Lululemon's Strategic Success: A Closer Look

Chip Wilson founded Lululemon in 1998 after discovering yoga and realizing the need for better clothing options. With experience in the surf, skate, and snowboarding industry, Wilson observed that traditional cotton apparel worn by yogis was inadequate for managing sweat and allowing flexibility. Leveraging his expertise in technical athletic fabrics, Wilson collaborated with yoga instructors to develop innovative products. The inaugural Lululemon store opened in Kitsilano, Vancouver BC in November 2000. This store not only aimed to enhance performance apparel but also served as a community hub where individuals could connect and share experiences related to a healthy lifestyle.

To sum up, Lululemon's strategy can be defined by its main components and the corresponding generic strategy.

Expand the company's store presence in North America

The company had a strategic objective to strengthen its presence by adding new stores and expanding into new geographical markets in Canada and the US.

Enhance the brand's visibility and raise awareness

Grass roots marketing strategies were implemented to improve the effectiveness of each new store's launch.

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These strategies involved organizing events and collaborating with fitness coaches in the local community.

Bring in groundbreaking technologies to develop fresh products

Lululemon should keep concentrating on developing and providing products that include technology-enhanced fabrics and performance features, setting it apart from its competitors and attracting more customers.

Broaden the customer base for Lululemon products.

This is divided in 3 sections: 1. Adding men apparel to the line 2. Expanding the product category to include items such as athletic bags, undergarments, sandals, and outerwear 3. Adding products suitable for additional sports and athletic activities 4.

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Expanding beyond North America

The company aims to establish a stronger presence in Australia and Japan. Afterwards, they plan to target the Asian and European markets as they possess similar, favorable demographics.

Lululemon has successfully implemented a unique niche strategy through offering a specialized in-store shopping experience and building strong relationships with fitness instructors, fitness establishments, and community events. In 2007, they made a major strategic change by directly selling to consumers through their website rather than relying on franchising.

Is Lululemon's strategy effective?

Assessing the following factors is key to determining the effectiveness of Lululemon's strategy:

The firm presently has three segments:

Corporate-owned stores

The corporate-owned stores segment in North America and Australia is the main source of revenue for Lululemon, as it encompasses all sales made through these stores. Lululemon has plans to open 30 stores in the United States and 2 Ivivva Athletica stores in Canada in 2012, further adding to the success of this segment.

Direct To Consumers

In 2011, the Direct to Consumers segment of Lululemon, which includes their e-commerce website, made up 10.6% of their revenue. Lululemon plans to improve its online presence by transitioning from physical stores to online platforms. This dedication will help the company grow its customer base and increase brand recognition.

Franchise

The company has announced that it will cease participating in franchise sales as part of its strategy. Furthermore, it revealed that it regained ownership of its four remaining franchise stores during fiscal 2011.

The content of the HTML tag is "SWOT Analysis".

Strengths: - Touted trademarked fabrics that set them apart - Actively engage in the community by offering free yoga classes - Provide employee training - Thrive on innovation - Offer stylish and comfortable products - Implement multiple green initiatives - Ensure high quality with products designed for 5 years of use while remaining functional - Maintain a strong brand identity Weaknesses: - Retail prices are relatively high - Product line is narrow - Struggle with quality control and supply chain management - Marketing efforts primarily target yoga instructors and studios - Difficulty maintaining customer service as the company grows - Relatively weak brand recognition - Do not effectively target men as customers Opportunities: - Expand the product line to attract a wider customer base - Serve additional market segments - Enter new geographic markets - Take advantage of the growing demand for athletic apparel - Capitalize on the current fitness craze Threats: - Face increased competition from established industry giants - Potential for copycat products - Economic factors that may impact sales - Possibility of new competitors entering the market - Risk associated with relying too heavily on niche markets

Lululemon, which entered the fitness apparel industry five years ago, has not diversified into new industries. The company underwent corporate restructuring soon after its formation, initially entering into franchise agreements and later forming a joint venture. This approach aimed to grow the brand while conserving financial resources, which proved to be a successful strategy. By establishing themselves as a multinational company, Lululemon expanded its brand awareness and customer base, benefiting from economies of scope. In 2011, Lululemon repurchased all franchise organizations, shifting to a fully corporate-owned store model. This decision aimed to maintain control over branding and focus more on e-commerce. We expect this strategy to effectively preserve Lululemon's brand image and competitive advantage while remaining competitive in the online market.

3. The company needs to focus on the top key issues.

The retail apparel industry is highly competitive and offers few barriers for new entrants, according to the analysis. Lululemon's success will inspire new participants and attract attention from current rivals, leading to a fiercely competitive sector. Moreover, the athletic apparel industry, which includes established competitors like Nike and Gap Inc., is also intensely competitive. As for Lululemon itself, its intellectual property related to performance fabrics and manufacturing methods is limited, enabling potential replication of the company's strategy in terms of quality and innovation.

Lululemon's market dominance stems from its distinct features, such as targeting a specific customer base, offering personalized products, and employing a community-oriented marketing strategy. These attributes pose considerable obstacles for competitors in the industry. Nonetheless, despite Lululemon's formidable presence, there are few impediments for new entrants. Consequently, Lululemon should be prepared for new rivals striving to imitate its triumphant formula.

The company could encounter present and future difficulties:

Despite facing increasing competition from Nike, Adidas, and Under Armor, Lululemon maintains a distinct position in the athletic apparel industry. While these major companies have dominated the market due to their larger market capitalization and continuous growth, Lululemon sets itself apart by focusing on innovation in its apparel products. Unlike its competitors, Lululemon chooses ambassador partnerships instead of print or media advertising to promote its offerings in specific markets. As a result, Lululemon's rivals are able to establish and maintain brand awareness and market share more quickly.

Having a narrow focus

Lululemon targets sophisticated and educated women who prioritize an active, healthy lifestyle. In contrast, Under-Armor, Nike, and Adidas cater to both genders across various age groups.

Emerging challenges pose substantial risks to our safety and overall well-being.

There are several brands that compete with Lululemon, including Athleta by Gap, Lucy Activewear, Inc., and the BEBE SPORT collection by Bebe Stores.

Price Point and Manufacturing

As competition increases from new and established players, Lululemon may need to lower prices for their products, leading to reduced profits. Furthermore, Lululemon lacks exclusive rights to the technology used in their merchandise. Therefore, it becomes easier for current and future competitors to create and sell similar items with comparable performance and style.

Due to differences in demographics, culture, and market conditions across countries, there can be varying buyer preferences for products or services. This means that a product design that is considered appropriate in one country may not be suitable in another due to differing local standards. Lululemon operates globally and must decide whether to customize their products to cater to the preferences of local buyers in each country or offer a mostly standardized product worldwide. For example, the winter clothing for women will vary between Canada and Australia due to the contrasting amounts of snowfall experienced by each country. Canada typically receives significant snowfall during winter while Australia experiences very little.

Therefore, the running gear and hoodies available in both countries will differ due to temperature and climate. Creating products that align closely with local preferences increases their appeal to local customers. However, customizing Lululemon's products for each country may result in higher production and distribution costs. This is because there would be a greater variety of designs and components, shorter production runs, and added complexities with inventory branding and distribution logistics. The second aspect of the transnational strategy combines elements of both a globalized and localized approach to strategy development. This strategy is appropriate when there is a significant need for local adaptability and substantial benefits from standardization.

Lululemon has its own disadvantages in implementing this strategy. It is more complex and harder to implement, as conflicting goals may be difficult to reconcile and require trade-offs. Additionally, implementation is more costly and time-consuming. However, it is worth noting that all major global companies utilize the franchising strategy. By employing this strategy, Lululemon can transfer most of the costs and risks of establishing foreign locations to franchisees. This means that Lululemon only needs to focus on resources for recruiting, training, supporting, and monitoring franchisees. The main problem Lululemon currently faces is the burden of bearing all costs for stores worldwide. Consequently, they must ensure that they provide products at discounted costs while simultaneously monitoring stores to maintain their standards for customer service and experience.

4. Suggestions for management to enhance performance and tackle key issues

The management recommendations are to enhance performance and address the main issues by employing a Transnational strategy, which involves thinking globally and acting locally. It is important to customize each country's requirements due to variations in demographics, cultural differences, and market conditions. Additionally, all locations should adhere to the same guidelines and customer satisfaction standards as the primary locations.

Price point and Manufacturing

Lululemon lacks intellectual property rights for the technology used in their product processing, making it simple for competitors to imitate their style. To address this issue, it is recommended that Lululemon patents their processing system. This would yield several benefits for the company, including higher price points and increased profitability. Additionally, it would provide a stronger competitive advantage, making it challenging for other companies to imitate or replicate their style.

Sponsor Events and Shows

Lululemon could increase brand awareness and gain publicity by sponsoring events such as large-scale yoga events or sporting events, similar to its competitors Nike (sponsor of the PGA Golf) and Adidas (sponsor of FIFA). For example, Lululemon could organize a yoga event at the Metro Convention Hall in Toronto.

Expand in Asia and Europe

To expand its presence in Europe and Asia, the company should focus on improving its market position and hiring new management professionals. Additionally, it should implement a proactive strategy to localize its business activities and maintain a consistent brand image across both regions.

New Customers

Lululemon needs to expand its customer base beyond its current niche market. One way to do this is by introducing golf and tennis apparel in its stores. Here is an action plan to tackle these issues and enhance performance.

The recommended approach to successfully completing these recommendations is outlined in the following action plan.

Appendix 1 - Value Chain Analysis

Supply Chain Management - Lower costs and improve quality control by decreasing the number of manufacturers from 45 and agreeing to contracts, without any long-term commitment.

Operations should tighten inspection and verification processes to prevent another recall, specifically addressing the see-through pants issue.

Distribution facilities are only in Vancouver-BC, Sumner, Washington, and Melbourne, Australia. This limited distribution network affects the company's reach. However, growth in online sales can help overcome this limitation.

Depend on word of mouth and community-based marketing to boost sales and marketing efforts. It is also possible to enhance marketing through media platforms such as television, magazines, and various other avenues.

Updated: Feb 16, 2024
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Lululemon's Strategic Success: A Closer Look. (2016, Mar 22). Retrieved from https://studymoose.com/lululemon-business-strategy-essay

Lululemon's Strategic Success: A Closer Look essay
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