Lululemon Strategic Management

Lululemon Athletica Inc. is a premium designer and retailer of athletic apparel that has remained profitable over the years. The firm’s profitability and success is attributable to various factors, particularly its fashionable products. Lululemon stores have more visitors on a daily basis because of these products, knowledgeable store personnel, and store ambience (Gamble, Peteraf & Thompson, 2019). This paper discusses strategic management for Lululemon Athletica Inc in relation to its business strategy and practices.
Competitive Forces Confronting Lululemon
Even though Lululemon has remained profitable over the years, the company is faced by various competitive forces in the market for performance-based yoga and fitness apparel. Given the attractiveness of this market to entrepreneurs and start-ups, the threat of new entrants in Lululemon’s market is high. The firm also faces a high threat of substitutes from established brands like Nike, Adidas and Reebok. However, the bargaining power of buyers in the market is low because Lululemon’s rivals act independently while the bargaining power of suppliers in moderate because of the intense rivalry in this market. Gamble, Peteraf & Thompson (2019) state that this market is characterized by intense competition, especially from established brands.
Strategic Group Map of this Industry
Based on my strategic group map, the performance sports apparel industry is characterized by numerous growth and better positioning opportunities. These opportunities are attributable to increased demands for stylish and fashionable apparel items by female customers who account for a significant portion of the industry’s customer base. Lululemon is well positioned in this industry as it is in a similar strategic group as Nike, an established brand. The firm’s better positioning is also brought by its success and performance in cross-group rivalry.
Key Success Factors in this Market
In light of the intense rivalry in the performance-based yoga and fitness apparel, companies face the need to adopt suitable strategies to enhance their success. Based on the case study, the key success factors in this industry include stylish and fashionable products, innovation, and strong brand recognition.
SWOT Analysis
The strengths of Lululemon include provision of high-quality, fashionable products, constant innovation, strong brand recognition and community involvement. However, the firms weaknesses include high pricing, a limited product line and weak supplier relationships. While the firm’s opportunities include expansion of the product line and expansion into new markets, threats include intense competition and high threat of new entrants and substitutes. With respect to SWOT analysis, Lululemon remains an attractive brand to many customers as it provides stylish, fashionable products. In addition, the company capitalizes on its strengths to adopt niche marketing and distribution strategies.
Primary Components of Lululemon’s Value Chain
The primary components of the company’s value chain include supply chain management, retail operations, marketing and sales, and customer relationship management. The company utilizes these components of the value chain in combination with differentiation strategy to enhance customer value.
Key Elements of Lululemon’s Strategy
Lululemon has continually revised its business strategy depending on internal and external forces in the market. Going into 2017, the firm has adopted a business strategy that seeks to enhance its performance once again. The key elements of this business strategy include increased product differentiation, product innovation, increasing brand awareness, and innovation in product development.
Competitive Approach
The competitive approach used by Lululemon is a focused differentiation strategy, which entails concentrating on a narrow customer segment or market niche (Gamble, Peteraf & Thompson, 2019). Lululemon focuses on marketing its products to sophisticated and educated women, which represents a narrow buyer segment.
Lululemon’s Financial and Operating Performance
Case Exhibi1 shows that the firm’s growth rates in nearly all categories of revenue and profitability slowed down considerably apart from the cost of goods sold. However, while the company experienced numerous challenges in 2013, the total revenues between from 2010 to 2014 was 36.9% while net income was 48.0% (Gamble, Peteraf & Thompson, 2019).. The financial data in this exhibit indicates a negative financial trend, which implies that the firm’s business is relatively stagnating despite robust cash flows.
Top Priority Issues
In light of the stagnation of Lululemon’s business and negative financial trend, the firm’s CEO Laurent Potdevin and the management need to address some key issues. The top priority issues that should be addressed include declining profit margins, intense rivalry from new entrants who copy its business model, and decline in store sales volumes.
Recommendations
One of the recommendations to address the top priority issues facing Lululemon is to conduct an analysis of the impact of cannibalization on store sales. The CEO and management should conduct an analysis of the extent cannibalization of store sales by its own online platforms is affecting volumes of store sales. This should incorporate conducting a comprehensive analysis of the supply chain to identify potential areas for cost savings and the reasons for increased costs. Insights from the analysis should be utilized to determine a new business strategy going into 2017.
Secondly, Lululemon should transform its business audience to incorporate a wider target audience to help improve profit margins. The company should consider incorporating young people and seniors as part of the target market, which would require using a different competitive approach other than the current focused differentiation strategy. In this case, the firm should adopt a brand differentiation strategy in order to reach a wider target market.
Third, Lululemon’s CEO and management should capitalize on its constant innovation to develop new products that reach the wider target market in order to deal with the threat of new entrants who copy its business model. Innovative product development initiatives would help ensure that the business model becomes sophisticated and avoid duplication by new entrants. Through this process, the company will create unique products that generate substantial competitive advantages over rivals in the market.
Reference
Gamble, J.E., Peteraf, M.A. & Thompson, A.A. (2019). Essentials of strategic management: The quest for competitive advantage (6th ed.). New York, NY: McGraw-Hill Education.