Introduction
Major manufacturers of sports gear, including Under Armour (UA), Nike, and Adidas face significant market competition from other industry players. The buyer power is very high in the industry because the manufacturers target powerful buyers such as teams and successfully advanced sports personnel for markets. Such individuals or teams realize the kind of influence they have on their global fans, thus they have strong bargaining power when it comes to signing deals (Lear, Runyan & Whitaker, 2009). The ease of venturing into the market is low because of the high number of brands. Firms such as Nike have established themselves elaborately, including a well-built brand loyalty among the buyers. This makes it difficult for new ventures to thrive.
The supplier bargaining power is equally low because the industry has numerous dealers who compete to win contracts with the major manufacturers. Overly, the competitive rivalry is high because of the many competitors in the market offering equally attractive merchandise in terms of quality (Giannoulakis & Apostolopoulou, 2011).
How Under Armour Sustains Competition
Under Armour’s, greatest competitive strength is in the differentiation strategy pursued by the company ever since its inception (Giannoulakis & Apostolopoulou, 2011). Kevin Plank’s original idea of business in 1996 when he founded Under Armour was to avail a unique type of sports gear that would provide comfort to athletes competing under any kind of weather. Under Armour’s competitive power is currently supported effectively by the strong profit margins because of the ever-growing revenues for the company. The elaborate expansion that has seen UA-branded merchandise spread across the rest of North America and parts of Europe has increased sales. This has, in turn, expanded the revenue base. The firm uses this strong revenue base to sustain the differentiation strategy.
The strategic partnership deals that the company targets and maintains with highly renowned athletes in various fields are critical in enhancing its competitive edge in the market (MacIntosh et al., 2012). These star athletes are considered to be special models by many global admirers and fans, thereby making them the important marketing agents.
However, rapid international expansion could also be the company’s major undoing in terms of sustaining growth and competition. Under Armour has not conducted any elaborate market research to determine the specific customer tastes in the Canadian or European markets that it has ventured into. Instead, it assumes its great market success in the local US market will automatically be replicated in these international markets. Any slight changes in customer tastes and preferences in these markets could end up being costly for the company given the huge revenues that it has spent on the expansion program (Eagle et al., 2003).
Under Armour has a great opportunity of registering substantial growth and significant expansion in the international market because of the rising globalization trend. Greater opportunities are presented by the emerging economies of China, India, and Brazil, which have a fast-growing middle-class population.
Significant Elements of Under Armour Strategy
Under Armour focused on manufacturing sports merchandise for every discipline without limiting focus on a single or only a few activities. This helped the company to capture a wider market, resulting in huge revenues. The retail marketing strategy has equally been critical in spurring growth and expansion of the company. The Under Armour “concept shops” idea provided a great opportunity for educating buyers about the brand, as well as achieving a more-engaging manner through which customers could shop for the UA merchandise.
The outsourcing of manufacturing services significantly enabled Under Armour to maintain low production costs, while ensuring high quality was observed all through (Ghausi, 2002). Under Armour managed to build a strong competitive power against its competitors in terms of price because a majority of the company’s external manufacturers are in Asia where labor is cheap and readily available.
Issues Requiring Management’s Address
The sports merchandise market is increasingly getting saturated as a result of the high competition between the rivals. Thus, the company will need to effectively spend more on research and development activities for any sustained competitive performance in the future (Serapio, Dalton, & Phyllis, 2000). Although Nike, which is the industry’s biggest player in terms of market share, spends significantly in the area of research and development, Under Armour does not emulate this worthy marketing effort. This is likely to affect the company’s performance in the area of innovation, resulting in negative growth.
Any further international market expansion should only be approved after conducting extensive research on specific markets. This will protect the company from spending heavily on expansion programs and end up registering poor sales as a result of failure to determine the exact market requirements and tastes. Although Canada and the UK have positively embraced the brand even without any prior market research and customization from the Under Armour’s management, it is critical to note that such results may not be automatic.
It is also important for Under Armour’s management to give priority to the emerging economies, while also considering international market expansion. Countries such as China, India, and Brazil are registering phenomenal economic growth each year. This highlights the lucrative nature of these markets. Under Armour is likely to make faster and higher profits in these countries than the other international markets. However, as noted earlier, the management must conduct prior market researches in these countries before venturing into them.
References
Eagle, L., Kitechen, P. J., Rose, L., & Moyle, B. (2003). Brand equity and brand vulnerability: The impact of gray marketing/parallel importing on brand equity and values. European Journal of Marketing, 37(10), 1332-1349.
Ghausi, N. (2002). Trends in outsourced manufacturing–reducing risk and maintaining flexibility when moving to an outsourced model. Assembly Automation, 22(1), 21-25.
Giannoulakis, C., & Apostolopoulou, A. (2011). Implementation of a multi-brand strategy in action sports. The Journal of Product and Brand Management, 20(3), 171-181
Lear, K. E., Runyan, R. C., & Whitaker, W. H. (2009). Sports celebrity endorsements in retail products advertising. International Journal of Retail & Distribution Management, 37(4), 308-321.
MacIntosh, E., Nadeau, J., Seguin, B., O’Reilly, N., Bradish, C., & Legg, D. (2012). The role of mega-sports event interest in sponsorship and ambush marketing attitudes. Sport Marketing Quarterly, 21(1), 43-52.
Serapio, M., Dalton, D., & Phyllis, G. Y. (2000). Globalization of R&D enters new stage as firms learn to integrate technology operations on world scale. Research Technology Management, 43(1), 2-4.