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

    Industry

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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

    Industry

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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

    Industry

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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