Under Armour is a company founded in America in 1996 that deals with the manufacturing and marketing of sports apparel, goods and accessories. The company mainly deals with sports related products. Porter’s five forces model was developed by Michael E. Porter and is used to analyze any market’s competitiveness and any company’s position in the market. The model uses five forces that externally act in any industry that effects the company’s operations and its position in the market. Considering the current position of Under Armour, we can apply the Porter’s five forces model on it:
Threat of New Entrants
Considering the factors taken into account while establishing a new company, there are a lot of barriers to entry in case of the sports apparel industry. Considering the cost needed for the capital, manufacturing costs, and then distribution cost, there are various costs that need to be taken into account in order to maintain a high quality sports apparel production or even other sports accessories cost for that matter. Moreover, it’s not that simple to penetrate into the market and gain that market share in return of the cost needed for the setup. So the companies might be willing to enter a small segregated market segment but not target the wider market as Under Armour is currently operating at, unless they come up with a very innovative and unique product that could break all the records in the market. Thus, the threat of new entrants into this market is very low.
Threat of Substitutes
When it comes to substitute products in the market, the consumers have a considerable amount of substitutes of Under Armour. These include various kinds of sports apparel manufactured in the industry. Other than that it also includes other clothing items. The demand for sports apparel has increased over the years and is expected to keep on increasing in the future as well, with the various kinds of sports apparel being introduced in the market. One of the main reasons for this growth is an increase in health conscious consumers. According to the stats, the sportswear industry is the one that is driving the growth in sales of apparel industry. So the threat of substitutes is high for Under Armour while the key to maintain its position is to keep manufacturing innovative, competitive products.
Bargaining Power of Suppliers
Under Armour outsources most of the raw material used in their products. The suppliers prefer to sell their products to the highly competitive company in the market, or the one with the higher shares. Suppliers have much power in this case as they can easily exploit their buyers. For example in case of Nike, which buys more volume of products from its suppliers, it gets those products at a lower price. However, the same supplier supplies the products at a higher cost than Nike to Under Armour as they buy lesser volume. Under Armour is however, known for its product differentiation in terms of blending the fabric and manufacturing unique quality products.
Bargaining Power of Buyer
Customers have a whole list of options when it comes to purchasing sportswear. They have it in every quality and price. And with the increasing trend of health consciousness and awareness, more people have come towards the purchase of sports apparel. It might seem that the buyers have great power in this industry because of the options available to them, but when we consider the target market for Under Armour, they are the buyers who are willing to pay the premium price for these products. In this case, the buyers are able and willing to pay the higher prices for these products, thus making their power over Under Armour very moderate. It is due to the marketing tactics of these companies that the buyers have lost their power over the companies like Under Armour.
Industry Rivalry
Many competitors are present in the market, which compete on price, quality and distribution networks. Various big companies are competing with Under Armour including Nike, Ralph Lauren, Umbro, Columbia Sportswear, Fila and many more. These competitors have been improving their marketing tactics in order maintain their position in the market. This includes partnerships with Sports events or clubs, using celebrity endorsements, product launches and other growth tactics. All these are the ways these companies are trying to improve their position in the market. So there is a high level of rivalry between competitors in this industry.
References
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Bain, M. (2017, January 23). Sportswear is carrying the global apparel industry. Retrieved July 12, 2017, from https://qz.com/889672/sportswear-is-carrying-the-global-apparel-industry/
Bisht, P. (n.d.). Sports Apparel Market by End User (Men, Women, Kids) and Mode of Sale (Retail stores, Supermarkets, Brand outlets, Discount stores, Online stores) – Global Opportunity Analysis and Industry Forecast, 2014 – 2020. Retrieved July 12, 2017, from https://www.alliedmarketresearch.com/sports-apparel-market
Koppelman, C. (2016, September 20). What Under Armour Knows About Branding That Its Competitors Don’t. Retrieved July 12, 2017, from https://www.forbes.com/sites/charleskoppelman/2016/09/19/what-under-armour-knows-about-branding-that-their-competitors-dont/#6367fa0f2feb