How strong are the competitive forces confronting Under Armour, Nike, and The adidas Group?

1. How strong are the competitive forces confronting Under Armour, Nike, and The adidas Group? Do a five forces analysis to support your answer.2. Does Under Armour have any core competencies and, if so, what are they?3. Does Under Armour have any resource strengths or competitive capabilities that qualify as a distinctive competence?4. What does a SWOT analysis reveal about the overall attractiveness of Under Armour’s situation?5. What are the key elements of Under Armour’s strategy?6. Which one of the five generic competitive strategies discussed in Chapter 5 most closely approximates the competitive approach that Under Armour is employing?7. What is impressive about Under Armour’s financial performance during the 2006-2011 period (as shown in case Exhibit 1)?8. How does Under Armour’s competitive strength compare against that of Nike and The adidas Group? Doa weighted competitive strength assessment using the methodology presented in Table 4.4 in Chapter 4 to support your answer. Based on your assessment and calculations, does Under Armour have a net competitive advantage or disadvantage in competing against Nike and The adidas Group?9. What 3-4 top priority issues do Kevin Plank and Under Armour management need to address?10. What recommendations would you make to Under Armour CEO Kevin Plank? At a minimum, your recommendations should cover what to do about each of the top priority issues identified in question 9.DescriptionPrepare a brief report to Under Armour CEO Kevin Plank outlining the 3-4 top priority issues thatUnder Armour management needs to address and the actions you think Kevin Plank shouldinitiate to address these issues and steer Under Armour into an even stronger position tochallenge Nike’s leadership position. Your report should contain detailed and convincingreasons in support of each one of your analysis and/or recommendations. It is imperative thatthe support offered for each of your analysis/recommendations be based on (a) conclusionsdrawn from application of the concepts and analytical tools discussed in Chapters 3 and 4 and(b) the content of Chapters 5-7 regarding strategic moves that may be suitable for UnderArmour in building a stronger competitive position vis-à-vis Nike and The adidas Group.Instructio Perform an analysis based on the case (p. 248), using external valid sources isnsencouraged. If you do use external sources, provide the references at the end ofeach question. You MUST use chapter concepts and be able to apply them to thecase questions.These are NOT short answers, but rather an in-depth research and analysis ofeach question. See paragraph requirements for each question.How strong are the competitive forces confronting Under Armour, Nike, and Theadidas Group? Do a five-forces analysis to support your answer. (Requirement: 4+paragraphs minimum)The competitive pressures coming from other firms in the industry arestrong. There are numerous competitors offering a broad range ofmerchandise in the same categories as Under Armour. Under Armour doesnot hold any fabric or process patents, and hence its product portfolio couldbe copied in the future. Additionally, the cost to switch brands is low for thebuyers. Aside from the actual brands, research and development has allowedcompanies to produce similar products offering the same characteristics.This has weakened differentiation and adds to the competition from othercompetitors. Additionally, most of the competitors have the capabilities ofeconomy of scale, which allows them to remain competitive with UnderArmour.The competitive pressures coming from the threat of entry of new rivals aremoderate. With the current trend leading towards a healthier and moreactive lifestyle, buyer demand is growing rapidly. Large capital costs arerequired for branding, advertising and creating product demand, and hencethis limits the entry of newer players in the sports apparelmarket.Newcomers can expect to earn attractive profits without inviting astrong reaction from incumbents. With a good brand and enough capital toget through the entry barriers, new entrants have the potential to compete inthis market since the cost of switching brands is low for the buyers.The competitive pressures coming from firms in other industries offeringsubstitute products is strong. Nike, Adidas, and other competitors areoffering good substitutes for sports apparel, shoes, and accessories. Mostitems are readily available, comparable, or may have better performancefeatures than Under Armour’s products. With the help of online comparisontools, customers can compare products and make a more informed decision.And since switching cost is low, the strength of the completion will be strong.The competitive pressures stemming from supplier bargaining power aremoderate,. In 2012, Under Armour’s products were produced by 27manufacturers located across 14 countries. Of these, the top 10 accountedfor 49 percent of the products manufactured. A diverse supplier base limitsbargaining power.The competitive pressures rising from customer bargaining power aremoderate. Under Armour clients include both wholesale and end consumers.Wholesale customers, like Dick’s Sporting Goods and the Sports Authority,hold a certain degree of bargaining leverage, as they could substitute UnderArmour’s products with other competitors’ to gain higher margins. Bargainingpower of end customers is lower as Under Armour enjoys strong brandrecognition.Does Under Armour have any core competencies and, if so, what are they?Include detail on why you believe these are corecompetencies. (Requirement: 4+ paragraphs minimum)A core competency is a deep proficiency that enables a company to deliverunique value to customers. It embodies an organization’s collective learning,particularly of how to coordinate diverse production skills and integratemultiple technologies. Such a core competency creates sustainablecompetitive advantage for a company and helps it branch into a wide varietyof related markets. Core Competencies also contribute substantially to thebenefits a company’s products offer customers.Under Armour core competence is high quality product and ready for topperformance under certain situations. They have significant prior industryexperience in the athletic clothing industry while working closely with thesports marketing team to identify product trends and stay innovative inmarket needs. With their unique start up in the dry-fit clothing industry keepsthem separated from some of their other competitors.Another core competence is the endorsements and product licenses toathletes which allow them to have a competitive advantage in reaching awide variety of markets. To add to that, their founder and CEO, was a formerathlete so it makes the brand more relatable to those consumers who aretheir niche group.Sourcing, manufacturing and quality assurance serve as another corecompetence because they sourced the fabrics and materials from a limitednumber of approved specialty fabric manufactures and none weremanufactured in house. This allowed Under Armour to utilize whatever fabricsuppliers were able to produce with the latest and best performance orientedfabrics.Does Under Armour have any resource strengths or competitive capabilitiesthat qualify as a distinctive competence? Include detail in youranswer (Requirement: 3+ paragraphs minimum).Yes, Under Armour’s resource strengths include their variety of globalsuppliers.Product performance and brand image gives them competitive capabilitiesbecause the product adapts to climate conditions, it is comfortable forathletes to wear, serve multi-purpose and there is a diverse range ofproducts.Brand Promotion has been one of the core growth and marketing strategiesfor Under Armour. They have begun seeking endorsements from celebritieswhich will open another market to their products. Under Armour continues tomakes its brand name a household name with various marketing campaignslike the one with the NFL which will strengthen the brand.What does a SWOT analysis reveal about the overall attractiveness of UnderArmour’s situation (Requirement: Conduct a SWOT analysis – 4+ paragraphsminimum)?The company’s early years started off slow but then took off fast. Theyexpanded their product line and focused on their marketing strategy throughendorsements and licenses.Strengths• Being financially strong helps Under Armour deal with any problems, rideany dip in profits and out perform their rivals.• A strong brand is an essential strength of Under Armour as it is recognizedand respected for its leading quality in apparel with sweat wicking fabric• Under Armour’s distribution chain can be listed as one of their strengthsand links to success.• High net income in year 2009 – High profit to earnings ratio• Offering wide range of casual apparel and sports wear• • Product licensing – Official outfitter of schools and universities teamsWeaknesses• Not reducing costs in the same way as their competitors’ means UnderArmour is outlaying more of their profits. Having higher costs than competitorsis a major weakness.• No patentsFemale market segmentOpportunities• Looking at export opportunities is a way for Under Armour to raiseprofits. * The changes in the way consumers spend and what they buyprovides a big opportunity for Under Armour to explore. * New marketopportunities could be a way to push Under Armour Forward * Expandinginto other markets* Reduce prices of the products* Increase number of retail outletsThreats* Tax increases placing additional financial burdens on Under Armour couldbe a threat* Substitute products available on the market present a major threat* Hard competition from its major competitors* Male dominated focusWhat are the key elements of Under Armour’s strategy ((Requirement: 3+paragraphs minimum)?Identify 3 – 4 top priority issues Kevin Plank and Under Armour managementneed to address. What recommendations would you make to Under ArmourCEO Kevin Plank? At a minimum, your recommendations should cover whatto do about each of the top priority issues identified (Requirement: 4+paragraphs minimum).The key elements of Under Armour strategy is growth strategy, product linestrategy and distribution strategy. Growth strategy focuses on continuing tobroaden the company’s product offerings to a variety of individuals in avariety of sports activities. They are also growing their brand image andstrengthening its appeal. The product line strategy expanded still focusing onconsumers comfort in weather conditions with cold, heat and all season gear. Distribution isseeking expansion into more global markets.While Under Armour maintains a strong market share compared to theircompetitors, there is still room to expand into untapped markets. Suchmarkets would consist of expansion into international markets such asvarious major European Soccer leagues, as well as Latin American BaseballLeagues and European Rugby Leagues. By moving into these markets, UnderArmour has the potential to take a larger share of apparel sales, not tomention securing long-term team sponsorships for professionally managedsports clubs. With the large number of professional leagues and individualplayers Under Armour can increase their overseas brand awareness andapparel sales.A second recommendation would be for Under Armour to use their overseasexpansion to gain high profile endorsements for marketing purposes. Thisexposure to a greater presence across more platforms will allow for a moredensely populated market in the household sector of sales. With sportplatforms such as rugby, cricket, and soccer leagues still with alternativesponsorships, up and coming athletes are yearning for well-known corporatesponsors, and thusly Under Armour has the ability to gain market sharethrough marketing campaigns.Another alternative strategy to increasing market share and sales would befor Under Armour to reinstate their original moniker, KP Sports, Inc., as a lowcost alternative to their Under Armour line of products. The product line of KPSports, Inc. would include all previous Under Armour products sold at areduced cost and marketed to lower income regions of the world. This wouldprovide the opportunity for Under Armour to increase their sales withouttarnishing their higher priced, higher quality brand name and image, whilestill providing quality equipment and apparel to regions of the world thatwould otherwise lack access to such products.A final recommendation for Under Armour would be to increase their retailpresence through the use of more specialty store locations. With only ahandful of existing Under Armour specialty stores, customers are beingforced to shop at retail locations such as Dick’s Sporting Goods and SportsAuthority. Such stores are over saturated with other top competitors such asNike and Adidas. By increasing the number of specialty locations, UnderArmour can offer their customers a wider selection of products, as well asoffering them expert assistance in meeting their athletic apparel needs.Additionally, these locations could offer sales and discounts similar to thoseof factory outlet locations without the stigma of being a low qualityalternative.After evaluating all of the potential alternatives the choice is clear thatexpanding to overseas markets is the best option to gain market share,increase sales, and build a stronger brand image. With approximately 98percent of sales coming from North America, the expansion overseas wouldprovide limitless opportunities for sales growth. Given the large amount ofsuccess since the company’s inception, Under Armour has the potential tobecome the largest athletic apparel provider in the world if they can gain alarger market share abroad.Strategy ImplementationIn order for Under Armour to implement these strategies the company needsto think on a larger scale. Plank has done a great job getting his company offthe ground and into the top three performance apparel firms around theworld, but if Under Armour wants to survive and continue to thrive, it needsto think beyond the norm and penetrate these new, emerging internationalsports markets.Plank has always strived to be the best so he has only hired the mostcompetent workers for his company. Structurally, Plank should search forglobal partners that have connections in foreign markets. When marketing aproduct one must not only have to know the product well, but be familiarwith the customs and norms of the market in which they are competing in.Incorporating foreign presidents and vice presidents into the company wouldallow Under Armour to get a solid hold on the Latin America, European, andeven Asian, African or Australian markets. Under Armour should also focus onareas with extreme climate. Doing so would play to the advantage of theirspecialty performance wear for hot and cold weather. This may call for a risein the number of people Under Armour chooses to employ.In order to reach new markets Under Armour must also reallocate itsresources. This means looking for cheaper labor markets to manufacturegoods, as well as setting up new distribution centers domestically and inforeign settings. Cheaper labor and shipping costs can lower the priceallowing for Under Armour to compete with Nike in the price war. Also,licensing the cheaper KP Sports brand can allow for a lower, more costefficient alternative that will not tarnish the Under Armour brand, which hasbeen known for the highest of quality. In the United States, Under Armourneeds to open up more outlet stores which exclusively sell Under Armourmerchandise. Spreading out merchandise between other retailers such asBass Pro Shop, Champs Sports, Foot Locker, and even Fanatics – an onlinesports apparel shop – will also help increase market share. Under Armourmay want to stay away from generic stores such as Walmart and Target inorder to reduce the chance of damaging brand name.Marketing is another key element to capturing market share and increasingsales. When it comes to commercials, billboards, and celebrityendorsements, Nike and Adidas lead heavily. Under Armour needs to get itsname out to the public as much as Nike and Adidas in order to stealcustomers away, not to mention reaching up-and-coming teens who will belooking for gear to perform in when playing their desired sport. This alsomeans targeting the biggest of star athletes on the rise. Not every endorseewill be a Michael Jordan, Tiger Woods, or Peyton Manning, but finding thenext big breakthrough athlete may be what it takes to get young athletes toswitch to Under Armour products.