Under Armour Challenging Nike in Sports Apparel Case Analysis

Under Armour - Challenging Nike in Sports Apparel
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Overview-History
Under Armour was started in 1996 under the name KP sports by Kevin Plank to help athletes become more comfortable, with their clothing in practice and games through cool, dry and light sporting gear. As a former football player, Plank struck on the idea after encountering moisture- wicking fabrics that would make it cooler for athlete to wear. The company had sales of 1.5 billion in 2011, and increased he market share from 0.6% in 2003 to 2.8% in 2011 in comparison to 5.4% in Adidas and 7% in Nike (Thompson, 2012). Since 2005, KP Sports adopted the name Under Armour as sales grew and the company widened its appeal.
Mission and vision statements
Under Armour mission statement describes what stakeholders should expect and is written in the present form and in this case it is “ to make all athletes better through passion science and the relentless pursuit of innovation,” (Thompson, 2012).
The vision statement describes what the company hopes to achieve in the future and it is“to be the world’s number one performance athletic brand.”
Mission/ objectives/ strategies
The company seeks to expand product offerings to a wider audience among collegiate, professional, athletic teams, athletes and consumers leading active lives (Thompson, 2012).n with increased retail locations across the world, the company will improve operations with marketing and communication strategies aligned with the needs of consumers.
Industry and sub industry analysis
The textiles, apparel and luxury goods industry consists of the athletic footwear sub industry with companies manufacturing and selling athletic gear. Even though, Nike and Adidas are the main players in the industry, other smaller specialized and innovative companies are increasing there market share in the industry including Under Armour, Deckers Outdoor Corporation and Wolverine World Wide, Inc.. Sponsorships and seasonal sales are main growth drivers in the industry, with industry having low input costs and higher gross margins.
Industry attractiveness
The textiles, apparel and luxury goods industry is attractive, but slow growth is likely to make the industry unattractive in the future. One of the main concerns is that there is little differentiation, and the dominant firms are at times bigger than suppliers. Since firms can commonage pricing, there are high returns which make the industry attractive, especially for companies which enjoy economies of scale and volume cost advantages. However, diversification is necessary as high rivalry in the industry has intensified because of aggressive advertising and limited diversity, and the industry is highly concentrated especially in the footwear segment.
Driving forces
Innovation and technology is a major driving force in the company, as this has led to rapid expansion with product performance being linked to high quality. This has enabled Under Armour to compete with better established companies in apparel, footwear and accessories segment. Another driving force is the brand image, which has also been linked with high quality products, with the brand more noticeable because of sponsorships and endorsements.
Five forces analysis
Threat of new entrants is medium with high capital costs limiting new entrants, but existing firms can be competitive in the apparel segment.
Bargaining power from buyer is medium with customers divided between wholesale customers and end- customers, and given under Armour product recognition end customers have lower bargaining power.
Bargaining power of suppliers is medium as there are diverse suppliers, but Asia accounts for the highest proportion of suppliers
Rivalry among competing sellers is high, with Nike and Adidas posing a huge challenge as they have patents and well established global distribution networks as well as brand recognition.
Threat from substitute products is low and there will be growth in demand for apparel and footwear.
Strategic group mapping
On a strategic map, both Adidas and Reebok have bigger market shares translating into bigger bubbles, while Under Armour has a smaller market share. Under Armour is more specialized and has a higher value in the y-axis, and since both Adidas and Nike have better technology resulting to higher quality with quality represented in the x-axis.
Key success factors
The key success factors are reputation and leadership. The company has used technology to produce high quality products which have no cotton. Furthermore, customers expect the company to continue improving the quality of products better than those in the marker. The company’s reputation is also associated with athletes who wear the company’s products allowing people to identify with the products. The leadership of the company is geared towards improving team working, with teams servicing the business and being responsible for making great products.
SWOT analysis
The SWOT analysis highlights on i...