KE1010 Strategic Management Case Study: Lululemon Athletica Analysis

This case study delves into the strategic management of Lululemon Athletica Inc., examining the company's background, business drivers, and the challenges it faced. The analysis includes a SWOT analysis, PESTLE analysis, and Porter's Five Forces framework to assess the external and internal environments. The core competencies and problem statements are identified, followed by an examination of key issues such as product quality, cross-border expansion, and inventory management. The case study presents strategic alternatives, evaluates them, and recommends an implementation plan to address the challenges, offering a contingency plan for potential setbacks. This case study provides a detailed look into the strategic decision-making process within a prominent athletic apparel company.

Running Head: STRATEGIC MANAGEMENT
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STRATEGIC MANAGEMENT

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Executive summary
In modern times, many organizations face critical and extent issues daily. The issue faced
in this case study is the quality of the product and technical failures. These kinds of issues are not
limited to small organizations but many huge organizations have also faced it for a long time.
This kind of consequence regularly affects the business's progress and life of a business. If these
kinds of challenges not solved will impact heavily organization success and lead to less at a high
level. The following discussion will present the case analysis of Lululemon Athletica INC. based
on its background and leadership issues. This paper will present the organization's background,
problem, key issues, internal and external analysis. Further, it will present the analysis and action
plan which will remain suitable to solve the issues.

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Table of Contents
Executive summary.....................................................................................................................................1
Background.................................................................................................................................................3
Business drivers...........................................................................................................................................3
SWOT analysis............................................................................................................................................4
PESTLE analysis.........................................................................................................................................5
Five forces framework.................................................................................................................................6
Core competencies......................................................................................................................................7
Problem statement.......................................................................................................................................8
Key issues....................................................................................................................................................8
Identification...............................................................................................................................................8
Alternatives and evaluation of strategy........................................................................................................9
Implementation............................................................................................................................................9
Recommendation.........................................................................................................................................9
Conclusion.................................................................................................................................................10
Contingency plan.......................................................................................................................................10
Bibliography..............................................................................................................................................11

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Background
Lululemon Athletica INC. is known as the French-based organization which has more
than 201 divisions. Divisions of the organization are located in North America, Japan, Australia,
and New Zealand. This organization has started its operations in 1998. This was established by
Chip Wilson. He motivated the people through a passion for technical athletic fabrics. This was
started by him by opening the design destined to create Yoga. He provided the leadership to the
first worldwide innovative with the technical athletic wear. The first-ever outlet of the
organization's objective is to enable the individual to share the idea for a healthy lifestyle. The
objective of the organization was harshly short-changed due to the increase in several users that
the organization could not cater to every individual that was seeking to know regarding healthy
living (Lululemon, 2020).
This organization was unable to provide the customers quality products as shifted its
objective to educating employees which will consequently educate the larger needy clients. This
organization regularly targets active young people by pushing each client to healthy living. It
present that organization target market is young people between the age of 15 and 37. This is
revealed that one of the main lulu products is Yoga pants that are worn during athletics. This has
been founded within the research that the organization uses the style and fit to design the pants
which help the male and female to look good by walking outside the home. This kind of design
also supports a similar group to boost self-confidence and self-esteem. This kind of clothing style
is insensitive for the people to stay more active and fit to fit within the cloth for the duration of
the practice sessions. This product has improved the markets subsequently to include active
males and used similar material within the product of males and makes the users beneficial in a
similar way as female customers (Lululemon, 2020).
Business drivers
Business drivers for the Lululemon Athletica INC. will be to welcome the feedback of
customers regarding the quality of the product. This will help the organization to encourage the
employees and look for new ideas with the consistency in product lines for development (Team,
2020).

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SWOT analysis
Particular Description
Strengths Equity of brand
Integration at the community level
A leader in a Niche market
Retail strategy at a vertical level
Focus on infrastructure and innovation
Maintain the customer's loyalty
Highly followed at the social network
Good financial position
Weaknesses More focus on female customers
Perception - “Yoga only”
Low management capacity
Depends on supplier
Low brand awareness
Limited market footprint
Opportunities Diversification of product
The movement to healthy living
Media buzz
High-level growth within the market
Growth at a niche market
Performance textile innovations
Threats Low margins on product
Worldwide economic condition
Costs of shipping
Dependence on IT
Competitive market at a high level
Exposure of currency
Main product “Fad” potential
Buyout or takeover
No margins on product

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PESTLE analysis
PESTLE analysis is known as the strategic tool that analyzes the macro environment of
the organization (Aithal, 2016). Changes within the macro-environment affect the organization
and also competitors within the textile apparel clothing. It affects the organization's competitive
advantage or overall level of profitability of the customer's goods industry.
 Political factors
This plays an important role to determine the factors which can impact the Lululemon Athletica
INC long term profitability within the particular nations or markets. This organization is
operating within the many nations that present the political system risk. This is very important
for the organization to diversify the systematic risk regarding the political environment. It should
ensure the mandatory employee benefits and favored the business partners.
 Economic factors
Macro environment factors like norms of competition impact the organization's competitive
advantage. Rates of exchange and stability of the currency of host countries affect the
organization. Levels of education within the economy, the rate of unemployment all affect the
organization. This organization can face the issue of convincing females as product value while
they have little income with which to spend on the highly-priced clothing.
 Social factors
Shared beliefs and population attitudes play a very important role within the market at
Lululemon Athletica INC. understand the customers while designing marketing messages. It
considers the skill and demographics population level. The culture of the organization to respect
for individual and promote the self-awareness
 Technology factors
A recent development within the technology by competitors has provided a competitive
advantage to the organization and impact the organization's offering of the product. This has also
presented the impact on the value chain structure of Lululemon Athletica INC. The technology

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of the organization is a huge component to maintain the quality as a material of yoga pant is luon
that allows the pants to fit tight and move with the body.
 Legal factors
Organization while entering within the new market should consider the legal factors like
copyrights, intellectual property law, laws of employment, protection of data, customers, and e-
commerce.
 Environment factors
Organizations to start the business in a new market or new business within the existing market
carefully evaluates environment standards that are necessary to operate within those markets. It
should identify the laws regulating the environment pollution, management of the waste within
the customer's goods sector, and attitudes to support renewable energy.
Five forces framework
Lululemon Athletica INC. will regularly require evaluating changing marketing to gain a
competitive advantage. The analysis of Lululemon Athletica INC.is placed within the present
yoga market apparel market by use of the porter five forces model to identify the industry
profitability through gauging source of viable pressure.
 Competition from substitutes (High)
This organization faces the competition ranges from the other organization selling a similar type
of attire to other clothing persons can wear in place of yoga clothing. An organization such as
Nike, Adidas, Champion offers the many kinds of athletic wear together with yoga clothing
(Elsawah, et al., 2015). One of the competitors known as the Athleta is expanding every fast and
becoming a major competitor of the organization. It has brand recognition that gives the
organization a definite competitive advantage and has the means to differentiate at the lower
economy of scale. Yoga wear provides more comfort and suited to apparel like athletic shorts,
leggings, and many more are substitutes which many individuals choose to use in place of
buying the proper pricey yoga apparel.

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 Competition from new entrants (High)
The new entrant explosion within the industry of yoga apparel has been very vast. It included
both small organizations as well as fortune 500 organizations. An organization that is far outside
the realm of yoga started to enter the market. For example, in 2008, BMW has come within the
yoga wear market. This is also gaining momentum and gratitude. Factors that affect the threat of
rivalry from new entrants are channels of distribution like online sales, small shops that can use
the opportunities to expand through the famous brand name.
 Competition from established competitors (High)
There is a trend of consolidation of an organization that occurring within the industry. For
example, Gap Inc. has purchased the Athleta to complement that present casual wear brands.
Lululemon Athletica INC. has considered buying the Athleta before its move to Gap Inc.
 Supplier’s bargaining power (High)
Suppliers have low bargaining power as most of the material used through the yoga apparel
manufacturers which are commodities. Include material is Plastic, fabric, hardware, and thread.
 Buyer’s bargaining power (Low)
Most of the retails store that sells yoga apparel not allows the customers to have bargaining
power (Siaw, & Yu, 2014). Buyer power comes from the small retail outlet which has the option
to purchase merchandise between competitive yoga product manufacturers. This kind of outlet
only carries a few brands which are trend-worthy at that time. These values which customers like
and deal with the best value at a low cost. The relationship between retail store buyers and
manufacturers heavily relies on brand strength and product quality.
Core competencies
This is defined as the capabilities and advantages which distinguish the organization from
similar businesses (Rouse, 2020). Core competencies of Lululemon Athletica INC. are product
quality of products and design. The quality of the products leads to brand recognition and
prominence within the customers. It works very closely with the suppliers to ensure that quality

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not compromised and unmatched and take the actions appropriately. It is attentive and welcomes
the feedback and regularly marks within the hopes to develop and maintain the best brands for
customers.
Core competencies of the organization include the unique organization culture which
extends out to include the customers. Customers and employees of the organization are heavily
trained and feel the deeper involvement within the brand because of the healthy lifestyles and
culture. The culture of the organization is loyal to customers and staff as motivates and engaged
them. This offers both online and offline services.
Problem statement
The organization has started to experience the critical issue of reputation due to the
delivery of the quality product. This was caused due to the market shares reduction and stock
quality status. It was a result of the reduction of stock values which caused due to removal of
Luon stock pants. It also reduces the organization's income and reputation and created a critical
issue by upset the customers.
Key issues
The following are the main issues faced by the Lululemon Athletica INC. are as follows.
 Cross border expansion and control of the location.
 Organizational change
 Cultural leadership
 Inventory problem
 Infrastructure problem
Identification
The organization can divers many changes to improve the product quality and trust of
customers. The organization can improve the options of the product which is available to
customers. This kind of move from the organization will remain effective as customers can

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switch to other organizations without any struggle. This kind of move is very important for the
organization to work hard and retain market expansion and circulation.
Alternatives and evaluation of strategy
The organization is settled within the niche market. To gain success it should explore the
present strategy with experiments and strategies. Alternative strategies which organization can
explore are wider differentiation, focus on differentiation, and the best cost.
The present strategy of the Lululemon Athletica INC. is to achieve a competitive
advantage by broadening the products and become more parallel to present and future customers.
The basis of the evaluation of the competitive strategy is when an organization is capable to
deliver similar benefits compare to the competitors but at the low cost and deliver the benefits
which exceed competing products. The organization regularly focuses on the present strategy
and decides to increase the alternative. The organization will focus on competitive and marketing
strategies.
Implementation
It should establish a low-cost strategy that helps the organization to position within the
entry-level marketplace for new customers. This strategy of the organization should focus on the
reduction of cost to invite more customers by providing quality products. It will help it to offer
low-cost products to the new customers in the market which were unable to afford within the
prior quality. This will help to invite and maintain the customers for a long time.
Recommendation
The organization should increase awareness regarding its brand through the application of brand
differentiation and competitive strategy. It should focus on the wider differentiation of products
with increased technological advancements. The apparel of the organization is designed for the
athletes. It should focus on the niche market to gain a more competitive advantage by increasing
the quality of the products. It should regularly focus on the quality which enables it to gain more
customers.

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Conclusion
In the limelight of discussion, it can be concluded that Lululemon Athletic INC. is
considered as the market-driven business which required to regularly focusing on providing
quality services. Customers of the organization have a high-value perception regarding the brand.
In today's time customers focuses on quality products and known as fashion-oriented. The
organization regularly addresses the requirements of the customers by applying many strategies
such as product differentiation and many more. It is involved with its communities and
encourages employees and customers to stay fit and active
Contingency plan
Lululemon Athletica INC. should have the contingency plan to move within the events of
a slowdown in the macroeconomy in which unemployment is at a high level and disposable
revenues are lower. Organization within the weaker economy is required to evaluate and justify
the high premium values like the back plan. This will be relevant for the organization to give
high competition to competitors that can afford and offer substantial discounts regarding the
product to customers.

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Bibliography
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operating concepts & business systems. International Journal in Management and Social
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Rouse, M. (2020, 03 22). Core Competencies. Retrieved from SearchCIO:
https://searchcio.techtarget.com/definition/core-competency
Siaw, I., & Yu, A. (2014). An analysis of the impact of the internet on competition in the
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Team, T. (2020, 03 22). What Is Driving Higher Revenue And Profitability Expectations For
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revenue-and-profitability-expectations-for-lululemon-athletica-in-q1-2019/
#28987fba9c28
Elsawah, S., Guillaume, J. H., Filatova, T., Rook, J., & Jakeman, A. J. (2015). A methodology
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