Download - Lululemon Competitive Advantage

7/22/2019 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