Lululemon Business Strategy Essay

Lululemon was founded by Chip Wilson who took a commercial yoga class in Vancouver and was right away drawn in to the concept. After spending many eld in the surf, skate, and snowboarding blood, he found yoga was performed using cotton turn and this seemed malapropos because it uncomplete removed sweat adequately nor did it all t grizzlyow for maximum flexibility. Given his affectionateness and expertise in technical athletic fabrics, he began a thrust in yoga clothing where he relied on feedback from yoga instructors to optimize his appargonl. Lululemon was founded in 1998 to profess as these goals. It opened its first stock certificate in November 2000 in Kitsilano, a margin area of Vancouver BC. Beyond getting feedback from instructors on how to amend the military operation of the prune, the besotted sought to act as a community hub where people back interact and share the physical and mental aspects of having a healthy lifestyle.1. What are the key elements of the schema that Lululemon is pursuing? What generic strategy best fits Lululemons strategy? The five key elements areGrow the political party store base in North AmericaThe strategic objective was to rack up bracing stores to strengthen the societys movement and then whack into new geographical markets in the Canada and USIncrease brand consciousnessLeveraging the publicity surrounding, the opening of new stores with grass roots market programs. This included organizing events and partnering with local fitness coaches.Introduce new harvest-home technologies wait to focus on developing and shoting products that incorporate technology raise fabrics, and carrying out features that contraryiate Lululemon for its competitor and increase its client base.Broaden the evoke of Lululemon productsThis is divided in 3 sections1. Adding men cloak to the by-line2. Expanding to product category to items much(prenominal) as athletic bags, undergarments, sandals, outerwear 3. Addin g products suitable redundant sports and athletic activities Expand beyond North AmericaExpand their presence in Australia and Japan. Then eventually pursue the Asian and europiuman markets that offer similar, attractive demographics.Distinctive shop experi seatceProvide 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 finished the company website. Lululemon fits itself in a differentiated street corner strategy2. Is Lululemons strategy utile?lets look at the following to determine if the strategy is effective for LululemonThe firm currently has three segmentsCorporate-Owned StoresThe corporate- accepted stores segment includes all sales to customers through corporate-owned stores in North America and Australia. This segment is by far Lululemons largest re venue base and go away continue to be successful as Lululemon looks to expand its base in 2012 by opening 30 stores in the United 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 intellect behind is to shift from brick-and-mortar stores to online channels, Lululemons commitment to increase its presence in e-commerce will help the company expand its customer base and improve brand sentiency.FranchiseWhile previously license sales were part of their strategy, the companyreported that it will no womb-to-tomb partake in the business and that it had reacquired its four remaining franchise stores during pecuniary 2011.SWOT AnalysisStrengthTrademarked fabricsCommunity involvement offered relinquish yoga class on monthly basis Employee trainingInnovation drift/comfortMultiple green initiativesQuality products designed to sustain 5 y ears of intended use enchantment maintaining functional Brand indistinguishabilityWeaknessHigh retail priceNarrow product lineQuality control/supply chainMarketing targeted to mostly yoga instructors/studios redness of customer service with increased weighing machineWeak brand actualizationLack of targeting to menOpportunityExpand product line table service additional market segmentsExpand into additional geographic marketsIncreased necessity in athletic apparelFitness crazeThreatsIncreased controversy from current large players in the market Copy catsEconomy bleak entrantsRisk of banking on niche marketsLululemon simply went public five years ago and feature not entered any new industries (focusing mostly in the fitness apparel industry). They return done whatsoever corporate restructuring short after the company was formed, Lululemonentered into franchise agreements and then a joint venture. The idea behind this was based on growing the brand to meet consumer inquire wh ile conserving financial resources. This was a rattling effective strategy and served Lululemon thoroughly 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 more on e-commerce. We believe this strategy will work well for Lululemon as it preserves its brand name / competitive advantage and staying competitive in the online market as well.3. Top Key Issues approach the company require to focus on areThe analysis 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 comp etitive industry with limited barriers to entry. The athletic apparel industry is very competitive, with well capitalized rivals such as Nike and Gap, Inc. Lululemon has limited knowing prop in regards to its deed fabrics and manufacturing processes, at that placefore the quality and innovation components of strategy could easily be replicated.Lululemons self reinforcing activities, such as target customer base, adapt products and community based market approach make it very contest 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 formatThis analysis brings us to pops 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. boastfulcompanies with large market capitals such as Nike, Adidas , and Under Armor put up dominated the athletic apparel industry and keep gaining more ground. With the expulsion of a commitment to creating innovative products in apparel, these initiatives are in credit line to Lululemon. In order 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 modern 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 commit emerged as competitors to Lululemon.Price Point and ManufacturingIn light of the new and old c ompetitors, Lululemon could be forced 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 makes it easier for current and future competitors to manufacture and sell products with similar performance capabilities and styling.Cross- solid ground differences in demographic, cultural and market conditions. Buyer tastes for a finicky product or service sometimes differ substantially from country to country. Sometimes, product designs suitable in one country are in countenance in an other(a) because of differing local standards. Lululemon is operating in an international market place and they hold back 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 o ffered in the winterseason will be different from Canada to Australia and bench vise versa. Firstly, Australia gets hardly any snow and while Canada on the other hand, gets majorly collide with every winter.Therefore, the running gear and the hoodies offered in both countries will commute because of the temperature and the climate. Making products that are closely matched to local tastes make them more likable to local buyers, customizing Lululemons products country by country may fool the effect of raising production and distribution cost 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 comparatively broad(prenominal) needs for local responsiveness as well as appreciable benefits to be realized from standardization.This strategy that Lululemon is trying to apply has its own disadvantages, such as it is more complex and harder to implement, conflicting goals may be difficult to reconcile and require trade-offs and implementation more costly and time-consuming. all(a) major global companies employ the franchising strategy. With the franchising strategy, the franchisee bears most of the costs and risks of establishing foreign locations while Lululemon would have to expend only the resources to recruit, train, support, and admonisher 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 break that they are providing the products at discounted costs but withal having to monitor to plug that their standard for stores and customer service and experience is maintained.4. Recommendations for management to improve performance / address key issuesThe recommendations we hav e for management is to improve performance and address 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. by means of analysis, a recommendation to solve this issue would be to patent their bear on 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 should sponsor some sort of events to gain publicity and increase brand awareness. Such 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 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. Action Plan to address issues and improve performanceThe following action plan is the recommended steps we believe would be the appropriate approach to successfully comp leting these recommendations.Appendix 1Value fibril AnalysisSupply 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 reach Growth in online sales can offsetSales/MarketingDepend on condition of mouth and community based marketing can increase marketing via media (television, magazines, etc.) and other avenues