Daily thoughts, observations, and speculations
International strategies are a special case of diversification. Under Armour demonstrates an international strategy by pursuing business opportunities across country borders. They do this for the main purpose of exploiting the economy of scope associated with gaining access to new customers for the current goods. As I pointed out in my case study presentation on UA, this global expansion is necessary for UA to be able to compete against the likes of Nike and Adidas. UA relies heavily on marketing to create their perception of a high quality, premium product, and they have taken the techniques deployed successfully domestically to win over customers internationally. Specifically, they have cornered many professional sports teams in Europe including soccer teams in England and Rugby in Edinburgh, Scotland. The problem with UA is that their products are imitable, and their competition has already been in operation so long that they have had a chance to widely popularize their brand name. This is UA’s biggest struggle, to grow internationally against likes of Nike and Adidas.
Under Armour is a healthy, growing company that should have the financial leverage and margins to continue growth. Their upward trend domestically is what has fueled their increased earnings and market cap. The challenge will be if they can successfully continue to grow globally and expand their marketing and operations. Mr. Barney tells us that as a firm pursues new economies of scope, they must evaluate the extent to which they can be responsive to local market needs and obtain advantages of international integration. Again, Nike and Adidas have the edge on UA because of their brand’s global historical presence.
UA’s biggest source of hope for global growth globally should be that given the broad range of international opportunities, they do not have to compete head-to-head with other firms pursuing the same international strategies that they are pursuing. Perhaps one of UA’s most valuable resources is an intangible asset, that is they have a certain “it” factor. Wearing UA has become cool and appealing to mass audiences. And by getting foreign athletes to wear their gear (bikers, rugby players, soccer players, etc.), UA creates a lot of perceived value in their customers’ eyes. This factor is indeed hard to duplicate and will help UA sell more clothes and gain market share on Nike and Adidas.
Going international is UA’s biggest challenge. Even though much of their product’s tangible characteristics can be substituted by a competitor, they need to capitalize on their intangible asset that made them so hip to wear domestically. Duplicating a strategy in one region typically doesn’t work well in another region because of cultural differences and customer expectations. However, the sport’s world is unique in that measure of winning and losing is very well defined. And in the sports performance apparel industry, the goal is to help the athlete win. All UA has to do is prove that their product can help the athlete win and they have a chance of capturing him or her as a customer. As it happens, the campaign that has helped UA prove their case in the US translates very nicely into international strategies as well. Herein, UA will increase their economy of scope and grow their customer base.