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Question:
Discuss about the Lululemon Athletica Competitive Environment.

 
Answer:
Introduction:

The current business environment is highly competitive especially for firms operating in the same industry. The management of companies strives to come up with strategies for creating a competitive edge against the competitors. Having a competitive advantage ensures a sustainable development for a company in the market. Understanding both the internal and external environmental factors helps managers in driving effective strategic management approaches that suit the current market demands.

Lululemon Athletica, a Canadian technical athletic apparel retailer for yoga wear, running, training, and among other many sweaty pursuits. Lululemon offers high-quality clothes to the guests who act as a marketing channel in informing their friends about the excellent offers in by the enterprise (Lululemon Athletica, 2012, p. 283). Having an idea of the surrounding environmental factors affecting the retail industry assists the company efficiently in developing strategic management approaches for sustainable development in the highly competitive market.

The following essay provides a critical evaluation of Lululemon's competitive environment in its attempt to gain a sustainable competitive environment in the market. Further, the article analyses both the internal and external environmental factors facing Lululemon's operations as well as their effects on the company's set goals.

 
Lululemon’s Competitive Environment

Lululemon Athletica offers high-quality athletic attire and apparel at affordable prices, yoga pants being the company's prime product. The competitors of Lululemon sell the yoga apparel at a price range of between $25 to $ 50. Surprisingly, the yoga pants available in Lululemon stores are priced almost two or three times more than the rivaling firm's prices, with the costs ranging from $78 to $ 128 per yoga pant (Lululemon Athletica, 2012, p. 285). The ability of the competing firms to sell the same product to the customers at a lower price than that of Lululemon creates pressure on the company's sustainability in the market. However, Lululemon's product sell fast in the market, and this high demand for the business's products creates pressure in its stores when it comes to keeping new lines in stock.

Lululemon's has an excellent source of sustainable competitive advantage in the market. The evidence to this argument is that, despite the fact that the company sells its products at high prices, the customers and guest for Lululemon keep on referring other clients to the enterprise. The competitor's approach to reducing down prices does not seem to affect the company's sales.  The chief product officer report that the "Paris Pink" product launched in 2011 to last for approximately 60 days sold completely in the first week of December. According to  Admson, (2015, p. 50), Lululemon's ability to connect with its guests on a deeper level than just establishing productive customers relationship creates an opportunity for a competitive advantage in the market for its products over the rivaling enterprises.

The direct and close competitors for Lululemon are Nike, Adidas, and Under Armour. These competitors, together with Lululemon use the same cotton feel, four-way stretch, and moisture wicking technology. As per Casteneda, (2014, p. 880), on top of producing high-tech yoga clothes, Nike, Adidas, and Under Armour sell at a cheaper cost for their clients and yet they have failed to position themselves in the market firmly as Lululemon has done. However, Lululemon's culture of understanding its target market has been difficult for the competitors to duplicate. Lululemon's ability to remain loyal to the clients and the close relationship it commands is inimitable for likes of Nike, Adidas, and Under Armour. 

Internal Environmental Factors Impacting Lululemon’s Ability to Compete in the Future

The internal environment of Lululemon refers to the factors that the management can control in their attempt to create a competitive advantage. Usually, the company aims at creating a committed brand suiting the shopper's demands. The following is ana analysis of the effects of internal environmental factors to Lululemon's capabilities and core competencies both in the present and in the future endeavors of the company.

Financial Resources

Lululemon Athletica is firmly financially positioned in the economic environment. Unlike the other competing firms, namely Adidas, Nike, and Under Armor having debts with the financiers, Lululemon has no debt with any firm. According to Ganin, (2014, p. 937), in the last few years, Lululemon has experienced a consistent growth rate in both the sales and returns. For example, the financial statements of Lululemon from the year ended 2009 to 2012, the company's revenues grew at an average rate pf 41.47 percent. Due to this high amount of capital, this increases Lululemon's ability to compete effectively in the future since its competitors cannot demand the premium yoga apparel lines that Lululemon employs on its products.

Target Customers

The management of Lululemon recognizes the target audience as the most valuable asset of the organization. Lululemon creates technical fabrics that work for the clients instead of against their demands. Lululemon recognizes the physical and economic aspects of the market in an attempt to achieve a balance between the client's needs and those of the company, and this enables the company to remain competitive (Lululemon Athletica, 2012, p. 290). Lululemon's offers high-quality products for the existing niche market through a combination of a high-performance material with attractive product design features for their customer brands.

Employees

The management considers all the staff in Lululemon's retail stores as a steward of the company's culture. For enhancing the creativity of new innovative measures for gaining a competitive advantage, the company hires qualified employees. Further after recruitment, all employees undergo a training and development process that induces them to the enterprise's mission and vision. Lavrence and Lozanski, (2014, p. 80) argues that the future success of Lululemon depends on the firm’s ability to employ experienced personnel in its retail stores. The company's employees share their knowledge of the clothing and culture of the enterprise with the clients who physically visit their store or who interact online with the customer service personnel.

 
Trends in the External Environment
Demographic Factors

The external environment over which Lululemon operates is particularly interesting due to the niche of the products it offers. The primary target market for Lululemon is female customers aged between the age of 15 to 65 years. However, the company offers some products for the men and even for the children whose age do not exceed four years. With this broad target over the female population, Lululemon commands over 105 million customer base of the US ladies population alone. The evidence that men, children, and international customers offer a substantial profit to the firm, Lululemon should make a change in its strategy of targeting females only. The company should come up with marketing strategies that seek to offer products at an equal measure to all the gender irrespective of age.

Economic Factors

The economic downtowns limit the consumer discretionary spending in the world market. Over the last three years, the company’s sales have continued to grow despite this fact. However, Lululemon does not lower its prices even under situations of economic depressions and downturns, and this may act as a tool for the competitors to compete Lululemon in the future (The context of Business: Understanding the canadian business environment, 2015, p. 220). The management of Lululemon assumes that the effects of changing global economies affects the firm's profitability and cannot be predictable. However, Lululemon should price its yoga clothes according to the economic changes in the marketing environment for this shows its value to the customer's needs and thereby ensuring a firm position in the market.

Political and Legal Environment

The future uncertainties in the political and juridical measures also affect Lululemon's performance. Both the domestic and international business regulations play a significant role in getting Lululemon's products to the market promptly. Lululemon manufactures its facilities in the US and is mostly based on global factories found in countries like Peru, China, Thailand, Vietnam, and others. The changes in international tax laws bring variability of the company's earnings. Therefore, to ensure a sustained development in the competitive environment, the management should make sure total compliance with the law.

Technological Factors

The changes in technology have made Lululemon develop strategies of coping with the changes, something that has contributed a lot towards its success. The product attributes of Lululemon are technology driven. For example, the IT personnel uses silver thread in selecting the right brand of products. Further, technology has played a great role in Lululemon's expansion to the international markets. For example, the e-commerce model adoption in 2009 has enabled the company to reach more customers in global locations.

 
Advantages of Lululemon’s Business Strategy
  1. Lululemon's ability to deliver high-quality products that are carefully and successfully tailored to meet the client's tastes and preferences leads to the company's success. The management offers the products at the right time to the customers.
  2. The administration of the company uses a marketing strategy that focuses on all clients in all localities by utilizing its ambassadors such as local athletes and yoga instructors; this intensifies the company's customer base in the markets.
  • Through effective communication and establishment of symbiotic relationships between the company's staff and their guests, this fosters a historical success support for the enterprise.
  1. The ability to identify markets sharing the common business language such as the United States, Australia, and New Zealand has made it easy for Lululemon to expand its operations and grow internationally.
  2. The unique capability of Lululemon in designing and creating technologically advanced products and the approaches for marketing these products to the target market enables the market to make high profits.
Business Risks Facing Lululemon

Every business remains surrounded by risks that create challenges to its success. The risks facing Lululemon Athletica company operations include:

  1. The threat of new entrants who may pose competition in the market.
  2. Government regulations, political factors, and economic crises.
  • Technological changes in the business environment.
  1. Pressures from the market who may demand more than the company’s ability to produce.
Potential Challenges for Lululemon as it Expands Internationally

A possible problem for Lululemon in its steps to grow internationally remains to be the regulatory frameworks employed by the multinational companies by the targeted state (Lululemon Athletica, 2012, p. 293). The law requires licensing of global players who are expensive for Lululemon to comply. Further, the corporate tax rate applied domestically use for Lululemon as it tries to operate in the international markets.

The threat of new entrants in the market also creates pressure for Lululemon since the new entrants in the retail industry bring competition for the available markets in the global world. The continuous efforts of the company to succeed in future on the international market are threatened by the similar firms entering the market (Casteneda, 2014, p. 880). Notably, the leading competitors of Lululemon, Nike and Adidas have also made steps to invest globally where Lululemon still targets.

The high cost of conducting market research in the international market is another challenge that Lululemon is likely to face. Before going internationally, companies need to understand the culture, language, and demands of the target market so that they may establish a suitable location for the firm; this may be costly for Lululemon (Roy & Banerjee, 2014, p. 219). Since the company seeks to offer high standards products for its suppliers, this requires a significant investment. Therefore, the cost may act as a challenge for Lululemon to expand internationally.

 
Recommendations for Reducing the Potential Risks
  1. The management should conduct a thorough environmental scanning so as to identify the most less costly strategies of conducting global market research.
  2. Lululemon should efficiently monitor its product lines and manufacturing capabilities in an anti-competitors oriented direction, and this will limit the threats from new entrants.
  • The management of Lululemon should ensure total compliance with the legal requirements when seeking to venture into international markets. Compliance with the international business law will make the company succeed in the foreign market.
  1. Lastly, the company should venture its business operations internationally in only locations where its products get demanded and where the people's culture are in conformity with the firm.'
Conclusion

The business environment affects the performance of an organization. Understanding the environment surrounding a business enables practitioners to design applicable management strategies for gaining a competitive advantage against the rivals. Companies cannot venture their operations in the international market without having succeeded in the domestic market. For a firm to thrive in its performance, the business culture must suit the tastes and preferences of the customers. However, the business environment gets faced with numerous challenges that may hinder a firm from succeeding. These problems include; technological changes, market demand changes, stiff competition, and inadequate finances. Therefore, companies must ensure that they are capable of coping with the business environmental changes before deciding to venture their operations in a particular market, be it domestically or internationally.

 
References

Casteneda, C., 2014. America the yogi fun: Insights into American yoga culture today.  pp. 880.

Ganin, C., 2014. American Apparel, crumbs, cupcakes, and Lululemon: Oh my examples of why increased shareholder involvement will not fix corporate America. Ariz. L. Rev, 56(2), p. 937.

Lavrence, C. & Lozanski, K., 2014. This is not your practice: Lululemon and the neoliberal government of self. Canadian Review of Sociology, 51(1), pp. 76-94. Retrieved from:https://scholar.google.com/scholar?=Lavrence%2C+C.+%26+Lozanski%2C+K.%2C+2014.+This+is+not+your+practice%3A+Lululemon+and+the+neoliberal+government+of+self.+Canadian+Review+of+Sociology&btnG=&hl=en&as_sdt=0%2C5

Lululemon Athletica (2012) Jenna, Beyer; Leon, Firfman; Eric, Ho; Miso, Kezunovic; Lance, Olian. pp. 283-294

The context of Business: Understanding the Canadian business environment (2015) Karakowsky, Len and Guriel, Natalie. pp. 220. Retrieved from: https://www.pearsoncanada.ca/media/highered-showcase/multi-product-showcase/showcase-websites-4q-2012/karakowsky-preface.pdf 

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