dbmaltby

Daily thoughts, observations, and speculations

Application of Concepts from Chapter 2 to Under Armour

Chapter two elaborates on performance criteria, and how a corporation should determine if it is competing successfully in its markets and industries. Specifically these measurements refer to measuring the firm’s competitive advantage. This implies that the firm first knows what defines good performance. Mr. Barney tells us that a firm has a competitive advantage when it creates more economic value than its competitors. A firm’s economic value is basically its perceived benefits less its economic cost. The company I am following, Under Armour, defines success by producing a product that makes ALL athletes better, and they edge out the competition by focusing mostly on their product’s perceived benefits. This increases their economic value, and subsequently its competitive advantage.

What Under Armour does really well is focus on the team concept. Essentially they market a product that helps the overall performance of the group. Their gear is perceived to be the best in the market in helping teammates shed unwanted heat and cold. Their specially designed product creates a program for the team to sink their teeth into: wear HeatGear® when it’s hot, ColdGear® when it’s cold, and AllSeasonGear® between the extremes and everybody’s performance will elevate.

I feel that the Intellectual Property surrounding much of their R&D creates a sustained competitive advantage in the “performance apparel” market. Although UA didn’t invent the market, they were the first to truly look at it from the perspective of the user (as opposed to an engineer designing a product to meet a prescribed list of needs) and develop technology that could be used by the entire team to increase productivity.

When looking at performance, much of it is in the eyes of the beholder.  I choose to look at the financials, which advocate the most popular point of view: the stakeholder’s view of performance. Today the company holds nearly 3% of the U.S. sport’s apparel (approaching half of Nike’s share), operates globally, and sells everything from shirts, shorts, and cleats to underwear. They also make uniforms worn by over 100 universities. Their trademark interlocking U and A is now as well recognized as the Nike swoosh. Under Armour is truly an entrepreneurial tale. They have a market cap of 5.05B, a beta of 1.2, and 40% year over year growth from 2001-2010.

In sum, Under Armour is a great company to follow as I read through the strategy book. They are run by disciplined, open-minded, intelligent managers and know what it takes to win. Their mission statement and business objectives are broad enough to allow them the flexibility to meet the challenges of a dynamic sports performance market, yet focused enough to keep the employees on track to service the customer and the team. I think it is going to be fun to apply the book’s concepts to their daily business decisions.

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One comment on “Application of Concepts from Chapter 2 to Under Armour

  1. dbmaltby
    January 28, 2013

    This was posted on 1/27/2013–I am not sure why the post date is showing the 28th.

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This entry was posted on January 28, 2013 by .
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