Acquisitions, which are partnerships with college and professional sport teams since they buy the rights to sponsor those teams, will be UA’s most vital corporate level strategy. The drawback to this is that UA’s distribution through retailers increases the prices of products (Burke, 2012). One way to remedy this is to open more outlets with more affordable products. We have to remember that Under Armour is a North American brand and the greatest percentage of these team rights that they own are North American-based teams.
Though it would be great to expand into global markets in Europe and Asia, and keep signing rising star athletes, they must first protect their house. In fact, that has been the main slogan used by UA often, “protect this house. ” The North American market is still highly competitive, and requires a lot of focus and attention to remain dominant and relevant. In saying that, UA must still dedicate most resources in acquisitions rather than spreading out its resources equally and diluting the business.
For Under Armour to have the most long-term success, they must focus more on acquisitions, as it is what got them on the map as a renowned manufacturer of sports apparel, and this is the best way for the brand to be seen continuously. Competitive Environment Just like any other company, Under Armour’s overall strategic challenge is to obtain a larger portion of market share in especially the sporting goods industry. Unfortunately for Under Armour, it will remain a difficult hurdle because they are competing with two industry giants, Nike and Adidas.
These companies are well established and have a long-standing history that allows them to capture a larger market share over UA. They are able to attain this through growth of their brand equity over time, efficient supply chains, and their ability to create value for stakeholders on a consistent basis. Over a four years period from 2011 to 2014, Under Armour has achieved a consistent increase in annual sales revenue from $1. 47 billion in 2011 to $3. 08 billion in 2014. Though this shows success and growth, it is substantially smaller compared to Nike, the industry leader with a $20. 10 billion in 2011 to a $27. billion in 2014.
Attempting to obtain a larger market share is an ambitious gesture however; UA must look at growth as a way of protecting themselves against companies like Nike and Adidas, as they pose a risk of pushing out smaller companies using their advantage over the market. Growth does not happen overnight, it is achieved with time and consistency. Some ways that UA can capitalize on achieving growth are: sports marketing, more efficient and effective supply chains, improved distribution networks, and creating more technologically advanced products through research and development (Daigle, Bowen, Dion, & Valentine, 2014).
Since Nike is the powerhouse of the industry that Under Armour competes in, I would say Nike is the biggest competitor. Both Nike and Under Armour are highly focused on innovation, as this is something that they must pay close attention to in order to stay relative to competition and consumer needs. They are both focused on continued growth, but from different perspectives. Remember UA is still somewhat new on the global market and international sales have still not exceeded 5% of total revenue, therefore the aim is to continue to increase market share.
On the other hand, Nike is already established on a global scale and more concerned with sustainability in the market. With that being said, both companies are looking to expand, but Nike are established enough to be focusing more on refining their strategies to increase profitability, while UA is still in search of brand recognition in overseas markets. Through diversifying, Under Armour is trying to expand by also offering products to women, while Nike is using that same diversifying strategy by selling new products to existing consumers.
Under Armour is focused on acquisition and has signed a five-year deal with English Premier League club Tottenham Hotspurs (Roy, 2016). From a market standpoint, this is the biggest media effort UA has undertaken in Europe given their US focused approach. Right now, UA has 3 teams and 4 individual endorsements in Europe so while this is a positive, they cannot focus on a sustainability issue right now like Nike because it is a lot to take on for a young company.
Nike has been through the process of expanding and is now focusing on attempting to reach zero waste by creating products that can be continuously reused without pre or post-consumer waste. When we review the analysis and comparison between both companies, we can see that they are both doing well in this industry. However, it is clear that Nike has the upper had on Under Armour at the moment because Nike is a more established brand with a wider consumer base. Nike has the larger market share, which means more customers, and ultimately more profits.
Under Armour is still a new company that is starting to expand globally and has a bright future to catch up to where Nike is at as of now, but that will be difficult and will take time. I definitely see a long-term success for UA with the progress that they have showed and the ability to create innovative products that catches consumer’s eyes. However, until UA is able to expand globally in the way that Nike does, and continues to expand the target market to offer more women products, they will not be as successful on a long-term basis as Nike.
Slow-Cycle and Fast-Cycle Markets Whether or not these companies are affected by slow or fast cycle markets, my decision would not have changed. The fact is that they are two companies in a different developmental stage form a growth standpoint. They are actually both affected by slow and fast-cycle markets that affect profitability in some way. Slow-cycle markets are the ones in which the firm’s competitive advantages are shielded from imitation for a usually long period of time and where imitation is very costly (Bower & Hout, 1998). Fast-cycle markets on the other hand are the complete opposite.
We see rival companies like Nike and Under Armour producing the same product at the same time over and over again, but boasting which product is better. Also, we often see cheap imitations on the market from low-end manufacturers. So this does not necessarily apply to these companies. There is always a product sold by competitors on the market that claims to have the same effects. It is important to build a one-of-a-kind proprietary competitive advantage because it can be sustainable if it is difficult for competitors to understand.
Indeed, for a while UA was the sole manufacturer of synthetic materials in their apparel for HeatGear, ColdGear, and AllSeasonGear, but soon after, other companies including Nike adopted that strategy and started to manufacture products with similar use. In fast-cycle markets, the pace of competition is somewhat frenzied as companies somewhat rely on the ideas and innovations of competitors as the engines for their growth and development (Bower & Hout, 1998).
Competitors can easily use reverse engineering to quickly obtain the knowledge required to imitate or improve the company’s products. This market is also highly volatile than slow-cycle markets because prices fall in quick succession due to the need to introduce new or improved products to the market. Both companies rely on each other and are rivals at the same time. If Under Armour were the only manufacturer of synthetic apparel, they still would not be more profitable than Nike because Nike has a wider range of innovated products.
Under Armour is still trying to manufacture more and more products to catch up with Nike and be a competitor in all areas therefore, Nike is still the bigger company whichever way we spin it. My choice would not differ in either slow or fast-cycle markets mostly because these companies are not competing necessarily on equal grounds. Conclusion We see organizational changes in UA’s senior management team this year with a change in Chief Merchandising Officer that will focus on key development areas for the business (U. S.
Security and Exchange Commission, 2016). This has happened early this month and may be a change for the betterment of the company. Sometimes change is required to move forward. Under Armour must work on the two goals that will further set them apart and set them up for long-term prosperity in the industry. The two goals are: expand globally and expand their target markets. These strategies will take time and the more they unfold, the more established Under Armour will become as a world renowned brand that is highly in demand.
It is key for UA to continue to strengthen their strengths and their weaknesses as a young company, as there is a smaller margin for error. Larger companies like Nike have the capacity to fall short because they have more to fall back on. However, UA must be more calculated in risk taking, but at the same time challenge themselves to take over markets. It is not just staying afloat because bigger companies with larger market share can push out smaller ones. It is more about beating out competition segment by segment by being more innovative and cutting edge with consumer products.