Advertising is a way in which a company generates interest in a particular product line in order to encourage greater sales within specific markets, but also to generate a certain degree of “hype” and product patronage for the products/services that the company is offering. In some product markets though, certain types of consumer goods and services require “an extra push” so to speak when trying to conduct normal business operations. In such instances, as explained by Professor John Zang from the Wharton School of Business, “if customers aren’t buying, more often than not it is an indication that a company is targeting the wrong people”. Taking this into consideration, it can be assumed that in cases where a hard to sell product is involved it is not that the company is experiencing a situation where the consumer does not want to be a customer but rather the company is merely targeting the wrong consumer market. It is in such instances that techniques such as informative, reassuring and persuasive advertising are utilized in order to gain the patronage of the market segment that the company is aiming for. An examination of the methods of advertising utilized by Under Armour reveals that its methods are similar to that of its competitors in that the company utilizes a combination of traditional advertising methods (i.e. print ads, commercials and social media) to corporate endorsement deals such as those seen in its sponsorships involving the football and baseball programs of particular Universities. The main difference through lies in the fact that Under Armour has a greater degree of market penetration and brand recognition in sports such as football and baseball due to its sleek and aggressive designs (Subramanian & Gopalakrishna, 2012). The end result is that while the company has a lower rate of penetration in sports such as basketball (which are the “traditional” markets of companies such as Nike and Adidas) it has a high rate of penetration into football which makes up for its low rate of penetration in other markets. The reason behind this is connected to its sale of casual outfits with the Under Armour brand on them. Advertising through brand association with a variety of major football programs within the U.S. has resulted in a considerable level of sales for the company (Subramanian & Gopalakrishna, 2012).
Expansion into Foreign Markets
International expansion initiatives such as those done by Nike, Adidas and Reebok all attempt to target new markets within foreign countries due to flat growth in their main consumer markets (i.e. the U.S. and Europe). They do this by utilizing various local pop culture icons in print ads and television advertisements in order to create an association between such stars and the product the company wants to sell thus resulting in a far greater degree of sales and product patronage. In this case, this is a form of informative advertising wherein companies seek to create greater awareness for their products/services. This is of course in combination with other traditional methods of advertising that such companies have utilized in the past. When examining the current rate of expansion of the company into international markets, it is actually rather regrettable that a low rate of market penetration was seen in growth markets such as those in mainland Asia and South East Asia. While the company has attempted an expansion into the European soccer league through its sponsorship deals with the Tottenham Hotspur Football Club as well as becoming the official technical kit supplier of the Welsh Rugby Union, the fact remains that the current European market that Under Armour is expanding into has already been overly saturated with a variety of sporting brands, the least of which is Adidas, Nike and Rebook. The company has little, if any, expansion into the Chinese, Philippine, Malaysian, Indonesian and Thai markets which have all been noted as growth markets that have a considerable level of potential. Such a minimal level of market penetration at so late a period during Asia’s growth is indicative of a failure on the part of the company to capitalize on potential sales opportunities and does not bold well for its future especially in the face of the aggressive expansion of Nike, Adidas and Reebok into these new markets.
Financial Solvency
At the present, Under Armour has developed a considerable degree of financial solvency in the form of $1,472,684,000 in revenue as of 2011, this is a considerable increase from its net revenue in 2009 which was at $856,411,000. However, a closer examination of the data reveals a trend wherein only 6.1 percent of its 2011 revenue, namely 89,338,000 was derived from sales of its goods within markets outside of the U.S. While this is a considerable increase from its 2009 foreign revenue rate of 48,391,000, the fact remains that it is indicative of a considerable slowdown in offshore sales as compared to other sporting brand companies such as Nike, Adidas and Reebok which derive 30 to 40 percent of their revenue streams from foreign markets. On the other hand, the strength of the company’s brand image should not be underestimated. Within the past few years it has set up numerous super stores which exclusively sell their merchandise and continues to expand into numerous new locations within the U.S. This is indicative of a considerable degree of financial solvency in terms of its ability to continue to grow. Such a business model is distinctly different from that utilized by Nike, Reebok and Adidas within the U.S. market wherein they rely on retailers such as Wal-Mart, Target and Foot Locker to be their primary method of selling their products to customers instead of creating their own stores. Thus, the method that Under Armour has chosen to better reach potential customers through the development of its own stores shows how effective its current business model is and how profitable the company has become within its current market (Plank, 2012).
Online Sales
Traditionally the buying and selling of products and services has always occurred either through a face to face transaction, a letter of intent or even a simple phone call where a person places an order and pays upon delivery. Yet due advances in technology where the scale and scope of the retail industry has come to encompass a global market place the traditional processes by which this industry has always followed has started to change. The internet has brought with it an unprecedented level of interconnectivity on a global scale through which more and more transactions such as banking and even retail are conducted. Sites such as Amazon.com, EBay, Craigslist and numerous other online retail suppliers are able to sell items such as computers, books, desks, clothing and even furniture online all of which are growing indicators of a shift in consumer preference from buying their wants and needs through traditional stores to picking the convenience of the internet for all their shopping needs.
As a result numerous companies have shifted various levels of their retail operations to online stores in order to compete with their rivals and take advantage of this growing trend. Compared to other retailers such as Nike, Reebok and Adidas, Under Armour actually has a considerable E-commerce platform in the form of www.underarmour.com which ships to a variety of international locations with a relatively low shipping price. Combined with its online social media campaigns through Facebook, Twitter and Google +, the company has been able to develop the brand’s online presence to the extent that this has enabled it to capture new consumer segments with a relatively low marketing cost (Plank, 2012). While there are no specific numbers published by the company as to how many sales its online social media marketing campaigns have generated, the fact remains that its Facebook page that has 2,234,038 “likes” shows just how far its online marketing campaign has reached an impressive assortment of potential consumers. It should also be noted that the current obsession over convenience has manifested itself through the growing number of E-commerce consumers with sites such as Amazon.com bringing in an estimated $48 billion in yearly profits out of the nearly $100 billion online consumer shopping market. While this is merely a manifestation of new technologies interacting with an age practice of increasing consumer convenience, the fact remains that by integrating itself into this new business structure, Under Armour has in effect secured its future in terms of creating a viable means of continuing to be relevant with an increasingly lazy consumer market.
Industry analysis
Bean & Radford (2000) indicate that research and development into new ways of producing and utilizing technology is one of the practices most often seen in technology intensive enterprises (Bean & Radford, 2000). This is due to the fact that technology has as of late been under a constantly accelerating level development and as a result has enabled new players to enter into markets whereas in the past distinct barriers to proper entry would have been present (Bean & Radford, 2000). As such, failure to sufficiently innovate along with new technological trends and products can be thought of as a failure on the part of the managerial practices at a company since being able to anticipate trends and use them to either reach greater market penetration or keep the company relevant to consumers is a necessity in today’s technology intensive market economy. In the case of Under Armour it can be seen that the company has been anything but complacent when it comes to the development of its sporting equipment. Utilizing sleek designs, composite materials and a variety of patent protected fabrics, the company has been able to produce products that not only look aesthetically pleasing to the eye, but are known to increase an athlete’s performance due to the way in which they promote motion instead of inhibit it (Plank, 2012). While other competitors within the same market have also delved into the science of improving human performance through the types of equipment athletes wear, the fact remains that this method of product development has primarily been isolated towards footwear. With Under Armour this encompasses a wider variety of equipment from full body gear, all the way to groin cups. As such, this shows how Under Armour is in a way a better company in terms of being able to provide a wider variety of performance enhancing equipment to their consumers.
Conclusion
Overall, based on this examination of the company, it can be seen that the company does have a considerable degree of solvency and profitability in terms of the company’s strength within the U.S. market. On the other hand, its continued lack of sufficient expansion into the Asian market is worrisome. As such, the company should resolve such a dilemma as soon as possible so as to not be left in the dust.
Reference List
Bean, R., & Radford, R. W. (2000). Powerful Products : Strategic Management of Successful New Product Development. AMACOM.
Plank, K. (2012). Under Armour’s Founder On Learning to Leverage Celebrity Endorsements. Harvard Business Review, 90(5), 45-48.
Subramanian, R., & Gopalakrishna, P. (2012). UNDER ARMOUR. Business Case Journal, 19(2), 62-83.