Under Armour: Working to Stay on Top of Its Game
Perform a STEEP analysis to understand the general environment facing Under Armour. How will the firm be affected by external factors?
Ans. Each factor under STEEP analysis giving Under Armour more information about how company should adapt itself, in order to be survived in the market. Let’s see the effects of these external factors to the company’s strategies each by each.
Gender : affects the designs for both male and female customers (e.g. apparel for women)
Age Structure : affects design, sizes, and features for different age distribution(e.g. youth) Lifestyles
Types of sports : affects designs of products for different types of sports and different level of players
Climates : affects different performance features of products, for example, shoes and apparels Economical factor
Degree of economic risk associated with premium price (Downturn economy), affect in declining net sales and encouraging the company to use conservative approach
Rapid change and innovation of technology, affects company by continuous improving product innovation, procurement and production process Political & Legal factor
Intellectual property rights law and regulation of the countries in global market very vary, affecting the company to consider their unprotected intellectual property issue.
Use Porter’s Five Forces Model to analyze the apparel, footwear, and equipment industry in the US. Given this analysis, is the industry attractive or unattractive?
Ans. First, The threat of the entry of new competitors (High) due to •Total U.S. performance apparel business is dominated by existing brand ex. Under Armour, Nike and Adidas. The loyalty for existing brand is quite high while there’s high initial investment required as well. For The bargaining power of suppliers (High) as company heavily rely on relative few third party suppliers. Moreover, the intellectual property right owns by suppliers, not unique to us. Therefore, the switching cost is very high. Thus, company has weak position related to suppliers. For The bargaining power of buyers (Moderate) as there’re many choices available for customers, but somehow they are loyalty to Under Armour brand. Thus, the bargaining power is moderate. Also, they don’t have only individual customers, but also as a team or making contract that make switching cost not too low or too high as well. For The threat of substitute products (Moderate to High) due to some brand loyalty and differentiation, the switching cost is moderate. By the way, there are many famous brands those sell similar product lines existed in the industry. Thus, the threat of substitute product to Under Armour is quite high. For The intensity of competitive rivalry (High), there’re many strong existing brands and some smaller brands as competitors in the industry. Given this analysis, this industry is unattractive because of intensive competition and high cost of initial investment requirement.
Who are Under Armour’s main competitors? How do they measure up against these competitors?
Ans. There are three main competitors in the market. First of all, Nike – which has strong budget part, hasrelationship with 700 factories in 52 countries, so low cost achievable but customers are still willing to pay at premium price. Providing High quality and innovative products. Secondly, Adidas/Reebok – the second largest athletic apparel manufacture, acquisition many small companies, no need to start up from zero. Also, it can access market bases and technology. Thirdly, Columbia Sportswear – one of the largest manufacturers and sellers of outdoor apparels with innovative and high-quality products. To measure up against these main competitors, Under Armour utilizes their capabilities and core competencies which will be further discussed in the next question....