Strategic Management Report: Analyzing Lululemon Athletica Inc.

This report provides a comprehensive strategic management analysis of Lululemon Athletica Inc. It begins with an examination of the competitive environment using Porter's Five Forces model, highlighting industry rivalry, threats from new entrants and substitutes, and the bargaining power of buyers and suppliers. The report then delves into Lululemon's internal environment, including its capabilities, product design, research and development practices, and human resource management, along with core competencies such as organizational culture and brand equity. The external environment analysis covers political, economic, technological, and environmental factors influencing Lululemon's strategic actions. Furthermore, the report identifies and evaluates Lululemon's business-level strategies, including differentiation and focused differentiation, and assesses their effectiveness. Finally, it addresses the challenges Lululemon may face in international expansion, particularly regarding cultural and language barriers, and offers strategic recommendations to overcome these obstacles, such as developing a fitness club membership program, providing employee training, offering unique products with effective pricing, and creating a luxury brand to target high-end customers.

Running Head: STRATEGIC MANAGEMENT 1
Strategic Management: Lululemon
Athletica Inc.

STRATEGIC MANAGEMENT 2
Answer 1:
Lululemon Athletica Inc. is a leading player in athletic apparel industry. Currently, the
organization has been started to serve a premium yoga niche for female segment. New
competitors are capturing a significant market share and having capacity to create an impact on
others. The competitive environment of the organization is analyzed using the Porter’s five
forces model, which shows that rivalry in this industry is starting to increase (Financial Post,
2017). The competitive environment of Lululemon is analyzed below;
Industry Rivalry
For Lululemon, the competition is rife with different challenges. The sales of this segment are
increasing and revenues can be generated by the organizations with powerful capabilities. In the
industry, there are so many competitors, like; Nike, Adidas, VF Corp. and Under Armour. These
are the major competitors, which operate business in the area of yoga apparel. Market is
beginning to strengthen and to impact the results and outcomes of the organization (Barney,
2014).
Threat of New Entrants
Threat of new entrants is very high for Lululemon organization. It is the major reason behind the
threats to continuous efforts of company. There are so many organizations, which have already
introduced their yoga clothing line. In this industry, the entry barriers are low, so many of the
organizations are taking its advantages and entering, like; Eddie Bauer, GAP etc. these players
enter with the extra capacity that decreases the profits of Lululemon (Cole, 2013).

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Threat of Substitutes
Threat of substitutes is low for the organization. Yoga devotees are wishing to get the features
offered by the organizations, which can understand their needs and demands and provide then in
better form. There are no other alternatives to satisfy their needs and expectations.
Bargaining power of buyers
Buyers maintain a medium to high level of bargaining power in this industry. They have a
number of same products, which are available from different brands on different prices. The
brand equity of Lululemon offers some safeguarding against bargaining power of buyers (Eden
& Ackermann, 2013).
Bargaining power of suppliers
Bargaining power of suppliers does not work as a strong competitive force. Lululemon utilizes a
focused sourcing strategy that depends on five major suppliers in Asia. It poses some political
and environmental risks for the organization. These risks can be decreased if it increases the
costs in North America because of supply disruption.
Yes, the organization has a source of competitive advantage. Supply chain system and
distribution channels are the major source for gaining competitive advantage against its
competitors. The company is reaching to customers through three distribution channels, like;
direct to customers, corporate owned retail stores and franchise, wholesaler and some other
channels (Financial Post, 2017). These distribution channels are assisting the organization in
generative significant revenues. The below-plotted graph shows the increase in revenues of
company among different distribution channels.

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Answer 2:
Internal environment of an organization includes capabilities and core competencies of an
organization. Capabilities of an organization are the systems, resources and ways of
communicating and combining resources to get the competitive advantage against its
competitors.
Capabilities
Product design and pricing policies
The unique and specific design and features of products are the major factors in the success of
organization. The organization is producing yoga pants and jackets to increase fitness appearance
among customers. The yoga laggings and pants have a section across the top to reduce the lower
stomach part of women.
This is the major factor, which forces the customers to pay comparatively higher prices. There
are so many competitors in the industry, which are trying to copy its product structure, but they
are failed to accurately replicate it (Freeman, 2010). The major element to the higher prices of
Lululemon is their creative and innovative practices. They are using Full-On Luon fabric and
other materials, which are comfortable for the users.

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Research and development
Lululemon Athletica Inc. does not utilize a big process to collect the data of customers, but it
uses an advanced process of customer awareness to analyze the trends among customers. This
research and development system of the company consists of strategic positioning of tables for
apparels that enables the employees to overhear the issues and complaints of customers (Gamble,
Peteraf, Strickland & Thompson, 2014). In addition, Lululemon has implemented a program in
which yoga instructors and trainers are able to be the part of R&D department to examine the
products and give feedback on fabric, fit, quality, design etc.
Human resource management
Lululemon creates an effective organizational culture, which is focused on training and personal
development. This different organizational culture enables the company to entice the well-
motivated and passionate. The company is supporting the employees in every manner, like;
health, professional and person lives. The company thinks that its relationship with employees is
a major contributor to the success of organization (Ho, 2014).
Core Competencies
Core competencies and competitive advantage generate from the capabilities and resources of
organization. The strategic competitiveness of Lululemon is resulted from its vision and product
differentiation strategy that is created on the organizational culture and brand equity. The unique
organizational culture is the key core competency of the organization. In addition, the
organization is using different feedback methods to ensure its brand and culture reputation.
By considering the internal environment of the organization, it can be said that there are two
weaknesses of the organization, which can impact its competence in the future. One of the major
weaknesses is that the organization is dependent on a single segment of yoga cloths. Another
weakness of the organization is its higher prices. There are some competitors, which are offering
similar products on comparatively lower prices (Larcker, Larcker & Tayan, 2014).
Answer 3:
There are some factors in external environment, which impact the strategic actions of
Lululemon. The organization needs to consider them to stay competitive in today’s business
environment.

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Political and Legal factors
There are some uncertainties in legal and political areas affect the Lululemon. National and
international rules and regulations play an important role in getting the products to the respective
market on a predetermined time. Operations of Lululemon are subject to the political
environment in foreign nations since all the suppliers of the company are situated outside the
North America. Company is operating the business in different countries by complying different
tax regulations. These political factors impact the strategic policies and operations of company
(Lululemon, 2017).
Economic Factors
The organization is operating its business under different economies. On the basis of product
pricing, the company is targeting higher income segment. The global economic downturn has
reduced their flexible spending. The higher prices of products have decreased bottom line of the
company. It is affecting the strategic actions of the company (Pearce and Robinson, 2011).
Lululemon is also open to the inflation, which have negative impact if the operating costs
enhances, but the prices remain same.
Technological Factors
Technological factors have played an important role in the operations of Lululemon Athletica
Inc. the product features are driven with technology, like; it includes silver threat in some
specific products. In the year 2009, the organization has introduced its e-commerce operations,
which has assisted it in reaching to customers outside the country. These factors support the
strategic direction of the company.
Environmental Factors
The operations and practices of Lululemon are not directly influencing the environment. This is
because it is outsourcing the materials from the third party. The suppliers are majorly situated in
the areas of Asia where pollution and environmental laws and regulations are very strict. It is
decreasing the use of paper at its offices or collecting remnants at its factory outlets.
In order to change some of its strategic directions, the organization should decrease its prices of
products or it should offer discounts on a huge purchase of products. It should change its pricing
strategy. In addition, before expanding in any new foreign market, it should consider its rules and
laws, which are imposed on this industry (Peteraf, Gamble & Thompson, 2014).

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Answer 4:
Lululemon is adopting two strategies as their business-level strategy. The organization is
implementing differentiation and focused differentiation strategy.
Differentiation strategy is the major business-level strategy that is used by Lululemon Athletica.
By offering unique fabric, the company covered the way for providing high quality and standard
yoga cloths. The products are offered to customers on higher prices (Walsh, 2011). This strategy
of the company comprises of the R&D of innovative designs, products and fabrics. It has
developed different technologies for athletic and sports clothes.
Another strategy is focused differentiation. In order to create this strategy, the major objective of
organization is to create and develop unique cloths for yoga practitioners. Implementation of this
strategy assisted the organization to expand its business to develop products for physical trainers,
runners and sport-practitioners (Stokes, 2008). This strategy reflected the gap between fashion
and fitness industry. The sales of organization are enhancing by this strategy as all the athletes
and practitioners prefer to wear functional and fashionable clothes for their sport and yoga
practices.
Yes the organization is taking advantage of these business level strategies. The implemented
strategies are supporting the mission and vision of Lululemon organization. By employing these
effective strategies, the company is creating the products, which enable the customers to engage
and to feel better about engaging in the physical training and exercises. Thus, it can be stated that
the business level strategy of the company is beneficial for the organizational growth.
However, the business level strategies of the company are effective and supporting to its
objectives, but still there are some associated risks (Walsh, 2011). Competition is one of the
major risks for Lululemon organization. There are so many competitors in the industry, which
are offering similar products at lower prices, like; Adidas, Nike etc. In the process of business
expansion, the company may face the risks related to locations and costs.
Answer 5:

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As the organization expands and grows internationally, it may face different challenges. The
company has expanded its business in many countries, like; New Zealand and Australia. Both the
countries share common culture and languages that means the barriers are lower than the barriers
in India and China. Cultures and language are major challenges in expanding the business
internationally.
In foreign market, the company may face some issues related to the hiring and staffing process.
As the organization hires a specific athletic individual, the locations where the fitness culture is
not very much dominant, will mean a rare talented pool of employees. This organization
implements a unique organizational culture, so they can face challenges when making efforts to
familiarize with the employees from domestic culture with the beliefs and values, which are
directly conflicting. Moreover, complying with laws and regulations of international business
can pose the challenges to the company (Varbanova, 2013). In this situation, some unethical
practices will be pulled up and due to intervention of government can develop an unwanted
condition for organization. The company may face the issues related to copying the business
model and products. The organizations in international market may have similar products.
Thus, these are the challenges, which company may face in the international market. Following
are the recommendations, which Lululemon may consider to overcome these challenges;
The organization should use an extensive strategy via developing a fitness club membership for
the loyal customers to the studios in the society. This will be very unique and new service to the
health and fitness industry. In order to overcome the culture and language challenges, the
organization should conduct training and development programs for employees, so that they can
understand the values and traditions of international market. While expanding business in
international market, the company should offer some unique products with effective pricing
strategy, so that it can compete with potential competitors effectively. It should develop an
effective strategy for recruitment and selection process. Another strategic recommendation for
organization is to create a luxury brand to aim the high-end customers. In the global market, the
company should focus on handling the legal and political risks and issues. They should comply
with the rules and regulations of the market, which are imposed by the country’s government.
The business expansion plan of the company should be focused on developing the resources,
capabilities and core competencies of the internal system of organization. These

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recommendations will assist the organization to overcome the associated risks and challenges in
international business market.
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