Each student will choose a company (Australian or otherwise) and independently analyze its internationalization strategy. The purpose of this assignment is to gauge the student´s ability to apply concepts and theories from class in order to analyze why, where, how and when this firm engaged in international business. Particular emphasis should be paid to issues related to the role of institutional environments (home and host countries),industry competition and firm-level resources as sources of advantages/disadvantages in relation to internationalization.
Quality of content and level of analysis, including coherence and consistency in argumentation;
Correct selection and utilization of concepts and theories from class in analysis;
Fact-based argumentation, including usage of qualitative and quantitative data;
Critical thinking, including high level of independent analysis as opposed to description;
Quality of communication, including writing skills and correct usage of references etc.
Background on the Company
Managing a business at an international level is an important part of the growth strategy. The company has shown a growth of more than 20 percent over year every quarter in last six years. The brand has gained a significant market position and started maturing and getting closer to saturation in its home market. At this point of time, international growth has become an important component to continue a long lasting growth story. In the recent time, the organization is witnessing a slowdown in sales in North America (Hobbs, 2016).
It’s their international sales that will keep up with the expectations of the brand. The international sales at Present amount to 15percent of the total UA’s growth. Looking on to the market condition, there is still an ample of space to grow world-wide. It will be tough for a brand to compete against the world’s most established brand Nike, Reebok and Adidas. With such a strong support the company can make initiative in the international market leading a significant growth. UA has a long way to go in order to gain increased sales. Interestingly, In FY 2015, international revenues at Under Armour amounted to 17.5%. In contrast, Nike managed to collect approximately 53.6% throughout the same period UA has continually stressed on its intention to raise its international presence.
In order to gain competencies, the brand is using Connected Fitness app (Hollensen, 2015). strangely 35% on the Connected Fitness network belongs to regions outside the U.S. The brand gained a competitive advantage made possible thanks to the acquisition of Endomondo in early-2015. The app was ranked amongst the top most efficient training app with close to 20 million user’s base primarily in Europe. Therefore, Connected Fitness gave UA the ability to market its products to international target audience at a fraction of the marketing cost. Moreover the app is able to gain a significant market share with 200 million users worldwide.
UA is America’s footwear, sports and casual apparel company formed in 1996 by Kevin Plank The head office of UA is located in Baltimore, Maryland (Team, 2013). There are different ranges of products manufactured by the company that include athletic shoes, t-shirt, jackets, hoodies etc. Moreover, the company is making uniform for American Football, basketball and soccer. Over the period of 4 years from 2010-2014, Revenue of the company has grown tremendously (Kell, 2017).
International expansion strategy
Majority of companies are spending well in order to create a capacity in order to gain economies of scale. The target of these companies is to convert the market opportunities and potential in order gain potential. Where, there is larger demand, it is important to occupy the market opportunity and to build efficiency in order to gain long-term sustainable objectives. An international expansion strategy is crucial for the business organization in order to target customers, channel strategy and to develop an effective creative model. For UA, it is important to implement an effective market penetration strategy to use the corporate resources in the best possible way. In order to gain market competencies, it is important to look onto the following segments in order to derive success.
- Firstly, it is important to choose a Target Market for the business.
- Secondly, a detailed market analysis in order to understand the market size and growth potential etc is suggested to gain market competencies.
- Thirdly, by determining market entry strategies and by deciding value proposal, positioning of the brand, targeting customers, product, influential price levels and channel strategy.
- Fourthly, by determining operational and organizational model(Martin,2017)
- Fifthly, conducting feasibility analysis in the market and determining action plan
- Sixthly, through support in business partner selection, consultancy and commercial agreements
- Lastly by Determination of production facility location
International Expansion Strategy
Under Armour, is a well known distributor of athletic apparel, footwear and accessories, shown a growth over 20% in its top line. In this time-period, UA is able to manage the profits in a well an effective way. The company's extraordinary expansion has been determined by its men's synthetic performance apparel business. This business is considered as the backbone of the company. Under Armour has maintained its growth through an effective revenue base and by strengthening its footwear, worldwide and women’s wear businesses. . With such a strong support the company can make initiative in the international market leading a significant growth. UA has a long way to go in order to gain increased sales.
It is projected that the company in near future will gain revenues from outside of their country. Investing in the international projects and has created a well diversified market across the globe. In the recent time, the company has allocated resources to the other foreign countries creating ample of opportunities. The growth is only possible if the business is able to grow like international brands: Nike and Adidas. Looking on to the market condition, there is still an ample of space to grow world-wide. It will be tough for a brand to compete against the world’s most established brand Nike, Reebok and Adidas (Verbeke, 2013).
Following In Nike’s Footsteps
By studying the world renowned brand Nike It is clear that the brand before entering the European soccer market, was producing running and basketball. The European market was conquered already by Adidas and Puma. Connecting them, 75% market share of Europe's market has a huge potential in terms of expansion. Nike deliberately targeted key teams and players for sponsorships. This in turn has helped the company in gaining market competencies. These sponsorships have helped in building strong relationship with national leagues. In today’s context, Nike is one of the most well-known names in the soccer business, supporting nearly 30 national teams and some of the most influential club (Deresky, 2017).
Under Armour has based its strategy on the similar concept. The company is currently is associated with American Football. It has sealed well-known partnership agreements with organizations in other sports. In this way they are able to align the organizational goal to influence consumers. Though, its capability is to persuade these consumers to gain competitive advantage. For gaining a competitive advantage the company is able to gain competitiveness with teams like Tottenham Hotspur. In order to gain admittance to large fan bases and persuade consumer insight, it is important to manage the teams through effective marketing strategies.
By developing an international strategic alliance, the company can gain successfully so as to be leveraged into even bigger company. The rising challenge in this sector can only be managed through competitive strategies. At this point of time, international growth has become an important component to continue a long lasting growth story (Cavusgil et al 2014).
Situational analysis based on SWOT
Strength- Under Armor of US can become the most successful company because of their excellent product. They have a significant positive impact which adds to the value by increasing profit. Their innovative culture can strengthen the brand value of UA because the customers can relate the company with the recent products.
Following in Nike's Footsteps
Weakness- their limited sale outside the North American market was the main after effect of the emerging global penetration plan. Most of their sales come from the men’s garments which is a drawback. UA has permitted NIKE to lead the industry as a result of that they are constantly struggling to go ahead in the competition.
Opportunities- they have the opportunity to expand their market from male products to other segments. They have also developed their accessories category with special performance feature. International Expansion UA got the opportunity to global expansion. They not only look into the domestic market of US but also outside.
Threat- Weak global economy has disrupted the growth prospects of UA. This has led to an increase in costs and decrease in profit because of reduction in product demand. The increasing competition from Adidas, Nike, Reebok and Columbia sportswear because of their huge investment on sponsorship, advertising and product innovation has posed a major threat for UA.
The company Under Armor should be taken to the given location because there is an increase in the minimum wages which will help in the growth and development of global brands. This can be done by bringing a change in the pricing policy so that the likelihood of the customers who will purchase the products will be modified. For gaining competitive advantage over Nike and Adidas, UA must use an efficient market penetration and diversified strategy. Recently, their sale has experienced slow down in North America so it will be the appropriate time to go abroad for setting up the business. Australian market will tend to give new opportunities to UA because the apparel industry is highly competitive. UA should gain a retainable position in the clothing industry by policy development and gaining knowledge of the situation.
VRIO stands for the question of value, rarity, imitability and organization. To get insight about UA’s internal environment and competitive advantage the process of VRIO analysis is an essential tool. This analysis is based on the detailed evaluation of the various resources and the abilities of Under Armor. In this analysis, such capabilities and resources are selected which are considered as the best for the in the athletic footwear sector. For the expansion of the organization, it is important to invest in new technologies and deliver competitive compensation to the labors in the form of wage, salary or bonus.
The shareholders can be provided with dividend and stock purchase so that the company can stand in the competitive industry. If the company can become competitive it should have a strong cash flow, reasonable debt which should be able to give interest and the potential to raise capital which can be further examined by the return of the organization. ROI or return on investment and return on equity, if present in good form can attract the investors to spend their capital for the company.
Tangible resources are used to gain competitive advantage and intangible resources are used to help the company progress in the apparel industry. Creativity and innovation are the best possible factors for developing the footwear industry. If UA can employ creative and innovative employers then, they will be at a substantially advantageous position. It is important to have an outstanding sales and marketing team for the success of the company, especially those who come up with new products quite often.
- USA has a robust democratic setup considering fair and transparent placement of policies.
- The country has gained a massive political and economic authority over national and international policymaking.
- Majority of international business organizations are located in the country.
Situational Analysis based on SWOT
- The country enjoys a GDP of over $16.760 trillion
- The economic system is well-developed and the economy bounced back after the 2009 recession with a growth of around 4% in the third quarter of 2014
- The country is also experiencing budget deficit, economic prosperity of the country.
- US face the difficulty due to an aging population leading to a serious labour shortage.
- The country has one of the most efficient education and healthcare system.
- People in USA has a liberal mindset with racial intolerance
- There is a continuous issue of rising risk of racial discrimination
- Innovation and technology are the backbone of the country.
- Moreover, the country is continuously enhancing and developing technologies in areas such as nanotechnology, environmental
- IT is one of the important field help in facing intense competition from countries like China and India.
- The country is following a strict legal structure with federal legal system.
- For international companies, legal factors are one of the most influential factors (Rothaermel, 2015).
- Country is a continuous supporter of Laws regulating environmental pollution, attitudes towards “green” solutions, climate change.
- The country has a bicameral Parliament, comprising the Queen, the Senate, and the House of Representatives.
- The country has a strong legal policies supporting international business.
- The policies are trade friendly helping international business.
- Low-cost Commercial Property
- The Currency exchange rates against Euros, dollars and sterling is very favourable in Australia today
- The foreign purchasers are able to purchase much more for their money
- The cost of living in large cities is very high.
- The economy of Australia is supportive in terms of business development.
- An effective market penetration strategy to use the corporate resources in the best possible way.
- The changing social trends have a huge impact on the demand for a firm's products.
- There are three main social classes: working class, the middle class, and the upper class.
- The country has seen a growth in middle class that requires goods to be produced efficiently without any other external interference.
- The country has witnessed an increase in professions, like accountants, computing specialists, engineers, and medical doctors. There has been a tremendous growth in the economy.
- The country has gained tremendous growth through effective business policies in terms of technological advancement.
- The Commonwealth Scientific and Industrial Research Organization (CSIRO), supports research and development in the country.
- This supports research and development.
- The technological growth and development in the country will help in gaining a competitive advantage for the international brand.
- There is an increase in the minimum wages that will help in expansion of international brands.
- Legal changes affect a firm's costs and likelihood of customers purchasing the good or using the service (Czinkota and Ronkainen, 2013).
- Australia supports a strong Environmental protection legal system.
- Changes in temperature can affect the industries including farming, tourism and insurance.
- The climate is changing due to global warming affecting a change in government policies.
- The purpose is to develop environmentally friendly products and develop an effective demand patterns (Hair, 2015).
The industry has witnessed tremendous competition from the brands like Nike and Adidas. There are very few companies who have a strong distribution channel. For, Now Nike and Adidas are causing a strong competition. In order to gain a competitive advantage, it is evident to understand the market segment and to deploy the policies accordingly. For the purpose of gaining a competitive advantage, UA need to use an effective market penetration and diversification strategy. Australia has a vast business opportunity. At this point of time, international growth has become an important component to continue a long lasting growth story. In the recent time, the organization is witnessing a slowdown in sales in North America (Forsgren and Johanson, 2014).
Potential new entrant
There is a high amount of competition in the athletic apparel industry. UA has tremendous opportunities to explore in the Australian market. Few segment in the athletic and sports industry is very competitive. There are many international brands causing a tough competition. For new entrant it will be tough to manage in difficult circumstances.
Power of suppliers
The large buyers are able to obtain goods at a cheap rate. Nike can buy goods at a very cheap rate creating a sustainable competition. There is an immense competition in the industry. Brands like Nike, Adidas and Reebok are causing extreme level of competition. In the recent time, the brand has gained an effective market position. In order to gain a competitive advantage, it is necessary to develop itself in the international market. Australia has a fair market condition and an inclination towards sustainable market growth and development (Shank and Lyberger, 2014).
Power of customers
The switch over cost of customers is very high. There are already many competitions as in the industry. Existence of premium brands is causing a harsh competition to the companies. In order to gain an effective market position, it is important to develop effective market strategies. These strategies will help in occupying sustainable growth.
Threat of substitutes
Clothing is a necessary item which is predicted to grow in upcoming years. UA has to gain a sustainable market position through development of policies and gaining an ongoing insight into the different situation. For managing growth, it is necessary to gain effectiveness and to deploy major functions and maintaining better opportunities. The growth is only possible if the business is able to grow like international brands: Nike and Adidas. Looking on to the market condition, there is still an ample of space to grow world-wide.
Issues in global expansion
An international expansion of a brand involves different issues causing hindrance in growth and development of the business. Marketing barriers: A business finds difficulty in expanding business due to issues in managing business in different culture. Culture obstructs the growth of a product. For gaining efficiency it is important for a brand to manage distinguish goals and to develop effective marketing strategies. There is a barrier in carrying out a business in a different country and managing the operations all together. For gaining a competitive insight it is suggested to deeply an effective framework leading to long term growth and development (Chadwick, Chanavat and Desbordes, 2015).
Legal barriers: These are the barriers caused due to a country’s legislation and are conducible to the establishment. It is important for a business organization to develop effective policies in order to manage objectives. In a competitive economy, it is important for a business organization to understand the legal obligation and to form the policies accordingly (DeGaris, 2015). The main focus here is to have a better understanding of the local law and policies so that; the business can be operated effectively. One can face following issues while expanding the business internationally:
- Change in economic trends
- Political instability
- Fluctuation in currency exchange rates
- Foreign investment and approval procedures
- Restrictions on termination and non-renewal
- Different regulatory requirements
- Access to capital and raw materials
- Accessibility of transportation and communication channel
- Labour and employment laws
- Technology transfer regulations(Fetchko, Roy and Clow, 2016)
In order to deal with the above mentioned issues, it is important for UA to deploy effective marketing strategies. The lifestyle of Australian attracts International brands to make investment. It should deploy the same strategy that is been used by Nike or Adidas. By doing so, they can gain an effective market position within a definite time-period. The company can make growth at the international market and can manage the business environment in an effective way. Global business strategies need to be compiled keeping in mind the importance of growth and development. In this way they can gain market saturation. Under Armour has maintained its growth through an effective revenue base and by strengthening its footwear, worldwide and women’s wear businesses.
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