Daily thoughts, observations, and speculations
Value-Chain Analysis to Identify Resources and Capabilities at Under Armour
The resource-based view (RBV) of a firm lies primarily in the application of bundle of valuable interchangeable and intangible or tangible resources at the firm’s disposal. For a firm to transform a short-run competitive advantage into a sustained competitive advantage requires these resources be heterogeneous and immobile. This is perhaps the biggest struggle Under Armour faces – the challenge of maintaining a differentiated product. Herein UA is limited by its package of productive resources.
A closer look at UA’s value chain helps to properly identify its productive resources. The diagram below adequately summarizes the performance apparel industry’s global value chain.
Next, the strategic thinker should look at the firm’s individual value chain to understand UA’s productive resources. The picture below is an accurate description of their Value Chain.
The first picture shows resources used by the sports performance industry. The second picture demonstrates UA’s internal value chain. The RBV stresses a firm’s resources are its inputs or factors available to help it perform its operations or carry out its activities. The theory states the resources can be financial, physical, human, or organizational. The resources above can be categorized in one of those four categories. A subsequent look at the application of the RBV also breaks the resources into its key resources. The theory evaluates whether these resources fulfill the following criteria: Valuable, Rare, In-imitable, and non-substitutable. Arguably UA’s biggest challenge most of its resources are imitable and even the resources considered high-value to UA are easily produced by competitors. UA’s primary differentiating resource is its design and style (organizational). UA has revolutionized the t-shirt to wick away sweat from the athletes. Furthermore, they have re-invented women’s athletic apparel. But all of this is easily imitated by competitors – competitors with very deep pockets. Bottom line is that with all of the threats UA faces, and its low barriers to their resources, they are going to have a hard time sustaining their competitive advantage.