CASE STUDY: PROJECTIONS, NPV, COMPILATION ASSIGNMENT

BUSI 690

Policy and Strategy in Global Competition

3/2/2022

Case Study Assignment: Lululemon Athletica Inc.

Executive Summary

Lululemon Athletica Inc. is one of the leaders in selling athletic apparel worldwide. The company focuses on healthy living and ensures their clothing provides comfort while performing strenuous activities. Lululemon is a yoga inspired clothing store but also makes a variety of other clothing. Some of the items include T-shirts, sweatshirts, pants, and shorts. The company wants its customers to know that they sell a lifestyle vice just selling clothing. As of February 2020, the company has 491 stores in 17 countries and an online presence on its website (Thompson & Harris, 2022). The company was founded in 1998 in Vancouver, Canada, by Chip Wilson. In the store, he sold clothing that he and his wife created. With the success that he received at this location; Chip decided the company. Chip’s intent was to create quality products to people who intend to live a healthy lifestyle.

Currently, the company has seen success as an international brand with about 300 stores that spans across Canada, the United States, India, Israel, China, and many other countries worldwide. The brand became so popular that mall owners/operators began seeking leasing options for the foot traffic they knew would come with the partnership. The company has seen success but not with seeing issues and problems. An ethics issue was discovered at their Youngone factory located in Bangladesh. The female workers at this facility reported verbal abuse, being beaten, being forced to work overtime, and being underpaid (Logan, 2019). Another issue was when the company was forced to pull certain yoga pants form its stores after finding out it was see-through when the individual bent over. This report offers a new mission statement appropriate for the brand and aligns with its business strategy. Based on the financial analysis conducted, alternative strategies have been proposed to ensure continues success of the company.

Existing mission, objectives, and strategies

Lululemon's mission statement states, "To elevate the world from mediocrity to greatness." The company's mission is to "Creating components for people to live longer, healthier, fun lives." Their mission/mission statement suggests that the company has a different perspective from other athletic brands and any other businesses. The statement indicates that the company wishes to give its customers a lifestyle rather than another company with a brand.

Objectives

Elevate the world by realizing its full potential. Inspire change by transforming its industry and creating a healthier world. The company has a set of values that puts quality first. The aim is to provide customer satisfaction and ensure the customer receives what they were told they would receive. This shows that the brand is committed to changing as the world changes and the styles change as they maintain their lifestyle of comfort clothing. An example of this would be the convenience of shopping online.

Strategies

The company aims to grow the business in North America, where most of its revenue comes from. Once the company has grown in North America, they would like to expand to other countries even more than they are currently doing. Another strategy would be to increase their brand awareness online and through their customer service. Another strategy the company wants to introduce is increasing their new product technology. The company also introduced its pickup in-store option when customers order online. Doing this gives customers the comfort of shopping at home but still receiving the same experience of shopping in-store. The company has seen sales increase by 45%, and direct-to-consumer revenue jumped to 155% in Quarter 2 of 2020.

New Mission Statement

· Customers: The study suggests that the company targets men and women in middle

upper class and higher. The company initially targeted women that were interested in yoga. As the study stated, this is the case that yoga paved the way for their company to expand. In 2013, the company aggressively took more consideration for their male customers. Their focus was an age group of men concerned about living a healthier lifestyle.

· Products or services: The firms' major products are athletic wear and mainly catered to

their female customers. Their attire allows its customers to accomplish activities feeling comfortable but trendy. The yoga pants that the company sells promote fitness and encourage a particular lifestyle. Lululemon's product innovation uses updated technology that makes the customer feel comfortable. The technology used in their products makes it easier to consume sweat and is breathable. Their services allow them to partner with yoga studios and run clubs.

· Markets: As the case study suggests, the company continues to add Lululemon stores in

its primary United States market and as well as worldwide. The company included 16 new stores in China throughout the years and planned to add more in 2020. The company also opened stores in Japan, Germany, France, the United Kingdom, Malaysia, Netherlands, South Korea, and many other countries. As clearly illustrated, the expansion allowed the company to report incredible advancements with their strategic progress in geographical market expansion.

· Technology: As indicated in the case study, the company continues to improve

In the technological area. The company focused on creating and providing products that introduced fabrics with technological improvements and performance-enhancing features throughout the years. These technological upgrades to their products have assisted the company in expanding its market share worldwide. Customers enjoy wearing Lululemon's products because of its technology and how it makes them feel about themselves. As the company makes new products, they continue to incorporate technology within their product lines.

· Concern for survival, growth, and profitability: The company understands that the

the only way they will survive in this market is through expansion. Direct-to-consumer sales through their website have become a critical component for the company. As indicated in the reading, in 2011 the lululemon's e-commerce sales increased from $106.3 million to $1.14 billion in the financial year ending 2019. During the pandemic, Lululemon's majority of retail outlets in the domestic market were closed. Like many other businesses that figured it out, ordering online became the way to continue profit. This showed that the company could adjust through diversity overcome slight roadblocks and profit.

· Philosophy: The company takes its philosophy stance seriously as it aligns with its core

values and its mission. As it states, it allows "people with the components to live longer, healthier and more fun life." Lululemon is set up to and has arranged to operate the company in the methodology in which it is stated within their mission. The company attempts to manage its staff ethically and encourages all to follow its motto. Ensuring the company is managed accordingly starts with the staff then the suppliers to ensure the products are produced and sold within company standards.

· Self-concept: Lululemon's specific product design and its processes for innovation is the

The reason it can make quality products. This is believed to be the key to its competitive strength. Lululemon had to make well-designed products that offer a comfortable fit and competitive pricing to be competitive and set itself apart in this competitive athletic apparel market. Within this market, the company competes with brands such as Nike, Adidas, Reebok, and Under Armor, as stated in the strategic group map within this paper. Additionally, the company sets itself apart by focusing on the customer and what they want. Lululemon understands the importance of customer relationship management and promoting brand loyalty. This is part of their strategic market approach.

· Concern for public image: Yes, the company is responsive to community needs through

its business processes. One way it does this is by "Omni Guest Experiences." It uses a marketing strategy that connects them with people who shop at its stores. The company creates opportunities through communities to live "sweatlife" and live long healthy lives. Through this avenue, people can connect. The company also takes part in dealing with environmental issues by following environmental protection protocols in its supply chain and within the community.

· Concern for employees: es, employees are an asset to the firm. Lululemon

provides its staff members with a supportive and encouraging working environment. It aims to encourage its employees to set goals in their personal and professional life. The employees are valuable assets of the company, and it shows in the numerous employee programs that lululemon offers. Some of these programs include personal development workshops and goal-coaching courses, just to name a few.

SWOT Analysis

A successful company such as Lululemon Inc needs to identify its areas of concern. To do so, it first needs to be identifying their issues by creating a SWOT matrix to include the four categories. When thoroughly conducted, the chart will show the company the improvements it needs to improve its sales or achieve sales goals.

Strength

Lululemon was created to create apparel for people to live healthier lives and have fun doing so. The first thing someone needs prior to starting a business is vision. In 1998, Wilson had a vision to "elevate the world from mediocrity to greatness" (Thompson & Harris., 2022, pg. C-81). The company hoped to serve their customer at all costs and be a leader in customer satisfaction. Understanding this, their strength is the detail they put in their clothing. Their fabric's comfortable fit and feel has made them a trusted brand. The technology that the company puts in its line cannot be duplicated. The clothing prevents odor as the material restricts bacteria and can be washed often without worrying about washing away (Thompson & Harris, 2022).

Another strength the company possesses is being aware of its brand and the market. From the date of conception, the company has never switched or changed who they were. Lululemon Inc. has gained notoriety from its competitors as well as customers. Due to brand awareness, the company has jumped from 40% in sales in 2020. Wilson has also created a strong relationship within the community. The company's mission statement resonated with its core audience.

Weaknesses

The company's weaknesses may be attributes that they stressed with their strengths. Lululemon has a reputation for creating comfortable and excellent quality clothing. This is all too apparent because it is part of its mission statement and sales strategy. In 2013, the company saw issues with one of their pants lines that recalled the item. Another recall occurred in 2015 where the tops were said to have an issue with the neck area. All these concerns with the clothing did do not reflect their mission statement.

Another weakness the company has is its pricing compared to all its competitors' prices. The company has set itself as a high-end company, while its competitors like Under Armor sell affordable clothing with the same comfortable quality. Another weakness would be the constraints on the company with supply chain issues.

Opportunities

When speaking of opportunities, the company has left an opening in the market for its competitors. Through the years, Lululemon has focused on women's apparel. The company's competitors have seen significant gains with men's athletic apparel, which has accounted for over half of their sales. In 2020, research showed that more men are shopping for athletic gear than women. Men are now accounting for more of the sales than women. With the growth of men's athletic apparel, the company should try to focus on shifting its focus on capitalizing on the recent surge of sales. CEO Laurent Potdevin stated, " Retail is evolving at an increasingly rapid pace" Potdevin added, saying, "consumers now connect with brands in a way that is driven by experiences, rather than transactions" (Shaw, 2016).

A great opportunity for the company would be to open more stores in the United States. In 2020, the U.S will lead apparel sales within the market with sales of 160 billion dollars. In 2021. According to the article, "The market is growing enormously, as people are progressively enticed by the product's capability to offer sweat-wicking and breathability and enhancement of physical movement" (Fortune Business, 2021).

Threats

The critical threat that should be listed is the threat of other companies. The price of their competitors is reasonable and well below that of Lululemon's. The price of yoga pants was 20% lower than that of their competitors. Other stores also provide significant discounts that Lululemon does not. Another threat is that Lululemon does not provide a wide range of sizes like its competitors. The company typically caters to smaller sizes like sizes 2 to 12. At the same time, other stores like Under Armor sell XL and XX clothing. The final threat might be the possibility of a company creating better quality at a better price than Lululemon. The company must remain vigilant and continue looking for better quality at an affordable cost.

SWOT Analysis Chart

Internal Factor Evaluation (IFE) Matrix

External Factor Evaluation (EFE) Matrix

Tows Matrix

The TOW Matrix listed will assist in the strategic planning that Lululemon can use to enhance its strengths, eliminate its weaknesses, and avoid the challenges identified within the threats. The Matrix shows how the company can benefit from opportunities to enhance its profit margins.

TOW Matrix Chart

Strategic Group Map

The strategic group map of Lululemon depicts a brand that all belongs to the athletic apparel market. The prices, the quality of the brand, and the customer's viewpoint then its reality the group map depicts them as such. Lululemon has made a name for the brand by having good quality products. The company also has a substantial female following. The Under Armer and Columbia company is more well-known and caters to a broader market with more sports apparel. Nike, Adidas, and Reebok are the signature brand. They are well known in sports and highly marketable within sports franchises. As shown on the map, these companies are highly favored and have a competitive edge over the other companies. The companies listed are highly competitive and are some of the world's most recognized brands within the market. As listed, "The annual revenue of these three competitors approaches $50 billion, with Nike achieving revenues of more than $25 billion, Adidas nearly $20 billion, and Under Armor topping $2 billion" (Jensen et al., 2016, para. 2).

Strategic Group Map Diagram

PESTLE’s Analysis

Political

The company was able to stay ahead of the tariffs bill enacted for China. The company has limited its exposure to China as the U.S placed a levy of 15% on most clothing from China. The company was well ahead of the bill, shifting to other locations.

Economical

Canada remains a stable country with no significant economic issues that could affect the companies' earnings. This also factors the pandemic that plagued the country and the rest of the world. Its Canadian clients are willing to spend their money, and the company is thriving within that market

Social

Certain social factors drive every market. This will determine how customers and clients respond to the market. The company could use yoga as a feel-good experience and create an experience for their customers. Also, In the wake of Covid-19, people stopped going to the stores and started buying products and merchandise online. The company was able to capitalize on and improve its online presence. Store sales suffered due to closures, but the company's online business surged 70%, accounting for 54% of overall sales compared with 27% a year earlier (Terlep, 2020).

Technological

The company has invested accurately in the latest technology through sound and deliberate strategic moves. This strategic step has given the company the ability to improve the efficiency of its product and maintain customer satisfaction. Doing this has also secured their competitive advantage over their competitors.

Legal

Not all companies can follow all rules and regulations dictated by certain regions that they operate in, but lululemon has followed the legal stipulations by law. They have remained compliant with regulations as required to operate. They have avoided fines that would affect their bottom line.

Environmental

Lululemon strives to lead from the front in limiting emissions within the atmosphere. The company also manages its waste accurately before it goes out in the environment. They understand that if they do not respect the environment, it may negatively affect their reputation.

PESTLE Chart

Porter’s Five Force’s Chart

Competitive Rivalry

Lululemon has multiple competitors, and they are aware of that. Some of these competitors are Nike, Adidas, Reebok, and Under Armor, just to name a few. As far as cost, Lululemon prices are higher than their competitors, and the company does not provide discounts on their product, unlike its competitors, which offer a more comprehensive range of discounts.

Supplier Power

Lululemon has a great partnership with its suppliers. This is due to having multiple suppliers throughout different countries with which they have created a strong relationship. Due to their strategic approach, lululemon has enforced strict ethical manufacturing practices within the facilities.

Buyer Power

Lululemon does not offer discounts on its apparels at their main store. The company does provide discounts on merchandise but only at their few outlet stores. The company prices on their products are much higher than their competitors, but it is due to the material and fabrics they use to make their products. The company states that premium raw material is what they use, and the cost of those materials is much more than what their competitors are using.

Threat of Substitution

Many athletic gear producers within this market, such as Nike, Adidas, and Reebok. These companies make it easier for lululemon customers to stay loyal to the company. The loyal consumers of the lululemon company would consider these companies as substitutes. Meaning their quality would never match up to those of lululemon.

Threat of New Entry

The possibility of new entry within the industry of high-quality athletic gear is low. This is because the apparel market requires a large amount of capital even to begin. If a new entrant attempted to step into the market, the new company would need much money to compete.

Porter’s Five Force’s Chart

Threat of new entrants