Under Armour Study Challenging Nike in Sports Apparel

Introduction and Situation Description

Business entities in the modern context utilize their capabilities, resources, and core
competencies in pursuit of achieving competitive advantage over numerous competitors in the
industry. In order to achieve this competitive advantage, organizations should focus on the
adoption and implementation of appropriate business and management strategies. The purpose of
this case, assessment is to focus on the appropriate generic strategy for Under Armour to
substantiate its competitiveness against other players such as NIKE and ADIDAS. The study will
integrate the core competencies, strengths, elements of the strategy, and top priority issues for
the management of Under Armour to address in pursuit of competitive advantage. From critical
assessment of the case of Under Armour, the management should consider addressing issues in
relation to distribution, global operation, and advertising or promotion with the intention of
improving its competitiveness against other players within the industry of the transaction.
Background on the Industry and Company
Under Armour comes out as a fast growing company capable of experiencing a top-line
expansion of up to 20 percent over the last three years of operation. In spite of these
developments, the company faces certain risks, which need critical management to facilitate
substantial growth in the market. Under Armour encounters stiff competition from such
competitors as Adidas and Nike. Such entities prove to have massive and larger possibilities in a
form of resources at their service. Moreover, Under Armour has no the fabric or process patents.
The position of Under Armour within the industry is evident in relation to the Porters five-force
analysis. In relation to competitive rivalry, Under Armour experiences tough rivalry on the
market with Nike and Adidas and other newer entities with the ability and prowess to offer
products under the influence of larger resources. The customers bargaining power as well as
threats is medium because of the resources and capabilities of the existing companies.
Nevertheless, the suppliers bargaining power and a risk of similar production are relatively low
within the industry, thus providing substantial competitiveness to Under Armour.
Strategic Situation and Analysis
The company has critical core competencies in pursuit of competitive advantage in the industry
of the transaction. Under Armours competence relates to innovation and technology in
improving products performance, which is ideal in the generation of a strong brand driving the
rapid expansion. According to the findings of the weighted strength assessment, Under Armour
does not possess a competitive advantage over Nike. The critical issue that really hurts the
company is the global strategy. The assessment notes that Nike has an upper hand in relation to
the strength assessment. Some of the critical success factors include product innovation, quality,
and global strategy. Cost competitiveness is not critical in relation to Nike, Adidas, and Under
Armour because they are not considered as the best cost providers, but differentiated operators.
Under Armour (UA) proves to have an upper hand in product innovation because of the usage of
the advanced moisture-wicking fabric. The company should consider addressing three critical

issues with reference to global strategy, distribution problems, and promotion or advertising.
Accordingly, the UA should consider starting with the global strategy because of the potentiality
of the approach to expand the revenues of the company in foreign countries. In addition, the UA
should consider investing more while concentrating on the footwear to gain a competitive
position against Nike and Adidas within the competitive industry. These attributes and strategies
will be essential in facilitating the effective handling of the demands of the customers.
Recommendations
Based on the issues such as global strategy, promotion, and distribution channels, I would
propose a more rapid marketing strategy. This is through engaging in exploitation of the social
media marketing with the intention of increasing the volume of revenues as well as the number
of consumers in the niche of interest. The approach should also consider the organization and
execution of contests with the purpose of enhancing the image and reputation of the business
entity among the consumers. The level of awareness among the consumers will enable the
organization to enhance its global coverage while incorporating rapid distribution channels. The
organization should consider expansion of the revenues and global operations to achieve
economies of scale and facilitate pursuit of cost leadership. These proposals will enable the
company to improve its image and profitability in the domestic and global contexts while
reducing the cost of providing quality products and services to the customers.
Two Exhibits
Table 1. Porters Five Force
Porters Five Force
Competitive Rivalry
Bargaining Power of Suppliers
Threat of Substitute Products
Threat of New Entrants
Bargaining Power of Buyers

Intensity
Medium to High
Low to Medium
Low
Medium
Medium

Financial analysis
The financial analysis comprises of determination of the revenue growth rates and trends,
profitability levels and trends, and an assessment of the firms overall financial position based
upon the firms 2009-2011 Financials. The formula used to calculate the revenue growth rate is:
; Where V1= the Revenue for year 1 and V2= revenue for the following year. The following table
gives the growth rates.
Table 2 Revenue Growth Rate

Years
2011-2010 2010-2009
Revenue growth rate 38.42% 24.23%

The rates depict an increasing trend for the period.

Level of profitability is net income minus cost for opportunity cost (labour, management and
capital equity). The net income kept increasing through the years hence increase in profitability.
The profitability may be ranked at seven, where there is not enough profit to increase company
savings. Generally, the company finances are improving as referred from financial statements.
The balance sheet strengthens over the years with 2011 value of $ 636432000 from $ 214388000
in 2006. The overall finances of the firm are highly promising for a sustenance.

SWOT Analysis
Strengths Attractive logo

Weaknesses Poor pricing strategy

Numerous loyal customers

Lack of online presence

Strong financial platform

Narrow focus or concentration

Innovation and brand equity

Male targeted brand

High profit to earnings ration

Expensive products

Diverse college athletes sponsorship

Ineffective advertisement techniques

Positive response from the customers

Inappropriate marketing strategy limiting the

achievement of success of Under Armour

Appropriate global strategy

Opportunities Critical concentration on
diverse sporting activities

Threats Economic crisis and recession

Male dominant concentration

Lowered pricing criteria

Stiff competition from Nike and Adidas
Acquisition and strategic alliances
Negative implications on the green market
Increase of the number of retail outlets

 Reduction in the cost of products

Changes in the consumption trend

Expansion of the product lines to increase

the product portfolio as well as sales

Low cost of imports

Availability of substitutes

Exploitation of export opportunities

Increased investment in innovation to
differentiate products

Increased taxes, limiting the profitability and

revenues of the company in the industry of the
transaction
Increased financial burden with reference to
the increasing interest rates

The Under Armour business entity is vital in the generation of core competitiveness in the
market through innovation. The organization focuses on the integration of the innovation and
creativity in designing quality products and services to the customers while reducing the cost of
operations. Innovation is vital in the generation of quality, as well as differentiated products in
the market and industry of transaction to eliminate or minimize the extent of competition from
other operators such as Nike and Adidas. In addition, innovative enables the company to
generate competitive products in accordance with the preferences of the customers while
improving the image and reputation in the local and global contexts. From this perspective, this
strength is ideal in the improvement of the loyalty among the customers, thus achievement of
competitive advantage.