Discuss about the Case Study on Lululemon Athletica.
Lululemon Athletica is a Canadian company dealing with athletic apparels. Dennis “Chip” Wilson founded the company in the year 1998. The company opened its first store in the year 2000 in Kitsilano, in Vancover, Canada. The company gained an edge for itself as it sold yoga apparels exclusively. This essay tries to explore the workings of the famous company, Lululemon athletica. It critically evaluates the competitive environment of the company and tries o find out whether or not the company has a sustainable competitive advantage over its competitors. It moves on to a detailed analysis of the internal working of the company. It discusses the capabilities and the core competencies of the company . It also tries to find out and analyze any weakness that can affect the ability of the company to compete in the future. The write up finds out the trends and conditions in the external environment that directly influences the strategic actions of the firm. It also mentions the ways through which the company should change its strategic direction. It then moves onto discussing the advantages and the risks of the business strategy of Lululemon Athletica. The write up discusses the challenges that the company is likely to face if it aims for a global expansion and the solutions to those challenges.
Lululemon athletica is a company specializing in yoga apparels. The company started off as a combination of a yoga studio and a clothing store. It has about 133 stores in Canada and the United States and has over 211 stores worldwide. It specializes in athletic and yoga apparels. Despite the presence of giant competitors in the market like Nike, Adidas, VF Corp and Under Armour, Lululemon continues to enjoy a niche market for itself. It sells customized product to a market, which has a demand for the exact products that the company manufactures (Lavrence and Lozanski 2014). The big competitors of Lululemon athletica enjoy a worldwide popularity. Brands like Nike and Adidas are famous all over the world. These companies dealing with sports and athletics apparels and footwear enjoy a worldwide popularity. Nike began its operation in the year 1964. Bill Bowerman and Phil Knight founded the company. A US based company, Nike started as a distributor of footwear later on turning into a global marketer of athletic footwear, equipment and apparel. The company now operates in more than 160 countries. One of the biggest competitors of Lululemon athletica is Nike. Nike garnered $20.8 billion in revenues in the financial year 2011 (Karakowsky and Guriel 2015). For that year, the income before taxes was $2.8 billion dollars. However, when it comes to the matter of debt, it can be observed that Lululemon has no debts whereas Nike has a debt of approximately around $0.5 billion. On the other hand, it can be seen that Nike has a substantial capacity to enjoy investment in new ventures and markets (MoranSendra et al. 2015). This is not seen in the case of the Canadian company. Adidas is another company that serves as a competitor to Lululemon. Adidas is one of the leading companies of the world dealing with athletic goods and apparels. The company attained a better position in the world market when it acquired Reebok International Limited with a footprint of around $11.8 billion. It can be seen that during the year 2012, the market capitalization of Adidas was $16.39 billion whereas the market capitalization of the Canadian company was $10.58 billion. It can be easily observed that the company enjoys a worldwide popularity whereas, same is not the case with Lululemon (Sousa 2016). The product range of Adidas is far wider than that of the Canadian company. The company is characterized by a strong financial and operational performance. The quarterly revenue growth of the company was only 11.3 % as compared to Lululemon with a quarterly revenue growth of about 51.4%. Under Armour is an American company founded in the year 1996. The balance sheet of the company is strong and it has around $175 million in cash. The company essentially deals with the sale of sports clothing and accessories. It holds a debt of approximately $78 million. Therefore, it can be observed that when compared with three of its competitors, it can be seen that net income of the Canadian company, Lululemon athletica is $184.06 million whereas Nike stands at the top with $2.27 billion, then comes Adidas with $887.06 million followed by Lululemon, ending with Under Armour with $96.34 million (de Heer and Tandoh-Offin 2015).
Lululemon athletica is a company that can easily get lost in the crowd of big companies like Nike and Adidas. However, it holds its ground by catering to a niche market. All across the globe, there can be seen and observed an increase of consciousness in regards to health and fitness. People all across the world have now become increasingly aware and conscious. They want to be fit and healthy which means that there is a rise in the sale of athletics and sports apparels and goods (Li et al. 2015). Among all other forms of exercising, practicing yoga remains on top as it provides a holistic approach to fitness. With the rise of health conscious professional individuals, the rise of the sale of health and athletic products is also evident. Therefore, it can be deduced that Lululemon athletica has a sustainable source of competitive advantage.
The company exclusively deals with yoga apparels and it caters to the consumers in Canada and the United States of America, which makes it an exclusive company catering to consumers in those two countries only. The company has an internal environment that is extremely interesting and thus can be a good subject for analysis. The company, lululemon athletica, considers its customers as ‘guests’, showering them with attention and tending to all their shopping needs while at the store. The employees are known as ‘educators’, who are strategically positioned to encourage and ensure personal connection with each of the ‘guests’. The employees go through an intensive training session at the beginning of their service so that the employees can enlighten the customers about the innovative and technical aspects of the design of the product (Chircu, Resnick and Saraswat 2015). The employees are encouraged by the company to pursue a fitness regimen and a fit lifestyle in order to create and maintain an image, which will help to push the sale further. In terms of revenue generation, the company continues to create a cash flow, which allows future investment, helps to add to the profit and keeps the company free of debt. The brand invests in grassroots marketing, involves the customers in a loyal relationship and tries to maintain the balance and equation (Tushman, Lakhani and Lifshitz-Assaf 2012). The company has synonymized their name with the lifestyle of the targeted segment of the market. The company aims to achieve a relation with the customers that goes beyond the selling and purchasing of the goods and items. They sell an idealized healthy lifestyle to the consumers by building a network of yoga and fitness instructors, hosting and sponsoring sporting events. The core competencies of the company lie in the packaging and look of the products. The products enhance the fitness appearance of the customers which encourages and further motivates them to achieve a healthier lifestyle. The better fit encourages the customers to pay a little higher amount. Lululemon manufactures garments that has an innovative moisture-wicking facility, provides a four-way stretch that helps the consumers to achieve maximum flexibility during exercising; the products also provide maximum support and coverage. Though many companies have tried to compete and imitate the structure and design of the products manufactured by lululemon, they were not able to achieve the same quality of product (Gosman 2014).
The company has a few weaknesses, which might affect the ability to compete in the future. The main weakness of the company is the high price which can prove to be a hindrance in the future. With all the big competitors like Nike and Adidas, which have a strong international presence, lululemon faces a major threat of losing out the customer base to all these big brands. Another weakness of the company is that it focuses its attention only on apparels for yoga. Competitors like Nike and Adidas, brings a wide range of apparels for different kinds of sports. The company just deals with yoga apparels for women, which makes it limited in terms of scope. This means that it misses the market for apparel for men. The company is now struggling to expand into apparels for men. One of the main weaknesses of the company is that it invests a lot of capital in the research and development of the products, which makes it all the more expensive than the products of its competitors. Since the company is based out of Canada, it has not yet explored the global markets which means the company is losing out a varied range of markets to invest in and to explore (Larcker, Laecker and Tayan 2014).
The trends and conditions in the external environment have a direct impact on the strategic actions of the firm. The strategic actions of lululemon athletica, like any other company, are dependent on a range of external factors. The trends and conditions of the external environment dictate the strategic actions of the company. The trend in the market scenario in the health and fitness sphere indicates that there is a rise of consciousness amongst the consumers, which points out that the company has a scope for steady growth. The health conscious population of the world is trying to achieve a holistic and healthy lifestyle. The strategic actions of lululemon athletica thus should be mapped out in such a way so that it caters to all sectors of the population who want to achieve a healthy body and embrace a healthy lifestyle (Pride 2013). The company should come up with a line of yoga apparel for men, as everybody, irrespective of gender, desires a healthy lifestyle. Since the company deals with apparels manufactured exclusively for the practice of yoga, it misses out on the market that has a demand for apparels for other exercises as well. The company is branded under the apparel and accessory industry. This industry mainly consists of companies that manufacture clothes for men, women and children. There is an existing rivalry between the outdoor and athletic industry (Carmen and Chi 2015).
Lululemon Athletica, like any other company, has now adopted a strategy that encourages a new growth and development of the company. The company has now started a line of apparels for dance, named ivivva athletica. This step means that the company is now open to diversifying the range of its products. The advantages of the business strategy adopted by the company are that it has developed superior quality products and has developed strong branding that is community centric (Gabler and Reynolds 2013). One of the main advantages of lululemon athletica is that it has a legion of loyal customers who have an undying loyalty towards the brand. The company has a position as a lifestyle brand that is unmatched. The company stands at a point where there is a strong presence of risks. One of the risks that the company deals with is facing strong contenders in the market and the risk of fluctuating economic conditions that might influence the spending capability of the consumers (Thomas 2015). The company has the risk of getting drowned in the sea of popular brands like Nike and Adidas. Another risk that the company faces is rejection from the consumers.
As the company expands and grows internationally, it comes face to face with a lot of challenges. Facing the big competitors in the world market is one of the biggest challenges of lululemon athletica. Brands like Nike and Adidas have a strong presence in the international scene. Therefore, establishing a strong customer base in the international market is a huge challenge for the company. As a result, the company can follow few recommendations in order to minimize any risk that might come its way and maximize the profit. Before expansion, the company should be well aware about the market it is investing in. The company should try to find out the areas of demand in the market and try to capture the area and develop the products to suit the taste of the consumers in the local market base (Karakowsky and Guriel 2015).
References:
Carmen, J.D. and Chi, T., 2015. Apparel reshoring movement: a case study of a made-in-USA business model.
Chircu, A.M., Resnick, M. and Saraswat, S.P., 2015. Online Intermediaries and Supply Chains. The International Encyclopedia of Digital Communication and Society.
de Heer, F. and Tandoh-Offin, P., 2015. Exploring the Benefits of Branding Universities: A Developing Country Perspective. IUP Journal of Brand Management, 12(4), p.58.
Gabler, C.B. and Reynolds, K.E., 2013. Buy now or buy later: the effects of scarcity and discounts on purchase decisions. Journal of Marketing Theory and Practice, 21(4), pp.441-456.
Gosman, M.L., 2014. Increasing Student Appreciation of A Liability That’s Liable To Be Good and Insightful. Business Education Innovation Journal, 6(2).
Karakowsky, L. and Guriel, N., 2015. The Context of Business: Understanding the Canadian Business Environment.
Karakowsky, L. and Guriel, N., 2015. The Context of Business: Understanding the Canadian Business Environment.
Larcker, D.F., Larcker, S.M. and Tayan, B., 2014. Lululemon: A Sheer Debacle in Risk Management.
Lavrence, C. and Lozanski, K., 2014. “This Is Not Your Practice Life”: lululemon and the Neoliberal Governance of Self. Canadian Review of Sociology/Revue canadienne de sociologie, 51(1), pp.76-94.
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