Under Armour (Case 26) free essay sample

Technological Hot and sweaty t-shirts are a thing of the past. New and innovative material for making clothing has changed the game for sports apparel. Now, high-tech fibers are woven into shorts, shirts, jackets and more that can adapt to and regulate the body’s temperature. This advancement is huge for athletes of all kinds, allowing increased performance and endurance. New â€Å"water-resistant† material and fibers that prevent ultraviolet and infrared rays are among the long list of technological advancements taking place in the sports apparel industry. Demographics Performance sports apparel has not always been so widespread. It started off as being primarily utilized by major sports teams, but over the recent years the market has extended to accommodate nearly all sporting activities. Not only are all of the major sports teams using some sort of performance apparel but also active lifestyle consumers and youths. Research has shown that nearly 80% of activewear is worn for non-sports activities. Another study determined that more than 85% of athletic footwear is being used for a different sport other than what they were made for. Only sports teams and sporting activities used sporting apparel until recently. Now sporting apparel extends to men, women and children of all shapes, sizes and walks of life. Economics The sports apparel industry has grown exponentially in the past few years mainly due to heavy marketing and advertising, technological advancements and a vast catalog of new items in new product categories. The ever-prolific sporting world has seen consist Political/Legal Large companies in this industry must stay up to date with the most modern clothing line and accessories in order to be competitive. With new products  and materials come legalities to maintain dominance over specific innovations. Outsourcing production and manufacturing also plays a huge role in legal policy’s and political conflicts. Sociocultural and Global Climate has a big effect on when, where and how often you can exercise or train. With innovative clothing lines that can repel water, prevent harmful rays from the sun and moderate body temperature, come new possibilities to train anywhere, anytime and for longer periods of time. And sports apparel is available to all who seek increased performance. Porter’s Five Forces Model—Apparel Supplier Power (High) Businesses in the performance apparel industry establish credibility with their suppliers. The suppliers use new and technologically advanced materials and create highly differentiated products; thus, giving them more power over their buyers. Barriers to Entry (High) A few very large sports apparel companies, i.e. Under Armour, Nike, Adidas, Columbia, that have been well established for many years dominate the market. Over the years, the larger companies have been able to establish themselves through brand recognition, advertising and various distribution channels. Thus, a company trying to start off in this industry would struggle initially but could profit in the long run due to fewer competitors. Competitive Rivalry (Moderate) The large companies are constantly inventing or reinventing their product lines depending on the consumer market and modern design. Due to a large degree of differentiation in performance and quality, there is less rivalry among performance apparel businesses. Threat of Substitutes (Moderate) There are a few substitutes when it comes to performance apparel. Only a few have been at the cutting edge of technological advancement and quality  enhancement by which they have established themselves as being among the top leaders for quality and performance. However, there is still a major threat of substitution for cheaper alternatives if the economy were to weaken. Buyer Power (High) Customer buying power for apparel is strong due in part to the availability to switch to other products at little, if any, cost, but mostly due to the percent of revenue that the large companies sell from their individual product segments. If a company has a large percentage in a single product category, they are more vulnerable than a company that has a well-diversified combination of products. Competitive Analysis Under Armour has several large competitors; the largest being Nike, Adidas and Columbia Sportswear. These companies are similar in that they all stress product innovation, advertising and sponsorships. Adidas is broadly focused in all sporting categories but fails to stand out. Columbia is known almost solely by its winter gear, limiting its growth potential and creating strong seasonality trends. Nike strives to be the best in every segment while Under Armour’s goal is to be a leader in each process of its product development, concentrating on quality over quantity. An advantage for Under Armour is that it is focused more on improving its brand and unique products, licensing other items and accessories through independent manufacturers. Internal Analysis Under Armour is continually improving their apparel line and broadening there market. The company has been growing at a substantial rate, 30.5% annually over a 5-year period, largely due to the ambition of Kevin Plank, founder, and also to heavy marketing and promotions. Plank attributes the success of the company to brand recognition and the ability to market to all consumers. Under Armour makes â€Å"head-to-toe† apparel for anyone during any season. It has pushed its image into as many stores as it can, reaching college universities and numerous distribution channels. Suggestions to the Firm Over 80% of Under Armour’s revenue comes from the sale of its apparel line. While it means that it has been very successful in this segment, there needs to be more diversity to increase competitiveness and decrease supplier power. While creating a footwear line will aid in Under Armour’s aim to create a full apparel product line and increase the pressure on competitors, many challenges will need to be overcome in order to penetrate this product market. Under Armour will need to reinvent and reengineer its footwear line. Alternative Strategies Expanding the product line to diversify its product portfolio may dilute Under Armour’s image and label thus causing consumers to deviate from premium-priced products. Alternatively, Under Armour could focus more primarily on the development of its footwear product and increase those sales. This option will be very costly and challenging due to the huge market players that already have dominance in footwear, i.e. Nike and Adidas. I suggest Under Armour pursue other product opportunities as well as the footwear to put more pressure on its competitors and to keep the focus on quality and performance rather than quantity.