Strategic Analysis of Lululemon Athletica, Inc

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Strategic Analysis of Lululemon Athletica, Inc.

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Kosbab, Hanna Jo, "Strategic Analysis of Lululemon Athletica, Inc." (2021). University of Montana Conference on Undergraduate Research (UMCUR). 3. https://scholarworks.umt.edu/umcur/2021/socialsciences_oral/3

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HANNA KOSBAB | UMCUR 2021

Photo by Ginny Rose Stewart on Unsplash Lululemon Athletica Inc. HANNA KOSBAB | UMCUR 2021

Introduction

Strategic 1 Assess Industry 2 Evaluate Company 3 Recommendation

Opportunities and Threats Strengths and competencies Implement sports specific within the athletic apparel within Lululemon's current lines that allow for industry strategy partnerships with teams and athletes

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Incorporated: 1998 in Canada What Is Founder: Chip Wilson Lululemon? Current CEO: Calvin McDonald Company Values: Honesty,

Courage, Personal Responsibility, Lululemon is an athletic apparel company that focuses on fitness as a lifestyle. The Connection, Entrepreneurship and company began creating workout clothes specifically for women's yoga, but now produces a wide variety of fitness apparel Fun (Lululemon, 2021) and accessories for men and women.

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Industry Porter's 5 Forces Key Findings Threat of new entrants Analysis Establishment growth (US Industry and Market Report, 2019) Deterred by brand loyalty (Bush, 2016) Rivalry among competitors Athletic Apparel Manufacturing Differentiation to compete with top companies (Mergent Mature industry (CFI, n.d.) Online, Lululemon, 2021) Segmentation Environmental Trends activity Economic geographic location COVID-19 (Patton, 2020) Major Competitors Social Lululemon Athletica, Inc Online shopping (Deloitte Digital, 2020) Under Armour Technological Columbia Sportswear Co. Importance of online interfacing (Dewald, 2020) Nike Inc. Environmental 04 Adidas AG Emphasis of sustainability (Haanaes, 2016) HANNA KOSBAB | UMCUR 2021 Lululemon Athletica Inc.

off matterriialls 05 HANNA KOSBAB | UMCUR 2021 Lululemon Athletica Inc.

Core Competency

Company Culture is at the center of Lululemon's Lululemon strategic choices. Promoting an active lifestyle, rather than simply products is what creates buy-in from customers and employees (Adams, 2019).

Evaluation Sources of Competitive Advantage Intellectual Property Patents for fabrics and designs (Paul, 2014) Brand Loyalty Inherently inimitable, because customers will avoid switching away from their favorite brands (Lutz, 2015)

06 HANNA KOSBAB | UMCUR 2021 Lululemon Athletica Inc. Financial Analysis

07 *Industry averages account for "Apparel and other finished prodcuts made from fabrics and similar materialsl" industry (Ready Ratios, 2021) **Lululemon key performance ratios from Mergent Online (2021) HANNA KOSBAB | UMCUR 2021 Lululemon Athletica Inc. Strategic Alternatives

Marketing Shift: Price Backward Vertical Integration Reducing prices through more frequent sales Acquiring a production firm for creating promotions apparel Pros Pros Opens target market to price-sensitive Allow for emphasis on sustainability customers and quality control (Haanaes, 2016) Compete with lower-priced brands in the Expand international strategy (Saibil, industry 2020) Cons Cons Lower profit margin Substantial capital investment Loss of "prestige" associated with Competency development Lululemon's brand

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Strategic Recommendation

Related Diversification Create athletic wear specifically for cycling Pros Partnerships with professional athletes (Drummond, 2020) Expanded target market Easily implemented within current infrastructure Growing industry (Grand View Research, 2020) Cons Switching costs for athletes This is the best option for Lululemon, because it provides new opportunities, without drastically altering the company's current financial strategy.

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Strategic Implementation

1 Identify Opportunities 2 Develop Product Line 3 Market with Athletes

Differentiate from big brands Partner with reputable Enter brand partnerships with like Lumiere Cycling, Gyro designers to overcome cyclists to promote the new Sports Design and Rapha brand-association related line through athlete- Racing Limited (Grand View hesitations associations Research, 2020)

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1 The athletic apparel industry offers opportunities to Conclusion differentiate in order to compete with top companies and take advantage of macro-environmental trends

2 Lululemon's strong financial position and company culture are strengths that allow it to expand into new ventures

3 Lululemon could expand its target market and create new revenues streams by starting a cycling specific line and partnering with athletes to promote it

11 HANNA KOSBAB | UMCUR 2021 Lululemon Athletica Inc. References

Adams, L. (19 March 2019). How Lululemon builds a more engaged service team. Stella Connect. from https://stellaconnect.com/resources/creating-a-culture-of-engagement-with-lululemon/

CFI. (n.d.) Mature Industry. Corporate Finance Institute. from https://corporatefinanceinstitute.com/resources/knowledge/strategy/mature-industry/

Drummond, I. (7 February 2020). How an athletic brand sports team partnership increases sales. Hollywood Branded. from https://blog.hollywoodbranded.com/how-an-athletic-brand-sports-team-partnership-increases-sales

Grand View Research. (June 2020). Cycling wear market size, share & trends analysis report by product (cycle wear apparel, cycle wear accessories), by distribution channel, by region, and segment forecasts, 2020-2027. Grand View Research. from https://www.grandviewresearch.com/industry-analysis/cycling-wear-market

Haanaes, K. (November 2016). Why all Businesses Should Embrace Sustainability. IMD. from https://www.imd.org/research- knowledge/articles/why-all-businesses-should-embrace-sustainability/

Lululemon. (2021). About lululemon athletica. Indeed. from https://ca.indeed.com/cmp/Lululemon-Athletica/about 12 HANNA KOSBAB | UMCUR 2021 Lululemon Athletica Inc. References

Lutz, A. (21 May 2015). Lululemon’s effective technique for hooking customers. Insider. from https://www.businessinsider.com/how-lululemon-gets-customers-2015-5

Mergent Online. (2021b). Lululemon Athletica Inc.: Company financial ratios. Mergent Online. from https://www-mergentonline- com.weblib.lib.umt.edu:2443/companyfinancials.php?pagetype=ratios&compnumber=119897

Paul, M.E. (15 September 2014). Lululemon a warrior in protecting its intellectual property. Trademarkology. from https://www.stites.com/resources/trademarkology/lululemon-a-warrior-in-protecting-its-intellectual- property#:~:text=Lululemon%20has%20even%20sought%20trademark,%2C%20LUON%2C%20SILVERESCENT%20and%20L UXCHANGE.&text=In%20addition%20to%20taking%20advantage,portfolio%20of%20thirty%2Done%20patents.

Ready Ratios. (2021). Apparel and other finished products made from fabrics and similar materials: average industry financial ratio for U.S. listed companies. Ready Ratios. from https://www.readyratios.com/sec/industry/23/

Saibil, J. (2 February 2020). 3 reasons why Lululemon will continue to gain in 2020. Nasdaq. from https://www.nasdaq.com/articles/3-reasons-why-lululemon-will-continue-to-gain-in-2020-2020-02-02

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Thank You!

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