Business Model in "Under Armour Inc"

Introduction

The company was conceived in 1995 by Kevin Plank. He set to develop a next generation shirt that would remain light and dry so that individuals would perform consistently under extreme conditions. A year of product testing and material sourcing resulted in the first Under Armour product known as performance apparel. It was realized that the synthetic shirt would be worn beneath an athlete’s gear to provide a snug without retaining moisture or weight. It proved to be a remarkable innovation as it would, indeed, improve performance (Plunkett, 2008).

Background Information

Since then, Under Armour products have expanded and evolved to include a wide selection of shorts, underwear, gloves, socks, hats, sunglasses, cleats, outwear, shirts, among other products (Fitness Box, 2012). Under Kevin Plank’s leadership, Under Armor has evolved from a niche company into a global industry leader. Sporting Goods Business has recognized the company’s delivery on the brand’s Universal Guarantee of Performance. Consequently, the company has been recognized as the “Apparel Supplier of the Year.” In addition, they are the official uniform supplier of the Texas Tech Football Team, University of Delaware Auburn University, University of Utah, University of Maryland, University of Hawaii, South Carolina University, and University of South Florida. Under Armour motto in America, “Protect this house” has allowed the company to build its identity (Gilbreath, 2009).

Growth and Expansion

Under Armour has established a brand name, and this has facilitated an effective distribution of various sporting apparel. The company achieved its initial success by focusing in a niche that other companies had ignored, a line of tight fitting t-shirts. Led by Kevin Plank, founder, CEO, University of Maryland graduate and former football player, Under Armor enjoys mutually beneficial relationship with Maryland. The company has nestled itself in the emerging market for high-tech athletic wear, thus becoming the top brand name. Under Armour superior wear, performance, using high quality synthetic fabric, gears itself to compressing moisture off the skin instead of absorbing it. This allows the company to promote its products as performance enhancing alternatives to traditional cotton (Kimball, 2009). This expertise allows consumers to improve comfort, regulate temperature, and wick away moisture.

Today, its products are sold worldwide and are worn by athletes at all levels. The company's target market ranges from youths to professionals, both women and men as well as consumers with active lifestyles. Having young and middle-age adults as its target market, Under Armour represents a sizeable market for the future. In addition, contracts with high schools and colleges represent a strong market for the company’s present and future earnings America is the biggest Under Armour’s market, and 95 percent of the company’s income has been produced from the United States sales. Its trademarks include, Under Armour, ColdGear, AllSeasonGear, and HeatGear (Fitness Box, 2012). ColdGear is used for insulation in cold environments while AllSeasonGear is used in between times. HeatGear is used for extreme environment.

The company boasts of wear that are offered in three unique fits; fitted loose, fitting, and compression. This ensemble allows Under Armour to position itself to promote the products to a dynamic lifestyle customer, one who likes comfort and mobility. The company's products are distributed in over 20,000 retail stores globally. It has a tremendous opportunity for growth since the company is diversifying into new products lines and international markets. The company’s revenues are generated from the general supply of its products to regional, international and specialty retailers (Kurtz, 2010).

Recent Developments

Currently, Under Armour is well positioned in the footwear, equipment, and apparel segments. The company operates in a highly competitive market. The size and resources of some of Under Armor competitors is massive compared to Under Armor. Their current competitors are proficient in producing and selling products with performance distinctiveness and fabrications comparable to theirs. Its main competition comes from Nike, Adidas, Columbia Sport Wear, and Reebok. These competitors have strong global brand recognition, long operating histories, larger sales force, economies of scale, and better advertising techniques than Under Armour. Under Armor is a subject to significant pricing pressure because of the current strong competition in the market. This issue has caused the company to reduce its retail prices to retailers and consumers. If the company is incapable of offsetting price reductions with similar reductions in its operating expenses it could cause Under Armour gross margin to decline (Plunkett, 2008).

In August 2006, Under Armour became the official supplier for the National Football League Combine, a showcase for college prospects. In 2008, the first Under Armour retail store opened its doors. Today, Under Armour is becoming the fastest growing companies in the world. Its business has stretched outside the U.S borders and into Europe, Japan, China, Canada, New Zealand, and Australia. Its marketing and promotion efforts begin with a strategy of selling its products to high performing athletes and teams on the collegiate and professional levels. The company achieves this through personal contracts with athletes, college sponsorships, and by selling their products directly to individual athletes and equipment managers, and,  as a result, their shirts, shorts, gloves, and other items are seen on the field giving their products exposure to various consumer audiences (Gilbreath, 2009). This setting with consumers helps them build on-field authenticity as consumers can see their products being worn by high-performing athletes.

 The company’s primary function is to develop and deliver high quality products in order to attain high level of success. This is directly involved with all strategic planning and operations including product development, sales, and marketing. The company maintains firm control over their trademark image with an in-house promotion and marketing unit that develops and produces all of their marketing campaigns. Recently, the company developed an aggressive marketing campaign aimed at female consumer. The project enjoyed immense success in recent and forecasted numbers. The company has also invested in research and development. This way, they are at par with the latest products and customer needs. Through research, they are able to identify the current textile technologies and innovations, which continue to improve product lines, while engaged in a highly competitive market place (Plunkett, 2008).

The company has launched product lines in English Premier League and several other renowned European rugby and soccer outfits. Consequently, the company has experienced dynamic growth models and investors are reaping the rewards. The company has a well-diversified variety of products in many of the world’s acclaimed sporting ventures. As a result, the current earnings and growth forecast are higher than its competitors are. The company has realized the benefits of differentiating by developing unique and superior products. The main driver is to provide superior products than what is currently being offered in the market. The company aims to deliver the products with more class than their competitors do (Gilbreath, 2009).

The central competitive advantage of the company is the ability to innovate products.  The company produces distinctively high quality athletes’ sportswear and equipment by employing the latest technology. Through advanced technological innovations, the company develops high quality products with lasting qualities. The company has increased the use of alternative distribution channels. Under Armour has employed other channels including, retail stores, merchandising, specialty stores and the internet to equalize the declining sales as traditional departmental stores. The company lowers the price point for mature lines, as well as creating new mid-priced lines specifically for discounters and merchandisers (Kurtz, 2010).

Conclusion

There is a concerted effort on the footwear front to be more attractive to a variety of users. In 2008, Under Armour developed a thriving cross-trainer shoe, which sold more than a million pairs in the opening year. In 2009, the company released running shoes during the Super bowl event. This indicates that the company has the ability to be innovative and branch out of its initial niche. Under Armour, currently, does hold a small market share when compared to the other prominent sporting apparel manufacturers. This indicates that that Under Armor has the ability to grow and expand in its respective industry. This is possible, if it can effectively break in these segments with its innovative creations. The company seeks to drive consumer demand for its products by increasing awareness as a top distributor of sports products and building brand equity (Kimball, 2009).

In conclusion, Under Armour has been successful due to its reputable productions, brand positioning, and aggressive advertising. Through continuous investments in research, the company has developed better textile technologies than its competitors. This increases their competitive advantage. Its business model should be emulated by other companies that wish to achieve dominance in the market like Under Armour.