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The strategies of the sportswear industry

A comparative analysis of Adidas, Nike and Under Armour

Term Paper (Advanced seminar) 2017 22 Pages

Business economics - Business Management, Corporate Governance

Excerpt

ii. Table of Contents

i.Executive Summary

iii. List of Abbreviations

iv. List of Figures

1. Introduction

2. Objective

3. Methodology

4. Main Part
4.1 Industry Analysis & Overview
4.2 Porters 5 Forces
4.3 SWOT Analysis
4.3.1 Adidas
4.3.2 Nike
4.3.3 Under Armour

5. Conclusion

Bibliography

Online Articles

Online Sources

ITM

i.Executive Summary

This assignment provides an overview of the strategies Adidas, Nike and Under Armour implement to compete in the sports apparel industry. The first method of analysis includes Porters Five Forces Analysis tool in order to have a nuanced picture of the sportswear industry and to construct an analysis of influential threats and opportunities. The second analytical tool used was the SWOT analysis to give the reader an in-depth view of the companies’ current position and the opportunities and threats that could arise.

Adidas, Nike but also Under Armour, to some extent, are leveraging from a high bargaining power over their suppliers due to a strong and global supply chain. With the increase in E-Commerce stores and sporty fashion trends the customer have a lower switching costs, making the sportswear industry very competitive. The sportswear industry consists of 6 strategic pillars including brand portfolio, innovation, markets, team, supply chain and sustainability. Nike & Adidas compete for the highest market share and try to create a global corporate culture exploiting their history and core values. Sustainability has become a big concern in terms of the unethical supply chain strategy. Under Armour on the other hand is focusing to expand and compete the big players in the sports industry with its unique innovation strategy to produce advanced sport products to enter new markets and reach more customers.

iii. List of Abbreviations

Abbildung in dieser Leseprobe nicht enthalten

iv. List of Figures

Figure 1: US Sports Apparel Market

Figure 2: Porters Five Forces

Figure 3: Under Armours Revenue & Retail Presence

Figure 4: SWOT Analysis

Figure 5: Strategic Pillars

1. Introduction

The sport clothing industry is one of the most competitive and vibrant industries worldwide. The global market for sport and fitness clothing is projected to reach over 190 billion US Dollar by 20201. North America is by far the largest market, followed by Europe; furthermore the Chinese and Indian market are profoundly growing and show great opportunities for sport producers to exploit on. These forecasted numbers are a logical consequence of the increasing fitness lifestyle and fashion trends of today’s society. Nike & Adidas have been the biggest players in the sportswear industry and have been in fierce competition over the past decades to reach the highest market share. Whereas Nike dominates the North American market, especially American football equipment, Adidas has a higher market share in the European market, investing a lot of their marketing budgets into football sponsorships and endorsements. Under Armour is by far the youngest player in this very competitive industry and still tries to increase its global market share and brand image. The analytical tools used in this assignment will give a more detailed information about the strategic positions of the three organisations and highlight their strategic goals.

2. Objective

The objectives of this assignment is to identify how big players in the sportswear industry compete within a target market that drastically develops and changes due to new fashion trends and the thrive to become the best in an economical and sportive perspective. The comparative analysis of Adidas, Nike & Under Armour will give the reader an overview of the various business strategies that are used to compete in such a aggressive market. Using the tools of Porters Five Forces, to further understand the sportswear industry, and further analysis of the three mentioned brands with the use of the SWOT analysis will highlight if these companies use cost leadership, differentiation or/and focus strategies to give them a competitive advantage.

3. Methodology

The information and secondary research from Adidas, Nike and Under Armour was collected from published books, journal articles, reports and online sources.

4. Main Part

Before starting the analyses of the sportswear industry, it is crucial to classify what a strategy is and how different business models can be identified. A strategy can have diverse meanings, and even after many years of research there has not been a clear definition of what a strategy consists of. Thompson has characterised a strategy as an action plan to outperform competitors and achieve superior profitability through actions that generate sales and market share. Furthermore he highlighted the importance of having more performance features, a more appealing design and better quality but also a wider product selection2.

More broadly speaking, a strategy is a configuration and formation of available resources for an organization towards meeting the needs, requirements and expectations of markets and stakeholders. A strategy should have a long run direction and scope of an organization that determines the visions and goals3. A company’s strategy strongly depends on the industry it operates in. Whereas the electronic industry including brands like Apple or Siemens focus on research and innovative products, a company like Coca Cola operating in the food industry works on maintaining a strong customer base and builds on a long lasting product that has not really changed within the last 50 years. The sportswear industry faces high competition, making it even more important for a company that operates in this industry to have strategic set points and to gain a competitive advantage.

4.1 Industry Analysis & Overview

Over many years Nike, Adidas and Puma dominated the sportswear industry by competing over the best sponsorship deals and athlete endorsements. Nike is a multinational company focusing on the production and selling of footwear, apparel, equipment, accessories and services like the ‘Nike +’ phone application. Nike is an American industry, founded in 1964 with it’s headquarter in Portland, and generates global revenue of 32 billion US dollars4. Nike is the biggest player in the sportswear industry and has the highest global market share. Nikes pricing strategy is based on premium segments as their customer5. Nike has a fixed base price, making its (shoe wear) products more expensive then similar products from its biggest competitor Adidas for instance.

Adidas is a sport brand with the longest history; the Daßler brothers founded the ‘Gebrüder Dassler Schuhfabrik’ in 1924 in Herzogenaurach. Adidas achieved the breakthrough in 1949 by the older brother Adi Dassler. The Adidas Group consists of many subsidiaries including well-known brands like Reebok6. In 2015 Adidas amounted global net sales of 16.92 billion Euros7 and is therefore one of the strongest competitor of Nike Inc.

Under Armour is the smallest and youngest sports apparel producer in comparison to Nike and Adidas. Under Armour established itself quickly within the industry, especially in the US market due to its innovative use of fabric technology and increasing brand recognition through athlete endorsements. Under Armour achieved global net sales of 3 billion US dollars in 20148.

Figure 1 shows a clear pattern of the industry and the competition between the three mentioned sportswear companies. Whereas Nike has constantly increased its market share, Adidas had to deal with record losses and near bankruptcy in the 1970s but found second wind during the rise of Nike9.

Under Armour has entered the market with a multipronged channel strategy to reach more customers in more markets10 and has constantly been growing since its establishment.

illustration not visible in this excerpt

Figure 1: US Sports Apparel Market11

Figure 1 gives a clear picture of the development within the sportswear industry within the last years. Whereas Nike, the biggest sports apparel producer, is under constant pressure by its biggest rival Adidas. On the other hand, Under Armour was able to progressively implement itself in the sportswear market by introducing innovative products to increase overall market share.

4.2 Porters 5 Forces

Porter highlighted the main factors that have an influence on business profitability. The concept of the 5 Forces Model works in almost every industry and is used to focus on addressing and minimizing risks to businesses12.

Porter has pointed out the threats of new entrants or substitute products & services but also the bargaining power of suppliers and/or buyers can heavily influence a companies performance depending on the industry it operates in. The Porters Five Forces model can be seen in figure 2 below.

illustration not visible in this excerpt

Figure 2: Porters Five Forces13

As seen above, the Porters Five Forces model shows a nuanced picture of the industry and gives a quick analysis of influential threats and opportunities. However the five forces model has been criticised to be static and to take industries for granted without any problematic boundaries14

The porter’s five forces model is an industry-focused analysis, and will therefore focus on the sportswear industry. The sports apparel industry is a highly competitive and unique industry, which changes drastically from one year to the next.

[...]


1 Global Industry Analyst Inc. (2015)

2 Thompson, A. (2013), p.5

2 Thompson, A. (2013), p.5

3 Johnson, G. & Scholes, K. (2008)

4 Statista. (2016)

5 Joachimsthaler, A. (2000)

6 Adidas. (2016)

7 Statista. (2016)

8 Statista. (2016)

9 Schulz et al. (2015)

10 Pride, W. & Ferrell, 0. (2015). P.332

11 Roberts, D. (2014)

12 Hargroves, K. & Smith, M.H. (2013). P. 104

13 Michael E. Porter (2008)

14 Faarup, P.K. (2010). P. 113

Details

Pages
22
Year
2017
ISBN (eBook)
9783668752412
ISBN (Book)
9783668752429
File size
485 KB
Language
English
Catalog Number
v429698
Institution / College
University of applied sciences, Munich
Grade
2,0
Tags
adidas nike under armour

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Title: The strategies of the sportswear industry