MGT695 lululemon athletica Inc Case Discussion

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Read the Lululemon Case. Answer Question 1 through Question 4.

Q1, Analyze the impact of the general environment on Lululemon's business. Highlight the demographic segment, global segment, political/legal segment, physical environmental segment, and sociocultural segment.

Q2, Identify Lululemon's internal strengths and weaknesses.

Q3, What challenges will Lululemon face when expanding into Asia? Focus on factors such as culture, pricing, brand awareness, positioning, customer acquisition, distribution, etc. Given your analysis of the firm's external and internal environments, what international corporate-level strategy would you recommend for Lululemon? Why?

Q4, What ethical issues has Lululemon experienced over the last few years? Analyze the impact of the ethical issues by addressing the stakeholders involved and consequences of the ethical issues. How could Lululemon have handled these issues differently?

I provided a previous student's answer with same professor's comments, which might be useful.

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lululemon athletica Inc. Choose a Positive Thought Based in Vancouver, Canada, lululemon athletica provides premium quality athletic apparel at a premium price. One of lululemon’s signature items is its yoga pants, typically sold by competitors for between $25 and $50. Yoga pants available in lululemon stores and online range between $78 and $128 with its most popular pair priced recently at $98 – two to three times rivals’ prices. However, lululemon’s products sell and they sell fast. Demand for lululemon clothing is so high that stores have trouble keeping new lines in stock. Sheree Waterson, Lulu’s chief product officer conveyed this example, saying, “A hot-pink color named ‘Paris Pink’ that launched in December (of 2011) was supposed to have a two-month lifecycle but sold out its first week.” The question then arises as to why customers, or “guests” as lululemon refers to them, are willing to pay high prices for high fashion items that are destined to be soaked in sweat! It seems the answer to this question resides in lululemon’s ability to connect with its guests on a deeper level than just the typical sales associate–customer relationship. After all, other companies such as Nike, Adidas, and Under Armour not only produce high-tech clothing with the same soft cotton feel, four-way stretch, and moisture-wicking technology that lululemon touts, but do so much less expensively for their end consumers. Ultimately, what competitors cannot duplicate is lululemon’s culture. It is lululemon’s deep understanding of its target market, close relationships with its communities, and an inimitable culture that transforms customers/ guests into diehard loyalists. This is not to say that lululemon does not uphold the highest quality standards in its products. Levisay states, “People will save up if they need to in order to afford our clothing because of the benefits they provide.” She goes on to explain, “It’s silly to spend that much on yoga pants if they’re not going to live up to their promise.” Jennifer Black, president of an investment research firm confirms this sentiment saying, “lululemon won’t put stuff in its store just to sell it. They don’t compromise on quality.” Friends Are More Important than Money lululemon athletica’s in-depth knowledge of its target audience is an important, firmspecific asset. “Rooted in yoga but expanded into any sweaty pursuit you may have, lululemon creates technical fabrics that work with you instead of against you. Plus, they look cute!” explains Levisay. The stores’ “...guests comprise anyone living a physically active life that strives to achieve balance,” although the majority of shoppers are female, have disposable income, and are in the 15- to 65-year-old range. Fitness blogs confirm that lululemon “...recognizes this niche market and combines high performance material with attractive product design to create a committed brand following.” One of the strongest examples of lululemon’s focus on culture is the company manifesto, which appears on multiple lululemon products, from bags to water bottles. Explaining the company’s perpetuation of its manifesto, Whitney, a store employee and lululemon blogger writes, “We are sharing a piece of our culture and inspiration as a company. We 1 have traditionally printed our [bags] with the lululemon manifesto, which is a series of statements that embodies our company’s vision, culture and beliefs... [as] a constant reminder of our vision to create components for people to live longer, healthier and more fun lives.” Observe a Plant Before and After Watering Each and every store employee at lululemon is considered a steward of the company’s culture. From the beginning of the hiring process, throughout training, and continuing throughout employment, each employee is expected to reflect the company’s mission and vision. lululemon athletica’s “...success is reflected in everything within the store experience. The people who work there believe strongly in the lifestyle and what it represents.” A focus on employee development is a crucial component of the company’s strategy. In general, a lot of money and effort is put into training store employees. Levisay comments, Employees don’t exist just to fold clothes or set up displays. They share their knowledge of the clothing and culture with every guest that walks through the door. They have the ability to explain functions of the clothing you would not necessarily recognize; items such as hidden pockets, body support, material that protects against harmful UV rays, and special woven silver that makes the material antibacterial. Another employee, Samantha Baldwin, clarifies the link between employee and guest. “If your employees are happy and feel supported in their goals, your genuine nature comes across and this allows consumers to buy the experience, buy the product.” This “caring-and-sharing” culture bolsters the high-quality products. Baldwin continues, “It wasn’t just about selling stretchy pants. It was about connecting with people on an authentic level and finding out their story.” This Is Not Your Practice Life lululemon athletica was founded in 1998 by Dennis “Chip” Wilson in response to increased female participation in sports and in accordance with his belief in yoga as the optimal way to maintain athletic excellence into an advanced age. Wilson, an avid surfer and snowboarder, had previously parlayed his passions for these sports into building a successful company – Westbeach – that sold snowboarding and skateboarding apparel. After taking a yoga class, Chip fell in love with the practice. Once again melding his athletic passions with his acumen for producing high-end performance apparel, Chip saw the opportunity to produce higher-quality yoga attire. Wilson noticed that the cotton materials used in yoga apparel were inefficient for the demands placed upon them. He applied his knowledge of materials to design highly technical fabrics that would move and breathe better. Chip opened a design studio and retail store that doubled as a yoga studio at night to pay the rent. Yoga instructors at the studio became product testers, wearing Chip’s designs while teaching, and providing feedback about the product. The first official lululemon store was opened in 2000 in Kitsilano, a beach neighborhood in Vancouver. The first store served as a community hub for multiple aspects of healthy living including nutrition, running, biking, and of course yoga. Realizing the potential for female-centric, high-quality athletic apparel, lululemon began to grow; expanding across Canada for the next couple of years and entering the U.S. market in 2003. lululemon 2 athletica continued to expand both in North America and overseas and announced its initial public offering in May 2007. In 2009, lululemon expanded its offerings by launching an e-commerce channel and ivivva, a subsidiary specializing in athletic gear for girls 4 to 14 years old. Dennis “Chip” Wilson The success of lululemon is attributable to the vision of Dennis “Chip” Wilson. After taking the company public in 2007 and serving as Chief Innovation and Branding Officer, Chip officially turned over the reins in January 2012. During his time with lululemon, he helped the company grow to 147 stores, transformed the brand into a cult following, and provided company focus by developing the lululemon manifesto. He remains chair- man of the board and continues to represent lululemon at investor meetings. His successor, Christine Day, has renewed the company’s goals and assembled an exemplary “management team with a complementary mix of retail, design, operations, product sourcing, marketing and information technology experience from leading apparel and retail companies such as Abercrombie & Fitch Co., The Gap, Inc., Nike, Inc., and Speedo International Limited.” Christine Day Christine Day joined lululemon as Executive VP of Retail Operations in January 2008 and was promoted to CEO in June 2008. Day was with Starbucks for 20 years, most recently serving as President of the Asia Pacific Group of Starbucks Coffee International. Starbucks and lululemon are very similar in that both are high-growth, international companies focused on cultivating their culture and brand loyalty. Day will focus on brand expansion and developing long-term corporate and business-level strategies. Don’t Trust that an Old Age Pension Will Be Sufficient In terms of financial strength, lululemon athletica (“LULU”) is positioned to weather declines in the economic environment. The company has a significant amount of cash, over 50 percent of assets and, although the company has a line of credit should it face an immediate liquidity need, lululemon holds no debt. Companies such as Adidas, Nike, and Under Armor all carry some debt and it is certainly noteworthy to see lululemon operate with none. lululemon athletica has experienced tremendous growth in both revenue and profitability over the last couple of years. Revenue grew by a compound annual growth rate of 41.47 percent from fiscal year (FY) 2009 to FY 2012. lululemon’s net profit margin improved from 12.87 percent in 2010 to 18.39 percent in 2012, driven mainly by improvements in the gross margin and control over the growth in sales, general, and administration expenses. As expected by the growth in sales and profitability, both return on equity and return on assets also increased (Exhibit 2). 3 As seen in Exhibit 3, lululemon compares very favorably to some very well-known companies within the performance apparel clothing industry. Because lululemon operates primarily in a niche product market, it is able to compete against the likes of Adidas, Nike, and Under Armour and still generate above-average returns, principally by offering customers what it believes are higher- quality products. Historically, Adidas, Nike, and Under Armour did not offer separate apparel lines for yoga activities; however, all three have recently entered this particular market. Even so, lululemon is the only publicly traded company focused solely on the yoga apparel market. While lululemon does face competition from other companies with yoga apparel lines, none of these competitors can demand the premium that lululemon has on its products. The Pursuit of Happiness Is the Source of All Unhappiness At the beginning of FY 2013, lululemon was forecasting that its revenue and profit would continue to grow, albeit at a slower pace compared to the firm’s recent growth rates. Management was forecasting that same-store sales would increase around 20 percent in FY 2013 and that earnings per share (EPS) would be between $1.50 and $1.57. The EPS expectation translates into a 16 to 22 percent growth range for net profit in 2013, which is substantial given the economic condition of the United States. Even so, these forecasts disappointed stock analysts that had expected the company would maintain its breakneck pace of growth at least throughout 2013. As the first – and sole – potential sign of trouble for the company, YE 2012 inventory increased nearly 85 per- cent from $57 million to $104 million. This growth in inventory combined with a lower sales growth forecast may reflect pressure from the economic environment, pressure that lululemon has historically weathered unscathed. Additionally, with the increased popularity of yoga and sustained above-average returns, new competitors are beginning to enter the market. For instance, in late 2011, Nike, Gap, and Nordstrom launched their own lines of yoga clothing to capture part of the growing market. The increased competition from these major apparel retailers will pressure lululemon and test its ability to continue generating desirable returns for shareholders as well as for other stakeholders such as employees. 4 That Which Matters the Most Should Never Give Way to that Which Matters the Least The general environment is particularly interesting for lululemon due to the niche nature of its product offerings (yoga, and more recently, running gear). Although lululemon offers products for males and even for children as young as four years old, its target is females between the ages of 15 and 65. Given this broad, targeted band of the female population, the potential market for lululemon’s products is over 105 million women in the U.S. alone, representing over two-thirds of the U.S. female population. Not even considering men, children, and international customers, it is evident that the potential customer base for lululemon is substantial. Of course, other factors, such as the medium to high price of its products and the fact that not all potential customers need or want yoga apparel, cull from this potential customer base. The geographic footprint of lululemon is growing every day. The company currently has 47 stores in Canada, 108 in the United States, 18 in Australia, and 1 in New Zealand. Through distribution centers in the United States and Canada, and the 2009 addition of its e-commerce business, the company has been able to serve an increasing number of international markets. Since its customer base encompasses such a large number of people, the ethnic mix of its customers is quite diverse. Based on its product pricing, lululemon targets higher income clientele. Given the global economic downturn, consumers worldwide have cut their discretionary spending. The company’s bottom line would be expected to decrease due to the high priced, discretionary” nature of its products; surprisingly, lululemon’s sales have continued to grow for the past twelve quarters. At this point however, it is unknown how the long-term effects of the changing global economy will affect the firm’s profitability. Uncertainties in political and legal areas also affect lululemon. The company has manufacturing facilities in the United States and Canada, but it also relies heavily on its factories in China, Taiwan, South Korea, Peru, Israel, Cambodia, Thailand, and Vietnam. International and country-specific rules and regulations play a significant role in getting the company’s products to market in a timely manner. Ensuring compliance with lululemon’s internal, international, and countryspecific policies is a time and capital-intensive effort. Recently, the company has had to deal with the California Transparency in Supply Chains Act of 2010. This law requires retailers and manufacturers doing business in California to disclose their efforts to eliminate human trafficking and slavery from their direct supply chains. This is just one example of the many legal hurdles that lululemon must address to operate effectively both domestically and globally while relying on foreign production facilities. Any potential changes in international trade laws could have a detrimental effect on lululemon’s operations. Additionally, changes in international tax regulations and country-specific tax laws play a large role in the variability of the company’s earnings and are an area that the company must continue to carefully evaluate. Technology has played a surprisingly important role in lululemon’s operations. Many of its product features are technology driven, including its use of silver thread in select products. Technology has also played a key role in lululemon’s expansion. The introduction of e-commerce in April 2009 has 5 made it possible for the company to reach customers outside of its traditional bricksand-mortar locations. Virtually all of the company’s employees, ambassadors, and guests participate in yoga and/or running. Collectively, they provide a considerable amount of valuable feedback on how to improve existing products and create potential product line extensions. Guests are given the opportunity to provide feedback in stores and online. Ambassadors are local athletes and yoga instructors recruited by lululemon to help promote the brand and apparel. They are the focal point of the company’s unique “grassroots marketing” campaign, but are not paid by the company. Ambassadors are given products to test so they can provide crucial feedback for the company. In turn, they become fans of lululemon’s products and encourage potential customers to visit a store. Finally, lululemon’s physical environment is taken into consideration in the company’s operations. Whether it is reducing paper use or packaging waste at its corporate offices or gathering fabric remnants at its factories, lululemon is constantly striving to reduce its environmental footprint. Creativity IS Maximized When You Are Living in the Moment lululemon athletica constantly scans its external environment to identify potential key issues, including new trends that the firm might be able to serve by developing product line extensions and/or entering new markets. Scanning keeps lululemon alert with respect to identifying new potential competitors. After a thorough environmental scanning, lululemon continues to monitor the environment and attempts to filter out the “noise” in an effort to identify what is actually important. Upon identifying potential issues, lululemon develops projections of anticipated outcomes should a potential issue become a real problem. Finally, lululemon conducts an assessment of the timing and importance of environmental changes and trends it observes. The implementation of this comprehensive analysis process led the company to introduce its running apparel segment and develop the ivivva brand for children. It also contributed to lululemon adding its e-commerce option to serve its global customer base. This process also keeps the company aware of potential competition, including the multiple entrants into its product field since the company’s founding in 1998. Jealousy Works the Opposite Way You Want It to The threat of new entrants within the yoga apparel industry is very high, and this poses a threat to lululemon’s continuous efforts to succeed. Virtually every company that has any semblance of active wear in its product lines and manufacturing capabilities is an actual or potential competitor. As noted previously, leading global companies, such as Nike and Adidas, and regional powerhouses such as Under Armour, have joined the market.49 The ease of market entry has also opened the door for retailers such as GAP, Nordstrom, Eddie Bauer, Macy’s, and many others in recent years. These new entrants bring additional capacity that, theoretically, should reduce lululemon’s profits, especially in an industry where switching costs are very low. As a testament to the power of its brand and culture, this has yet to become a reality for lululemon. The company has high standards for its suppliers and this requires a large investment of lululemon’s time to ensure they are up to standards. In a retail setting, timing is very 6 important. Because lululemon champions product exclusivity as a main component of its popularity, having an adequate and timely supply of product is crucial. In addition, lululemon does not own any of its manufacturing facilities. In fact, more than 36 percent of its product offerings are produced by 5 of its 45 manufacturers. If something were to happen to any one of these five manufacturers, it would have devastating effects on lululemon’s supply chain. Additionally, 90 percent of its products are produced in Asia, with 49 percent produced solely in China. Any global political or environmental events that affect this part of the globe would have material ramifications on lululemon’s product supply. The vast number of similar products available from many different brands means that buyers have multiple choices available to them. Additionally, lululemon’s products are on the high end of the price spectrum. A change in buying habits or a large decrease in discretionary spending could affect lululemon’s ability to operate as profitably as the company desires. Surprisingly, lululemon has continued to grow at an admirable pace in spite of the global economic downturn and decline in discretionary spending. Not only is it charging more than some, if not most, of its competitors, but it is selling more than it ever has. Its brand equity combined with extremely loyal customers and a highly successful grass- roots marketing campaign have made lululemon a force in the industry. Dance, Sing, Floss, and Travel The company relies on its ability to maintain the value and reputation of its brand by successfully anticipating and adjusting to customer preferences and changing needs. lululemon concentrates on providing an active and comfortable communication relationship with its customers. One example is the fact that executives go into the stores and observe customer behavior. Further examples include yoga instructors providing frequent and detailed inputs to the firm’s research and development process, sales staff treating their customers as guests rather than buyers, and apparel folding stations located near the dressing rooms so employees can over- hear and respond to comments and complaints. By building relationships with its customers, lululemon is better able to design and produce products that satisfy their needs. For instance, the design team “identifies trends based on market intelligence and research, proactively seeks the input of our guests and our ambassadors” to develop products in conjunction with suppliers. This process ensures that its products are of the highest quality and able to perform according to customer preference. Goal Setting Triggers Your Subconscious Computer The company concentrates on creating value through its grassroots marketing, superior service, and communication with customers. Supply-chain activities also play an interesting role in lululemon’s strategy. The company creates artificial scarcity through limited production runs and purposely seeks to maintain low levels of inventory. This strategy keeps the already sought-after clothing at a demand level that exceeds supply. As a result, lululemon rarely has leftover inventories, which serves as an advantage in the ever-changing retail industry. When new lines are released to the public, excitement is generated, and these lines typically sell out before their anticipated expiration date. 7 According to the Wall Street Journal, this creates a “feeling of scarcity that increases the psychological need to purchase the products.” Your Outlook on Life Is a Direct Reflection of How Much You Like Yourself The company relies on its unique capability to design and create technologically advanced products and market those unique products to a particular/targeted group of individuals. The company indicates that it may expand its product variety and target new market segments that share the same interests as the target market: healthy life- styles and stylish performance wear. Sweat Once a Day The vast majority of lululemon’s revenues come from product sales in its stores located throughout the world; but a small portion comes from sales at the five ivivva branded stores. The company notes that ivivva’s clothes are for very seriously active girls. The products are designed with inputs from several parties including ice skaters, gymnasts, and dancers. At least in the near term, if not the mid-term as well, revenue growth is expected to come from newly established lululemon locations, increases in ivivva’s sales, and from additional online sales activity. Finally, two percent of total revenues come from wholesale operations. Revenue from whole- sale operations – originating in premium yoga studios, health clubs, and fitness centers – are not expected to grow dramatically. Wholesale operations are viewed as offering “an alternative distribution channel that is convenient for our core consumer and enhances the image of our brand.” Do It Now, Do It Now, Do It Now The company’s success has been built on lululemon’s ability to deliver quality products that are carefully and successfully tailored to address customers’ preferences. The company has been able to create these products through input received from customers and through its grassroots marketing that utilizes ambassadors, such as local athletes and yoga instructors. As the company grows in size and continues to expand globally, can it maintain the community-centered and symbiotic relationships it has historically relied on for success? International growth is another issue for lululemon to consider. To date, lululemon has expanded internationally into various countries such as the United States, Australia and New Zealand. These developed countries share common languages and have similar cultures, meaning that the barriers to expansion in these countries are lower than the barriers in emerging markets such as China and India. With further expansion, will the company be able to replicate its success in countries with significantly different cultures? Expanding overseas is not necessarily a panacea, either. Nike, the world’s largest sporting-goods company, shows the troubles Lululemon’s high-priced products may face abroad. The Beaverton, Oregon-based shoemaker in September said it had resorted to discounting merchandise in China to clear inventory that wasn’t selling well, which was in turn hurting demand for new products. In addition to cost, culture might 8 derail lululemon’s international expansion. Already, a few sections of people in the U.S. who subscribe to the traditional norms of dressing in public are raising an alarm about yoga pants becoming a mainstream clothing alternative, and lululemon might face a much bigger backlash in conservative societies such as China, India, etc. Life Is Full of Setbacks Lululemon founder Chip Wilson is thought of by many as a man with unorthodox opinions. For instance, in a 2009 interview with Canada’s National Post Business Magazine, he admitted to having chosen the company name because “it’s funny to watch [Japanese] say it.” Wilson also stated on a blog his opinion that the rise in divorce rates and breast cancer among “Power Women” was due to a combination of smoking, taking birth control pills, and the additional stress which came from taking on the career responsibilities once held mostly by men. He attributed Lululemon’s growth as stemming from the coming together of “female education levels, breast cancer, yoga/athletics and the desire to dress feminine.” A more recent ethical problem for Lululemon occurred in March 2013, when they released black Luon yoga pants that become sheer when the wearer bends over. They instituted a massive recall which comprised 17 percent of all the women’s pants sold in their stores. Afterward, investors attempted to sue Lululemon, claiming that they purposefully hid defects in the pants. However, the lawsuit was dismissed the next year. A few months later, in November 2013, Chip Wilson defended his product by suggesting that women’s bodies are to blame for the fabric’s sheerness and their tendency for pilling. He also claims that many women buy pants that are too small for them, which wears them out. Critics viewed this as a sexist comment, exacerbating the issue at hand. In the midst of consumer outrage, Wilson stepped down as Chairman of the Board. Listen, Listen, Listen Lululemon is known for wanting to avoid collecting large amounts of customer information through big data techniques. Instead, they desire to have a close and open relationship with customers. One of the ways they do this is by listening to customers as they shop in the store. Lululemon takes customer complaints or concerns seriously and will attempt to make decisions based on this information. Although this emphasis on listening to the customer is an important part of Lululemon’s customer relations, some people believe Lululemon takes it too far. A less well-known ethical risk that the company practices is the training of retail employees to eavesdrop on their customers. Christine Day, the former CEO, used to spend much of her time in retail stores, pretending to be a customer, in order to listen to complaints and observe shopping habits. When she was with the company, she had stores set up their clothes-folding tables next to the fitting rooms so employees could better overhear any complaints. 9 Source: 1. Jenna Beyer, Leon Faifman, Eric Ho, Miso Kezunovic, and Lance Olian, lululemon athletica Inc., 2014 2. Justus Adams, Kristen Bruner, Ivan Mora Juarez, and Jennifer Sawayds, Lululemon: Encouraging a Healthier Lifestyle, 2014 10 1. Analyze the impact of the general environment on Lululemon's business. Highlight the demographic segment, global segment, political/legal segment, sustainable physical segment, and sociocultural segment. Lululemon is a designer, distributor, and retailer of healthy lifestyle inspired athletic apparel and accessories that operates mainly out of North America. For Lululemon's business, some factors in the general environment that impact the firms’ performance showing as following. Demographic segment Lululemon targets to customers who love an active lifestyle. The majority of shoppers are females and they are in 15 to 65-year-old range. In terms of population, the potential market for lululemon products is more than 105 million women. In the United States, it accounts for more than two-thirds of the female population. Not considering men, children and international clients, the potential is obvious that Lululemon has a large customer base. Global segment With an increasing number of females interested in Yoga activities. Lululemon gain a lot of attention from international females to buy their products. As a result, Lululemon has expanded internationally into various countries such as the United States, Australia and New Zealand. From those successful expansion, Lululemon is keeping increasing its expanding in various countries to increase its productions. Political/legal segment The political and legal issues in many countries brings a lot of uncertain problems for Lululemon’s operation. The political and legal issues would be different in different countries. For example, an unstable political and legal country cannot deliver the products to some international markets which will force the company in a situation of out of stock. This situation will directly lead to a reduction of sales and a large of its customers would change their ideas on buying Lululemon products. Sustainable physical segment With more concerning on sustainability, many customers are paying more attention on green products. Lululemon’s physical environment is taken into consideration in the company’s operations. The mainly is reducing paper use or packaging waste at its corporate offices or gathering fabric remnants at its factories, lululemon is constantly striving to reduce its environmental footprint. Sociocultural segment To share their clothing and culture, company invest a lot of money and effort to train their store employees to explain functions of clothing, functions and its lifestyle culture. Already, yoga pants becoming a mainstream clothing alternative in the United States. However, it would be a challenge to expand to China and India because bigger backlash in conservative societies such as China, India. Hence, Lululemon has to stop its international expansion for a while. Q1 professor comments: needs to highlight lulu's global supply chain, the impact of trade barriers, tariffs, and both international and domestic regulations, and the social trend toward healthy life styles in general. 2. Identify Lululemon's internal strengths and weaknesses based on the case facts. Internal strengths Lululemon offers the innovative and different product styles to keep its customers coming back and bring more new customers in. The style of the product has a variety of designs. Some products have intricate designs, and mesh and other materials are strategically placed throughout the process to create a more breathable and comfortable workout which benefits consumers. These different designs make the product suitable for any situation. For running, going to the gym to exercise, marathon, or a yogi. Lululemon ensures that style and products are right for every sport. High quality is another strength of Lululemon. By building relationships with its customers, design team “identifies trends based on market intelligence and research, proactively seeks the input of our guests and our ambassadors” to develop products in conjunction with suppliers. This process ensures that its products are of the highest quality and able to perform according to customer preference. Also, Lululemon has 45 material patents and is a registered trademark for a variety of products, fabric names and images. From those, Lululemon can distinguish itself and protect itself from competitors. What’s more, Lululemon has an innovation strength. In the company, they use they keep innovating new materials and designs to attracting their customers. The company identify the new trends that the firm can serve by developing new products to enter new markets. Internal weaknesses First of all, high price product would be the weakness for Lululemon. One of lululemon’s signature items is its yoga pants, typically sold by competitors for between $25 and $50. Yoga pants available in lululemon stores and online range between $78 and $128 with its most popular pair priced recently at $98. The high price would reduce some of customers because they can buy cheaper products from Nike or other sports stores. Secondly, changes in international trade laws could have a detrimental effect on lululemon’s operations. Uncertainties in political and legal areas also affect lululemon. The company has manufacturing facilities in the United States and Canada, but it also relies heavily on its factories in China, Taiwan, South Korea, Peru, Israel, Cambodia, Thailand, and Vietnam. Because the rules and regulations play a significant role in getting the company’s products to market in a timely manner. A weakness for the firm would be the tax and political issues. Which will put the company in a weakness in its operation. Q2 Professor comments: could include additional strengths such as its brand, customer loyalty, culture, employees as well as additional weaknesses such as its niche focus and limited selections etc.. 3. What challenges will Lululemon face when expanding into Asia (focus on factors such as culture, pricing, brand awareness, positioning, customer acquisition, distribution, etc.)? Given your analysis of the firm's external and internal environments, what international corporate-level strategy would you recommend for Lululemon? Why? Some challenges Lululemon would face when expanding into Asia. It would be very hard to attract the attention from Asian customers. First of all, the language would be a large barrier. The employees in Asian stores may cannot have a better understand on the products. In Asia, there are many different languages in different areas, so every local store would need local employees to speak their language. It would be a big challenge for manage and monitor all the employees. Secondly, the price is compared too higher than some other sports wear. So many customers would not be going to buy Lululemon products. The income in developing country are low than developed countries. So, they will treat Lululemon as luxury products and most people cannot afford. They would think it is an unnecessary to buy the luxury sports wears. Thirdly, Lululemon’s target products are on yoga products, it lacks a diversification or product segmentation. Most Asian has already known the famous brand of Nike and Under Armour, very few people know the Lululemon brand before. Also, the customers really are not interested in yoga products. So, this would also be a challenge to expand its brand in Asia. Some challenges are resulted in expanding to Asia because of the cultural difference and different business strategies. Asian culture is strict on dressing codes for their females. If Lululemon want to enter the Asian market, I would recommend the strategic alliance to enter the Asian market. Lululemon can corporate with some Asian sportswear companies to provide the products according to local response. It is a fast way to help them understand the Asian market. What’s more, Lululemon can combine the resources with the local factories to produce low cost products to enter their markets. Q3 Professor Comments: cultural differences in Asia need to be elaborated and a specific international strategy (not entry mode) needs to be recommended. 4. What ethical issues has Lululemon experienced over the last few years? Analyze the impact of each ethical issue by addressing a) the stakeholders involved, b) consequences of the ethical issue AND c) how Lululemon could have handled these issues differently. An ethical problem for Lululemon happened in March 2013, because they released black Luon yoga pants that become sheer when the wearer bends over. This has resulted a massive recall. After this recall, investors attempted to sue Lululemon, claiming that they purposefully hid defects in the pants. However, the lawsuit was dismissed the next year. After that, Chip Wilson defended his product by suggesting that women’s bodies are to blame for the fabric’s sheerness and their tendency for pilling. He was considered racist and then Wilson was forced to step down as Chairman of the Board. And he makes apologize for all females and believed that it will not happen in Lululemon. Another ethical practice for the company is Christine Day, who used to spend much of her time in retail stores, pretending to be a customer, in order to listen to complaints and observe shopping habits. When she was in the store, she had stores set up their clothes-folding tables next to the fitting rooms so employees could better overhear any complaints. This is considered to be hearing personal privacy. The result has forced her to leave too. They can do some survey to collect the comments and complaints to analysis the problems for the company. However, she did not. Q4 Professor Comments: the impact of the said ethical issues need to be specified and additional ethical issues such as the founder's other controversial remarks, false advertising could be addressed too.
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Running Head: LULULEMON CASE STUDY

Lululemon’s Case Study
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LULULEMON CASE STUDY

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Lululemon Case Study

Q1, Analyze the impact of the general environment on Lululemon's business. Highlight the
demographic segment, global segment, political/legal segment, physical environmental
segment, and sociocultural segment.
Introduction
Lululemon is a Canadian retailer and designer of athletic apparels for men, women, and
girls. It designs and manufactures fitness products such as yoga pants, tops, accessories and
bottoms (Ganin, 2014). The firm began in 1998 under Chip Wilson, and currently, it has almost
404 stores in more than 12 countries in the world.
Demographic segment
The products manufactured by Lululemon target individual who lead a healthy and active
lifestyle that is people who engage in exercising, going to the gym and yoga. Majority of these
shoppers are young women and young men (Roy and Banerjee, 2014). Many of its buyers are
from the age of 15 to 65 years with women and girls making up 2/3 of those buyers.
Global segment
The firm has had plans to cross the border for a long time majorly due to globalization.
The domestic regulations have influenced it in many ways whereby in countries where the d
regulations are not strict it has had an easy way through and vice versa (Lavrence and Lozanski,
2014). In 2010, the firm had to comply by the California transparency in supply chains act of
2010 that required it to disclose data on its supply chains to prevent slave labor and human
trafficking.
Political segment

LULULEMON CASE STUDY

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The politics of a country or region determine the success of firms. Political aspects like
treaties and pacts play significant roles in the trade. In our case, Lululemon has benefited from
the North American free trade agreement, NAFTA that allows the Canadian firm to trade freely
in the United States where it has a vast customer base (Lavrence and Lozanski, 2014). The tariffs
and eased internal regulations have benefited the entry of Lululemon into foreign countries. The
strict domestic rules have however made it difficult for the firm to enter the Asian markets.
Physical environment segment
Many customers are now trying to leave healthy lives and are going for green products.
Lululemon has incorporated this in their operation by using biodegradable materials in packing
their products and gathering remnants of their fabric. As a result of global warming effects, some
countries are experiencing a lot of colds and hence have to go for warmer clothes which affects
the firm, but the global warming has brought a lot of heat than cold and hence their light and less
warm products are suitable.
Social-cultural segment
The firm’s products get geared towards creating a society that is healthy and fit, and this
aspect is stipulated in its products and...


Anonymous
This is great! Exactly what I wanted.

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