Case Study

Under Amour Case Analysis

Jessica Simmons

Kaplan University

MBA 671 – Strategic Management

01/24/16

1. Use a "Five Force" analysis to determine how strong the competitive forces are confronting Under Armour, Nike, and The Adidas Group.

The five competitive forces that in most cases shape the business competitive strategy include the following:

(a) Threat of new entrants:

It is believed that new and fresh entrants in the industry often bring new and fresh capacity and a very strong desire to gain shares of the industry market. These new entrants in the industry put more pressure on costs, prices and the investment rates. The threat of new entrants in the industry therefore puts a cap on the profitability as well. When the perceived new entrant threat is high, the incumbents are forced to hold their prices down or improve their investment to prevent the entry of new entrants. Considering the three main competitors in the sportswear industry which includes Nike, Adidas and Under Armour, the threat of new entrants in the sportswear industry is moderately high due to customer appeal for a better lifestyle. However, since the three companies have a large customer base, with high quality products and high investments a new entrant in this industry will require a lot of capital to venture in the market. Also the customer switching costs are very high since a particular buyer will have to change the specifications of the products to suit the new supplier. This factor is the barrier for the new entrants in the sportswear industry.

(b) The bargaining power of the industry suppliers:

If the suppliers are very powerful, they tend to charge high prices for their products therefore limiting services or quality and shift the costs to the participants in the industry. Under Armour led to the erosion of profitability of the industry by charging high prices for their sportswear products. Due to the high quality products they produced, their prices were very...