Strategic Management

Case : Lululemon Athetica, Inc. In

2014:
Can the Company Get Back on Track?

Presented By :
Harris Torma Raya P. (15/387270/PEK/20820)
M. Reza Ariansyah (15/387296/PEK/20846)
Riana Purwandani (15/387315/PEK/20865)
Company Profile (Video 1)
 Company Background

Lululemon Athletica Inc. designs and retails

athletic clothing. The Company produces
fitness pants, shorts, tops and jackets for
yoga, dance, running, and general fitness.
Lululemon serves customers globally
through its online and 254 retail stores.
Company History
 Mission
Creating components for people to
live longer, healthier, fun lives.
Lululemon has developed a distinctive
community-based strategy that we
believe enhances the brand and
reinforces guest loyalty.
The key elements of the companys strategy
Design and develop innovative athletic apparel that combines
performance with style and incorporates real-time guest
feedback

Locate stores in street locations, lifestyle centers and malls

that position each Lululemon Athletica store as an integral part
of its community

Create an inviting and educational store environment that

encourages product trial and repeat visits

Market on a grassroots level in each community, including

through social media and influential fitness practitioners who
embrace and create excitement around our brand
The Yoga Marketplace
Accourding to the yoga journal Yoga in America :

In 2012, there were 20,4 million people in the United

State who practiced yoga. (million in a previous 2008)
82% in yoga exercise are woman
63% yoga parctitioners were in 18-44 age range.
44,8% beginners level
39,6% intermediate level
15,6% expert level
Spending on yoga classes, apparel and related items
was estimated $10,3 Billion in 2012 (up from
$5,7Billion in 2008).
 Case Story
In April 2014, Shareholders of lululemon athetica
a designer and retailer of high tech athletic
apparel letica brand names that offered
performance, fit,and comfort - were concerned
whether customers were losing enthusiasm for
the companys stylish, premium-priced products.

The lost sales, the additional cost incurred, and

the write-downs on the affected inventory all had
a significant negative bottom-line impact and
were a big reason why lululemons net imcome
rose a meager.
Lululemons Financial Highlights
YEAR 2011 - 2012 -
GROWTH
(fiscal) 2012 2013

20,8
Revenue 36,9% 16,1% %

14
Sales 16% 2% %

Net 43,7
47% 3,3% %
Income
Company Background

In 2007, the companys announced growth

strategy had five key elements:
1. Grow the Store Base in North America.
2. Increase our Brand Awareness.
3. Introduce New Product Technologies.
4. Broaden the appeal of lululemon
products.
5. Expand Beyond North America.
 Main Issue

What strategic actions could

lululemons management
initiate to get strong strong
revenue growth back on track?
 Laurent
Corporate Structure Potdevin
(CEO)

Tara Dalaney S. (EVP.

John E. Poseley Retail Op. North
Currie (CFO) (CPO) America)

Dennis J.W.
(Chairman Of
the BOD)

Michael Robert William Rhoda Martha

C. B. G. M.P A.M

RoAnn Thomas Emily

C. G. White
Core concept
The macro-environment encompasses the broad
environment context in which a companys
industry is situated.
PASTEL analysis can be used to assess the strategic
relevance of the six principal components of the
macro-environment :
The five competitive forces :

Competition from rival sellers

Competition from potential new entrants
Competition from producers of subsitute products
Supplier barganing power
Customer bargaining power
Using The Five Forces Model Of
Competition
For each of the five force, identify the different parties
Step 1 involved, and the specific factors that bring abaout
competitive pressures

Evaluate how strong the pressures stemming from each of the

Step 2
five forces are ( strong, moderate, or weak)

Determine whether the collective strength of all five

Step 3 competitive forces is conducive to earning attractive profits
in industry.
Factors Affecting the Strength Rivalry
Buyer demand is growing slowly or declining.
Buyer cost to switch brand are low.
Industry products are becoming more alike.
There is unused production capacity, and\or
products havehigh fixed costs or high
storage costs.
The number of competitors is increasing
and\or they arebecoming more equal in size
and competitive strength.
The diversity of competitors is increasing.
High exit barriers stop firms from exiting the
industry.
Factors Affecting the Threat of Entry
Economies of scale in production, distribution,
advertising, orother areas of operation
Experience and learning curve effects
Unique cost advantages of industry incumbents
Strong brand preferences and customer loyalty
Strong network effects in customer demand
High capital requirements
Building a network of distributors or dealers and
securingadequate space on retailers shelves
Restrictive government policies
Expected reaction of incumbent firms.
Factors Affecting Competition From Substitute
Product

Substitute Products Considerations:

Ready availability of substitutes
Pricing, quality, performance, and other
relevantattributes of substitutes
Switching costs that buyers incur
Indicators of Substitutes Competitive
Strength:
Increasing rate of growth in sales of substitutes
Substitute producers adding output capacity
Increasing profitability of substitute producers
Factors Affecting the Bargaining Power Of Suppliers

Supplier Bargaining Power Considerations:

Ready availability of supplier products
Criticality of supplier products as industry inputs
Number of suppliers of standard\commodity items
Buyers costs for switching among suppliers
Availability of substitutes for suppliers products
Fraction of supplier sales due to industry demand
Ratio of suppliers relative to industry buyers
Backward integration into suppliers industry
Factor Affecting the Bargaining Power Of Buyer
Buyer Bargaining Power is stronger when :
Buyer demand is weak in relation to industry supply.
The industrys products are standardized or
undifferentiated.
Buyer costs of switching to competing products are low.
Buyers are large and few in number relative to the
number of industry sellers.
Buyers pose a credible threat of integrating backward
into the business of sellers.
Buyer are well informed about the quality, prices, and
coasts of sellers.
Buyers have the ability to postpone purchases.
Buyer are price-sensitive when :
Buyer earn low profits or low income.
The product represents a significant fraction of their
Core Concept
The strongest of the five forces determines the
extent of the downward pressure on an
industrys profitability
Having more than one strong force means that
an industry has multiple competitive challenges
with which to cope
How Are Industry Rivals Positioned Who Is
Stongly Positioned And Whis Not ?
A Strategic Group
Is a cluster of industry rivals that have
similarcompetitive approaches and market
positions:
Have comparable product-line breadth
Sell in the same price/quality range
Emphasize the same distribution channels
Use the same product attributes to buyers
Depend on identical technological
approaches
Offer similar services and technical assistance
Using Strategic Group Maps to Assessthe
Market Positions of Key Competitors
Constructing a strategic group map:
Identify the competitive characteristics
that differentiate firms in the industry.
Plot the firms on a two-variable map using pairs
of differentiating competitive characteristics.
Assign firms occupying about the same map
location to the same strategic group.
Draw circles around each strategic group, making
the circles proportional to the size of the groups
share of total industry sales revenues.
Key Success Factors:
Are the strategy elements, product and
serviceattributes, operational approaches,
resources,and competitive capabilities that
are necessaryfor competitive success by
any and all firms in an industry.

Vary from industry to industry, and over

timewithin the same industry, as drivers of
changeand competitive conditions change.
Identification of Key Success Factors
What product attributes and service
featuresbuyers strongly affect buyers when
choosingbetween the competing brands of
sellers?
What resources and competitive capabilities
arerequired for a firm to execute a
successful strategyin the marketplace?
What shortcomings will put a firm at a
significantcompetitive disadvantage?
Industry Profitability Considerations:
The industrys overall growth potential
Effects of strong competitive forces
Effects of prevailing drivers of change in the
industry
Competitive strength of the firm: its market
positionrelative to its rivals, its capability to
withstandcompetitive forces, and whether its
position will changein the course of competitive
interactions
The success of the firms strategy in delivering
on theindustrys key success factors
Comparative market positions
 Target Consumer

32 year old female

Affluent earns >
$85,000 per year
Educated
Career and goal
oriented
Works out 4-5 times
per week
Confident
 7 Core Compents
Broaden the Lululemon product line
Grow the store base in North America, primarilly
the United States.
Open additional store outside North America
Broaden awarness of the lululemon and ivivva
brands
Provide a distincitive in-store shopping experience
Grow traffic and sales at the companys website
Incorporate next-generation fabrics and
technologies to strengthen consumer association
 Product Line Strategy
2014, Lululemon offered a diverse
and growing selection

Lululemons strategy of offering only

limited range of apparel sizes
Lululemons size range of 2 12
Retail Distribution and Store Expansion
Strategy

2010, top management determined that

having franchised store was not in
Lululemons best long-term strategic interests

Management would be concentrated mainly

in the United States and that Lululemon
would gradually expand into additional
counteries, primarly Asia and Europe
(company-owned stores or joint-venture)
 Lululemons Retail Stores
Location : primarly on street locations,
in upscale strip shopping center, in
lifestyle center, and in malls

2500 to 3000 square feet in size

Unique feature : has a class yoga

before or after regular shopping hours
Lululemons Retail Stores
 Wholesale Sales Strategy
Lululemons management did not want to
grow wholesale sales to these types of
establishment into a significant reveneu
contibutor

The strategic objectives of selling

lululemon apparel to yoga studios, health
clubs and fitness center was to build brand
awarness
Direct-to Consumer Sales Strategy
2009, Lululemon launched its e-commerce web site
to enable customers to make online purchases
supllements its already functioning phone sales
activitie
greatly extend the company market reach

Strategic benefits
Providing added convenience for core customer
Securing sales in geographic market where there
were no store lululemon
Helping build brand awarness
Product Design and Development Strategy

Lululemons producr design efforts were

ed by a team of designers based in
Vancouncer, British, Columbia.

Design team member regulary visited

retail stores

The design team worked closely with its

manufactures to incorporate innovative
fabrics
Focused Differention
Focusing on lifestyle perception

Creating superior products (features, design,

performance)

Striving for innovation and technologies

advances

Empharizing marketing and brand building

activities
 Lululemons Community Based Marketing
Approach and Brand-Building Strategy

Every lululemon store

had a dedicated
community
coordinator who
developed a
customized plan for
organizing,
sponsoring and
participating local
events
 Business Strategy Approach : Competitive Advantages
oga inspired athletic wear
Function is fashion
uilt to exceed expectations
vestment in quality fabric and trims
uropean counture inpired style with West Coast function and
ncourage healty living
ross-over functionality and appeal

Sustainable Advantages :
Has communiny that built awarness brand
Mapping Competitor
 Conclusion
Lululemons has some strategy
Product line strategy
Retail distribution and store expasion strategy
Wholesale sales strategy
Direct-to- Consumer Sales Strategy
Product design
Brand building strategy

Lululemon has some strategy, the strategy stay

in sync with the companys business strategy
 Recomendation
Recomendation for Lululemon is to create a
luxury brand to target high-end customers. The
benefit from this strategy :
Lululemon can build brand awarness
Lululemon can make community more exclusive and
closer
Lululemon can controll operation easier than
entering a mass market