INDIVIDUAL ASSIGNMENT

1. How strong are the competitive forces confronting lululemon in the

market for performance-based yoga and fitness apparel? Do a five-
forces analysis to support your answer.

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Threads of new entrants: medium

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Lululemon has different target customer (for women) from other rival
brand like nike, under amour (for men)… . At that time, the advance capital
expenses is low due to the organizations can outsource the bigger part of
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their assembling oversea.

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Thread of substitutes: low

Bargaining power of buyers - high

Bargaining power of suppliers-low

Industry rivalry – high

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 2. What does your strategic group map of the performance sports
apparel industry look like? Is lululemon well positioned? Why or why
not?

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From the data, I think Lululemon has quite good position in the market of
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athletic and fitness. As we can be seen, they are at medium level with their
price and quality. Eventhough their products are not popular, they also have
their own target customers who accept on yoga and fitness apparels with
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high quality and high price.

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3. What do you see as the key success factors in the market for the
performance-based yoga and fitness apparel?
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There are four the significant factors that make the success of Lululemon in
the market for the performance-based yoga and fitness: Strong brand image
and reputation, wide distribution in the world, diversified product design
and loyal customer. The first factor is about the brand image and
reputation. The second factor is wide distribution in the world. In Nov
2000, CEO Wilson opened the first store in Vancouver. In 2002, many other
stores were expanded into the US in order to build the US operations. In
2004, a franchise was opened in Australia. The later year, 2005, the
company had 14 stores and 1 franchise and also in 2005, a franchise was

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 continued to open in Japan. With this rapid development, until 2014, the
company owned 54 stores in Canada, 171 stores in US, 25 stores in
Australia, 4 stores in New Zealand and other franchises. The next important
factor is about diversification and design of product. They design the
product available in many sports: yoga, running and general fitness, many
categories: bras, tanks, tops, jackets, hoodies, pants, crops, shorts, skirts,
dresses, swimwear, gear bags, socks, underwear, caps, glovers, bottles, yoga
mats, props… for both man and woman. Besides, the design of product
must meet the criteria in garment (stretching, moisture wicking, color
fastness, comfortability and durability); convenience features (pockets to
hold things, clips for monitoring heart-rate, long sleeves in winter) and
advanced sewing techniques. Last but not least, customer loyalty is one of
the most important things in the success of this company.

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4. What does a SWOT analysis reveal about the overall attractiveness

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of lululemon?

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Firstly, lululemon has strengths of good reputation, high quality product.
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Because of diversification in retail distribution in many countries, it is easy
to understand the wide brand of this company in Canada, US, Australia,
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New Zealand,... The next thing is about the quality of product. the design of
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product must meet the criteria in garment (stretching, moisture wicking,

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color fastness, comfortability and durability); convenience features

(pockets to hold things, clips for monitoring heart-rate, long sleeves in
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winter) and advanced sewing techniques. Beside strengths, Lululemon also

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has some weaknesses in product line the target market. Although there are
many categories in the product line, the fields they focus are just in yoga,
running and fitness. Moreover, the company has narrow target market that
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focuses on sophisticated and educated woman understanding the

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importance of healthy lifestyle. From both of strengths and weaknesses,

there are some opportunities to develop and threads to face for the
company. About opportunities, beside existed sports, lululemon can expand
another ones to diverse the product line. The company also should expand
target customer apart from women. From the reputation, they also develop
more stores in many countries around the world. With opportunities, there
are also some threads they have to face with. In the market, many other
brands will be the redoubtable rivals like Reebook, Under Amour, Nike,…

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 5. What are the primary components of lululemon’s value chain?

There are six primary components of value chain. Firstly, the supply chain
management needed input of real time from customers and short time to
receive and deliver samples. Secondly, operations mostly focused on
streamlined design and development processes. Thirdly, it is about facilities
of stores in Vancouver- BC, Sumner, Washington, and Melbourne, Australia.
The next thing is sales and marketing which has community based, yoga
educators and ambassadors. Service is also a component in value chain: “
educators”, “guests”, lululemon manifest. The last thing is profit margin: net
profit margin is 17,1%, about 15% above comparaed with an average.

6. What are the key elements of lululemon’s strategy?

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In 2014, Lululemon built many strategies that fit with the mission and

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target customer in product line; retail distribution and store expansion,

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wholesale sales, direct-to- customer sale, product design and development,

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facilities, brand-building and store personnel. Firstly, Lululemon offered a
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diversification and selection of premium-priced performance and
accessories for men, women and even young girls in many healthy lifestyles
such as yoga, running and fitness. And in 2014, this company also
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introduced items in another field: swimming. Besides, many categories also

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were developed: bras, tanks, tops, jackets, hoodies, pants, crops, shorts,
skirts, dresses, swimwear, gear bags, socks, underwear, caps, glovers,
bottles, yoga mats, props. The second strategy is about retail distribution
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and store expansion. The strategic initiative was begun to operate

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franchises as company stores or convert franchises to company owned

stores. Over time, many franchises became stores of company in many
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places: Japan (2005), Canada (2009 – 2010), Australia (2010), US (2010),

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Colorado (2011) and California (2011). In 2014, Lululemon would

concentrate mainly in United States and develop primarily in Asia and
Europe. 39 new stores in North America, 2 stores in Australia and 2 new
ones were planned to open in 2014. The company’s merchandising strategy
was set full price for all of items in retail stores. Some special colors and
seasonal things were sold in limited time. Moreover, Lululemon wanted to
open more showroom in order to introduce brand, interact with local
instructors and host fitness events. The third strategy is in wholesale sales
strategy that sell apparel to yoga studios, health club and fitness centers to

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 show brand in new market, especially in places where were planned to
open. The next strategy is in direct-to-customer sales. In 2009, a website
www.lululemon.com was launched so as to interact with customers for
selling online. That direct sales way became the very important thing of the
company’s strategy so Lululemon decided to keep and develop e-commerce
websites to provide a distinctive online shopping experience and
strengthen its reputation. Product design and development strategy were
also mentioned. The design of product must meet the criteria in garment
(stretching, moisture wicking, color fastness, comfortability and durability);
convenience features (pockets to hold things, clips for monitoring heart-
rate, long sleeves in winter) and advanced sewing techniques. The next
thing Lululemon wanting to mention was distribution facilities. The
company stores were equipped by modern and cost-efficient facilities. In

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order to providing the flow of new inventory, merchandise was shipped to

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retail stores bt multiple time per week. Building brand awareness and
customer loyalty were characteristics the company focused. The company

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used many communications to building these such as print, television, use
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social network. The last strategy is about store personnel. ‘Educators’
would be trained to give knowledge for customers taking information on
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classes and events.

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7. Which one of the five generic competitive strategies discussed in

Chapter 5 most closely approximates the competitive approach that
lululemon is employing?
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Focused differentiation strategy is most closely to the competitive approach

that Lululemon use. The reasons for that statement are diversification in
product line, premium-priced selection and limited products. Lululemon
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offered a diversification and selection of premium-priced performance and

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accessories for men, women and even young girls in many healthy lifestyles
such as yoga, running and fitness. This company also introduced items in
another field: swimming. Besides, many categories also were developed:
bras, tanks, tops, jackets, hoodies, pants, crops, shorts, skirts, dresses,
swimwear, gear bags, socks, underwear, caps, glovers, bottles, yoga mats,
props. Moreover, some special colors and seasonal things were just sold in
limited time.

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 8. What does the data in case Exhibit 1 reveal about lululemon’s
financial and operating performance?

From statistic of exhibit 1, the performance of finance is quite strong. The

growth rate rises rapidly from 2009 to 2013 and constrain later. The gross
profit increases from $58.3 to $279.5 million (24 times) and EPS grows 21
times for the last five years. Until 2014, lululemon has 54 stores in Canada,
171 stores in US, 25 stores in Australia and 4 stores located in New Zealand
and the record sale is about $85 million each year. However, because of
mistakes in yoga pants, the net profit slightly grew $2.1 million in the last
fiscal of 2013. Fortunately, the potential of this company was still good,
therefore the stockholder’s equity rose by $200 million each year.

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9. What 3–4 top priority issues do CEO Laurent Potdevin and

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lululemon management need to address?

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There are four most important issues that Lululemon company has to

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address: redoubtable competitor, the bad quality of yoga pants in 2013 and
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narrow target market. The product line and the design in products of
Lululemon still have some similarities compared with these of rivals.
Moreover, another things such as quality, feature, fashion, distribution,
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brand, reputation and price are all factors that lululemon has to consider to
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compete with other rivals. Especially, in 2013, a product which customers

complains most is yoga pants. They are disappointed about the see-through
and unflattering nature of the fabric. The last issues is about the target
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market that focuses on sophisticated and educated woman understanding

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the importance of healthy lifestyle.

10. What recommendations would you make to lululemon CEO

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Laurent Potdevin? At a minimum, your recommendations should

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cover what to do about each of the top priority issues identified in

question 9.

From the issues considered in question 9, there are some recommendations

for lululemon company. So as to compete with other competitor in the
market of athletic and fitness apparel, the design team has to find and
create the differences of their product compared with other products.
Besides, the company should expand their target market both in customers
and places.

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