A Five Forces Analysis of the Competition in the Sports Apparel Industry
There are different ways through which different businesses maintain their existence within the market while ensuring their growth. This makes adopting different management strategies in the sports industry necessary. There are good questions that should be answered which include deciding whether entering some industries is a good idea. A business that wishes to enter a specific market should consider the competition level that is expected from the other businesses and the size of a market share that it aims at acquiring.
Rivalry between Dominant Producers
This entails the fight for higher ranks within an industry through competition for customers. A business should know the competition moves that others make and that new companies pose a threat such as Under Armor.
Threat of Substitutes
This occurs when a new company enters the market. For example, Crocs entered the market recently venturing into water sports since it has bright colors which are recognized by everyone. Thus, the company entered an agreement with NFL to sell its shoes to it. The new shoes brand combined professional colors (Lussier & Kimball, 2014).
Threat of Entry
This entails evaluation of the cost by businesses as well as how easy new firms can enter the market. This enables them to defend their products. In sports, competing businesses compete in the provision of athletes’ wear (Masterlexis, Barr & Hums, 2012). Under Amor can use this technique to maneuver and to manage to reach a high-rank position in the industry.
Power of Suppliers
When there is one supplier for a company, it means that the supplier has a stronger bargaining power. However, this is not a limit for a company that wants to have more bargaining powers (Beech & Chadwick, 2012). For example, contractors who create sneakers for Nike are manipulated by this company. Thus, it uses little amount of money to pay them and this enables it to control its suppliers.
Bargaining Power of Consumers
This entails reliance of a company on its customers. Customers are at liberty to deal with other companies that offer better products or cheaper prices. Thus, the company has to offer its customers the best products and prices (Smith, 2008). This strategy is what enabled Nike to remain at the top of the industry.
Among these forces, identifying consumers’ bargaining power is the strongest. This is because it enables a company to ensure that it continues doing business and existing in its market. A business is kept in any market by consumers. They enable the management to indirectly avoid factors that can lower their possibilities of operating within a market or profitability.
This force is the foundation on which strategies are laid. On this foundation, businesses engage in activities that will lead them into realizing their goals. For Under Armor, the top competitors are Adidas, Fila and Nike since these have been in this industry for a while. Thus, they know the situation of the market better at specific times. The strategies of Under Armor should concentrate on performance improvement for athletes. The aim of the strategies of Nike is to increase sales levels for its products. For Adidas, the aim of the strategies is to create awareness for the global sporting lifestyle. The Under Armor’s strategy is the best since despite the fact that it is a profit-oriented firm it considers value that athletes get from its products.
The higher margin that Nike has in terms of profit has made it a good performer based on the provided financial data. Under Armor should learn how to protect its share of the market and also how to have different alternatives while providing its products.
Beech, J. G., & Chadwick, S. (2012). The business of sport management. Harlow: Financial Times/Prentice Hall.
Lussier, R. N., & Kimball, D. C. (2014). Applied sport management skills.
Masteralexis, L. P., Barr, C. A., & Hums, M. A. (2012). Principles and practice of sport management. Sudbury, MA: Jones & Bartlett Learning.
Smith, A. (2008). Introduction to sport marketing. Amsterdam: Elsevier Butterworth-Heinemann.