Essay Sample on UA's Market Challenges: A Footwear Story

Introduction

Based on the history of UA, it is clear that critical market-related challenges originated from the establishment of a new line of products. The company had initially focused on sports apparel and accessories; however, in the year 2006, the management introduced the footwear product that included athlete, basketball, and football cleats (Bowen et al., 2014). The performance was satisfactory and the firm projected improved sales but in the subsequent years, there was a decline in quarterly sales contrary to the predicted U.S. market growth of over 4.5%. The major challenge that the company faced was the unequal product appeal and acceptance for the footwear line of products compared to accessories and sports apparel (Subramanian & Gopalakrishna, 2010). The footwear did not fetch a higher market share than the other initial products by the company. Diverse customer loyalty between the new line of products and the existing ones created a gap in profits that forced UA to at some hesitate to increase production. Nevertheless, currently the company is facing new dimensions of challenges such as achieving geographical diversity, selecting the appropriate product endorsements, unbalanced outsourcing results, and reformulation needs amid improved technology.

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Managers and Board

The board of management plays a key role when making decisions regarding the strategies to be implemented in an organization. The vision and mission of a company and the nature of the operations being undertaken are as a result of the numerous decisions made by the management. At UA, the management resorted to the introduction of the footwear line of products back in 2006. The company has been registering improved cumulative performance across its brands (Thomas, 2019; Insider Guide, 2018). The decision was based on the popularity of other brands by the company; therefore, it was expected that the cleats will equally achieve a high market share within a short period due to the high level of customer loyalty that the company enjoyed. However, the outcome was contrary since the management did not resort to proper market research before introducing the footwear line of products in the market (Subramanian & Gopalakrishna, 2010). The wrong decision was not the new products but a lack of proper market analysis before venturing into this dimension of the industry. Currently, the leadership of the company is unable to strike a long-term strategic plan to guarantee the profitability and competitiveness of the firm amid increased competition and product substitutes in the market.

Opportunities and Threats: External Environment

It is important to note that there are numerous opportunities for UA in the United States and beyond. Improved technology has paved the way for sports apparel and accessories manufacturing companies to focus on improved customer experience (Bowen et al., 2014). With the current UA's investment in technology development, the company could improve its profitability, competitiveness, and sustainability in the long-run. At the same time, there is a positive outlook regarding the cumulative apparel and footwear market across the entire United States and other Western countries. In fact, a trend where improved revenue originates form female consumers has been witnessed in the country.

On the other hand, the industry's external environment is dominated by several threats, which impacts strategic operation of firms. There is a high risk originating from the escalating cost of labor. Initially most investors considered the cost of labor from the Asian countries as affordable; however, there is a significant increase in labor cost as witnessed by UA over the last few years (Orlik, 2013). Another threat originates from the constant fluctuation of petroleum cost. Most products in this industry are manufactured with polyester and petroleum textiles, which imply that an increase in the cost of petroleum significantly impacts the production costs. With increased low entry barriers, the segregation of market share could persist; therefore, there is a possibility of declined market share for UA across the globe (Bowen et al., 2014).

Industry Analysis: Task Environment

Based on Porter's Five Forces Model, the sports apparel industry is influenced by a number of factors that directly impact the sustainability of the anticipated profits. The current forces have also influenced strategic implementation of UA as a player in this sector. It is important to note that rivalry in the industry is intense and dynamic. The demand condition for sports apparel is high and keeps changing with the tastes and preferences of the customers (Bowen et al., 2014). UA is therefore expected to keep up with these customer expectations and improve on their products if they want to remain relevant and competitive in the market. UA has faced stiff competition from established companies such as Nike, Adidas, and Champion (Subramanian & Gopalakrishna, 2010). The rivalry between firms impacts the magnitude of share control by acquired and sustained by each firm.

Improved technology and the lucrative nature of the market have attracted a significant number of entrants in the industry. The global sports apparel market has attracted new investors over recent years because of access to common technology and limited resource requirement due to partnership and procurement of manufacturing services. Although a new firm will require a high budget on marketing and advertising, product differentiation and improved technology have improved the capacity of a significant number of new firms in the industry (Bowen et al., 2014). However, the market experience culminating over an extended period since its inception is an opportunity that could enhance UA competitiveness in the U.S. market and beyond.

Another essential force in the industry is the threat emanating from the existence and emergence of substitute products. The use of technology has enhanced the capacity of companies to produce improved versions of the products available in the market based on the needs and expectations of customers. For example, through improved technology UA was able to provide customers with improved T-shirts with a low level of moisture retention capacity compared to the available brands in the market (Subramanian & Gopalakrishna, 2010). A similar trend is equally evident across sports apparel, accessories, and footwear. UA has focused on improving its products to enhance customers' experience and build brand loyalty. By putting more resources and research into this area, the firm stands a chance to improve the performance of each product in the market (Bowen et al., 2014).

Moreover, the bargaining power of buyers equally impacts the sports apparel sector. The desire to meet the quality expectation of customers comes with increased cost of production. At the same time, customers expect affordable prices. Companies such as UA have faced significant challenges trying to balance between the cost and the market prices while meeting profitability milestones. Furthermore, the effect of the bargaining power of suppliers especially when the manufacturing process is outsourced also negatively impacts the success of firm in the industry including UA (Bowen et al., 2014). However, the cheap labor and availability of technological resources in the Asian countries offer the opportunity for UA to maximize profit margins.

References

Bowen, R., Daigle, R., Dion, T., & Valentine S. (2014). Under Armour Case Study. Available at: http://robertdaigle.com/wp-content/uploads/2014/01/BowenDaigleDionValentine_UnderArmour_CaseStudy.pdf

Insider Guide. (2018). Under Armour's International Grwoth Looks Promising. Insider Guide. Available at: http://www.investorguide.com/article/20652/uas-international-growth-looks-promising/

Orlik, T. (2013, May 17). Rising Wages Pose Dilemma for China. The Wall Street Journal. Dow Jones & Company Inc. Available at: https://www.wsj.com/articles/SB10001424127887324767004578488233119290670

Subramanian, R. & Gopalakrishna, P. (2010). Case 24: Under Armour - Industry Four - Apparel.

Thomas, L. (2019). Under Armour shares soar on earnings beat and higher profit outlook. CNBC. Available at: https://www.cnbc.com/2019/05/02/under-armour-reports-first-quarter-2019-earnings.html