Strategic Analysis of Lululemon: Competitive Environment and Strategy

This report provides a comprehensive strategic analysis of Lululemon Athletic Inc., evaluating its competitive environment within the athletic apparel market, particularly against rivals like Nike and Adidas. The report assesses Lululemon's capabilities, core competencies, and potential weaknesses, including high prices and brand perception challenges. It examines external environmental trends, such as economic struggles, demographic shifts, technological advancements, and political factors, and their influence on Lululemon's strategic actions. The analysis further explores the advantages and risks associated with Lululemon's business-level strategy, focusing on its store expansion, brand awareness initiatives, product diversification, and unique shopping experience. Finally, the report identifies potential challenges Lululemon may face during international expansion, such as intense competition and cultural differences, and offers recommendations to mitigate these risks, including product uniqueness and price adjustments.

Strategic Management A29579
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Introduction
Headquartered in Vancouver, British Columbia, Canada, Lululemon Athletic Inc. is an athletic
designer and retailer of technical athletic clothing. It produces the clothing and also runs many
international clothing stores. Lululemon's main competitors are Nike, Adidas, and Under Armour
just to mention a few.
1. Evaluate Lululemon's competitive environment. Does the company have a
source of sustainable competitive advantage?
As the market size for sporting clothing continues to grow, so do the industries producing the
clothing grow. Many sports clothing companies are established as the already existing are
enlarging to reach more people and meet the market demand. Lululemon is thus facing fierce
competition from its competitors in the sports clothing market. For lulu lemon to stay in
business, they have to look at several factors like price, quality, and speed of delivering. If the
company becomes ignorant of these factors, then it will be thrown out of business by companies
like Nike, Adidas, Puma, and Under Armour among others. In the sports clothing business, there
is also potential development of substitute products and services and any company in this
business must invest heavily in the R&D department to make sure that their products are not
kicked out of the market by substitutes. Investing heavily in R&D helps the company to come up
with new ideas, and this reason ensures that the company is not facing fierce competition from
new entrants in the market. Other factors that determine the nature of the competitive
environment is the bargaining power of suppliers and consumers. In the sports business clothing,
a company like Lululemon is supposed to have several suppliers so as to avoid a situation where

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the supplier has more bargaining power than the company. When a company has appealing
products which meet the customer needs, then it eliminates the situation where the customer has
more bargaining power because they will not opt to buy from other companies (Human Kinetics,
2010).
Although Lululemon is a very young company compared to companies like Nike and Adidas, it
has some competitive advantages which are sustainable enough to keep it in business and
growing as well. For instance, sometimes back Lululemon's company founder made some sexist
remarks which made its stocks to dip several times because of market speculation (Tofurious,
2015). However, this did not affect the company's revenue and it continued to grow. This may
have been caused by its competitive advantages like patented technology, preemptive retail
strategy and their yoga community (Tofurious, 2015). A customer many have wanted to buy
yoga attires from other companies because of the remarks, but there was nowhere else would
he/she get technologically best attire. If Lululemon continues the same trend of offering high
quality and unique clothing, then their competitive advantage will be sustainable for a long time.
2. Based on an analysis of the internal environment, discuss the company's
capabilities, and core Competencies. Does Lululemon have any weaknesses
that can impact its ability to compete in future?
Just like any other successful organization, Lululemon has some capabilities as well as core
competencies. Among the capabilities, is how they conduct their marketing and sales their
approach to marketing is focused on increasing the brand identity and customer loyalty (Tsang,
Chu, and Pothecary, 2013). In short, their advertising is community-based. The company builds
local networks through sponsored events (Road Less Invested, 2012). Another capability is that

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their logistics is outbound; their inventory management is in such a way that they supply less
than the demand, this creates an artificial scarcity of their products, and the result is that
customers will buy quickly before the product runs out of stock (Road Less Invested, 2012).
Apart from producing and selling their athletic apparels, they also conduct yoga classes and other
activities such as runs (Lululemon Athletica, 2016). This increases its popularity among the
people. Regarding procurement, it has developed very strong relationships with its suppliers
(Road Less Invested, 2012). Another capability is the way they conduct their technological
development. They do a thorough market research before developing any new product. Through
better human resource management, it employers is highly trained and also develops personal
connections with customers (Tsang, Chu, and Pothecary, 2013).
A Strong relationship with customers is one of its core competencies. This helps in customer
retention and development regarding market power against the competitors (Tsang, Chu, and
Pothecary, 2013). Their product and design quality which are very reliable is also another
competency and it leads to brand name recognition among customers. They also have an
effective culture which motivates the customers and employees. Despite its continued growth,
Lululemon has some weaknesses which can affect its nature of competition in future. One of the
weaknesses is high prices. The price of products from Lululemon compared to the same products
from other competing companies is very high. This could affect its market in future because
some customers will choose the cheaper if it is serving the same purpose. Another weakness is
the brand perception. Many customers believe that the products from Lululemon are only for
yoga. This means that it faces a big challenge when trying to diversify its products and services.
It will thus have to invest a lot to change the peoples' perception (Value Line Publishing, 2016).

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3. What are the trends and conditions in the external environment that will
have a dominant influence on the firm's strategic actions? In what ways (if
any) should Lululemon change its Strategic direction?
There are some several external environment trends and conditions that affect the strategic
actions of Lululemon. The external environment should be the primary determiners of the
strategic position of a firm (Test Bank College, 2016). Some of the external environment trends
include: within the European Union, there has been a lot and continued economic struggles, and
this may affect the ability of Lululemon expansion strategies in future (Tsang, Chu, and
Pothecary, 2013). This may mean that, for them to continue expanding globally, they may have
to adjust their prices because the customers will prefer the products with fair prices when there is
continued the economic struggle. Another external factor is the demographics. In the modern
world and future, many aging people are getting involved in sports and thus there is an increased
demand old people sporting clothes for Lululemon, and they will thus have to adjust their
strategies to meet that market demand. Men's sporting clothing also demand is also a potential
opportunity for Lululemon (Tsang, Chu, and Pothecary, 2013).
The trends in changing technology are also an external factor that will affect the company's
future strategies. Online shopping enables Lululemon to reach more people, and this is the future
of the retail industry. This means that in future they many have to reduce their retailer shops and
focus on the online shopping. Present companies are also using social media to advertise and
spread brand awareness, and Lululemon should not be an exception. Political factors also affect
the strategic future of a company. As the spreading across North America is not a problem for
Lululemon, it may face political barriers in future because of its patents. They might, therefore,

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be forced to change their strategic approach to deal with this issue. As many countries around the
globe develop, the wages paid to the workers also increases. This may raise the cost of
production for Lululemon's products which might be produced in these countries like China. If
the cost of production rises, then the company will be forced to change strategies in future to
keep the cost of production considerably low. Other factors that will influence Lululemon's
future strategic approaches are the factors in Porter's Five Forces. These factors are bargaining
power of suppliers, customer bargaining power, a threat of new entrants, competition level and a
threat of substitutes.
4. What are the advantages of Lululemon's business level strategy? What are
the risks?
Since its founding, Lululemon has had to change its business strategy towards sustainable
growth. To understand the advantages of the current strategy, there are few elements of the
strategy that are worth noting. Number one is growing the company store base in North America
(Moose, 2016). This strategy's objective is to reach new markets in Canada and America and
consequently increase its revenue. The other element is increasing the brand awareness. This is
achieved through participation in organizing events and partnering with fitness coaches. The
advantage of this strategy is that when the brand is well known among the people, more
customers will be willing to buy from Lululemon and in the long run, this grows the company.
Another business strategy element is introducing new product technologies (Moose, 2016). With
developing technology, many current customers demand products that have present technology
incorporated in them. Lululemon has been doing this, and the advantage is that it differentiates

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its products from other competitors increasing the customer base and sustainable future
competitive advantage.
The next element is diversifying their products. Having many privileges of yoga in the past and
the most customers of yoga clothing are women; Lululemon has now changed this strategy. They
are now adding men apparel to their line (Moose, 2016). They are also producing other products
like athletic bags, sandals, and outerwear. This means that they will be able to reach more
customers and also increase the number of products that a single customer will buy from them at
a go. They also have strategies to expand to Australia and Japan in a bid to reach more people.
Lululemon also offers a unique shopping experience. Selling its products to the consumers
directly from their website offers the experience, and this is what customers enjoy. They have
had to adjust to this strategy from the previous franchising strategy. With their business model,
one important risk it posses is the fickle consumer taste (Thangavelu, 2015). This is the ability of
customers to change their preferences and taste in the products offered. This is likely to affect
Lululemon negatively in future with their current business strategy.
5. As the company grows and expands internationally, what challenges is it
likely to face? What Recommendations can you make to reduce these
potential risks?
Like many other companies face challenges as they go global, Lululemon is also likely to face
some challenges along the way as it goes global. One of the challenges is competition. When it
comes to the international market, Lululemon faces fierce competition from the well known Nike
and Adidas. These companies have been in the international scenes for very long time and
beating them won't be a simple job for Lululemon. For them to excel internationally, the will

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have to do some important things. One of them is lowering their products prices. This will make
their products more affordable for many people. Consequently, Lululemon will reach more
people in the global market. Another recommendation is making their products as more unique
as possible. This will make their customers and new clients buy from them as there will be no
substitutes to meet particular needs.
Another challenge likely to be faced by Lululemon is Changes in business Culture. For instance,
the Chinese business culture is said to be different from business cultures from the western
countries. For this reason, you might find that a business model that has worked well for
Lululemon in the United States and Canada might not be successful in the Chinese market. It is,
therefore, my recommendation that for Lululemon's to succeed in the global market; they would
have to adopt different business models for different cultures, rather than sticking to the one that
has worked in the United States and Canada.
Their entry to underdeveloped countries may also be a challenge. With their most selling yoga
attire, you will find that most people in underdeveloped countries don't go for yoga classes and
therefore their demand for the apparels will be very low. The high prices of these products is also
a challenge in entering these countries because most people only have enough money to make
their stomachs full other than buying sporting attires. Entry to some countries is also likely to
present a challenge because of government regulations. Some countries have tough government
regulations and acquiring licenses is a major challenge. The taxation cost in some of these
countries is also high, and this is a big challenge. These are just some of the challenges and
recommendations, but there are still many other challenges that it is likely to face in future while
expanding globally.

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References
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