Lululemon Case Study Essay
Strengths: niche market leader, product technology, customer focused, quality, innovation, brand, corporate social responsibility, and sustainability Weaknesses: perceived female focus, Local centricity, price point, inventory, perceived as yoga only, distribution, and access to stores Opportunities: Product diversification, line expansion, accessories, leveraging perceived expertise, category leader, and expert Threats: Buyout, fad potential, low barriers to entry, competition, global economic state, and unfavourable exchange PEST
Political: childhood obesity, costs on healthcare, tax incentives for extra-curricular programs, healthier lifestyles and thinking, and leverage community programs Economical: CPI up over the years, increased unemployment rate and exchange rate Social: yoga users has grown as well as their household income Technical: Online shopping has increase and Canadians are more tech savvy Porter’s 5 Forces Bargaining Power of Suppliers: is low since the supplier segment is quite disjointed and less focused than the clothing retail industry.
There is lot of choice for supplier substitution and buyers typically embody a significant customer group. Threat of New Entrants: is low because of high hurdles of entry.
The industry is categorized by large capital requests, access to distribution channels, large economies of scale and product distinction. New entrants will require spending a lot of time and money to come in to the market, increase cost advantage, and establish loyal customer base.
Threat of Substitutes: is quite temperate since customers do not face great substituting cost when substitute products are lower in price, the quality performance capability of substitute products is not greater. Lululemon offset the appeal of substitute products by posing superior products with distinctive customer experience that is highly valued. Bargaining Power of Buyers: low because the industry is categorized by a large sum of customers, and no one customer tends to have bargaining leverage. This permits Lululemon to set the prices high and enjoy higher profit margins.
The company’s products are extremely unique which also drops the bargaining power of buyers. Industry Rivalry: Nike Yoga, The Gap Athleta, Adidas, Lotuswear, Under Armour Question # 2 Resources and Capabilities Active brand connection with consumers, its own distribution and high quality products enabled the company to offset a high threat of substitutes and intense rivalry among competing firms. This results in extremely loyal customer base and brand popularity. Their intangible resources include company’s reputation, customer interaction, brand name and the perception of the product quality.
While tangible resources are its stores (300 stores in Canada, United States, Australia and Hong Kong), distribution channels, and knowledgeable work staff. Human Resources include the empowerment of its employees by turning them into educators and engaging them into many aspects of the retail operations as well as marketing, advertising and clothing design. Capabilities derive from the following functional areas: human resources, management, manufacturing and marketing. The company has an ability to envision the future of clothing and managed to create an effective culture that is hard to copy.
From marketing perspective, Lululemon’s strategy is based on innovative, low-cost promotion strategies, effective merchandising through its front store and superior customer service. Question # 3 Lululemon’s resources and capabilities provided a strong foundation for competitive advantage and allowed the company to warrant long term maintainable advantage. Lululemon is valuable due to the company’s ability to reduce their cost and generate high revenues by offering superior customer experience. They developed strong relationship with its customers that are very deep and effective.
It is also expanding the reach further through e-commerce and on-line presence as a part of its global expansion strategy. The customer rapport is a very important part that adds to the company’s achievements. The superiority of their customer relationship is grounded on the flow of information between the company and the customer. Lululemon supplies quality interactions to the customers which goes past selling exercise attire, but invites them to be a part of that “exclusive club” that encourages bettering one’s self through exercise and optimistic thinking.
As a result the customer purchase is perceived as an investment in oneself. They are rare because of the and tactics to community engagement. Competitors characteristically take on traditional sales and marketing procedures to distinguish the product because resources are costly to imitate due to lululemon’s unique culture and distinctive store environment with a brand name that has been established over time. In order for Lululemon to sustain its dominating position, these resources have to be well organized when choosing and implementing their strategies.
Question # 4 To preserve its prevailing position Lululemon ought to work on their weakness of inventory management to ensure that the company meets increasing demands and reduces spending on extra shipping. The company must develop its supply chain by working on enhanced planning with the distributors and look into other sources of suppliers to guarantee the company has a sufficient amount of inventory and refrains from sales loss to its competitors.
They should also continue to expand geographically and diversify its customer base to minimize the threat of brand fatigue and show consumer they are not only targeting woman but men and children as well by coming out clothing lines for them. They should continue with its marketing techniques since they have had extraordinary success and low cost; nonetheless, they should expand its product by offering products beyond yoga to other target markets.