dbmaltby

Daily thoughts, observations, and speculations

Diversification Strategies

Under Armour implements a limited corporate diversification strategy. Most of its business activities fall within a single industry, the sport’s performance industry. Specifically, UA makes it revenues as a dominant business, wherein between 70 and 95 percent comes from a single business – it’s clothing business. UA does not leverage their resources and capabilities beyond a single market or industry, the apparel market and the sports industry respectively. When you categorize their many products (t-shirts, shoes, sweat pants, etc.), you see that they are all engineered at removing sweat and providing a comfortable workout for the common and professional athlete. To understand their scope of operations, it is helpful to compare their mission statement to the likes of their competitor, Nike.

Nike’s mission statement: To bring inspiration and innovation to every athlete in the world.

Under Armour’s mission statement: To make all athlete’s better through science, passion, and relentless pursuit of innovation.

Both companies rely extensively on innovation in their mission statements. However, they use innovation for different purposes. Nike links it to inspiration and the idea that everybody has a body and is therefore an athlete. With UA, it is linked more to science and the idea that existing athletes, be it amateur or professional, will benefit from their high-tech product.

Under Armour diversifies by selling new products to existing customers. Expansion for UA doesn’t come in the form of entering new markets; they stick to their core customers and produce new products within the scope of sports performance apparel. This is different than Nike, who has branched into various markets within the sports industry. For example, Nike makes more than just shoes, shirts, and undergarments – all of which are sport’s performance apparel. They also operate horizontally in markets throughout the sports industry, for example they make golf clubs, footballs, soccer balls, baseball equipment, tennis rackets, cricket gear, etc.

Thus UA has carved a very small niche for its area of operations. They innovate and market so effectively that they can be a premium company. While their competitors are spread out over many markets, UA’s focus allows them to channel all of their resources into innovating high-tech sports performance apparel that will improve the athlete’s performance.

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This entry was posted on April 7, 2013 by .
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