Free Essay Sample «Under Armour Case Analysis»

«Under Armour Case Analysis»

Introduction

Under Armour is a large international company that specializes in the production of performance apparel for athletes to keep them light, dry and cool in the process of a game, or training. Founded in 1996 by Kevin Plank, a former football player, the company has started its development with making T-shirts that created wicked perspiration and compression to regulate body temperature. Its major business outcomes were evidence. The period from 2003 to 2012 was successful for the company because of an evidence growth and development of the brand presence. Specifically, its sales in 2012 equaled to $ 1.8 billion with 7 % of market share in the U.S. market for sport shoes and 13.7 % for the sports apparel. Additionally, the domestic market share has grown as well from 0.6 % to 3 % since 2012 (Thomson, n. d.).

The company’s success and huge potential for growth is due to several reasons. First, the company’s CEO Kevin Plank has managed to develop a recognized brand which has made loyal a large customer segment in the short time. Second, the company has a number of opportunities for expanding company’s product lines, as well as attracts new brand-name appeals to the new products, having small percentage of market share. Finally, the company has managed to quickly penetrate to the international market and establish its brand outside the United States. Its major mission is to make all athletes and sportsmen become better through design, passion and constant search for innovation. Its business activities are confined distribution, marketing and development of branded performance accessories, footwear and apparel for youth, women and men. Under Armour was initially determined to deliver performance alternatives to traditional products which could be worn by all athletes, both professionals and amateurs. 

Strategic Issue

As it has been briefly mentioned, the company has chosen strategic growth strategy that focuses on the purpose to increase sales revenues up to $ 4 billion by 2016 from the approximately estimated $ 2.2 billion in 2013. Overall, the company’s strategy in 2013 embraced several strategic issues. First, Under Armour continues broadening its products to women, men and youth and widens its varieties of recreational and sport activities. Establishing consumer segments of the company’s lineup of products and increasing its entering to the market for athletic footwear are two subsequent strategies which have been developing since 2012. The security of additional marketing and distribution of company’s product in the retail marketplace in the United States and abroad through store retailing is not the only option. However, specialty stores and factory outlook at company’s website is also presented. Furthermore, the company planned to expand sales products in foreign countries to become a global competitive and achieve its competitive advantage over other companies producing athletic footwear and performance products. Finally, the company focuses on global awareness of other brands and has established its name brand by enhancing the appeal to Under Armour products across the world.

Apart from growth strategy, the company also enjoys the development of a product line strategy by proposing diverse product offerings embracing footwear, apparel and accessories for the target audience marketed at different price levels in a range of style. At the same time, the stylish footwear is promoted through the development of products that regulate body temperature and temperature conditions. The major product lines include Apparel, HeatGear, ColdGear, and AllSeasonWear. While discussing the Apparel product lineup, the company has developed and designed three major types of product, including heat gear and cold gear. HeatGear was developed for hot and warm weathers under the single-layer equipment. As such, compression T-shirt was among the first, original products which were further developed with different signature types. Apart from apparel, the company is designing footwear and accessories which are also in high demand among their target audience.

The marketing strategies, including brand management and promotion are also presented through the advertising campaign which is oriented at consumer demand and awareness. Customer loyalty, therefore, is not less important, leading to the development of a new performance brand for athletes. The company’s expenses, therefore, involving endorsement and advertising equaled about $ 205 million in 2012 and nearly $ 168 million in 2011. The expenses in 2010 and 2009 were $ 128 million and $ 109 million respectively. These figures also included the expenses for various sport team and sponsoring events.

The company has also made successful steps in sports marketing. The major aspect of promotion and marketing strategy included the promotion of use and sales of its product to high-performing and successful teams and athletes on professional and collegiate levels. The strategy was premised on entering the outfitting contrasts with a range of professional and high school teams; it sponsored a range of professional sports activities by selling and advertising the company’s products to team equipment managers, as well as to individual athletes. Finally, the retail marketing is also among the major issues which are included into product presentation. To enlarge on this issue, Under Armour resorts to ‘concept shops’ approach which is presented an effective means to place products in prime flow space, as well as educate consumers regarding the company’s products. Additionally, the promotion campaign also allows developing a sales-producing and engaging means for consumers to purchase these products.

External Analysis

The environment is constantly changing particularly when it concerns customer’s loyalty and preferences. Currently, the consumers all over the world are in the pursuit of environmentally friendly, innovative products of good quality. Therefore, a company which plans to stay successful should also work on improving performance through the development and design of innovative and eco-friendly products. This aspect is especially important for Under Armour that should make incredible efforts for integrating innovative technologies into their products since many other companies are working on improvement of their footwear and apparel and proposing good products and high-quality products. At this point, the company should constantly conduct external analysis to sustain a competitive advantage over other companies. External analysis is also essential for defining the measurement tools for the quality standards of product a company offers. At this point, it should take into consideration all stages of product development and how it could be effectively penetrated into the market. To underline the issue, Shank and Lyberger (2014) have stated, “organizations with a marketing orientation will incorporate consumer preferences to ensure their needs are being met with respect to product design for new and existing products” (p. 296). Companies that produce sport footwear and apparel should customize certain characteristics of their shoes to the mass market and introduce an individualized approach. Importantly, the market design should be presented with regard to the changes and demand in the marketing environment. As an example, the change can relate to the viable market for sport product for specific audience.

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In general, the company has chosen a reasonable and multi-route way of affecting consumer demand and loyalty. Specifically, the company has managed to introduce long-term perspectives by advertising products and proposing them to the consumers. However, there are still essential gaps in their marketing and promotion techniques. Before evaluating the effectiveness of the marketing strategies, three aspects should be taken into consideration. First, it is necessary to figure out whether the company’s strategy fits properly the external and internal factors (Shank and Lyberger, 2014). It should also adhere to the competitive conditions. As it can be seen from the case study, the company fails to adequately assess the level of its competitiveness at the international market although it makes attempt to enter foreign markets and gain the loyalty of foreign customers. Second, the company spends a sufficient amount of financial resources for sustaining its development of product lineups. However, it should still pay attention to external factors, such as the promoting and marketing strategies formed by its direct rivals, such as Adidas or Nike (Thomson, n. d.). Third, the company’s vision, strategic framework and mission should be directed at increasing company’s performance. In this case, the company turns out to be successful because all their advertising techniques are directed at widening its influence and gaining customer loyalty through diversification strategy and development of innovative products.

In the context of the external environment analysis, the marketing aspect of sport products relates to the functions that include the transfer of services and products from manufacturers to the consumer. The major point of these functions embraces certain areas, which are also called as four Cs of the marketing mix, such as the company itself, the competition, the consumer and the climate (Shank & Lyberger, 2014). The consumer refers to an organization or individual that buys products and services for ownership and direct use. In order to reach the customer segment sport marketing professionals go through a range of processes. Segmentation is one of the concepts driving a diverse group with a series of attributes typical of smaller groups with certain features. Targeting, therefore, is aimed at defining the best ways to deliver product’s image into the consumers’ mind, as well as to the entire consume product, which is accompanied by focusing on the marketing mix – product, place, price, and promotion. 

Apart from the consumer demand, the climate and competition is associated with the SWOT analysis. In this respect, Schwarz, Jason, Hunter, and LaFleur (2012) have explained, “the leaders of the company tend to focus on the external opportunities and external threats posed by competition and the environment” (p. 18). At the same time, they should also focus on the climate, the influence, and the function of an organization, including such internal factors as organizational culture, structure, and change, along with external ones, including information technology, economy, political and legal forces, and ethical and social standards. All this information could be compiled and integrated into a marketing plan, which could be emphasized with primary and secondary approach, as well as financial and economic considerations.

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With regard to the above-presented theoretical considerations, a strategic plan proposed by Under Armour is comprehensive and integrated aimed at considering long-term projections of a strategic business (Schwarz, Hunter, and LaFleur, 2012). The strategic plan is all-inclusive, synergistic, and forward looking. It should provide different stages of sport business regarding how sport business should be created, and how business objectives could be reached. Finally, strategic planning demands a complete awareness of the current matters, as well as how the information can affect the entire strategic planning process related to the initial outcomes (Pedersen, 2011). The strategic options could also be presented through analysis of strengths, weaknesses, opportunities, and threats to reach the ideal vision. In order to determine the direction in sport business, the first step should be implementing the strategic marketing plan which should be followed by the development of major result areas, introduction of goals and objectives, as well as the creation of strategies. After this stage, all these aspects could be introduced into an action plan the chronicles that is going to take responsibility for implementing strategic sport marketing plan, as well as what tactics should be used for success. The action plan should also integrate budgeting schemes, operations plan and department plans to foster the overall business plan toward attaining the optimal vision and set forth new strategic spots. As it can be seen from the case study, competition is considered to be the major problem, which revolved because of performance and reliability, pricing strategy, product development and product identity through promotion and marketing, customer service and support. Such a problem is common for leading companies that actively strive to contact with influential and prominent athletes to promote their brands and products. The major competitor of Under Armour is Nike which is also engaged in marketing, development, selling and design of sports equipment, footwear and accessory products. Total company sales reached $ 21 billion in 2011 and about $ 24 billion in the next year (Thomson, n. d.). It is recognized, therefore, that Nike could be regarded as the best retailer of athletic apparel. The task of Under Armour is to keep pace of Nike’s activities to outperform and provide more innovative products through branding and efficient marketing.

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The Adidas group is another important goal which should be monitored by the company to be able to sustain a competitive edge. At this point, the task of the producers is to consider their immediate payments and develop a new plan for marketing penetration through the development of online shops. In such a way, they could also conduct online surveys and control the activities of its major rivals. It is also important to engage celebrities in advertising their brands (Hill & Jones, 2012). Additionally, the company should realize that there are many new opportunities to work in the sphere of sports. For instance, it can organize certain activities and engage voluntary organization to show their concern with corporate responsibility. The company’s managers should realize the importance of communication with these stakeholders because they can play an important role in featuring a product from a new perspective. For enhancing the importance of a brand policy, the company could produce plates, mugs and coins with logo and moto of a company to attract more customers and make the regular customer stay with the company. Furthermore, the development of advertising events and the assessment of external potential in terms of employment should also come to the forth. The company is overwhelmed with developing a strong brand loyalty, but the latter is impossible to achieve without dedicated employees.

The major approach to competition should come from the effective internal policy. Market research should be conducted at all levels to make sure that the customer segment is fully explored. It is essential to establish direct contact with the customers and general public by means of surveys, polling and focus groups. In the majority of cases, customers are more concerned with buying habits. Apart from the primary marketing research, there should be the secondary marketing research, which could be used for understanding how the primary information could be collected. There are four major approaches for this type of research. These channels include trade associations, government, local census bureau and many other commissions and establishments that deal with the statistical information. In the field of sport, the attention should be paid to the target market. In order to enhance its competitive strategy, the company’s marketing department should think over new potential for expanding their market segment. In this respect, they should focus on the new population categories, in terms of geography, product choices and psychographics. It should also be stressed that the major problem with sport marketing product is premised on the challenge to keep a simple and fresh product, which could always be attractive for the customers.

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A range of firms pay attention to strategic dimensions to resort to a similar strategy which is also called strategic group. The competition among companies within a strategic group is much more important than outside it. According to Hitt, Ireland, and Hoskisson (2006), “intra-strategic group competition is more intense than is inter-strategic group competition. In fact, there is more heterogeneity in the performance of firms within strategic groups than across the groups” (p. 45). Therefore, the performance leaders should be able to adhere to strategies that are similar to other organizations included into the group. At the same time, they should still maintain uniqueness in strategic decisions to sustain a competitive advantage. This strategic vision could be used by Under Armour in relation to its major competitors. Although the chance of cooperation is evident, the company’s managers should still adhere to their genuine vision and mission to make sure that their policies are distinctive and differ from those dictated by such companies as Nike and Adidas. What is more important is that the company should also focus on the coordination between internal and external factors. This is of particular concern to product quality, leadership, pricing policies, customer services, and distribution channels, which are also pillars of strategic dimensions that the organization could treat correspondently. The major patterns of competition within those strategic groups could be presented in the following way: “Organizations in a strategic group occupy similar positions in the market, offer similar goods to similar customers, and also make similar choices about production technology and other organizational features” (Hitt et al. 2006, p. 47). Therefore, the membership and coordination in this group identifies the major characteristics of the company’s vision and strategic approach. The concept and idea of strategic groups could be advantageous for exploring the competitive structure of a specific industry. Such evaluations could be beneficial in defining competition, profitability, and positioning of the company that operates in this industrial sphere. Furthermore, high level of competition, mobility barriers, and scarcity of resources among the firms can become a significant obstacle for the formation of those strategic groups. At the same time, it is suggested that as soon as the strategic group is formed, its members are considered to be stable across a certain period of time, contributing to an easy way for analysis. With the application of a strategic group concept for understanding the competitive structures demands, the company should develop the respective responses and actions along strategic dimensions, such as product quality, distribution channels, and pricing decisions. In the majority of cases the use of media is essential for attracting the specific consumer segment. The strategies could be relatively similar, but the task of the company is to provide its distinctive line of action.

 

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