International Business Scenario: Lululemon's Expansion in China

This business report analyzes Lululemon Athletica's potential expansion into the Chinese market. It begins with an executive summary and a brief overview of Lululemon, the Canadian athletic apparel company. The core of the report focuses on the favorability of the Chinese market for Lululemon, assessed through a PESTEL analysis, considering political, economic, social, technological, environmental, and legal factors. The report then proposes expansion strategies, emphasizing a global localization approach, adjusting product sizes to fit the Chinese market. It also suggests a standardization strategy, focusing on efficient manufacturing and economies of scale. Finally, it outlines Lululemon's marketing strategy and marketing mix, considering the specific needs of the Chinese consumer. The report concludes by summarizing the key findings and recommendations for successful market entry and growth in China.

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Name of the Student
Name of the University
Author Note

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Executive summary
This paper is a business report on the Canadian company Lululemon Athletica, who makes
athletic apparels and lifestyle apparels and focus mainly on people who are into fitness. This
paper focuses on the expansion of the company in a foreign market and considers the
company in expands in China. The favorability of China will be analyzed through PESTEL
analysis which will give an overview of the external market in order to understand the market
and the favorability of Lululemon to expand in this market. Efficient strategies will be
proposed for the market expansion of the company that will help Lululemon in making
profits in China and have a healthy growth in the company.

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Table of Contents
Introduction................................................................................................................................3
Discussion..................................................................................................................................3
Brief overview of the company..............................................................................................3
Expansion of Lululemon in China.........................................................................................4
Strategies utilized for expansion............................................................................................7
Marketing strategy of Lululemon...........................................................................................8
Marketing mix of Lululemon.................................................................................................9
Conclusion................................................................................................................................12
Reference..............................................................................................................................13

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Introduction
Globalization is referred to the procedure of integration across economies and
societies (Ritzer & Dean, 2015). Globalization encompasses the flow of services, products,
finance, labour, ideas and information moving across the nation borders. In recent times,
globalization has paved for businesses expanding in other countries in order to mark their
growth and in order to dominate the global market (Steger, 2017). This paper will focus on
the company Lululemon Athletica and propose a country that will be favourable for
expansion which will help in generating more revenues for the profit of the company.
Discussion
Brief overview of the company
Lululemon Athletica is an athletic apparel retailer based in Canada. Lululemon
describes themselves to be a yoga-inspired athletic apparel company for men and women.
Founded in the year 1998, the company has its headquarters in Vancouver, British Columbia,
Canada. The founder of the company was Chip Wilson and currently the Chairman of the
company is Glenn Murphy (Lululemon, 2019). The company is popular for their range of
athletic apparels which includes pants, performance shorts and shorts. Lululemon also
provides lifestyle apparels and various yoga accessories. Initially the company only operated
in Canada however with their success and growth now the company has expanded and sells
their product in the international market as well. In 2018, the company generated revenue of
3.29 billion. Around 15,700 employees are working in the company and have been
contributing to the success of the organization (Lululemon, 2019). The company has been

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growing and is currently giving a stiff competition to brands like Zella, Adidas, Nike, Under
Armour and Alo Yoga.
Expansion of Lululemon in China
Lululemon Athletica is growing and becoming a popular company. The company has
become popular especially among people who are into fitness and are into yoga. The
popularity of the company has made them sell their products in the largest e-commerce site
Amazon Inc. as well. The company is currently focusing on expanding their market in China.
In order to assess and understand their favorability PESTEL analysis will be conducted to
understand and analyze their external environment.
China is a country in East Asia and is said to be the most populous country in the
world. The world currently has a population of around 1.438 billion (Data.worldbank.org,
2019). It is considered to be the third largest country in the world.
Political factors- China is said to be amongst the most powerful countries in the world. The
Communist party is the ruling and founding party in the country (Pieke, 2017). China has a
stable political environment however there is paucity of freedom in terms of political factor
which is a concern. There is lack of openness in the country. The country consists of an
improved infrastructure and cheap labour. The country positions itself as great and positive
destination for FDI. The country in the year 2016 made a record of US$139 billion of Foreign
Direct Investment (Tradingeconomics.com, 2019). China is a dominant investor overseas and
the Chinese FDI has reached several countries like the UK, The United States of America,
Bangladesh, Argentina, UAE, Indonesia and Pakistan to name a few.
Economic factor- China is considered to be the largest economy in the world on the basis of
purchasing power. In the late 1970s many economic reforms took place that contributed to

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the economy of the country to grow rapidly (Jacobs, 2016). The country made a huge shift
from being a centrally planned market to an economy based market. According to the World
Bank, the GDP growth of the country was an average of 10 percent per year
(Data.worldbank.org., 2019).
However it has been seen that economic development of the country has cropped up
some challenges for the country. Rapid urbanization, environmental damages and high
inequality are among few of the challenges that the country is currently facing however the
country needs to make effective measures to contrive with these challenges conducive to
maintain economic stability in the country (Lu et al, 2015).
Most of the global companies find China favorable in terms of manufacturing their
products since there is availability of cheap labour (Bieler & Lee, 2017). Cheap labour has
been one of the key elements that have given the country a competitive advantage in the
market.
The corporate income tax rate in China is 25 percent however the government of the
country reduces this rate and makes it 15 percent in order to encourage businesses to operate
in the country (Lardy, 2016).
Social factor- China is said to be the country with most amount of population. It is
considered to be a prodiguous market for products for consumers. The wage level of the
country has risen over the years which have resulted in the increase of spending of the
customers. The citizens of China long for the status symbols in the market like smart phones,
luxury clothing and cars (O’Cass & Siahtiri, 2014). In terms of the expansion of Lululemon,
Chinese people have a keen interest for sports and they play a variety of sports ranging from
football to yoga and many more (Qingmin, 2013). This attitude of people provides a great
opportunity for the domestic as well as foreign companies in the market.

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China has a literacy rate about 96% (Hayford, 2017). This literacy rate has helped the
country in making a progress especially in the reduction of poverty. It has been said that the
country, China has lifted around 68 million people out of poverty over the last five years.
China however faces few social challenges like the increase in the ageing population and how
the country can suffice the demand for labor.
Technological factors- According to reports China is said to have the largest online
population in the world with about 772 million active users (Lu et al, 2016). China has few
tech giants like Tencent, Baidu and Alibaba. These companies are said to be very powerful
which has led to the failure of foreign countries that had expanded in the market.
China has a vision of becoming a global leader in technology and science. In order to
achieve this target and goal the country in 2015 launched the mass entrepreneurship and
innovation programme (Xu & Carey, 2015). The aim of this programme was facilitate and
spread entrepreneurship in China. The country also aims on becoming an innovation driven
country.
Environmental factors- The rapid and the continuous growth of the economy in the country
has had a huge impact on their natural environment. There are a few environmental
challenges that the country has been facing like air and water pollution, climate change,
industrial waste, loss of biodiversity and many more (Song, Li & Zeng, 2015). However, the
Chinese government has made several issues and has come up with several initiatives that has
addressed these issues and has been in progress to overcome the issues. The country shows
concern for the growing environmental issues and it may help in resolving the issues in the
coming years.
Legal factors- China has various laws that helps in regulating the employment and business
practices in the country. The employee stipend, labour standards, labor disputes and labour

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standards are managed and regulated by The PRC Labour Law 1995 and many other
administrative regulations (Lan, Pickles & Zhu, 2015).
It can be seen that China is one of the largest consumer market and the market is
favorable and open to foreign investments and is favorable for them to strive in the market.
The legal factors are suitable for foreign companies to operate smoothly. The country has a
high economic growth which will be suitable for Lululemon and help in bringing sufficient
sales in the market. The literacy rate is high in the country which will be a bonus for the
company to recruit highly skilled employees who will be able to make positive contributions
to the company to achieve their goals. The availability of cheap labors in abundance will also
be beneficial for the company in order to maintain the smooth operations of the organization
and help them in curbing their expenditure. The people in the country are tech savvy thus it
will be suitable for Lululemon if they operate their online shopping websites. Chinese people
are into a lot of sports thus Lululemon may have a huge demand in the market as they are
mostly popular for the athletic apparels in the market which becomes an added advantage for
the company if they expand their business in China.
Strategies utilized for expansion
Conducive to make a successful expansion in the market, Lululemon needs to use the
global localization strategy. The global localization strategy is the term that helps in defining
a product which is created and then distributed in the global market however is adjusted in
order to accommodate the consumers and the users in the local market where they are
expanding (Cooke, 2015). This is often known as think globally act locally. These changes
are made in order to satisfy the demands of the customers in the local market. In this case,
Lululemon needs to adjust and make e few changes in their products while expanding in the
Chinese market. The body structure of the people in China is different from the people in

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Canada. Chinese women are considerably more petite in comparison to the women in other
countries and the same goes for the men in the country (Fisher, 2014). The men in the
country are more on the slimmer side thus the size of the apparels by Lululemon should be
made according to the body structure of the people of China to ensure they cater to the size of
the people residing in that country.
For the establishment of a successful business environment in China, Lululemon will
be using a standardization strategy. Standardization strategy is used only when an
organization treats the entire world as only one market with very little variation in the market
(Tan & Sousa, 2013). The assumption of this strategy is that the product manufactured or
produced by an organization satisfies the need of the people in all the countries. Lululemon
do not need to make any significant changes in their products or materials however the
company needs to make a small change that is to manufacture athletic and lifestyle clothing
in different sizes that cater to the sizes of the people of the country. This strategy will help to
produce efficiency by centralizing various common activities like reducing the market costs,
simplifying supply chain, product design and also gain scale economies in terms of
manufacturing.
These strategies will help Lululemon in increasing their revenue and also thrive in the
Chinese market. The strategies used will help in catering to the needs that are necessary for
the people in China.
Marketing strategy of Lululemon

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Table: STP model for Lululemon Athletica
The STP model is a process that will help Lululemon in demonstrating the link
between the overall market and how they choose to compete in the proposed market. This
model will help in identifying the valuable segments of the company and then help in
creating the correct marketing mix and the production positioning strategy for these
segments. It can be seen that the company mainly focuses on the people who are heath
conscious and are active in playing sports. They will mainly cater to the people who belong
from upper middle class to middle class people. The product positions itself as a premium
product in the market and will cater to people who are willing to pay according to the quality
they receive.
Marketing mix of Lululemon
Lululemon will use a marketing tool which is marketing mix which will help the
company to pursue their marketing objectives and aims in their target market. The company
will consider the 4p’s which are product, price, promotion and place.
IndividualswhoarehealthconsciousIndividualswhoplayalotofsportsPeoplewhopracticeyogaandcyclingAthliesureMiddleclassanduppermiddleclasspeoplePremiumqualityHigh-techFashionablepeople

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Product
The product will use a standardization strategy in order to expand in China.
Lululemon creates manufactures products like outwear, jackets, sweaters, bras, pants,
swimwear and other accessories like shoes, bags, yoga mats, hats and many more. The
products will be the same and there will be no such changes in the products except for the
sizes because of the different body structure of the people.
Price
Lululemon Athletica mainly positions themselves as a premium brand in the market
as they differentiates their brand in terms of their product offering in the market. The
company uses different material in comparison to other brands in the market which makes
them distinctive from other products in the market. Perceived target of Lululemon are
established mainly in people belonging from the secured income groups ad professionals who
have the ability to afford premium brands. Lululemon needs to keep a value-based policy for
their products. In China, Lululemon will adopt the premium pricing strategy because of their
qualitative products which will be consumed and purchased by mainly high-end customers
who believe in brand quality and value in comparison to price (Pantelous & Passalidou,
2015).
Lululemon may also adopt the promotional pricing strategy where the company will
provide discounts, free shipping and incentives to their customers in the market which can
help in attracting the customers when the company expands in China.
Place

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Lululemon is known for their strong distribution channels that have helped the
organization in distributing their products in the domestic as well as the international arena.
The distribution channels used in China will be the following:
Physical stores- As the brand positions themselves as a premium brand in the market the
company will open and locate their stores in posh areas in China and in the big malls. This
will help in the shopping experience of the people in China and will help them in having a
close look at the products.
Online shopping website- Lululemon already has an official website from which people
shop however China is not added to the list and they may add the country in their website to
provide their online delivery service for their customers who are busy and do not have time to
travel to malls or shops to buy their products.
Promotion
Lululemon Athletica needs to adopt an effective promotion strategy to create brand
awareness among the people in China. In order to do so there are various methods that
Lululemon needs to adapt like the following:
Advertising- Lululemon can create advertise in order to attract their customers. According to
scholars, visual content lasts on the minds on the people which may encourage them to
purchase the products (Janiszewski & Wyer Jr, 2014).
Digital marketing- In the age of digitalization most of the people are on social media and
browse the internet (Whiting & Williams, 2013). Majority of the people in China are tech
savvy thus digital marketing will help Lululemon to market their brand to the customers in
China (Kotler, Kartajaya & Setiawan, 2016).

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Discounts and schemes- Munson & Jackson, (2015) opines discounts are great in order to
promote and facilitate the buyer behavior of the people. Lululemon can initially provide
discounts in order to attract customers and make them make a purchase.
Conclusion
Lululemon Athletica is an apparel company that is currently thinking of making an
expansion in a foreign country in order to increase their revenue and dominate the global
market. From the above analysis it can be seen that China has several factors that will help
the company in their expansion and will help them to strive in the market. The positioning
and the targeting show that the company will provide their products to the middle class to
upper middle class. The promotion strategies and the pricing will encourage the people in
China to make a purchase. Thus it can be concluded that the China will be a favourable
market for Lululemon Athletica to generate revenues and strive in the market.
.

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