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Overview of Lululemon's Competitive Environment

Questions:

1.Critically evaluate Lululemon’s Competitive Environment.  Does the Company have a source of (sustainable) Competitive advantage?  

2.Based on an analysis of the internal environment, discuss the company’s capabilities, and core competencies. Does Lululemon have any weaknesses that can Impact its ability to compete in the future?   

3.What are the trends and conditions in the External Environment that will have a dominant influence on the firm’s strategic actions? In what ways (if any) should Lululemon change its strategic direction?  

4.What are the advantages of Lululemon’s business level strategy? What are the risks?  

5.As the company grows and expands internationally, what challenges is it likely to face? What recommendations can you make to reduce these potential risks?

Lululemon Athletics Inc. is athletic apparel company for both males and females (but basically targets women between the ages of 15 and 65) and provides a diversified range of shorts, shirts, pants and yoga accessories (Lululemon, 2017). It faces strong competition from Nike, Adidas and Under Armour and has adopted various business level strategies to expand its geographic market and to have an edge over its competitors (Car & Newell, 2014). Lululemon maintains high quality standards in its products which in turn has resulted in increased loyalty among the customers towards the brand.

1.The primary competitors of Lululemon include Adidas, Nike, Under Armour and VF Corp. and continuously face challenges and potential threats from its competitive environment. These competitors are unrivaled in terms of their global success as a result of their high performance products. These are financially powerful brands as compared to Lululemon and also provide diversified range of products (Schlossberg & Lutz, 2016). But the competitive advantage for Lululemon lies in the fact that these brands are unproven in the yoga segment and they only provide limited focus on the yoga line. Therefore, Lululemon is capable of attracting the yoga enthusiasts since it creates value for its customers which could not be replicated by big brands like Adidas and Nike (CSI Market, 2017).   

Lululemon’s competitive advantage lies in the differentiation strategy in which unique materials are chosen in order to create products that attract the customers with their comfortable fitness and daily wear range.  The organizational culture adopted by Lululemon is unique and therefore acts as the source of competitive advantage. The efficiency that it possesses due to outsourcing and technological advances in various processes relating to its online store has kept it a step ahead of its competitors. Moreover, corporate social responsibility is aimed by encouraging the employees to take responsibilities of their individual actions with Lululemon. It also has a different department which is always engaged in developing innovative materials and products in order to have an edge over the competitors. Also, Lululemon establishes a connection with its guests which makes the customers prefer it over others (Lucid Press, 2015). In other words, a sense of responsiveness towards the customers is maintained at all times which have the ability to transform its customers into the die-hard supporters. The quality standards are never compromised and always upheld to meet the customer preferences. 

Lululemon’s Capabilities and Core Competencies


2.Lululemon’s capabilities and core competencies are derived from its tangible and intangible resources. They aim to create value for their customers by the way of implementation of various strategies which are framed after proper consideration of all the relevant facts. Its capabilities include its unique product designs which are considered as the key to its success. The products are intended to increase the fit appearance of the customers. Also, the higher prices are the result of innovation in the materials to provide a soft touch feel to the customers. Lululemon holds intellectual property rights over the designs of its products and also limit the availability of specific designs. Its research and development is dependent on the system of customer responsiveness so that the trends in the minds of the customers can be produced as products by them (Singer, 2012). Their unique feedback collection methodologies ensure that the brand and culture are propagated. Moreover, its organizational culture is focused on training and personal growth which results in attracting passionate and motivated employees. Also, the grassroots approach adopted by Lululemon for the purpose of marketing has resulted in the achievement of strong brand identity and customer loyalty (Sherman, 2016).  The store employees of Lululemon are also trained and educated in order to develop strong relationships with clients.

The ability of Lululemon to compete with other brands may be affected in future due to various reasons. Since the company spends huge amount of time and money on the research and development activities for the apparels, the prices are higher than its competitors which may affect its sales in the future. Moreover, it has created a brand perception in the minds of people that its products are only for yoga enthusiasts. Therefore, Lululemon must take steps to create awareness their products can be used for any physical activity other than yoga (Dalavagas, 2016). If the demand and expansion of the organization will not be managed properly, the final performance and brand image might suffer in the future. Also, Lululemon’s inability to safeguard their intellectual property rights could reduce the value of their brand and weaken their competitive position. Moreover, Lululemon is also affected by the uncertainties in political and legal areas. Global and country-specific 3.Lululemon performs the function of constantly scanning its external environment in order to identify the ongoing trends such that its full advantage can be obtained by entering new markets or by developing product line extensions. The consumers all over the world have reduced excessive spending as a result of global economic downturn. Since Lululemon deals highly discretionary nature of products, it is expected that the changing global economy will affect the profitability of the organization in the long run. Moreover, it faces uncertainties in the legal and political areas due to variation in the international and country-specific rules and policies. There is a continuous threat of new entrants in the market since the retailers in the industry takes the benefit of low entry barriers. Strategic competitiveness and strong emphasis on the intangible resources allows Lululemon to enhance its ability to positively execute the focused differentiation strategy and to leave behind the entire industry. The firm’s strategic actions are influenced dominantly as a result of such conditions in the external environment.

External Environment and Impact on Lululemon’s Strategic Actions


It is important for Lululemon to adopt practices which enhance strategic elasticity and responsiveness to fluctuating conditions because the industry environment and the internal assets of the firm affect its performance over time. Also, the increased completion in the industry will significantly lead to long term effects on the profitability of the firm. In order to deal with uncertainty and support strategic decision making, Lululemon has already adopted various practices related to the environment scanning.       

4.Lululemon uses focused differentiation strategy which has resulted in availability of high quality and performance athletic apparel to the customers at the best price (Thompson Jr, Peteraf, Gamble, et. al., 2015). The strategy has engaged coordination of commitments and actions which provides a competitive advantage to Lululemon. The strategy has benefitted Lululemon in increasing the geographical presence and brand awareness due to its participation in various events and establishing partnerships with local fitness coaches (Business Teacher, 2017). Moreover, the popular branding strategy has made them distinguished from their rivals. The strategy has built customer loyalty for the brand which has helped in reducing the price sensitivity and disarms those competitors who try to gain market share by the way of reducing the prices (Nelson, 2011). It enables the company to provide superior value products to its customers in terms of richness, reach and affiliation dimensions. This in turn reduces the uncertainty faced by the company and improves the decision making quality of the organization in order to deal with the competitive risks.


The business strategy adopted by Lululemon makes it vulnerable to a variety of risks including the fickle consumer tastes. Moreover, the market is extremely competitive due to the existence of competitors like Nike, Adidas and Under Armour. There is the possibility for the customers to evaluate the price of the products offered by Lululemon by making comparison with its competitors. Also, the development of rare yoga apparels suffers from less enthusiasm and therefore maintenance of focus becomes a difficult job therefore, the company should avoid the distraction caused by the unrelated lines of business while looking for new growth opportunities. The source of differentiation identified by Lululemon may divert the organization from the value for which the customers are willing to pay.

5.As the company grows in size and expands its operations globally, it would become difficult to maintain the community-centered and symbiotic relationships (Ho, S, 2013). Moreover, till date the expansion is made in countries such as Australia, United States and New Zealand which share common languages and culture and therefore, the barriers involved were comparatively lower (Baymout, 2014).  But the emerging markets such as India and China have altogether different cultures thereby involving various barriers for the new market entrants. There may arise some challenges while the expansion of the brand in relation to the approach to be used such that local responsiveness is achieved at a high pace. Also, the selection of the entry mode in a new market may create a challenging situation for the company.

Lululemon’s Business Strategy and Potential Risks

The potentials risks can be reduced by the help of continuous environment scanning which has already been adopted by the organization with the view to identify them in advance and therefore, allows them to take proper steps before the potential risks converts itself into a real problem. The firm should enter the market through the wholly owned subsidiaries as it will allow to achieve the potential to produce value and also enhance the strategic competitiveness of the company. Also, it is recommended that Lululemon should opt for multi-domestic approach along with the decentralization in the strategic and operating decisions while expanding the brand globally as it will enable them to provide tailor-made products to the local market.

Conclusion

Lululemon Athletica Inc. has become a favorite shopping spot for all the fitness lovers. Since Lululemon puts its entire focus on protecting a special community for the yoga enthusiasts, it has created value for the customers which cannot be replicated by other popular brands such as Adidas and Nike. It has new growth opportunities as its competitors do not put their complete focus on the yoga line. Moreover, there is increasing scope for expansion in various emerging markets (Hitt, Ireland & Hoskisson, 2014). Lululemon must take into account the above recommendations in order to encounter the potential threats that may arise with the growth and expansion of the company in the international market.  The expansion plans adopted by the organization are well-matched with the strategy and capabilities but they must increase the emphasis on the use of social media platforms in order to improve the relations with the target customers and provide them an engaging brand experience.

References

Baymout, M. (2014). GLOBAL SUPPLY CHAIN DISRUPTIONS AND MITIGATION STRATEGIES. International Journal of Advance Research. vol 2(5). pp. 1-15.

Business Teacher. (2017). Lululemon SWOT Analysis. Retrieved November 25, 2017 from https://businessteacher.org.uk/swot/lululemon.php

Car, M. G. & Newell, L. H. (2014). Guide to Fashion Entrepreneurship: The Plan, the Product, the Process. A&C Black.

CSI Market. (2017). Lululemon Athletica Inc.  (LULU). Retrieved November 25, 2017 from https://csimarket.com/stocks/compet_glance.php?code=LULU

Dalavagas, L. (2016). SWOT Analysis: lululemon athletica inc. Retrieved November 18, 2017 from https://www.valueline.com/Stocks/Highlights/SWOT_Analysis__lululemon_athletica_inc_.aspx#.WhBza1WWbIU

Hitt, M. A., Ireland, R. D. & Hoskisson, R. E. (2014). Strategic Management: Concepts and Cases: Competitiveness and Globalization. Cengage Learning.

Ho, S. (2013). Analysis: Lululemon’s next challenge: overseas growth. Retrieved November 25, 2017 from https://www.reuters.com/article/us-lululemon-outlook-analysis/analysis-lululemons-next-challenge-overseas-growth-idUSBRE99712S20131008

Lucid Press. (2015). 5 of our brand identity heroes and what you can learn from them. Retrieved November 25, 2017 from https://www.lucidpress.com/blog/our-brand-identity-heroes-and-what-you-can-learn-from-them

Lululemon. (2017). About Us. Retrieved November 25, 2017 from https://info.lululemon.com/about

Malcom, H. (2013). Lululemon lovers buy into healthy lifestyle. Retrieved November 25, 2017 from https://www.usatoday.com/story/money/business/2013/03/19/lululemon-yoga-exercise-retail-running/1917659/

MBA Skool. (2017). Lululemon Athletica SWOT Analysis, USP & Competitors. Retrieved November 25, 2017 from https://www.mbaskool.com/brandguide/lifestyle-and-retail/4646-lululemon-athletica.html

Nelson, J. (2011). Loco for Lulu. Retrieved November 25, 2017 from https://www.canadianbusiness.com/lifestyle/loco-for-lulu/

Schlossberg, M. & Lutz, A. (2016). 19 up-and-coming athleisure brands that aren’t Lululemon. Retrieved November 25, 2017 from https://www.businessinsider.in/19-up-and-coming-athleisure-brands-that-arent-Lululemon/articleshow/50848624.cms

Sherman, L. (2016). The Rise, Stumble and Future of Lululemon. Retrieved November 25, 2017 from https://www.businessoffashion.com/articles/intelligence/the-rise-stumble-and-future-of-lululemon

Singer, J. (2012). Lululemon: A Cult, a Phenomenon or Just a Great Brand. Retrieved November 25, 2017 from https://www.therobinreport.com/lululemon-a-cult-a-phenomenon-or-just-a-great-brand/

Thompson Jr, A. A., Peteraf, M. A., Gamble, J. E., & Strickland III, A. J. (2015). Instructor’s Manual.

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