Lululemon Competitive Advantage
Transcript of Lululemon Competitive Advantage
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Introduction
Industry Attractiveness
Strategy
Internal Capabilities
Summary
Final Presentation:
Lululemon Athletica
MGMT 561October 17, 2013
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IntroductionLululemon Athletica
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Founded in 1998 by Dennis Chip Wilson Fitness activities include yoga, dancing and running Basic business model Fashion-forward Innovative and creative Increasing sales
Introduction
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Sports apparel focused on yoga & performance technolog Competing with Nike, Under Armour and Athleta (Gap) $114 billion industry according to Global Industry Analyst U.S. sales of womens active wear $13.7 billion U.S. sales of mens active wear $12.7 billion
Industry AttractivenessThe Industry and the Economics
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Sales Trends Industry
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Sports Meets Fashion Industry
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Celebrity Collaborations Industry
Kate Hudson for
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Five Forces that Shape the Industry
Rivalry amongexisting competitors
HIGH
Threat of substituteproducts
HIGH
Threat of newentrants
HIGH
Bargaining power ofsuppliers
LOW
Bargaining power ofbuyers
LOW
Industry
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Bargaining power ofbuyers
LOW
Bargaining power ofsuppliers
LOW
Strong brand recognition
Large number of customers Strong relationship between store
and customer Take-it-or-leave-it pricingapproach
Various suppliers and highcompetition among them
Diverse distribution channels
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Threat of substituteproducts
HIGH
Existence of close
substitute productsincrease the propensity ofcustomers to switch toalternatives in responseto price increases. Is there and attractive
substitute whichcustomers can easily shiftto if the cost is low?
$108 $74 $175
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Industry
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Rivalry amongexisting competitors
HIGH
Intense competition from the well
capitalized companies like Nike,Under Armour and newer players
Nike and Adidas, haveconsiderably larger resources attheir disposal
- making a play within the performance apparelmarket to gain market share in this upcomingproduct category
These larger companies couldleverage their strong brand
recognition and marketing effortsto enhance their presence in
international markets- Lululemon has a limited presence. derives only
6% of its revenues from the international markets
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Industry
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Threat of newentrants
MEDIUM/HIGH
Highly saturated and challenging
industry Large capital required forbranding and creating productdemand limits entry of newentrants The demand for performance
apparel, sports footwear andaccessories is expected to
continue to grow- Areas of focus: technology, functionality, pricing
and cost of production
Brand and consumer preferencewill be keys to continued success
Industry
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Trends Changing the Industry Industry
1. Fashion and Function
2. Sweat working!
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Created a powerful new brand Business strategy is to keep things simple. A distinctive corporate culture with a mission toproviding people with the components to live a longer,
healthier and more fun life Innovative, functional, and trendy items; Specifically
thought out designs for women and men Technical elements including seamless stitching,breathable fabric, antimicrobial fabric
StrategyAt a Glance
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Strategy
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Strategy
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Customers are willing to pay a premium forperformance apparel.
Retail Monitor Survey Strategy
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Fashionable and functional
Product Differentiation Strategy
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Unlike most retailers Lululemon does not:- use software to gather customer data
- does not offer discounts- purposely stocks less inventory
Strategy is getting the product right and keeping it
scarce The goal is to sell full priced apparel and tocondition customers to buy when they see an itemrather than wait. They release new items weekly insteadof seasonally to create this fanatical shopper.
Inventory flow and product differentiation continues tobe what drives Lululemons sales.
How Strategy is Delivered Strategy
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Strategy
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Complimentary Saturday morning yoga session on
Church Street, Montclair, NJ.
Connecting with the Community Strategy
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Product implementation is a crucial issue forLululemon to manage. Future success will be greatlyaffected by:
- How consistently the right product mix gets into their stores and on theirwebsites worldwide
- How they will manage product differentiation in the long term againstcompetitors such as Nike and Under Armour
Our Opinion Strategy
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Internal Capabilities
Lulu Nike UA
2012 2011 2012 2011 2012 2011
Return on Equity 36.35% 36.98% 22.00% 21.80% 15.80% 15.40%
Gross Profit Margin 55.67% 56.88% 43.59% 43.50% 47.92% 48.40%
SG&A Expense as aPercentage of Revenue
28.20% 28.21% 30.74% 30.28% 36.55% 37.35%
Free Cash Flow $186,880 $86,960 $42,896 ($98,675) $166,457 ($28,486)
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(In Thousands) Net Revenue CGS Gross Profit SG&A
2009 452,898,000 229,812,000 223,086,000 136,161,000
2010 711,704,000 316,757,000 394,947,000 212,784,000
Percent Increase 57.14% 37.83% 77.04% 56.27%
Lululemon Capabilities
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Capabilities
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Yoga Tanks Yoga Pants Sports Bra
Lululemon $42 $82 $42
Nike $30 $60 $30
Under Armour $23 $55 $30
Capabilities
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Product design Unique market strategy Customer service
Value Added
Weaknesses
Increased inspection time Product mix
Capabilities
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Capabilities
0
500000
1000000
1500000
2000000
2500000
3000000
Revenue Cost of Goods Sold Gross Profit
Lululemon Annual Data and Estimates(in thousands)
2015 2014 2013 2012 2010 2009 2008
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Industry Competitors Strategy Capabilities
Summary
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KOWITT, BETH, and COLLEEN LEAHEY. "LULULEMON: In An Uncomfortable Position." Fortune International
(Asia)168.5 (2013): 110. Business Source Complete. Web. 12 Oct. 2013.
Lululemon Athletica. Company History. Web. 08 Oct. 2013.
The Washington, Post. "Honest about his tea ... . .. and inspired by Lululemon." Washington Post, The Apr.
0010: Regional Business News. Web. 13 Oct. 2013.
Works Cited