Business Capstone paper on Under Armour.

Four Financial Management of Under Armour

Name

Institutional Affiliation

Financial Management

SWOT Analysis

Introduction

Business organizations operate in a highly competitive market that requires an effective strategic plan coupled with active financial management. The presence of many companies and organizations has led to a substantial increase in cash flow in the market. The money pumped into the market by big firms and proceeds of their products is responsible for the increased flow of capital in the market (Admin, 2019). The increased entry of new firms into the market, however, puts the lives of companies in danger due to the high level of competition over a few customers. To reduce such effects, companies must practice effective financial management. Under Armour, therefore, needs to establish sound financial management practices. Under Armour, Inc. is an American company that specializes in the production of sports, footwear, and casual apparel. The company's headquarters is located in Baltimore, Maryland (Admin, 2019). The company uses new technology in its production resulting in the production of high quality products.

Over the years, Under Armour has diversified its production to cater to women, men, and children. Offering products for people across all ages has tremendously increased its sales volume. The company operates under the mission; "To make all athletes better through passion, design and the relentless pursuit of innovation" (McDonald, Christensen, West & Palmer, 2018) However, it was in 2006 when the company went public, thus making it possible to acquire stock value. Through the effective leadership and innovative nature of its employees, the company has experienced high levels of growth. Nevertheless, some factors such as; free entry into the market, high level of competition, the existence of substitute products in the market and high bargaining powers of both suppliers and consumers have led to inflation thereby prompting the need for effective financial management practices (McDonald, Christensen, West & Palmer, 2018).

Financial management can be defined as the process of planning, directing, organizing, as well as controlling all financial transactions and activities such as the use of funds within an organization and procurement (McDonald, Christensen, West & Palmer, 2018).  General management principles guide it to the financial resources of an enterprise. To have sufficient financial management in Under Armour Company, the organization requires effective policies supported by a mission. The company, therefore, needs to establish effective policies and a mission statement. Under Armour should also get local and international acceptance to guarantee a good market for the products. In sustainable strategy management, the company is supposed to follow the right steps that lead to competitive advantages.

Stages Followed In Financial Management

Determining the current financial situation

At this stage of financial management, company leaders should establish the current financial position of the company with regards to; debts, incomes, living expenses, and savings. The company can get the exact current economic situation of the company by preparing a list of existing liabilities and asset balances, as well as the amounts of money spent on various items (McDonald, Christensen, West & Palmer, 2018). Liabilities are an organization’s legal monetary debts that arise from business operations. A business assets are an items of value owned by a business company.

Developing financial goals

The second step in financial management involves conducting analysis aimed at differentiating needs from wants. Setting specific financial goals is imperative in financial management since the business will make its budget depending on the set financial goals besides channeling resources towards the achievement of such goals (Matthew, 2017). The company’s shareholders must be involved in this process. Shareholders are owners of shares in a company. The process further helps the organization in prioritizing the objectives at the expense of other activities hence increasing its working capital. Working capital is the capital of a business which is used in its day-to-day trading operations, calculated as the current assets minus the current liabilities.

Identifying alternative courses of action

The creation of an alternative course of action is essential in financial management. Several factors, however, influence the alternative course of action. Nevertheless, probable courses of action fall under the following categories; changing the current situation, expanding the current session, taking a new course of action, or continuing the same course of action (Matthew, 2017). Developing alternative courses of action helps a company by ensuring that options to a problem are always available. The board of directors and other stakeholders must be highly involved in this process. Board of directors group of qualified people who jointly oversee the activities of an organization. Stakeholders are persons with interest and concern in something, especially a business.

Evaluating alternatives

Upon developing the alternative course of action, the shareholders must jointly evaluate the alternative when taking into consideration the company's current ratio, acid test, financial situation as well as current economic situations (Admin, 2019). Acid test is a conclusive test of the success or value of something. Current ration on the other hand a liquidity quotient that measures a firm's capability to pay short-term debts. The alternatives must have the capacity of improving shareholders’ dividends. Dividend refers to a sum of money paid annually by a company to its shareholders out of its profits (Matthew, 2017). Decision making will, however, be an ongoing process to ensure mistakes are not made. Additionally, the management body must conduct a risk evaluation.

Creating and implementing a financial action plan

At this stage, the organization develops an action plan that requires making a choice on how to achieve the goals. The actions taken must be able to achieve both short and long-term plans. Implementing a financial action plan, however, requires a joint effort from all personnel in a company (Admin, 2019). Comprehensive consultation must thus be made before decisions are made.

Reevaluating and revising the plan

Financial management is a process that does not end when a particular action is taken. The administration must, therefore, be committed to revising the plan to ensure corrections are made to include current events in the market (Matthew, 2017).The reevaluation process might prompt the changing of social, economic, and political factors to aid in achieving the company's goals.

Recommendations

In the bid to improve on its services, the company should increase its working capital and consequently invest in new technology. It should thus take full advantage of e-commerce by using different internet aided services. The use of social media will increase the company floor of operations hence growing its profit margin (Kraft & Lee, 2009). Improving the level of interaction with the customers is one main advantage that will accrue to the company when it uses social media, and interned aided platform. Introduction and subsequent use of different social media outlets are aimed at introducing the company's products and services to its new and prospective customers, thereby enabling it quickly access the market (Matthew, 2017).

Through social media, customers will easily access the company hence faster communication and customer service delivery. The social media platforms will further increase the company's sales volume. Customers can make inquiries about products and services and consequently making payments through online payment services. After making online purchases, the goods can then be delivered at customers' premises (Kraft & Lee, 2009). The use of social media offers an important opportunity for the company to promote its products and services as well as acquiring more customers. The company must therefore evaluate the success of social media’s use in its activities during the annual report. An annual report is an inclusive report on a firm's activities through the preceding year.

Porter’s Five Forces Model

After conducting a SWOT analysis, the company needs to deploy the use of Porter’s five forces model. Porter's Five Forces Model offers an organization the freedom to consider critical forces affecting them. Through this tool, the company will get an opportunity to highlight strengths promoting its success as well as those limiting the chances of the company’s progress. Through the model, the company will get a chance to identify the forces to deal with before getting into the market (Kraft & Lee, 2009). Forces such as competitors, the risks associated with the introduction of new products into the market, buyers buying power as well as their bargaining power will be determined; hence the company will be able to project the quantity of purchase it is likely to make. The model will also help the company in establishing the bargaining power of suppliers based on their uniqueness, prices, and quality of their products improving on its Net working capital. Net working capital is the difference between a company's current assets and current liabilities (Kraft & Lee, 2009). Porter's five forces model will guarantee that the company offers similar products that cannot be imitated by rivals. That ensures the company maintains its brand and serve loyal customers.

Technological Advancements

In recent years, Under Armour has introduced different better designs, shoes, as well as other products thanks to its use of advanced technology. Through the adoption of advanced technology, the company has increased the quality of its products, which allowed the company to maintain its flexibility as demand increases, taste, and preference of the customers' change. Under Armour can use this chance to create inventions that will be more attractive to the customers and ensure a broader market (Kraft & Lee, 2009). The old designs can be improved to cope with the competition hence improving the Net operating working capital. Net operating working capital is the excess of operating current assets over operating current liabilities (Kraft & Lee, 2009).

Access to new markets

Getting entry into new markets is often the priority of every organization. Entry into new markets often increases the floor of operations there adding more customers. Under Armour's management should, therefore, establish a strong and workable strategic plan that would help it gain access to new markets. Despite being dominant in the United States, the company should venture into other countries by opening up offices in such countries. Through entering into new countries, the company will be able to make more profits, thus increasing its financial strength. Moreover, expanding the floor of operations aid in reducing the intensity of competition since it will acquire more customers than it loses to the competitors should, therefore, expand the scope of its operations (Rose, Westerfield & Jardon, 2017). Results of entry into new markets should be evaluated through the company’s financial statements. Financial statements are an assortment of summary-level reports on an organization's economic outcomes, financial 

situation, and cash flows (Rose, Westerfield & Jardon, 2017).

Conclusion

In conclusion, financial management plays a fundamental role in instituting ways through which Under Armours Company can compete efficiently in the market. Consequently, Under Armour should observe the central competencies to increase the sales volume, thereby winning over more customers. The organization has more strengths and opportunities that it can use to compote favorably. The benefits of the company’s disposals should be used to its competitive advantage to counterbalance threats and faults posed by other business firms. The business should further have affective strategic plans that will guarantee more success in the coming years. A proper leadership style should also be adopted to warrant the smooth running of operation and quality products. However, the company should embrace the use of new technology in its production. Adoption and subsequent use of social media provide an important opportunity for the company to reach more customers.

References