Daily thoughts, observations, and speculations
Under Armour began as a niche company. Kevin Plank designed the perfect t-shirt and used his locker room access to land sales to key sports teams and penetrate the sports performance industry. In order to continue to compete in this hypercompetitive industry, Mr. Flank had to redirect his growing company’s strategy by shifting to a product differentiation strategy. UA is up against companies with very deep pockets, a wide variety of product lines, and well established distribution channels. Mr. Flank stressed to his investors that his company’s most important commitment is to innovation. Furthermore, UA’s website professes their commitment to remaining flexible with their strategy in order to meet the dynamic needs of their market.
UA understands that the technologies and offerings within their industry are so new that the standards and rules are in constant flux. Thus they tactically commit themselves to building and exploiting temporary advantages through market disruptions rather than trying to sustain an unsustainable advantage. This also spares them from over-committing themselves to one particular piece of technology.
Indeed, one of the costly problems with this industry is that of leap-frogging. Basically, right when one company comes out with an innovative idea, a competing company leap-frogs that idea by improving upon it. UA has to be cautious not to be stuck in that precarious situation wherein they eat the sunk cost of the original design.
So to hedge this risk, and also to assist with their attempts to become a global corporation, UA has partnered with the very large Tottenheim Hotspur in Europe. This has opened the door to the English Premier League soccer division. They have also begun a large campaign to win over the female athlete. Finally, UA has reached out to sign up-and-coming star athletes. These endorsements are important in developing positive consumer perception about the quality of their products. In the sports apparel industry, these testimonials are akin to pre-emptive strategic assets and should pay dividends.
UA’s will have to continue to reinvent new products to create the market disruptions required to make profits. Their tactics of partnering with larger companies to penetrate the global market seems effective. UA’s journey continues to be a David and Goliath tale.