problem statement and analysis for company
WHAT NEEDS TO BE DONE
(I) Problem Identification
a. This section should include brief discussions (ie. a paragraph for each) of all significant challenges, weaknesses, problems, or the company’s inability to take advantage of business opportunities you have found. For each, describe the issue and how it impacts the company and, if possible, give a brief description of key causes.
b. For the “main” problem you have identified, provide an extended discussion of the issue:
i. Nature of the issue
ii. How it impacts the company and what’s likely to happen if it isn’t resolved
iii. Whether or not it’s mission critical and why, urgent and why
iv. Formal Problem Statement
v. Thorough Root Cause Analysis
(II) Identification of Alternative Solutions
a. This section should include a brief (1-2 paragraphs) discussion of the alternative solutions you have identified including a discussion of the solution itself, how it could help solve the problem, and brief discussion of Pros and Cons for the alternative.
(III) Evaluation of Alternative Solutions
a. Discussion of objective criteria for evaluation of alternatives
b. Comparison of how 3 – 5 alternative solutions meet these criteria
(IV) Discussion of Recommended Solution
a. Clear statement of the recommended solution
b. Cost – Benefit Analysis with discussion of key factors
c. Feasibility Analysis
d. Ethical Screen
i. Alignment of the proposed solution with company values
ii. Discussion of legal or ethical issues related to the proposed solution
iii. Discussion of key stakeholders and how they would be impacted by the proposed solution
(V) Solution Implementation & Success Measurement
a. Implementation
i. Key steps involved in implementing the required solution
ii. Significant resources required
iii. Timeline
b. Monitoring and Measurement
i. Discussion of key criteria to be used to evaluate the success of the proposed solution
ii. Plan for monitoring improvements following start of implementation
1. Frequency
2. Milestones
3. Expectations
PROBLEMS IDENTIFIED
Problem Identification
Some of the risk or potential problems factors Under Armour lists on its most recent From 10-K Annual Report, seem to have been realized in recent time. From issues to do with the company having the ability to develop and launch new, innovative and updated products, and their ability to accurately forecast customer demand for their products and to manage inventory in response to changing demands, as well as a loss of a key customer which could lead to material loss of net revenue and growth retardation the increasing competition that has forced them to reduce the prices of their offerings and legal issues with competitors and shareholders. All of these are potential risks that have turned into actual issues of concern for the sporting goods company and which could and have already had a negative effect on the company’s results of operations ( 10-k 9).
Failure to anticipate consumer preferences during the At leisure fashion trend period
Under Armour' stock price is said to have fallen by 30% in the first quarter of 2017. This according to analysts was as a result of the company not keeping up or being quick enough to react to the shift of athletic apparel to more fashionable clothing like its competitors had. Analyst Christopher Svezia said that because of this lapse in innovation the company's "ability to return to its former glory is unknown". Svezia says that presently apparel and footwear which are anchor segments for the company only make up less than 5% of its total sales, none the less the company is busy trying to play catch up with the athleisure trend, but is a bit late to the train. Under Armour has admitted to their lack of foresight when it came to the athleisure craze and none other than the CEO and founder Kevin Plank on a phone call with analyst after the earnings report came out said " the consumer wants it all. They want product that looks great that wears great, that you can wear at night with a pair of jeans, but that also does perform for them. We need to be more fashion” (Green). Athleisure is key trend for North America and so it is paramount for Under Armour to get in on the action and with 80% of UA's online sales pegged on this line of clothing now it is paramount that they gain traction because many industry experts predict this trend will be around for a while longer(Green).
Over reliance retail for revenue and growth
Yet another problem that Under Armour seems to be going through as predicted in its risk assessment is the over reliance on retailers for its revenue and growth. This has been shown by the failure of one of its biggest customers Sports authority and deals that have gone sour with the likes of Dick's Sporting Goods and Kohl's. In the case of Sports Authority once the company announced that it was going bankrupt, it disrupted the retail environment in North America which is still the biggest market for Under Armour. The effects on th financial of Under Armour were evident since it has continuously missed its earnings projection since then. The company cut its sle outlook in 2016 following the declaration of bankruptcy by Sports authority. the company said with the bankruptcy announcement under Armour would only be able to realize only about a quarter of the revenue it had initially planned to get from Sports authority Again, it said that it would take a $23 million impairment charge on its present quarter. This would result in the company posting $4..93 billion in sales that year which is a drop from the $ 5 billion projected in April and less than the $5.03 billion analysts had predicted(Lisa). In early 2017 UA missed its earnings and sales projections for the fourth quarter and dropped to 20% at about $18.90. As at 9th march 2018 the stock was selling at 17.16 and had dropped 1.27%. Even though the company has continued to deliver on revenue, it has failed to leave up to analyst expectations for close to a decade. In yet another show of the companies over reliance on retail at present is a recent deal with Midtier department store Kohls. In an attempt to rev up growth, the company in July of 2016 announced that it would sell a new line of its gear at Kohl's, this was a 360 turn away from traditional sporting goods stores such as Dick's who have been known to be averse to giving discounts as much as Kohl's do. Under Armour in pursuing this strategy wanted to try and plug the hole left by the departure of Sports Authority. So they planned to sell sporting goods at Kohl’s that would not eat into the company's sporting goods sales. However, this strategy seems to have worked against Under Armour since it upset one of its biggest customers Dick's since it has had to lower its own growth expectation with Under Armour itself announcing a restructuring plan on first Aug of 2016. Dicks complained during one of its earning calls that it was forced to bring down its own prices because of the aggressive discounting by its rivals. Dicks in recent time has introduced its own private-label line of athletic wear, what this means is that there is little space for Under Armour in the stores. This stretched relationship of Under Armour and its retail partners is a reason for worry for the company and it needs to come up with measures that will reduce this over reliance (Gottfried).
Legal issues
Under Armour has also had its own share of legal issues, ranging from litigation by rivals Adidas over patents to recently being sued by its own shareholders over a drop in earnings. As regards the suit filed by Adidas, Under Armour was accused of infringing on 10 of Adidas patents that were used in the German company's fitness tracking system which was known as MiCoach. Even though the two companies core business is shoe and apparel making, the entry into the accessories market and more so the technology powered market is revealed by investments into gadgetry. Under Armour in 2013 paid $150 million for a company known as MapMyFitness, which at present has over 20 million people registered on it to use its website as well as mobile application so as to track, record, map and share their work outs. According to Addidas the MapMyFitness product and others by Under Armour are similar to those of Adida's. Adidas said that Under Armour willfully infringed on its patent and for this it sought a jury trial even though .Ultimately the two settled matters out of court when
Under Armour agreed to pay Adidas AG licensing fee of undisclosed amount for some of its patents (Germano). In a more recent suit Under Armour was sued by its shareholders Gin a federal class-action lawsuit in which the CEO Kevin Plank and his company are accused of knowingly misleading shareholders regarding Under Armour financial health. According to the suit even though the company had shown enthusiasm externally to the plaintiff and the shareholders, the company and its CEO especially were well aware of the decreasing growth margins and of the over surplus of unsold inventory. However, the company in a statement to the Baltimore Sun said the claims were without ground and said that "Under Armour will vigorously defend the case". The principle plaintiff known as Brian Brecee filled the suit on behalf of everyone who bought the Under Armour Class A and Class C common shares in between April 21, 2016 and Jan. 30 2017. In the suit he says that Plank had seen the writing on the wall regarding the financial situation of the company and he had set off selling his own Under Armour shares beginning in April 2016 so as to avoid any individual loss but only enough to maintain control over Under Armour, by while at the same time praising the financial health of the company. These legal problems could adversely affect the revenue of the company and projected future growth prospects and therefore need to be dealt with accordingly (Bonesteel).
Problem statement
The main problem from the ones listed above has to do be the issue of earnings. It is clear from the different problems the company is going through, from issues with not being upto date with trends, declining retail space and litigation over projected earnings that the company needs to find a solution to its earning problem quickly so as to avoid going under.