September 4, 2014
Under Armour Case 2
1. How strong are the competitive forces confronting Under Armour, Nike, and The adidas Group? Provide a five-forces analysis to support your answer. The most powerful and widely used tool for assessing the strength of the industry’s competitive forces is the five-forces model of competition. The five competitive forces include pressures stemming from buyer bargaining power, pressures coming from companies in other industries to win buyers over to substitute products, pressures stemming from supplier bargaining power, pressures associated with the threat of new entrants into the market, and pressures associated with rivalry among competing sellers to attract customers (the strongest of the five competitive forces). Currently the competitive forces confronting Under Armour, Nike and Adidas are strong and many. Under Armour faces competition from Nike and Adidas in terms of marketing strategies, growth strategy, distribution strategy, promotion, advertising, licensing, globalization, targeting, penetration rate, outsourcing, manufacturing, quality, efficiency, and inventory management. Seller-buyer relationships represent a significant competitive force because some buyers have significant bargaining leverage to obtain price concessions. For example, Dicks Sporting Goods and other retail stores are huge buyers of Under Armour, Nike, and Adidas apparel so they can bargain for a cheaper price. In 2012, 29% of Under Armour’s revenue was generated through direct-to-consumer sales. There is significant competition in terms of buyer bargaining power because Under Armour, Nike, and Adidas are all companies in which the buyers’ cost of switching to competing brands or substitutes are relatively low. Competitive pressures continue to exist between the three companies because sellers can buy substitute products. The three companies all provide the same types of products which make...
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