Case Questions: Lululemon Athletic, Inc.

2021-05-19 09:53:44
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How strong are the competitive forces confronting Lululemon in the market for performance-based yoga and fitness apparel?

Lululemon faces a lot of competition in the manufacture, sale, and distribution of the yoga and fitness attires. Competition in this industry is primarily centered on quality, performance, styles and fitness, innovation, distribution, prices and brand recognition. In these regards, the rivalry is vigorous. The market is very competitive as established companies seek to exert their dominance by expanding production and while those seeking to enter the market facing an uphill. Lululemon faces competition from the like of Nike, Adidas, Reebok, Under Armour, the Gap, and Athleta among others.

Nike is a dominant force in this industry having begun its operation way before Lululemon opened shop in Canada. It is a well known and powerful brand name globally with an extensive line of various sports apparel. In fact, as of 2012, when Lululemon was enjoying its best years financially, Nike was ranked as the largest sports and athletics seller worldwide.

Another force to reckon within this industry is both Adidas and Reebok. The two companies were already a global brand before Lululemon had established a voice in this industry. They both boast of very high tech quality garments of a different variety from sports to athletics and yoga apparels. As of 2011, Adidas was selling its merchandises all over the worlds while Reebok was not so far from that reality.

Other market competitors considerable threat include a recent entrant, Under Amour, the company specialized in designer sports apparels. And as of 2011, it had established itself as a formidable force from its revenue collection. The Gap, a fashion chain company, penalized in body fit collection of lifestyle products. And last but not least was Athleta, an online retailer specializing in high-performance women workout apparels and sports attires.

Is Lululemon well positioned vs. its competitors? Why or why not?

Due to its operation in a market flooded with numerous similar companies manufacturing and distributing the same merchandise, Lululemon has had the challenge of positioning itself as a force to reckon with, however, in some respect, it has managed to assert its position as far as market dominance is concerned.

Lululemon boasts a premium brand followership and loyalty. Its products are very popular, especially among the educated, high-income, health conscious women. Their apparels, from the yoga pants, shorts, and other comfortable wears have led the industry in sales. This is in spite of the hike in prices. The company enjoys the most retail distribution in areas they operate in, and as the fitness consciousness continues, sales will continue to grow. Finally, the company continues to advance by increasing creativity and innovation and pushing the industry as far a possible something others companies especially the recent entrants cannot keep up with. And finally, the company has enjoyed a comfortable cash flow as from 2007; Lululemon strong balance sheet is unrivalled among most of its competitors with good financial returns, strong assets, and almost zero debts.

Nonetheless, Lululemon has found itself lacking in some ways, and has faltered in areas that could cost them the high loyalty they enjoy from their customers. One of the faults is their dynamic prices. Lululemon hiked its prices in 2012, with a very minimal increase in quality. Such a drastic measure had clear consequences as those who could not afford the new prices bought from competitors. Similar products in Nike and Under Amours companies were sold for much less. While such a move does not hurt the company immediately, in future when they intend to go to other markets dominated by their competitors, it might hurt their chances of success.

At the same, Lululemon does not have global brand recognition. The company had not intensified their global dominance past North America as of 2012, while its competitors, like Nike, were already enjoying global markets. At the same time, most of its apparel was for women and a small proportion made for men, unlike its competitors such as Adidas who made sports garments for everyone, men, women, and children.

What do you see as the key success factors in the market for performance-based yoga and fitness apparel?

The key to the success of yoga and fitness attire companies in the competitive market is based on how much a company position itself. The following are several factors that determine a companys success.

Product Quality: To gain customers loyalty and confidence, a company has to improve their product quality. This could involve seeking to know what product the customers want and making them to the standards they want. For sports apparels and yoga attires, it involves using the right fabrics.

Prices: Prices are amongst the biggest determinant of whether something will be successful in the market or not. The more important the price of a garment is, the more successful it will be in the market.

Performance features: Since these apparels involve a lot of movement that sometimes is random and rough, the material used to make them should be able to perform when it matters. High-performance apparels become popular with customers.

Fit and stylish: Customers, especially women want to wear something that is trendy and fits them right. The success of a garment comes down to how fitting or fashionable it is.

Brand recognition: Most people identify with certain brands since they have over the eyes commanded confidence and respects. Some brand like Nike and Adidas have global recognition, and their merchandise has enjoyed some significant share of market success.

What does a SWOT analysis reveal about the overall attractiveness of Lululemons situation?

The following is the SWOT analysis of Lululemon operations;

Strengths

Brand followership and loyalty: Its products are very popular, especially among the educated, high-income, health conscious women. Their apparels, from the yoga pants, shorts, and other comfortable wears have led the industry in sales. This is in spite of the hike in prices. The company enjoys the most retail distribution in areas they operate in, and as the fitness consciousness continues, sales will continue to grow. Finally, the company continues to advance by increasing creativity and innovation and pushing the industry as far a possible something others companies especially the recent entrants cannot keep up with.

Weaknesses

High Prices: One of the faults is their dynamic prices. Lululemon hiked their prices in 2012, with a very minimal increase in quality. Such a drastic measure has clear consequences as those who could not afford the new prices bought from competitors. Similar products in Nike and Under Amours companies were sold for much less. While such a move does not hurt the company immediately, in future when they intend to go to other markets dominated by their competitors, it might hurt their chances of success.

Lack of global brand recognition: The Company had not intensified their global dominance past North America as of 2012, while its competitors, like Nike, were already enjoying global markets. At the same time, most of its apparel was for women and a small proportion made for men, unlike its competitors such as Adidas who made sports apparels for everyone, men, women, and children.

Opportunities

Lululemons opportunities are expanding their brand globally as well as broadening their target customers to young children and men. Expanding the product globally include entering the markets in Asian, Middle East, and Africa. This will in no doubt increase their revenue. At The same time, they should make apparels for all persons in the society.

Threats

The athletics and sports apparels industry is very competitive in general. Lululemon faces a lot from multi-billion companies like Nike and Adidas who have been in operation for a very long time and have already established global dominance and loyal customers. The major threat posed by these companies is that due to the economies of scale they enjoy, they can lower the prices to levels that could force smaller companies like Lululemon to face severe losses or leave the market altogether.

What does the data in case Exhibit 1 reveal about Lululemons financial and operating performance?

Exhibit 1 depicts the companys impressive success and growth from the year 2007 to 2012. The company was projected to have an upward growth momentum since the year 2012, and each financial year had seen the company gross profit almost double. At the same time, its share was going to increase from $1.3 to $1.57 by the end of that year.

What recommendations would you make to Lululemon CEO Christine Day?

Considering the amount of opportunism the Company is missing out on, my advice to the CEO would be as follows: That the firm should venture into another part of the globe like the Far East, to countries like Japan, China Vietnam and the Philippines, and of course in Africa. Another recommendation would be to diversify their merchandise to target more customers like men and children. Still, I would recommend that she stabilize the prices, or even consider bringing them down to the level of their competitors.

Finally, the company needs to create a lot of brand awareness campaigns even in areas where it has established dominance, and even more where it wishes to start operating. Brand names that are popular attract some loyalty and this translates into more sales. Lululemon competitors like Nike and Adidas have a global presence, and this earns them lots of sales.

Reference

BIBLIOGRAPHY Thompson, A. A. (2012). lululemon athletica, Inc. Alabama: The University of Alabama .

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