Bgen 499 - Case 3

Colter porter

BGEN 499

Case 3

1 February 2017

Question One: What Competitive Forces Do Under Armour, Nike And The Adidas Group Confront And How Strong Are Each Of Those Forces.

1. The market maneuvering and jockeying for buyer patronage among rival sellers in the industry:

• Rivalry among the three companies is very strong. All three companies are competing for customers and market share.
• Competing for the highest quality.
• Competing for the best performance.
• Competing for the best Brand image.
• Competitive Force: STONG

1. The threat of new entrants into the market:

• Threat of new entrants is relatively low. It is unlikely a company could start up tomorrow and take a large part of the market share away from the three big dogs.
• Relatively high entry barriers.
• Strong brand name held by the top three.
• Competitive Force: WEAK

1. The attempts of companies in other industries to win buyers over their own substitute products:

• There are many available products that are not made from performance fabrics.
• Lesser materials are cheap.
• These other lesser materials are less comfortably nor do they provide the performance people are looking for.
• Competitive Force: WEAK

1. The exercise of supplier bargaining power:

• I see two types of suppliers who really matter for this argument. The companies who make the fabrics and the manufactures who produce the shoes.
• High end fabric makers can have a huge impact on price and quantity supplied.
• Manufactures are eager to have contracts with the big three so they are likely to play fair and nice.
• Competitive Force: WEAK

1. The exercise of buyer (or customer) bargaining power:

• These are the individual customers and big chain companies who buy the products in bulk.
• Individual buyers have no power other than just not purchasing the product.
• Retailers have the power and freedom to pick what brands they sell.
• Easy to switch brands.
• Power to display whichever brand they chose. (high visibility in stores)
• Competitive Force: WEAK-MONDERATE

        The rivalry is being intensified by the three companies continually competing for a larger product line with better performance over the other brands. The rivalry is also increasing because each brand is trying to strengthen their appeal to customers by signing celebrities to endorse their products, sponsoring sporting events, and giving promotions for their products. The competition could be seen as weak at times because customers do become brand loyal and only buy shoes form one company, but I do not see this as a strong enough force to dull the very strong competition between the three.

Question Two: What Forces Are Driving Changes In The Industry And What Impacts Will They Have On Competitive Intensity And Industry Profitability?

        The main force that is driving change in the industry is each of the big three maneuvering and jockeying for buyer patronage among rival sellers in the industry. The competitive intensity is only going to increase in this industry. Each brand is going to be aggressive in their marketing campaigns as well as the development of newer and better materials and products. This is going to make it very hard for new entrants to join up, but will also make it difficult for any one of the top brands to get ahead of the pack so to speak. I think the overall industry profitability will continue to grow at the current rate. However, the individual profitability for each of the brands may go up or down based on customer trends and demands.

Question Three: What Market Positions Do Rivals Occupy—Who Is Strongly Positioned And Who Is Not?

The market is primarily owned by Adidas and Nike. These two companies represent about 45% of the industry and take home about 35% of the overall revenues. Nike and Adidas are very strongly positioned and I do not see it changing anytime soon. Although Adidas is not as popular as the others in the U.S. they are huge in other parts of the world. Nike is very popular in just about all parts of the world and will continue to be the top rival for the industry. I think Under Armour is not as strongly positioned as Nike or Adidas are. UA is a relatively new company compared to Nike and Adidas, they have done some solid work getting their name and brand out there. I think this is in part because of their compression clothing that wicks moisture and keeps athletes warm. UA still has a lot of work to do to get to the top level of this industry and lot of this can be accomplished by increasing their marketing, R&D, and their supply chain efficiency.