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Under Armour Company Case Study


PESTEL Analysis

Macro-environmental factors affecting a company’s performance in market are uncontrollable forces from the external operations. These factors cannot be controlled and only require a change in the business marketing, management, operations and production processes. The factors are analysed using PESTEL model; implying analysis of political, economic, social, technological, and legal issues.

Legal consideration

The Under Armour Company is based in Baltimore and it operates within the confines of the State’s laws. The company operates within the business structural laws that govern the business operatives in the state of Maryland.

Since the Under Armour Company also operates in international markets such as Japan, UK, Germany, Canada, and France, it has to adhere to the other laws that govern companies that operative across the globe in order to facilitate smooth operations.

Since the Under Armour Company is a registered local and international business with no record of unethical practices, the legal factors are not intense towards the operation of the business and have minimal impacts. The adherence has facilitated a smooth activity of the Under Armour Company all over the globe. For instance, the company has expanded from the US to continents such as Europe and Asia.

Technological Consideration

Technological macro-environmental factors are designed to affect business operatives in the global sphere. The type of machinery that a company opts to use in the production of its products and offer its services, the strategic measures it takes in the marketing process, and its accessibility has a lot of impact on the market.

Companies with innovative skills in their production lines and those using online marketing strategies are highly likely to have higher number of customers. The Service Oriented Architecture is a technological initiative by the Under Armour Company, which enables the management to monitor general trends in performance at a glance and spot out any existing bottlenecks that could be slowing down business.

The speed with which this happens helps the management to put corrective measures into place that eventually averts losses or negative growth. These technological advances have attracted more customers from diverse sports backgrounds due to the improved product orientation as evident in the success of the football cleats product in the US and European market.

Cultural consideration

The cultural set up and the population are a major key to the social concerns. The Under Armour Company is set against a social background with a population of dynamic social and cultural orientation. For instance, the US, Canadian, European, and Asian markets consist of highly stratified cultures that the company must satisfy in its lines of sportswear and other gaming apparel.

Against this background, the company has ensured that its products are not highly priced while still maintaining quality productions. For instance, despite the high quality products, the prices for the Under Armour Company’s products are flexible to the high-end, middle-end, and low-end customers across the globe. The main advantage that the company relies on is that the targeted population has a big following and fun for sports.

In addition to its base market in the US, the Under Armour Company has extended its sales to the new markets outside American such as Europe (UK, Germany, and France), Asia (Japan), and Canada. In achieving this goal, its products have been customized to be cultural sensitive and be able to be used across the global environment.

Economic consideration

The global market cycles has a great impact on the business operation both in the present and the future. The economic boom, recession, and any kind of inflation cause the business to make drastic measures to withstand the challenges of existence. Predictions of these economic factors are very difficult to estimate since their studies vary a lot based on the school of thought.

The market swings as a result of competition and economic depression are a real threat to the survival of the Under Armour Company since it operates in a very dynamic market that is directly affected by changed customer preferences and economic downturn.

Comparative foreign exchange also affects the Under Armour Company since it conducts global transactions in the foreign markets, that is, differences in the value of money at the points of production and destination markets has immensely impact on the earnings from exports of the company. Measures should therefore be undertaken to ensure that this concern does not create a negative impact to the Company’s operations.

Political considerations

The closer economic relations in the US, Europe, and Asia have benefited the Under Armour’s business performance for a long time. These regions enjoy political stability which is a perfect environment for doing business for the company. This is a good assurance for shareholders, both domestic and foreign, that their investment is safe and it is an incentive to them to add even more.

With continued political stability, the Under Armour Company is poised to grow and expand even more as many investors are assured of safety in the event that they decide to put their money into the venture. There are no fears of political wars and uprisings that can affect the Under Armour Company’s business performance in the current target markets.

Porters Value Chain Analysis

The Under Armour Company is focused on supplying its consumers with premium products that suit their needs and experiences. The company premises are furnished in luxurious manner that attracts potential consumers from all categories in the market. The company’s commitment to high ethical values is demonstrated through the value network and chain.

The company value chain commences with the development of products through own factories, independent manufactures and acquisition of licensed accessory supplies from partners, especially in Japan. As a global company, the Under Armour Company management considers standardised and system supported supply and production process as success factors.

Minority of the company’s full line products are supplied by independent and commissioned producers while majority are produced by the company’s own factories. The high self-production is significant for the Under Armour Company as it covers the portion of its traditional ready-to-wear product range which enables the company to gain expertise and optimise on both the product quality and availability.

As opposed to its competitors which produce their products from central points, the strategy to spread production points around the world consolidates its supply networks and strengthens its long-term partnerships. Moreover, the spread of the sourcing volume across the global network of suppliers spreads risks and makes the company independent of any single sourcing location and manufacturer.

From the manufacturing and supply points, the Under Armour Company products are distributed either through company’s own retail stores or through independent store owners and super markets as in the case in Europe and Asia.

Organization Culture

The physical structures of the Under Armour’s organization culture promotes positive relationship between favourable and effective job performance and work environment as attributes of motivation and congenial conditions. The structure encourages security, comfort and safety, and prevailing physical convenience.

Measuring factors such as interpersonal relations, working conditions, support and trust, welfare provisions, and work environment has greatly contributed to the organizational effectiveness in terms of product innovation and diversification. At present the Under Armour Company has more than six product lines.

The Under Armour Company has three building blocks of learning such as a supportive learning environment, concrete learning processes, and practices leadership that reinforce innovation. The managers play a significant role in setting up the learning environment for their employees.

This culture has created an ideal climate for innovation and communication among the employees. The Under Armour Company’s management has been working to fill the corporate culture with life to instigate individual employees to bring their commitments, personal skills and enthusiasm to the company, contributing to success of the company globally.

Furthermore, the company thrives on employee diversity to beat its rivals. The Under Armour Company is characterised by diversity and internationality, in the local and international product lines in Asia and Europe. The diversity and internationality of the company employees does not only represent the enrichment of the corporate culture, but also demonstrate a clear success factor of the company in its international competition.

The management competency has enabled the company to earn good reputation through provision of well aligned products that ensures consumer experiences. Moreover, the Under Armour Company management emphasise on follow-up of their customers to understand what they say regarding their products. This has enabled the company to improve its products to suit consumer needs.

Business Approach

The business approach of the Under Armour Company is organic growth since its expansion has been necessitated by the increasing customer base and demand for different product lines. For instance, the growth from the year 2005 to 2008 was inspired by market expansion and introduction of extra product lines with high demand in the local and international markets.

Besides, the company has successfully adopted the integrated perspective to launch new product lines targeting different customer segments. For instance, the successful launch of the football cleat in 2006 further expanded the company market to include the women, children, and youths.

From the inception of the company, the business strategy has always followed a strategic plan in physical growth and market growth within the US and external markets. For instance, the company applied its previous expansion plan within the US market to move into the European market. The plan involved proactive market engagement, systematic research, and constant innovation and product improvement.

The company uses the international diversity perspective to ensure that foreign markets are served with products that match their culture and expectations. For instance, in order to penetrate in the European and Asian market, the company partnered with local stores and outlets to ensure that the products sold in such markets are market oriented.

BCG Matrix and Competitors

The Under Armour Company has been strategic in product introduction to minimize cases of failure. As part of its long-term strategic value creation, the Under Armour Company decided to diversify its products to target the women and youth segment in the year 2006. Besides, the company has created several apparels such as the footwear and accessories besides the license revenues.

Apparently, the men wear has the highest market share followed by the women wear. The accessories are categorized in the cash cow matrix since they have high market share of 29% for the company despite the low growth. However, the licensing revenues have the lowest market share in the company’s market control matrix of less that 10%.

The Under Armour Company faces very strong competition from established sports apparel companies in the global market. Moreover, there are still more local companies entering the global apparel market. Given in table 1 below are some of the key competitors in the apparel industry.

Table 1: The Under Armour Company main competitors

Name Establishment and Operations Products Targets and market share Competitive advantage
Nike Established in 1962 and currently operates globally. Deals in apparel and accessories. Targets customers of all ages interested in sports products. The company has a market share of 16.4% in the US. Diverse products, affordable prices, household name, and global operation.
Addidas AG Established in Italy in 1948 and operates in global market. Deals in apparel and accessories. Targets customers of all ages interested in sports products. The company has a market share of 13.4% in the US. Specialised and diverse products that are affordable and associated with quality.
Russell Athletics Founded in 1978 Capitalises on freelance sports designs and apparel. The company has a market share of 3.5% in the US. Diverse designs and ability to offer series of products to different groups of potential customers.

Porters Five Forces

Porter’s five forces analysis is necessary for the Under Armour Company as it assists in comprehension of the market strengths and weaknesses. Table 1 below summarises Porter’s five forces with regards to the Under Armour Company.

Table 2: Porter’s five forces analysis

Competition Rivalry Determinants of buyer power Threat of Substitution Determinants of supplier power Threat of new entries
The Under Armour Company faces rivalry from both the local companies and international companies in all regions in which it competes. The key rivals are listed in table 1. Customer power is high in most of the market environments in which the Under Armour Company operates in North America and Western Europe. With the substitutes in the market, the consumers may decide to shift if they feel unsatisfied with the Under Armour Company products. Moreover, the cost of switching products for the consumers is quite low. The threat of substitute products is high in the sports apparel industry. Some customers would also opt for ordinary apparel rather than designer fashions. The supplier power in the industry is quite high. With the national and international laws ensuring that suppliers are treated fairly, the company does not yield more power over them. The threat of new entrants into the fashion market is quite high. Although the market place is already having many companies, more companies are entering the marketing to seize opportunities that are not yet exploited.

Business Strategy Diamond Analysis

The business strategy diamond analysis reviews the elements of arena, vehicles, staging, differentiators, and economic logic. In relation to the Under Armour Company, strategy diamond analysis encompasses proactive interaction of these elements to create a strategic business.

In relation to the diamond analysis, under the element of arena, the most active product category is that of men and it accounts for 34% of the total revenues. Despite the product presence in Europe, Canada, and Asia, the US market is the most active and commands 96% of the company’s revenues. The apparel category is more active than the footwear and the licensing revenues for the company.

Under the element of vehicles, the company has been proactive in licensing and joint venture, especially with the foreign market as part of its internalisation strategy. This has been successful as evident in its expansion into Germany, Japan, the UK, Canada, and France.

The main differentiation strategies for the Under Armour Company include product reliability, styling, and price. The company has three pricing categories for the high-end, middle, and low-end customers. The Under Armour Company products are developed to guarantee customer comfort.

In addition, all the product lines (footwear and apparel) are very stylish. The company has a sequence of initiatives such as product diversification. In the years 2004, 2005, and 2006, the company managed to roll out new products and stores that were very colourful and easy to notice. The economic logic of the above strategies was to provide premium products at competitive prices to ensure that company survives competition from giants such as Addidas and Nike.

Competitive Advantage Analysis

The Under Armour Company has established a brand image that enables it to attract customers with less effort as opposed to most of its less established rivals. The entrants have to invest heavily in promotion and advertising for them to attract new customers and maintain their customers. The established brand image has enabled the company to cut on its cost and get increased levels of profitability.

Strong commitment to quality and product innovation enables the company to get the right experience for their customers. Moreover, the company conducts more market research to ascertain customer thoughts and changing demands. Having been in the fashion industry for over 10 years, the Under Armour Company has acquired enough experience to compete favourably in the industry.

It has had sufficient time to learn from its weaknesses and develop long-term strategies that will anchor it through the market future. Fast adopting the emergent technological changes, the Under Armour Company has invested in technological creativity to suit its consumer changing needs. Finally, the company has been able to win more customers with its strategically-placed and ambient stores with conspicuous features such as attractive colours besides diverse quality sports apparel and footwear for all ages and gender.

Recommendations

The Under Armour Company should ponder introducing trade-offs to its products in countries which do not have strict laws that protect the business, when expanding further to other foreign markets. Countries like China do not have strict rules which protect business entities from being copied by competitors.

In safeguarding its products’ brands and making sure that it is not imitated by the local firms, the Under Armour Company should ensure that it introduces measures in its operative process that would make it distinct from any firm. The introduction of trade-offs should be applied while ensuring that the amount of revenue collected do not decrease.

The Under Armour Company may partner which medium businesses retailing products similar to those of its competitors. This strategy will expand its market and make it easy for customers to access the products. When properly implemented, the company is likely to counter the strategy of its competitors, such as Nike and Addidas, of reaching the customers through proxy retailers.

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IvyPanda. (2019, June 22). Under Armour Company. Retrieved from https://ivypanda.com/essays/under-armour-company/

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"Under Armour Company." IvyPanda, 22 June 2019, ivypanda.com/essays/under-armour-company/.

1. IvyPanda. "Under Armour Company." June 22, 2019. https://ivypanda.com/essays/under-armour-company/.


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IvyPanda. "Under Armour Company." June 22, 2019. https://ivypanda.com/essays/under-armour-company/.

References

IvyPanda. 2019. "Under Armour Company." June 22, 2019. https://ivypanda.com/essays/under-armour-company/.

References

IvyPanda. (2019) 'Under Armour Company'. 22 June.

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