Under Armour

Under Armour

Assignment 1: ^[a]Five Forces Industry Analysis

Tyler Resende – Tyrik Wilson - Panitep Veerapatarakul – Doug Dias

University of Massachusetts Boston

MBA MGT 689

Dr. Riaz

March 3, 2017

Rivals

Under Armour was competing in the sports apparel and athletic footwear industry going against power houses Nike and Adidas. Being in a low differentiation industry^[b], competition between the leaders were high and based around key factors like price, product identity and service. Each firm spent hundreds of millions of dollars in advertising/sponsors trying to win big contracts from major league teams, colleges and famous coaches. Marketing costs in 2011 were $167.9 million for Under Armour, $2.45 billion for Nike and $1.36 billion for Adidas. Demand for these products were high and all three companies lead the market share. Nike was the market leader with market share of 7.0% respectively. Adidas fell right behind with market share of 5.4% and Under Armour rounded the top three with a market share of 2.8%. Each company focused on different factors of product design and development. ^[c]Under Armour focused heavily on fabrics, to enhance the fit and product end-use of its products. Nike focused more on design, to reduce injury and maximize comfort in its products. Adidas focused highly on performance, to constantly improve the performance characteristics of its products.

Buyers ^[d]

Under Armour’s business strategy relies fairly heavily on visibility, which gives more purchasing power to professional and Olympic athletes who wish to utilize Under Armour garments during games, events, or training. Wholesalers, which are responsible for over 90% of Under Armour’s sales, might have moderate purchasing power depending on the volume of orders as well as the visibility that they provide to Under Armour as a brand, especially since the brand has very few brick and mortar locations. Licensees are also buyers with medium buying power, as they might appeal to Under Armour’s strategy to break into new sports apparel markets, such as shoes, watches, etc. Lastly, Under Armour buyers with low purchasing power would be amateur sports team and individual athletes, as their individual purchasing power is not great enough to influence the company’s decisions.

Suppliers

Under Armour is fairly dependent on its fabric suppliers because the company has very stringent specifications for fabric that might make it hard to replace a specific supplier. ^[e]For this reason, I believe that fabric suppliers are the most powerful of Under Armour’s suppliers. Manufacturing vendors have only low to moderate power, as their specific capability to adhere to the company’s quality demands is offset by the fact that Under Armour has already significantly diversified its manufacturing operation.  Lastly, raw material suppliers seem to barely deal with Under Armour directly, and therefore holds no power in the process. It is also important to note that, while fabric suppliers and manufactures have some power, Under Armour’s strong vertical integration power gives them ultimate control of the supply process.