When it comes to athletic apparel, the first company people think of is either Nike or Adidas. Why? Both Nike and Adidas have done an impressive job in marketing their products, with popular spokesperson like Kobe Bryant or Derrick Rose. Nike’s success is attributed to its products contributing to the success of the athletes who purchase them. Nike and Adidas seemed as though they had control on the athletic apparel oligopoly, but recently, Under Armour has become a serious competitor to the two companies.
The road to becoming a legitimate competitor has been tough, specifically because of the competitive nature existing between firms in the same market. The market structure, determinants of supply and demand, and future outlook of the company can help us see the state and performance of Under Armour. Under Armour’s market is an example of a monopolistic competition, meaning they have aspects of a perfect competition market structure, but their products are not the same as its competitors. As mentioned above, Under Armour’s main competition is both Nike and Adidas.
Recently, Adidas has gained somewhat of a bad reputation for causing injuries to its athletes. The most popular example of is Derrick Rose, who has suffered a torn ACL, a torn meniscus in both knees, and multiple ankle injuries. No person wants to buy an athletic shoe and take pre-cautionary measures when exercising. A lot of athletes believe Adidas’s shoes are a direct cause of Roses’s injuries, sadly. Nike remains as the powerhouse in the athletic apparel industry. Nike prides itself on improving its athletes’ performances with their products.
The company has spent a sumptuous amount of money to attract and keep the most popular athletes around the world, most notably spokesperson and NBA player Kevin Durant, who was paid $300 million by Nike. Under Armour’s success can be traced by to 2013, when they new spokespersons like Stephen Curry of the Golden State Warriors and Cam Newton of the Carolina Panthers gained worldwide fame. Not to mention, the signing of Tom Brady in 2010 also played a role in the company’s popularity. Under Armour’s main focus is continuing to sell their products, in order to grow their brand name.
Under Armo me. Under Armour is popular around the United States, but the real challenge is getting their name trending in Europe, the Middle East, and Asia. Under Armour is slowly emulating Nike’s motto of elevating the athlete’s performance. Under Armour needs its consumers to feel like they can have a genuine love and appreciation for their products. Another important factor in a monopolistic competition is profit maximization. Profit maximization will expand a firm’s production until its marginal cost is equal to its marginal revenue.
Under Armour needs to be able to find the point of production to where they can become most profitable. They will have to be aware of the economy and recognize, in a recession, it will be harder to sell products than in a time of expansion. Finding the balance depending on the current economy is the key to Under Armour’s success. If they are able to find it, then they can achieve maximum profit and put their competitors behind them. Also, Under Armour will need to identify inputs of the costs of the things to make their products.
Likewise, they will need to discover the prices of any complimentary goods that go along with their products as well as substitutes that could diminish it. Under Armour is in a monopolistic competition, which means it only has some control over the price of their products because it is limited by the close substitution of goods their competitors produce. Under Armour’s major benefit from a monopolistic competition is its supply of a wide variety of products. Under Armour like most firms, rely heavily on the state of the economy.
When the economy is “healthy,” Under Armour will thrive because their will be a high demand of their products. If the demand for Under Armour increases, it will allow it increase the prices for its products. If there is a large demand for Under Armour products, there will also be an increase in supply of their products. Under Armour will be able to experiment with new fabric technology, which will elevate the performance of their consumers. If the economy is in a recession. Under Armour will struggle. With their products being somewhat expensive, there will surely be less of a demand for Under Armour’s products.
One challenge Under Armour faces today is it constantly has to develop new ways to attract new customers. Physical activity and personal health have both become popular in today’s society, which have increased the need for athletic gear, and puts athletic gear in high demand and therefore raises the price of products. It is important to note Under Armour is not as expensive as its main competitor Nike, which makes Under Armour’s products more elastic in the long run because their products are looked at in high regard but they also serve as an inexpensive alternative.
Under Armour has become a wellrecognized name because it endorses players like Stephen Curry, the former MVP of the NBA 2014-2015 season and champion of the NBA 2015 Finals. It also endorses NFL player Cam Newton, who has become one of the most popular players in the league in 2015. Under Armour is associated with quality athletes, which makes it easier to charge more for its products. As of September 2015, Under Armour’s margins are at strong 48. 76%. The future of Under Armour is bright, since the economy is coming out of a recession and physical activity is becoming more and more popular by the day.
Big-name athletes continue to sign with Under Armour, which therefore increases the demand for its products. Under Armour has recently began to manufacture a few of their accessories here in the United States, which is an important factor to mention when the public begins to focus more and more on globalization. Under Armour has recently become the official supplier of athletic gear to the United States military. With all the factors mentioned above, I see Under Armour becoming the top athletic brand in the United States in the near future.