Business Expansion Plan - Strategies for Lululemon Athletica

This report highlights the expansion strategies of Lululemon Athletica Company and how it is going to expand and manage its operations on the long run. It includes the best mode of entry, associated theories, strategy formulation, operations overview, financial overview, approaches to sustainability and ethics, and timeline.

Running head: BUSINESS EXPANSION PLAN
Business Expansion Plan
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1BUSINESS EXPANSION PLAN
Executive Summary
The business expansion plan can be considered as a vital step for any business. It means that
the business is doing well at its domestic country and is ready to enhance their profitability by
expanding. In such cases, majority of the companies should conduct a proper research and
development of the market shares in the international countries. In addition to this, the
companies should also check and monitor their financial statements in order to run the
business in a successful manner. The purpose of the report is to highlight the expansion
strategies of the Lululemon Athletica Company and how it is going to expand and manage its
operations on the long run.

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Description of the Venture
The expansion of a business in the international market is considered to be a vital step
for the companies as it brings in huge success within the organization. However, after
analyzing the facts, it can be said that the best mode of entry into the international company
for Lululemon Athletica would be licensing. This entry mode will prove to be highly
advantageous for the company. International agreement of licensing allows the firms to
manufacture exclusively and non-exclusively, the products of the proprietors. However, the
products are manufactured for a certain period of time in the specific market (Dabic,
González-Loureiro and Harvey 2015).
Moreover, the foreign entry mode market allows the licensor at the home country to
make limited resources or rights available to the host country’s licensee. In simpler terms, it
is the contractual agreement between the companies of various countries, through which the
company grants permission to the other company that is abroad. The companies have the
right to utilize a productive procedure, a registered brand or patent, intangible assets or trade
secrets and a royalty and both (Grewal et al. 2013). Therefore, the licensee generally sells the
service or product in domestic market along with same characteristics, which it was before.
Literature Review
According to Gunnigle (2014), expanding a business and that too, on an international
platform can be an exciting proposition. It gives a hint that the business is doing well and it is
ready to expand and grow on to the next level. However, very often any business requires
financial support in order to implement the ideas of expansion. The professional business
plan assists in outlining the details of the expansion and can earn money, required for the
growth of the company. Lululemon Ahletica should form a proper business plan which

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should provide details about the competition. In addition to this, it should include similarities
and differences in the services, marketing tactics and target market.
Moreover, it is important for the organization to provide the management team with
proper information as per Han, Lee and Lee (2014). On a similar note, while planning for the
business expansion it is immensely important to provide with the financial details of the
business, current statements which show expenses, income and the net worth. In addition to
this, it is important to outline the costs for the expansion and the projected profits over the
upcoming years. McDonnell, Lavelle and Gunnigle (2014) examined that if the expansion is
about opening a new venture at an international market, it is important to include blueprints
for the proposed plan.
Assessment of Associated Theories
There are several expansion theories, which are applicable in this case of Lululemon
Company’s expansion plan. It is important to analyze the strengths as well as weaknesses of
the competitors before taking any further step. According to the tortoise theory of business
expansion, it can be said that the firm should run the business in a phased manner on the basis
of the break-even factor of the previous business. In addition to this, moving to the second
phase helps in ensuring the fact that the business sustains on a long term. Moreover,
according to the business model, it is important to kick start the resources including growth
capital and funding (Roh, Hong and Min 2014).
Another theory of business expansion involves potential drawbacks and benefits. The
three stage theory of the international expansion explains the link between performance and
multi-nationality within the service sector. In addition to this, spreading central and common
overheads over more and more nations is immensely important for the international
expansion. This is highly critical in the research and development intensive industries, which

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require amortization of the procedure from more than few markets (Samaha, Beck and
Palmatier 2014).
Strategy Formulation
Formulating the expansion strategies is one of the important factors, which the firm
needs to consider while expanding their business. Lululemon Athletica needs to increase their
sales as well as products within the international markets. This is a very common tactic and
might require a bigger area, improved marketing techniques, different strategies of pricing
and others. In addition to this, the company can also introduce new products and services in
order to offer its international customers, with a huge variety to choose from (Dabic,
González-Loureiro and Harvey 2015). However, generating customer feedback is also
important in order to expand in a risk free way.
The company can also develop a new segment in the market and move into the new
geography. Moreover, these areas might have uncertainties and require cost outlays. In
addition to this, moving the products into some new demographic segments and categories
require proper research in the market, new strategies of marketing and beta testing. Therefore,
the management of the new locations is highly important. It might absorb a significant
amount of attention and time, but the methods are inevitable. Lululemon Company will be
adopting the strategy of licensing as it carry lesser risks and the company can sell
distribution, production and manufacturing rights.
Operations Overview
The licensing mode of entry refers to the network based services, which lets the
company carry out their expansion strategies without lesser risk factors. However, on
discussing about the operations of the entry mode, it is important to conduct a thorough

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research of the market. It is important to carefully analyze the factors, which needs to be done
before entering the international market for choosing the most profitable markets. The
operations overview includes the laws as well as regulations of the international platform,
conditions of the infrastructure, legal framework and property rights, cultural and political
factors as well (Roh, Hong and Min 2014).
Licensing will allow the Lululemon Company to use legally protected technology and
products. In addition to this, it will enable the business to conduct their market research in a
very particular manner, for the agreed time period and within the agreed territory. However,
it can be said that the operations will be very easy and lesser risks will be involved in this. In
this type of entry mode, communication is highly involved. Moreover, the financial risks will
be transferred to the licensee. It also ensures better resource utilization, with easier
appointment, low labor costs and lesser investment involved (Han, Lee and Lee 2014).
Financial Overview
Revenue $62,484
Operation Income $24,098
Net Income $18,760
Market Research and Development $36,788
Stockholder’s Equity $40,090
Income Tax Expense $5,000
Total expenses $187,220
(Table: Financial Statement
Source: Created by Author)

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Approaches to Sustainability and Ethics
Different companies utilize different types of strategies in order to enter the
international markets. However, it is highly important to maintain certain ethics in order to
sustain in the markets. Licensing is the entry mode, which is utilized by various companies as
it easier and risk free, to some extent. The company should export the commodities to the
external markets in order to gain international markets through the large number of shares.
However, the company should maintain some ethics at the time of exporting materials and
abide by the rules and regulations of the international markets. Moreover, there are different
laws at different countries, which the company should strictly maintain. Lululemon Company
should conduct thorough analysis before entering the markets and maintain the ethics in order
to sustain at the international platform (Grewal et al. 2013).
Timeline
July August September October November December
Revenue
Operation
Income
Net Income
Market Research
and Development
Stockholder’s
Equity
Income Tax
Expense
Total expenses

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(Figure: Timeline
Source: Created by Author)

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References
Dabic, M., González-Loureiro, M. and Harvey, M., 2015. Evolving research on expatriates:
what is ‘known’after four decades (1970–2012). The International Journal of Human
Resource Management, 26(3), pp.316-337.
Grewal, R., Kumar, A., Mallapragada, G. and Saini, A., 2013. Marketing channels in foreign
markets: control mechanisms and the moderating role of multinational corporation
headquarters–subsidiary relationship. Journal of Marketing Research, 50(3), pp.378-398.
Gunnigle, A.M.J.L.P., 2014. Human Resource Management in Multinational Enterprises:
Evidence from a Late Industrializing Economy.
Han, J.J., Lee, H. and Lee, J., 2014. How and where to offshore: a productivity comparison at
the firm level. Applied Economics, 46(15), pp.1704-1715.
McDonnell, A., Lavelle, J. and Gunnigle, P., 2014. Human resource management in
multinational enterprises: Evidence from a late industrializing economy. Management
International Review, 54(3), pp.361-380.
Roh, J., Hong, P. and Min, H., 2014. Implementation of a responsive supply chain strategy in
global complexity: The case of manufacturing firms. International Journal of Production
Economics, 147, pp.198-210.
Samaha, S.A., Beck, J.T. and Palmatier, R.W., 2014. The role of culture in international
relationship marketing. Journal of Marketing, 78(5), pp.78-98.