BUS301 Integrated Capstone Project : Problems Being Analyzed
• Industry and competitive analysis
• Company resources and capabilities
• Global or multinational strategy
• E-business strategy issues
• Diversification strategies and the analysis of multi-business corporations
• Financial conditions and financial analysis
• Staffing, people management, incentives and rewards
• Organizational structure, core competencies, competitive capabilities, staffing
• Policies, procedures, operating systems, best practices, continuous improvement
• Corporate culture issues
• Ethics, values, social responsibility
• Corporate communication and public relations
In your final report, you need include:
Section 1. Executive Summary;
Section 2. Background of the company / topic being studied;
Section 3. Issues / Problems that being analysed;
Section 4. Detailed analysis of the identified issues by referring to disciplinary knowledge and skills learnt from your degree;
Section 5. Recommend solution / Suggestions
Section 6. Plan of your career or future study(Must individually complete)
Answer:
Background of the company
Under armour is an American company that was founded in 1996 with its headquarters based in Baltimore, Maryland in the United States (US). The Company was initiated by Kevin plank, a former football player of university of Maryland. Kevin plank (founder) began the business from a basement and he made the first team sale in 1996 where a revenue of US 17000 (Zimmerer Scarborough and Wilson, 2005). The company growth tremendously began in 1999 when it won a contract of outfitting warner brothers’ film. Another breakthrough came when the company was offered the contract of outfitting XFL football league. The company therefore gained a remarkable popularity during the league’s debut on a national TV. Since then, the company has substantially increased on its sales irrespective of the financial obstacles (Weedon 2012, p270). It primarily manufactures foot wears, clothing’s, Sportswear and accessories among others, supplying within the United States and the world at large. The company takes pride in producing top notch products which has time to time helped it in favorably competing in the industry. The company is also characterized by a high level of innovativeness as the company seeks various strategies in improving and maintain the standards of its products. The main target market of the company are the active sports figure/ sports men and women. However, for the purposes of diversity to increase on the revenue, under armbour produces other products for the general public (Unlucan 2014, p.314).
Under armour enjoys a competitive advantage of a strong brand loyalty accompanied by a cost effective advantage. Being a young company, under armours has indicated a steady tremendous growth evidenced by the recent achievements for example contacts with the major league baseball and endorsements with major celebrities However, given the fact that the company is still very young, it still needs an extensive strategies and efforts help in the expansion of its operation to the rest of the world (Touchette et al. 2015, p.110).
3 Issues or problems being analyzed
The analysis will begin by making an evaluation of the current situation of under armbour that is the current position of the company as well as the financial performance. The analysis will also involve a critical evaluation of the macro environment
4 Detailed analysis of the identified issue
4.1 The current situation of under armbour.
This section is meant to provide an overview of the current company situation as far as the company objectives are concerned. It highlights the various aggressive moves that have currently been made by the company for the purposes of accelerating its current success.
Some of the vibrant and aggressive actions taken by the company, among others include; extensive promotions and marketing, increase distribution as a result of increased retail outlets, diversifications in the number of products produced and evolution of sales strategies. All the actions are geared toward achieving a specific set of goals and objectives (Suarez and Kahl 2013, p.420).
Some of the objectives as clearly stated in the company goals is to be the leading providers of quality and first class wears more especially to the athletes. This is clearly evidenced in the improvement of the brand. Every latest product of under armbour is proved to be better than the initials which is a clear indication of the progress and improvement. It also aims at developing passion in the users of the product as a way of achieving customer loyalty in the competitive industry (Shea-Van et al 2011, p.180). Given the fact the company is just an upcoming player in the market, it still falls behind other strong companies, for example adidas. However, in the recent years, research statistics indicate that under armbour is progressively and steadily acquiring new market. This implies that the market shares of the main competitors in the market are being reduced.
With the mission of the company as “empower athletes everywhere” under armbour has extensively relied on the passion of athletes in producing a first class choice in relation to the athlete. This is evidenced by the endorsements made by various athletes with the company. Under armbour also fights to keep its mission of making all athletes better by use of design, passion and relentless pursuit of innovation (Ratten 2015)
4.2 Some of the strategies being adopted by the company
Signing influential models and athletes. The company has in the past signed contracts with influential public figures. Having celebrities wearing the company brans is a big achievement as far as advertisement is concerned. Some of the influential athletes who signed for the company include Jordan spieth who was signed in the year 2013. He won the Masters in 2015 and made a record as the youngest player to win it. This gives the company a high reputation and attracting premium customers. Another influential signee of under armbour is Stephen curry. He is an exceptional and reputed basketball player, who won the most valuable player award in the year 2015. This greatly and positively impacted on the company’s footwear sales (Ratten and Ferreira 2016)
4.3 Applying porter’s five forces model in the analysis of under armour performance
New entrants.
Under armour operates in an industry in which there is limitation to new entrants into the market. This is due to the high capital needed in investment at the beginning of the business. Given the fact that company was established over two decades ago, there was no need for high capital to enter into the industry as the competition was not as stiff as it is today. This explains under armours success given the poor financial history. Since the establishment of the business, there has been a tremendous change in the market situation (Ranck 2012). As it can be evidenced by both research reports and the current industrial situation of the industry, there is a stiff competition in the industry. The restrictions also comes about as a result of reputed brand loyalty created by the major industrial players. The main players of the market include Nike, adidas, under armbour among others. However, given the stiff competition that creates entry limitation, there are still moderate chances of new payers/ firms entering into the industry. This can directly be related to the dynamic changes in the technology which can provide a competitive advantages to the new entrants into the market (Pierce and Petersen 2011).
Bargaining power of suppliers.
Looking at the raw materials used in the manufacture of under armbour products, the suppliers of the company have got a weak bargaining power. This is due to the availability of the raw materials in abundance. The raw materials used include fabric blends, cotton, rubber, and clothes among others. The main suppliers of under armbour are both from the United States and Latin America. Due to the abundant supply, the company has strict standards set for the suppliers to meet in order to remain in business with the company. With the sufficient suppliers of raw materials, the company is able to keep the costs low with the ability to switch suppliers. In other words, the company has an elastic demand to its suppliers which gives it an advantage of keeping the prices low (Pierce and Petersen 2011).
The bargaining power of buyers
Under armour has a strong brand reputation in the industry. For decades, the company has developed a strong brand customer loyalty through promotional campaigns. It is clear that under armour has extensively carried out marketing campaigns which also explains the reasons behind its vigorous growth and expansion in the industry. Research indicates that under armour was able to double its revenues in just less than three years. This is an indication of the strong competitive capability of the company accompanied by the strong brand name. In other words, the industry is oligopolistic in nature implying that there is high level of product differentiation (Miloch 2012, p.42). This is aimed at making the products look unique from the competitors’. However, besides the strong brand name and product differentiation, there is high level of customers substituting the brands in case of any dissatisfaction that may come in for of high prices or poor quality. The company therefore has to maintain the high quality of products produced accompanied by more extensive marketing campaigns and fair prices as far as the target market is concerned. In this case therefore, there is a high threat of the clients switching to other products. As a way of reducing the threats level, the company ought to carry out extensive research for it to take the lead in innovation.
The threats of substitutes.
As clearly explained before, under armbour operates in a very competitive industry where there other players who produce a closely related products, the company faces a high threat of substitutability by the clients. The main competitors in the industry have got strong brand names and also produce high quality products which can easily replace the company products. For the company to maintain new market shares as well as creating new clients, under armbour has to embark on maintaining quality (Mahdi et al. 2015, p.170)
The intensity of rivalry among the existing competitors
Under armour operates in an industry which consists of few competitors. However, the few players are all big brand names that creates a big threat to the company. They all have reputable brand image, manufacturing high quality product brand. This implies that under armour faces a strong threat of losing its clients if any slight mistake occurs. For this case therefore, under armour should be critical and vigilant in its operation. In other words, the company should exploit all the necessary methods in promoting marketing campaigns and sales promotion (Kraft 2008). This will help it to stand the stiff competition/ favorably compete in the industry
Drawing a conclusion on porter’s five force analysis, under armour is in a fully competitive industry characterized by oligopolistic competitive market. Entry of new firms is restricted due to the high levels of capital needed in order to secure a market share in the industry, and a building a brand name. However, the analysis also indicate that the company has a high bargaining power from its supplier. Brands produced by all the industry players can be substituted for another except the situations of customer loyalty (Kraft and Lee 2009).
4.4 Internal assessment of under armour
This is intended to critically analyze and evaluate the internal performance of the company. It will provide an insight into the strengths in which the company has in the industry as compared to other competitors, the company weaknesses in regard to the prevailing situation in the industry, opportunities that the firm may take on and the threats. In this analysis, we shall therefore make use of the SWOT analysis theory (Hindle et al. 2011, p.330)
SWOT analysis of under Armour
The SWOT analysis is meant to analyze and evaluate the strengths, weaknesses, opportunities and the threats that the firm is likely to face in the industry.
Strengths
Recurring innovation and technological advancement. Under armour has demonstrated a dedication in taking the lead in the industry. This gives evidence to the recurring innovation and adopting on new technologies all focused towards leading the competition. The CEO of under armour, kevin Plank designed T-shits with latest technology that could help the athletes fell comfort and dry during the hectic strenuous practice and competitions. This clarifies the type of innovation that exist in the company. In other words, the company tries at its pick to bring about a difference in their products. Comparing under armour with the main players in the industry, it is one of the youngest, meaning it was supposed to be among the least competitive as far as competition is concerned. However, this is not the case as the company is in the top three main players of the industry which demonstrates its level of innovation to attract new customers for its products (Gil 2017)
Visionary leadership
Under armour has enjoyed an incredible visionary leadership from the time of its initiation. Given the fact that the company is still under the leadership of its founder, under armour enjoys an incredible and feasible leadership under Kevin Plank. The effective and transparent accountancy in the leadership has helped the company to gain a steady and progressive growth, with recent research indicating that the company was able to realize a double increase in revenue within just three years (Bolos et al. 2016, p.3). In an interview, Kevin Plank, the CEO and founder of under armour said that his vision in 1996 was not to build a huge and big brand company in the world but rather to make the best T-shirts in the world that all the athletes would like. With such a curiosity of being the best, we can draw a conclusion of the reasons for the company’s fast growth under the vibrant leadership (Fortunato 2015, p.91)
Weaknesses of the company
Retail presence; basing on recent research, under armour only has 144 branded outlets as compared to one of its competitors (Adidas) having 490 and Nike with 930 outlets. This therefore implies that under armour does not have enough established retail outlets that deals in their products more especially outside the US. Given the fact that the company has built several brand outlets within the United States, it needs more brand outlets in other countries where customers can directly purchase the products from a branded outlet. In other words, the retailers who sell under armour products are not specific to the company/ not branded. This makes it hard for the clients to find verified retail outlets where they have to purchase such. This problem prevails mostly in other countries other than the US (Brown 2007).
Third party manufacturer dependency; under armour highly depends on third party manufacturers. The SEC filling reports that in 2015, the company relied on 44 primary manufacturers who were based in 13 different countries. China, Jordan, Indonesia and Vietnam manufactured over 60 percent of the company products. For big company like under armour, it is very bad for it to keep relying on other primary producers. The firm may face business uncertainties as it has limited control over the primary producers. As compared to its main competitors in the industry, the Nike and Adidas all have their own manufacturing plant which makes their production reliable and dependable. However, under armour is paying a dedicated effort in solving this as it has begun its process of making an independent plant (Calkins 2012, p.236)
Decline in women’s apparel; even thogh reports shw that under armour is vigourously growing, the company faces a setback in women’s apparel. According to Morgan stanly, there is a decline in the women’s apparel by approximately 6%. This is so alarming to the company as this these are the most crucial points for the company’s growth.
Opportunities
Progressive increase in the market share; under armour has the highest growth rate in the industry. The main player who include adidas, Nike, and many others have considerably lost their market share to the new and young company (under armour). This is evidenced by the statistics which indicate that the company is among the top three main player in the industry (Center et al. 2003)
Positive growth of global athletic market; basing on the trend of the global athletic market, there is a higher prospects of increase in the demand of the company brands. It is absolutely true that under armour is best known for its athletic products. An increase in the athletic market will basically imply an increase in sales of the company. The company should therefore toil to the maximum to secure the best reputable brand name in the industry (Clavio et al. 2009, p.40).
Diversification; under armour primarily began as a company specialized in making T-shirt as evidenced from Kevin plank’s own speech an interview. However, today the company is producing different varieties of apparel indicating that the company is diversely expanding (Dai and Chen 2017, p.90)
Threats
Counterfeit is one of the biggest threats that te company faces. Research studies have shown that one of the most terrible problem face is counterfeit. When other small firms duplicate the brand products, the company reputation is steeply lowered. This reduces its market share in the industry. Under armour also faces a serious threats from the old players of the industry as due to financial constraints. As compared to other players, under armour has a lower financial capability. This may limit its competition in the industry (Davies and Burakowski, 2015, p. 271).
4.5 Organizational structure of the firm
From the subsequent illustration, we can see that the hierarchy is composed of both operational and administrative linage. The executive director/ chairman is the initiator and owner of the company, who in this case is Kevin Plank. He passes the final decision upon what is reached on by the board of directors’. Next in the hierarchy is the board of directors after the deputy chairman, who are responsible for the decision making of the company. The CEO is the general manager of the company and he guides all the activities that are involved in the firm. He is answerable to the board of directors. The project team members work under the guidance of their team leader in the department management. In this case, the team leader is driven by the instruction of the department manager who also work under the CEO. With this logical hierarchy, every personnel has a responsibility they play in execution of activities for the perfect running of the company.
After getting a clear insight of the structure of the organization ought to be, we can now make a clear fact of the organizational structure of under armour (Dhoot, 2016).
5 Recommendations/ solutions
Through a strategic plan, there are a series of recommendation that under armour can take to improve on its performance and competitive capability in the industry. It the recommendations are amended accordingly, the company can realize a considerable growth and expansion in its revenues.
Firstly, the company should look into the women’s apparel. As analyzed and evaluated previously, the women’s apparel production has thoroughly gone down. This product line has one of the greatest potential for increasing the company’s revenue. Kevin plank highlighted the company’s problem in the women product line. He said that lack of fashion is one of the causes of the poor performance. The company should therefore;
- Create a partnership with women’s world class brand designers to help the company make fashionable women sports clothes that will look unique from the company competitors. It is ultimately true that women’s seasoned fashion clothes will sharply increase on the company revenues (Dietrich and Livingston 2012).
- Creating women competitive promotional campaigns for modeling using the company’s brand. This will provide advertisement opportunity to under armour. The general public will always reflect the women’s product of the company in relation to the modeling competitions. This strategy has been adopted by many companies and always works out. For example, Honda Company was named after a great athlete called “Honda” so that people can always reflect the person into the brands.
Under armour should also hunt out for more hidden gems/ sports personalities. As mentioned previously in the analysis, Stephen curry and Jordan Sapient have played a great role in changing the brand name of the company. The value of these personalities to under armour is approximated to exceed 1o billions. Looking at this, the company should look for more exceptional sports personalities who can generate even more revenue to the company as a result of building the brand name of the company (Duffield and Portus 2007)
The company should also lay down strategies in making premium brands exclusively for the high class. Relating to its competitors, adidas and Nike tend to produce products with limited editions. This will also help in increasing the reputability of the company.
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