Under Armour

  • Under Armour

    Strategic Issue

    For Under Armour, the strategic issue is as such:What strategies should be used to continue expansion to global markets and successfully compete with Nike, Adidas, and other rivals?

    Strategy Recommendations

    The general strategy recommended for Under Armour should be broad differentiation, which means that the company has to distinguish its products from the competitors' ones in order to reach more customers . This strategy is beneficial for Under Armour because currently, the company is already focused on differentiation by offering products for various purposes, conditions, and sports. However, its products are relatively expensive, and it cannot reach all potential customers, especially in the developing countries. Thus, the grand strategies for Under Armour should include market growth and product development. The company should focus on growing in different markets and creating new product lines for the developing countries. In particular, it should establish new product lines with lower prices to reach target customers with low incomes. Market growth should be mostly focused on the developing economies. As for marketing, it is necessary to start promotional campaigns in the developing markets to popularize Under Armour products, especially the low-cost lines. In operations, Under Armour should also start new manufacturing lines or modify the existing ones to produce, promote, and sell the new product line with lower prices. In the human resource management area, it is necessary to hire new specialists or to use the assistance of the existing ones to develop cheap products for the developing countries. In the financial area, it is necessary to plan the costs of development and promotion, as well as estimate revenues from the new product line and markets.

    Objectives

    The key performance indicators that should be reported for the new strategy include financial and non-financial parameters. Financial indicators should be based on the results of the previous years. For instance, the growth of net revenues was about 25% in 2012 compared to 2011 . Thus, as Under Armour goes to new markets, it should plan to increase its revenues by about 5-10% annually. The growth will be low in the first several years because the development and promotion of new products cost much. However, if the new products are popular in the new markets, the growth rate of net revenues will be higher. Net income of Under Armour grew from $96 million in 2011 to $128, or by 33% . Key net income growth should be set at about 10-12% for the following years because going into new markets may be risky and costly. Like net revenues, net income will grow gradually if the new markets are conquered successfully. In terms of non-financial indicators, Under Armour can use customers' loyalty in each new market, brand awareness, and other factors related to the perception of its brand and products in the new markets. To make the indicators more detailed, the company may estimate them for each country or product group.

    Strategic Justification

    Under Armour has different options and strategies; for example, it can change nothing and continue producing expensive innovative products. My recommendation is the best one because the markets of the developed countries are already taken by competitors, and in the developing ones, there are many chances to succeed because they grow quickly. Moreover, in the developed countries, economic crises occur periodically, and because of them, the demand for expensive sports goods may decline. Thus, the recommended strategy is beneficial, because Under Armour can shift its sales to the emerging markets if the demand in the developed countries declines; moreover, it can offer its new cheap product lines in the developed countries as well. The main disadvantage of this strategy is that it may cost much money and time; however, it will be more beneficial and profitable in the future compared to doing nothing or creating only expensive products.

     

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