Porter's Five Forces Model is a helpful tool prospective investors use to help analyze the industry in which a certain company operates. The model, developed by Harvard Business School professor, Michael E. Porter in 1979, is used to analyze and identify five competitive forces that shape every industry while determining its strengths and weaknesses.

The model analyzes and identifies the competition in the industry, the potential of new entrants to the industry, the power of suppliers, the power of customers, and the threat of substitute products. It allows investors a chance to learn about an industry's competitive dynamics to better identify an investment opportunity in a particular stock by looking at factors outside the company's financial metrics such as 澳洲幸运5官方开奖结果体彩网:price-to-earnings (P/E) ratios. This 🍌article a🔴nalyses athletic apparel manufacturer and retailer Under Armour using Porter's Five Forces.

Under Armour: An Overview

Under Armour (UA) manufactures and markets clothing, sporting goods, and accessories. The company operates in the sports apparel industry—a highly competitive industry characterized by rapid growth and strong consumer demand. According to Linchpinseo, the global sports apparel market is forecasted to reach $580 billion by 2025.

Headquartered in Baltimore, Maryland, the company was founded in 1996 by Kevin Plank, who serves as executive chair. Plank began the business from his grandmother's basement. The company went public in November 2005 when it began trading on the Nasdaq under the澳洲幸运5官方开奖结果体彩网: ticker symbol UARM. Under Armour jumped to the 澳洲幸运5官方开奖结果体彩网:New York Stock Exchange (NYSE) in December 2006.

The company reported $4.5 billion in net revenues for fiscal year 2020 versus $5.3 billion in fiscal year 2019. Net income was ($549) million in 2020 versus $92 million in 2019. As of Dec. 4, 2021, the company's market capitalization was $10.3 billion.

Under Armour in the Market

Under Armour must rely on superior product innovation and unique marketing techniques to compete. Its product development and marketing 🍸techniques prove UA has been on the front line of changing competitive dynamics in its industry.

UA's 澳洲幸运5官方开奖结果体彩网:strategic management decisions prove its desire to be the industry leader in product and marketing innovation. For example, the company has spent substantial money on acquisitions—notably, mobile technology companies such as MapMyFitness, EndoMondo, and MyFitnessPal—to engage with athletes and create deeper brand affiliations more effectively. At the time of the acquisitions, Under Armour became the world's largest digital health and fitness community. Its ability to innovate and provide increased 澳洲幸运5官方开奖结果体彩网:perceived value to its cꦿustomers is necessary for future success due to the intense competition it faces.

While there's no dearth of athletic apparel companies that compete with UA in certain market niches, only a few companies have the sheer size and established 澳洲幸运5官方开奖结果体彩网:distribution channels to compete across all the product lines offered by UA. The largest of these competitors are 澳洲幸运5官方开奖结果体彩网:Nike and Adidas. Both are older companies wit🐬h higher total annual sales than UA.

Revenue for Nike came in at $44.5 billion for the 2021 澳洲幸运5官方开奖结果体彩网:fiscal year. Adidas reported revenue of $12.2 billion (10.3 billion in euro) for six months ending June 30, 2021. The 澳洲幸运5官方开奖结果体彩网:market caps for both as of Dec. 4, 2021, were $269.5 billion and $55.🔜3 billion, respectively. While the disparities are enormous, UA has seen a significant degree of growth. Although it 🔥may not be as diverse in terms of products or when it comes to international market penetration, UA has been successful in nearly every industry subsection it entered.

Potential of New Entrants

The barriers to entry for a diversified athletic apparel company are generally very high. It takes a significant amount of financial and 澳洲幸运5官方开奖结果体彩网:human capital to develop products, manufacture them with qualityও and affordability, and push products into the appropriate distribution channels.

It is highly possible for new companies to enter smaller niches of the industry. For example, a new entrant may find success in marketing an innovative product to one particular sport, such as golf or tennis. UA did just that by marketing primarily to American football, creating a better base-layer shirt than what was available on the market at the time. It's more likely for certain segments of the industry to be susceptible to new competitors than the entire industry, at least in the near term.

Competition in the Industry

Power of Suppliers

Suppliers in the athletic apparel industry often sell materials to competing companies. Larger buyers obtain cheaper prices from these suppliers by ordering larger quantities than smaller companies. For ex𒉰ample, Nike may be able to buy exponentially more cotton for T-shirts than UA and negotiate a substantially lower price. This may partially explain why UA, in general, tends to haꦏve higher-priced products than Nike.

But UA has been extremely innovative in the materials it uses by creating various proprietary fabric blends it sources from third parties, creating product differentiation from the competition. This also hel🌜ps the company avoid the disadvantage of buying the same materials at a lower volume and higher cost than competitors.

Power of Customers

Customers certainly have a wide range of choices when it comes to buying clothing and accessories for their favorite sports. Thanks to 澳洲幸运5官方开奖结果体彩网:online shopping෴, customers can quickly and easily shop for the lowest price for a similar product. With that in mind, it becomes critical for a company such as UA to create products for which customers are willing to pay a premium over mainstream, price-competitive goods.

Research shows customers also buy based on 澳洲幸运5官方开奖结果体彩网:brand recognition and association. This is why companies like Nike have famously paid huge amounts of money to sponsor athletes—customers perceive value based on associations. With this in mind, UA started spending huge dollars to sign some of the best athletes in the world to represent its brand. The company managed to snag NBA champion and MVP, Stephen Curry, in 2013 and quarterback Tom Brady in 2010.

The Threat of Substitute Products

Clothing is a staple item that is always in demand. As worldwide interest in sports continues to rise, the demand for athletic clothing and accessories is expected to grow. For each product, there is always the threat of a more innovative version entering as a 澳洲幸运5官方开奖结果体彩网:substitute. However, in UA's industry, it is difficult for a company to create many such substitute products across various sports successfull🌟y.

For example, UA's flagship stretchy base-layer shirt has mostly replaced the standard cotton T-shirts previously worn by athletes. UA was able to use that early success and 澳洲幸运5官方开奖结果体彩网:brand recognition to create other products, but it took ꧅time and investment to expand.

St🎉yle and fashion trends also play a significant role in the industry. While pure fun﷽ction might be the only factor a professional athlete considers, the everyday consumer cares much more about appearance and styling. This is a much more subjective area and may be more susceptible to other brands becoming popular.