional evaluations must be placed on their design department in understanding the wants of the customers, as well as focus on evaluating the organizational culture that fosters production, innovation, and creativity. The company must develop a sustainable differentiation strategy that requires the company to make changes in various functional areas. This includes improvements to their Human Resources department in hiring competent and creative people that have experience working in the sports industry. They must also focus on their marketing strategy, which needs to produce more creative advertisements that target both athletes and fans to promote sports apparel and accessories for a broad range for consumers. This also points to the internal controls of the company in regards to implementing evaluation tools that provide employees with individual feedbacks. This can also contribute to coaching and training to employees that help to develop their skills and increase a productive organizational culture. For evaluation of these internal controls, the head of the department must be in charge of implementing these controls that contribute to the rest of the organization.

In regards to system controls.  They must implement the necessary quantifiable metrics the measures their sales, customers, and dollars reached, and want to achieve. These factors can measure customer satisfaction, as well as allow managers to evaluate the data to examine where the company needs to do to achieve their strategic objectives. The implementation of system controls for Under Armour can help to obtain feedback from customers, which relate to the company’s standards and goals, as well as help in implementing in new and improved processes, training, and policies. From these measures management is able to replicate the steps for future success, or understand how their can improve their results and performances. The controls that have been established during the evaluation phase can help in improving their marketing strategy, which provides benchmarks to assess how their marketing and strategy can be accomplished.

These evaluation and controls to be implemented within the company are beneficial to sparking creativity and innovation within the organizational culture. As well as helped to increase their sales and market share in their evolving sports apparel industry. The company must implement these controls within their business, marketing, and sales strategies to sustain long-term growth and success.

References

Thompson, Arthur. “Under Armour–?Challenging Nike in Sports Apparel.” Crafting & Executing Strategy: The Quest For Competitive Advantage. 19ed. Irwin Mcgraw-Hill, 2013.Print.

Subramanian, Ram, Gopalakrishna, Pradeep. “Case 20: Under Armour.” in Concepts in Strategic Management and Business Policy: Toward Global Sustainability, 13th Edition Prentice Hall. 2012.