Introduction
Established in 1966 by Kevin Prank, Under Armour (UA) is an international company based in Baltimore, the United States. UA deals with high-quality athletic wear that meets the diverse needs of sports. Concerning the continuous growth in athletic events and recreational activities, the company has expanded its operations into the foreign markets. With its mission to provide athletes with high quality-all weather sports garments, the company has maintained continued invention that enhances its competitive edge in the international market. Thus, as an international company that has managed to penetrate into diverse global markets, UA is appropriate for this project.
Foundations of Global Business
Over the years, UA has conducted its marketing penetration strategy effectively through active participation in professional athletic teams’ sponsorship and individual athlete endorsement. The global market presents greater opportunities for the business industry as it explores new demand in unexplored regions. By expanding its international market share, UA has grown its product market in several states, mainly China, Jordan, and Mexico.
The main factors influencing the choice of market penetration to these regions include a large population base, industrialization, country’s policy amendments, and a positive shift of perception on athletics and recreation activities. However, the trade policy amendment involving world trade relations in these countries significantly played a major role in market expansion. China, Jordan, and Mexico are member states to global financial institutions, which include the World Bank, the World Trade Organization, and the International Monetary Fund. These policy amendments involved the formulation and structuring of trade regulations to suit the international standards of these global financial institutions.
In promoting globalization, the Chinese government adopted various political strategies that transformed the country’s transparency in business activities involving banking, franchising, insurance, financial services, supply chain, franchising, and licensing, which branded the country among the top business-friendly regions in the world. However, Jordan and Mexico have a lower index rating than China in transparency despite continued efforts to transform their political environment with Jordan scoring better compared to Mexico.
On the contrary, Jordan has a well-established judicial system with three main subsystems of religious, regular, and special courts that effectively resolve trade disputes (Nesheiwat, 2014). The Chinese judicial system fairly addresses disputes with only a single unit whereas judicial processes in Mexico are ineffective. In Mexico, the existence of poor government measures in the judicial system to avert crime has significantly contributed to an uncontrolled increase in crime among the majority of the population in the country (Brown & Velásquez, 2017). Thus, Mexico’s judicial system has a compromised functionality in handling disputes amongst the mentioned countries.
Through policy formulation, the Chinese leadership transformed the country’s structure of governance into an agency service-oriented system to reduce corruption and improve the service delivery process in line with the WTO’s regulations (Nathan & Scobell, 2016). Jordan’s robust governance facilitated the implementation of policies on the protection of intellectual property rights that attracted foreign investors while Mexico’s democratic achievements in leadership demonstrated strong political principles that enhance globalization (Negroponte, 2013; Nesheiwat, 2014). As a result, China leads market entry competition followed by Jordan and Mexico respectively.
UA deals with the production of high-quality athletic goods that include sportswear and casual apparel. Although most of the company’s products dominate the United States’ market, UA has expanded its market share into the international markets. In these export markets, with China leading in trade restrictions, the company faces various challenges in tax regulations and high market entry requirements set by existing market players (Devadason & Chenayah, 2014). The major trading blocs faced by the company in its market expansion within the mentioned countries include China-ASEAN, NAFTA, and the Arab League.
These trading associations enhance political stability, promote economies of scale, reduce tariff barriers, promote intellectual property protection, consolidate customer base, and promote product demand (Gaspar et al., 2014). These market forces enhance the company’s competitive edge, market penetration, and revenue sustenance. Since UA has expanded its market share to foreign markets, a multilateral trade organization such as the WTO promotes the consolidated formulation of strategies and centralized follow-up on customer feedback.
Global Business Environment
As a global company, UA has an extensive global business environment because it does business in over 18 countries (Under Armour, 2017). The analysis of China and Israel as selected countries relative to the United States reveals some differences in the Hofstede cultural dimensions. When compared to the US, China has a higher power distance (80), collectivism (15), average competitiveness (55), lower uncertainty avoidance (40), and long-term orientation (114) (Ofstede Insights, 2017). When dealing with Chinese, the US managers should consider high power distance and treat superiors and elders with high regard (Khairullah & Khairullah, 2013).
Since the Chinese have a long-term orientation, the US managers ought to exploit it and build business relationships to improve returns on investments made. When compared to the US, Israel has a lower power distance (13), average individualism (54), caring (47), and higher uncertainty avoidance (81) (Ofstede Insights, 2017). In this view, when dealing with the Israelis, the US managers should not be too formal for Israelis to have a low power distance than Americans and undertake business deals with slight risks due to a high level of uncertainty avoidance.
UA operates in countries such as Bangladesh, Honduras, and Egypt, which are politically risky for they score ‘C’ in political risk rating according to the Globaledge risk assessment (Michigan State University, 2017). This rating shows that UA operates in countries with an unstable and unreliable political environment and among governments with considerable deficiencies. In the economic risk rating, UA operates in Cambodia, which has ‘D’ rating as per the Globaledge risk assessment (Michigan State University, 2017). It is challenging to manage businesses in Cambodia because the poverty level is very high and the skilled workforce is lacking. Most countries that UA operates in, such as China, Colombia, El Salvador, Honduras, Indonesia, Mexico, Vietnam, Thailand, Taiwan, and Nicaragua, apply the civil law in their legal system. Within a civil law country, legislature formulates legislation and provides a predictable legal environment that favors investors.
Although there is no direct evidence to show UA has procured insurance from the US Overseas Private Investment Corporation (OPIC), indirect evidence indicates that the OPIC participates in activities in most countries (10/18) that UA undertakes its activities. Evidently, the OPIC has authorized projects in Nicaragua, Colombia, Israel, Indonesia, Honduras, El Salvador, Jordan, and Egypt (Overseas Private Investment Corporation, 2017). These projects are in industries such as mining, energy, farming, banking, infrastructure, and real estate. UA possesses hundreds of intellectual property protections in four sections, namely, footwear, accessories, digital, and apparel, as well as company name and AU logo (Under Armour, 2017). In an attempt to increase its market share and enhance its competitiveness, Loney (2017) reports that UA’s start-up in China filed a lawsuit against Uncle Martian for infringing on its trademark, and consequently received $30,000 for damages on 19 June 2017 and protection of its trademarks of UA.
Among the 18 countries in which AU operates in, Malaysia ranks relatively high with the corruption perception index (CPI) of 49. Owing to high cases of corruption, its anti-corruption committee declared corrupt business practices as the leading economic enemy and planned to sensitize over 20,000 citizens monthly to fight corruption (“Malaysia,” 2017). The dominant perceived risks of corruption are bribery, government scandals, and overreliance on petroleum products. Comparatively, Nicaragua ranks relatively low with the CPI of 26 (“Nicaragua economy,” 2016). The International Labor organization established that tax evasion, weak property rights, and underdevelopment are corruption perceived risks in Nicaragua.
Global Business Strategy and Organization
UA’s market penetration strategy involves alliances and licensing agreements with foreign firms to supply top quality raw materials and distribute the company’s products to the local customers. Khan and Khalique (2014) argue that the formation of production alliances reduces risk investments by facilitating continuous company analysis and improvement to promote the establishment of robust production chains. This approach to the foreign market is essential to UA market growth due to its small capital and customer base. UA’s corporate managers are highly skilled in risk aversion and maintenance of an efficient and straightforward exit strategy. According to Gaspar et al. (2014), the major exit strategy involves short-term licensing agreements with affiliate companies in the foreign market to reduce costs.
UA business operations focus on enhanced corporate social responsibility through the production of high-quality products, environmentally friendly production and business activities, and sponsorship programs. The company follows strict processes in the selection of its affiliated companies and conducts full training of all its employees in maintaining high company ethical standards and legal regulations governing its business activities across the globe (Gaspar et al., 2014). UA Give Back Team champions the enhancement of corporate social responsibility through employee participation in community projects. UA’s commitment to the continued invention of high-quality performance apparel to promote athletes’ achievement is in line with the company’s mission to enhance athletes’ performance through the improvement of product design and quality (Under Armour, 2017). The corporate managers have adopted a client-oriented business strategy formulation, which is lined with the company’s mission statement thus facilitating the development of quality productions and client engagement practices.
Despite the much focus in the international market, UA has its headquarters situated in Baltimore, Maryland. Unlike its main competitor, Nike, UA has maintained its main operations in America with an overseas affiliate, and an outlet company is acting as distribution channels. However, with the advancement in technology, UA has identified the presence of more business opportunities in the international market. The amazing advantage of the stateless approach is that it poses great challenges due to high entry requirements, large capital base required, and intense competition from both local and established market players (Gaspar et al., 2014).
In line with its business objective, UA has maintained a functional organization structure with a chief executive, revenue department, finance, digital, and human resource units with board members representing shareholder interest. Considering competitor’s organization structures and success such as Nike’s matrix system (Brenner, Schlegelmilch, & Ambos, 2013), UA‘s foreign market expansion requires the adoption of the new structure to enhance its operations and sustenance of growth.
Managing Global Business
UA has experienced several challenges in facilitating its employee welfare with Nicaragua being the most affected country. According to the Fair Labor Association (2016), the company’s employees in Nicaragua faced ethical challenges and related discrepancies with employees from New Holland Apparel, a UA’s affiliate company. The complaints entailed unwarranted dismissal, inappropriate coordination, and poor cooperation between employees from the two company’s units. These findings enabled corporate managers to adopt necessary steps in setting policies to compensate for the dismissed employees, punish violators, and control future occurrence (Motohashi, 2015).
Additionally, the company’s human resource unit plays a significant role in ensuring adequate availability of skilled workforce through proper training and deployment of expatriates to various production units across the continent (McNew, 2016). Moreover, in line with employee financial welfare, the company has invested its resources in hiring expatriates to educate and facilitate employees on their financial rights and compensation regarding their duties and workstations (Hansen & Rasmussen, 2016). These training programs and personnel enrich employees with relevant skills on UA’s values, ethics, and culture necessary to conduct duties appropriately.
Although these training programs are effective, UA utilizes internet on-duty learning programs that include Adobe Captivate and Articulate Storyline in continuous knowledge empowerment of employees across the globe. Additionally, UA continues to utilize the internet platform in conducting its business operations online and over the counter sale of products in the international market. Soni (2014) argues that despite the sale of the entire product catalog to all international markets, developed nations provide more business opportunities due to a stable economic position. However, given the difference in popularity of athletic events in the global market, the company has placed its market expansion focus in Europe and America.
The primary market penetration strategy involves professional team sponsorship and individual athlete endorsement that facilitate a specific target market campaign (Motohashi, 2015). Nevertheless, significant competitors have adopted this market strategy, resulting in a high market rivalry. Therefore, to enhance its competitive edge, the company utilizes several distribution channels that include factory outlets, online sites, franchises, and affiliate companies. Additionally, in assessing raw materials, UA has license agreements with several high-quality production firms in foreign countries to facilitate the continued delivery of quality products in the market. The major countries with contract firms include Mexico, China, Taiwan, Malaysia, and Vietnam (Under Armour, 2017). Indonesia, Vietnam, and China are the major producers of footwear products while Jordan, Malaysia, and Vietnam deal majorly in accessories and casual apparel.
Due to market expansion, UA utilizes several supply chain channels in product distribution across the global market. The major supply chain is the Vietnamese éclat Textile Company and Zhong Shan Bao Da Shoes Company with more than 5000 and 1000 employees respectively (Under Armour, 2017). The company imports its major raw materials from Vietnam, China, and Mexico. However, it exports most of its products to France, China, Qatar, Brazil, Kuwait, Germany, and South Korea. These foreign markets provide business opportunities and enhance profitability in stable economic conditions (Gaspar et al., 2014). However, during harsh economic conditions in these countries, the company faces several investment and growth challenges leading to losses and risk of a damaged reputation.
Conclusion
UA has been able to venture into global markets and manage global business commendably. By employing effective corporate strategies, UA has established its foundations in competitive global markets. Although UA operates in diverse economic, legal, and political environments, it has managed to adapt and exploit diverse global markets. By managing its businesses, UA adheres to best practices for employment and management of the workforce while protecting its intellectual property. Therefore, it is apparent that UA is a global model company that has a rich history for it has faced numerous challenges and managed to overcome most of them as it dominates in the competitive global markets.
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