Under Armour Question 1

1. How strong are the competitive forces confronting Under Armour, Nike, and The adidas Group? Do a five-forces analysis to support your answer.

The competitive pressures coming from other firms in the industry are strong. There are numerous competitors offering a broad range of merchandise in the same categories as Under Armour. Additionally, the cost to switch brands is low for the buyers. Aside from the actual brands, research and development has allowed companies to produce similar products offering the same characteristics. This has weakened differentiation and adds to the competition from other competitors. Additionally, most of the competitors have the capabilities of economy of scale, which allows them to remain competitive with Under Armour. (Reference Figure 3.4)

The competitive pressures coming from the threat of entry of new rivals are moderate. With the current trend leading towards a healthier and more active lifestyle, buyer demand is growing rapidly. Newcomers can expect to earn attractive profits without inviting a strong reaction from incumbents. With a good brand and enough capital to get through the entry barriers, new entrants have the potential to compete in this market since the cost of switching brands is low for the buyers. (Reference Figure 3.5)

The competitive pressures coming from the producers of substitute products are strong. Nike, Adidas, and other competitors are offering good substitutes for sports apparel, shoes, and accessories. Most items are readily available, comparable, or may have better performance features than Under Armour’s products. With the help of online comparison tools, costumers can compare products and make a more informed decision. And since switching cost is low, the strength of the completion will be strong. (Reference Figure 3.6)

The competitive pressures stemming from supplier bargaining power are moderate.