Lululemon Business Strategy Essay

Lululemon was founded by Chip Wilson who took a commercial yoga discipline in Vancouver and was immediately drawn in to the concept. After spending many years in the surf, skate, and snowboarding business, he found yoga was performed using cotton clothing and this seemed inappropriate because it neither removed sweat adequately nor did it render for maximum flexibility. Given his passion and expertise in technical athletic fabrics, he began a reason in yoga clothing where he relied on feedback from yoga instructors to optimize his app bel. Lululemon was founded in 1998 to meet these goals. It opened its first memory board in November 2000 in Kitsilano, a beach ara of Vancouver BC. Beyond getting feedback from instructors on how to advance the proceeding of the apparel, the firm sought to act as a community hub where people can interact and parcel out the physical and mental aspects of having a firm lifestyle.1. What are the key elements of the schema that Lululemon is purs uing? What generic outline best fits Lululemons strategy? The five key elements areGrow the companionship store tail in northeasterly AmericaThe strategic objective was to add raw(a) stores to strengthen the unions presence and then tap into new geographical commercializes in the Canada and USIncrease brand kenLeveraging the publicity surrounding, the opening of new stores with grass roots merchandiseing programs. This included organizing events and partnering with local anesthetic physical fitness coaches.Introduce new yield technologiesContinue to focus on developing and offering products that incorporate engineering science enhanced fabrics, and performance features that distinctiate Lululemon for its competitor and increase its customer base.Broaden the appeal of Lululemon productsThis is divided in 3 sections1. Adding men apparel to the line2. magnifying to product category to items such(prenominal)(prenominal) as athletic bags, undergarments, sandals, outerwear 3. Adding products suitable additional sports and athletic activities Expand beyond North AmericaExpand their presence in Australia and Japan. Then eventu completelyy pursue the Asian and European markets that offer similar, attractive demographics.Distinctive shopping expericance put forward a distinctive in-store shopping experience, complemented by strong ties to fitness instructors, fitness establishments and community events The two biggest strategic adjustments since 2007 had been to drawback from the use of franchising and sell directly to the consumers through the company website. Lululemon fits it ego in a variantiated niche strategy2. Is Lululemons strategy core groupive?Lets look at the retraceing to determine if the strategy is effective for LululemonThe firm periodly has three segmentsCorporate-Owned StoresThe corporate- leted stores segment includes all sales to customers through corporate-owned stores in North America and Australia. This segment is by far Lulule mons largest revenue base and forget continue to be successful as Lululemon looks to expand its base in 2012 by opening 30 stores in the get together States and 2 Ivivva Athletica stores in Canada.Direct To ConsumersThe Direct to Consumers segment involves Lululemons e-commerce website. Which is 10.6 % of revenue (2011) comes from this segment. The idea behind is to sackful from brick-and-mortar stores to online channels, Lululemons commitment to increasing its presence in e-commerce will help the company expand its customer base and improve brand sensory faculty.FranchiseWhile previously license sales were part of their strategy, the companyreported that it will no longer partake in the business and that it had reacquired its four remaining franchise stores during fiscal 2011.SWOT AnalysisStrengthTrademarked fabricsCommunity involvement offered free yoga class on monthly basis Employee trainingInnovationStyle/comfortMultiple green initiativesQuality products designed to sust ain 5 years of intended use while concuring functional Brand identityimpuissanceHigh retail legal injuryNarrow product lineQuality take hold/supply twineMarketing targeted to mostly yoga instructors/studiosLoss of customer service with increased scaleWeak brand experienceLack of targeting to menOpportunityExpand product lineServe additional market segmentsExpand into additional geographic marketsincrease demand in athletic apparelFitness crazeThreatsIncreased competition from current large players in the market Copy catsEconomyNew entrantsRisk of banking on niche marketsLululemon only went public five years ago and have not entered any new industries (focusing mostly in the fitness apparel industry). They have done or so corporate restructuring shortly subsequently the company was formed, Lululemonentered into franchise agreements and then a joint venture. The idea behind this was based on exploitation the brand to meet consumer demand while conserving financial resources. T his was a very effective strategy and served Lululemon swell in establishing themselves as a multinational company, helping to build on economies of scope, increasing brand awareness and building a larger customer base. In 2011, Lululemon finally repurchased all the franchise organizations and now all of their stores are corporate owned. The ultimate motive for closing out the franchise business was to preserve and maintain control over branding and focus much on e-commerce. We believe this strategy will oeuvre well for Lululemon as it preserves its brand image / competitive advantage and staying competitive in the online market as well.3. Top Key Issues facing the company needs to focus on areThe compendium shows us that the retail apparel industry is competitive with very low barriers to entry. Lululemons success will attract new competitors to the industry and attract interest from existing competitors. Ultimately, this is a competitive industry with special barriers to ent ry. The athletic apparel industry is very competitive, with well capitalized rivals such as Nike and Gap, Inc. Lululemon has limited intellectual post in regards to its performance fabrics and manufacturing processes, therefore the quality and innovation components of strategy could easily be replicated.Lululemons self reinforcing activities, such as target customer base, tailored products and community based marketing approach move over it very challenging for existing retailers to challenge Lululemon in its market from their own store bases. However, there are limited barriers to entry in this industry and Lululemon should expect new competition to try to copy its putThis analysis brings us to issues the company is / could faceIncreasing CompetitionDespite occupying a unique niche within the athletic apparel industry, Lululemon has recently gained competitors in recent years. I.e. Bigcompanies with large market capitals such as Nike, Adidas, and Under Armor have dominated the a thletic apparel industry and keep gaining more ground. With the exception of a commitment to creating innovative products in apparel, these initiatives are in contrast to Lululemon. In revise to market its products, Lululemon completely shuns away from print or media advertising and instead focuses on selecting ambassadors within carefully selected markets. As a result, its possible for Lululemons competitors to achieve and maintain brand awareness and market share more quicklyNarrow focusLululemon is targeted towards sophisticated and educated women who understand importance of active, healthy lifestyle. Under-Armor, Nike, and Adidas are targeted towards men and women of all ages.New ThreatsApart from the big name athletic apparel manufacturers, competitors such as Gaps Athleta brand, Lucy Activewear Inc. and Bebe Stores BEBE SPORT collection have emerged as competitors to Lululemon.Price full point and ManufacturingIn light of the new and old competitors, Lululemon could be for ced to sell their products at lower price thus reducing margins. Plus Lululemon does not own exclusive intellectual property rights to the technology for its products. This bring ups it easier for current and future competitors to manufacture and sell products with similar performance capabilities and styling.Cross- unsophisticated differences in demographic, cultural and market conditions. vendee tastes for a particular product or service sometimes differ substantially from country to country. Sometimes, product designs suitable in one country are inappropriate in an other(prenominal) because of differing local standards. Lululemon is in operation(p) in an international marketplace and they have to wrestle with whether and how much to customize their products in each different country market to match the tastes and preferences of local buyers or whether to pursue a strategy of offering a mostly standardized product worldwide. For example, the clothing for women offered in the w interseason will be different from Canada to Australia and vise versa. Firstly, Australia gets hardly any snow and while Canada on the other hand, gets majorly hit every winter.Therefore, the ladder gear and the hoodies offered in both countries will vary because of the temperature and the climate. Making products that are closely matched to local tastes make them more appealing to local buyers, customizing Lululemons products country by country may have the effect of raising production and distribution be due to the greater variety of designs and components, shorter production runs, and the complications of added inventory branding and distribution logistics. The second issue of transnational strategy incorporates elements of both a globalized and localized approach to strategy making. This type of middle ground strategy is called for when there are relatively high needs for local responsiveness as well as appreciable benefits to be realized from standardization.This strategy tha t Lululemon is trying to accept has its own disadvantages, such as it is more complex and harder to implement, conflicting goals may be difficult to defer and require trade-offs and implementation more costly and time-consuming. All major global companies employ the franchising strategy. With the franchising strategy, the franchisee bears most of the cost and risks of establishing foreign locations while Lululemon would have to expend only the resources to recruit, train, support, and monitor franchisees. The big problem that Lululemon is facing currently has to bear all costs of stores all around the world. With this, they would have to ensure that they are providing the products at discounted costs but in like manner having to monitor to ensure that their standard for stores and customer service and experience is maintained.4. Recommendations for management to improve performance / address key issuesThe recommendations we have for management is to improve performance and addre ss the key issues, are employing a think global and act local strategy (Transnational). They need to ensure that each country does have the required customizations because the demographics, cultural differences and market conditions vary from country to country. They need to ensure that all their locations follow the same guidelines and customer satisfaction guidelines like they have for their primary locations.Price point and ManufacturingLululemon does not own any intellectual property to the technology of what processes their products. In turn this makes it easy for competitors to imitate their style. Through analysis, a recommendation to solve this issue would be to patent their processing system. This would be beneficial to the company in such ways as increasing price points, which in turn increases overall profits. It will also allow for a higher competitive advantage, making it difficult for competing companys to imitate or copy their style.Sponsor Events and ShowsLululemon s hould sponsor some sort of events to gain publicity and increase brand awareness. such(prenominal) can be done by organizing yoga events on a grand scale or some sort of sporting event. Not as high scale as done by its competitors (Nike sponsors the PGA golf game and Adidas sponsors FIFA) E.g. Lululemon could organize a yoga event at the Metro Convention Hall, TorontoExpand in Asia and EuropeThe company should plan to enhance its European and Asia market, recruiting new management talent and initiating an aggressive program to regionalize this business utilizing a consistent brand image throughout Europe and Asia.New CustomersLululemon should find new customers base other than its niche market. A potential target niche would be adding apparel for golf and tennis into its stores. exertion Plan to address issues and improve performanceThe following action plan is the recommended steps we believe would be the appropriate approach to successfully completing these recommendations.Append ix 1Value Chain Analysis append Chain Management45 different manufacturers, no long-term contracts can improve quality control and lower costs by decreasing and agreeing to contractsOperationsTighten inspection and verification processes to ensure another recall does not occur (see-through pants issue)DistributionFacilities only in Vancouver-BC, Sumner, Washington, and Melbourne, Australia Limits Companys mountain chain Growth in online sales can offsetSales/MarketingDepend on interchange of mouth and community based marketing can increase marketing via media (television, magazines, etc.) and other avenues