Lululemons Expansion into Mexico

Submitted To: Brad Herd Submitted By: Felix Carapaica Submission Date: October 22, 2013 Course:

I have decided to choose to expand Lululemon a Canadian company into Mexico. I believe this would be a good choice because Lululemon has already expanded into the United States and expanding into Mexico would increase their revenues and be a trial to see if they should expand into other countries of Latin America like Argentina, Brazil, Chile, and Uruguay etc. The Latin American region is expanding rapidly worldwide and it is a good place to target while there is less completion and while one can secure a place in the market. (Cateora, 2011) Mexico is a country in North America that is one of the three involved in NAFTA, United States and Canada being the other two. (NAFTA Secretariat) This allows freer trade between Canada and Mexico because NAFTA allows trade with less restrictive barriers, no tariffs and stronger health and safety standards (1998) all things that a company would look for before expanding. Mexico is ranked the 50th freest economic country in the world which puts it well about the world average. (Index of Economic Freedom, 2013) It has taken steps to improve its monetary, trade and investment freedom but it has lacked in its ability to protect property and diminish corruption. (Index of Economic Freedom, 2013) This would be a factor for Lululemon as they might have to deal with government corruption in order to secure land and property deals and might have to be involved in business tactics that might not be appropriate in North America, for example bribing. A good factor for Lululemon is that the country is taking strides towards improving its trade laws and recovering after the financial crisis. (Index of Economic Freedom, 2013) and consumers are starting to spend more since the recession started and they are generally feeling more confident that the economy will recover. (Creixell, Garcia, Hauss, Lacayo, Martinez) Mexicos unemployment rate is 5.29 % and the highest it has been in the last 14 years is 5.93 %, 2.2% being the lowest but regardless Lululemon appeals to a higher end clientele anyways that has the money and leisure time to engage in physical, mostly yoga activities. (Trading Economics, 2013)

The population of Mexico is 116,220,947 million, of which about 30% is Native, 60 % is Mestizo (Spanish-Native), 10 % white and 1% other. (CIA Factbook, 2013). Therefore Lululemon could target native populations especially by having ads in Mayan and Nauhatl that would show that they care about Mexicans from all different backgrounds and that they promote their products to everyone that wants to live their manifesto which is about loving who you are, reducing stress and caring about the nonmaterial aspects in your life such as friends, family. (Lululemon, 2013) The main language spoken is Spanish, spoken by about 92. 7 of the population, but about 5.7 % speak both Spanish and indigenous languages, and 0.8% speak only Native. (CIA Factbook, 2013) So even though it could target to native population in languages other than Spanish its main language of promotion would be Spanish, so they would have to translate their slogans and products which are all in English and French into Spanish, specifically the one spoken in Mexico. Lululemon would have to be careful to use not use a generic Spanish since there are many different colloquial words throughout Spanish-speaking America as well as Spain and that way it could ensure their message is coming across in an appropriate way. Mexico has a growing middle class that in 2013 was estimated to be 42 percent or around 49 million. (Rueda, 2013) This and the upper class which consist of 1,340,000 people or 1.7 percent (Flannery, 2013) More specifically the middle class tends to cluster in urban areas over rural areas as half of the urban areas are middle class where only a quarter of the population is. (Flannery, 2013) Therefore Lululemon could first expand into wealthy neighbourhoods of Mexico City such as Lomas de Chapultepec (Wilkinson, 2011) that would test to see if they have enough demand to then expand into other regions of Mexico. It would be important to target the upper classes or the elite because they are the ones most likely to buy the products since they have more available cash and as innovators or trend setters, other people aspiring to be more like the upper class or elite would be more likely to buy the products and follow in their lead. They could use Mexican singer/actress Thalia to be a spokesperson for the company as she is very well known outside of North America (Dougherty, 2003) and already

practices yoga extensively. (2012) Seeing a local superstar that most people would recognize could encourage them to at least check out their products and come in the door, and the good quality and exceptional customer service would ensure the sale. Lululemons launch into the country could start in the fall of 2014, and therefore they could launch it and then use the Christmas hype to get people to buy merchandise for Christmas for people that they think might be interested in yoga and wellness. Then they further the promotion into New Years when people are making goals to better themselves both physically and mentally. Therefore this would give Lululemon a crucial boost for when they are starting out. Mexico City with a population of nearly 20 million would have plenty of customers to make this a profitable venture. (World Atlas, 2013)

References 2013 Index of Economic Freedom: Mexico (2013) Retrieved from November 3, 2013 from http://www.heritage.org/index/country/mexico Cateora, Phillip (2011) International Marketing. Canada. McGraw- Hill. CIA Factbook: Mexico. (2013) Retrieved from November 3, 2013 from https://www.cia.gov/library/publications/the-world-factbook/geos/mx.html Creixell, Santiago. The post-recession consumer: Describing the Mexican Shopper. (2013) Retrieved from November 3, 2013 from http://csi.mckinsey.com/knowledge_by_region/americas/post_recession_mexican_consumer Direct Selling Education (1998) Retrieved from November 3, 2013 from http://www.library.unt.edu/gpo/oca/nafta.htm Flannery, Nathaniel Flannery. (2013) Retrieved from November 3, 2013 from http://www.forbes.com/sites/nathanielparishflannery/2013/07/23/whats-the-real-story-with-modernmexicos-middle-class/ Lulelemon: Manifesto. (2013) Retrieved from November 3, 2013 from http://www.lululemon.com/about/manifesto# Manuel Rueda. (2013) Retrieved from November 3, 2013 from http://fusion.net/modern_life/story/mexico-approaches-middle-class-country-status-18016 Nafta. Retrieved from November 3, 2013 from https://www.nafta-secalena.org/Default.aspx?tabid=85&language=en-US Retrieved from November 3, 2013 from http://anamariao7.wordpress.com/2012/01/11/thalia-the-yogamaster-starts-new-contest-on-twitter/ Steve Dougherty. People: Heat Rising. (2003) Retrieved from November 3, 2013 from http://www.people.com/people/article/0,,20140776,00.html Tracy Wilkinson. (2011) Retrieved from November 3, 2013 from http://articles.latimes.com/2011/apr/19/world/la-fg-mexico-rich-poor-20110420 Trading Econmics (2013) Retrieved from November 3, 2013 from http://www.tradingeconomics.com/mexico/unemployment-rate Word Atlas. Retrieved from November 3, 2013 http://www.worldatlas.com/citypops.htm#.UncxifmTgTU