Introduction

Industry Attractiveness


Strategy


Internal Capabilities


Summary
Final Presentation:
Lululemon Athletica

MGMT 561
October 17, 2013
Introduction
Lululemon Athletica
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
Sports apparel focused on yoga & performance technology
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 Attractiveness
The Industry and the Economics
Sales Trends
Industry
Sports Meets Fashion
Industry
Celebrity Collaborations
Industry
Kate Hudson for
Five Forces that Shape the Industry
Rivalry among
existing competitors

HIGH
Threat of substitute
products

HIGH
Threat of new
entrants

HIGH
Bargaining power of
suppliers

LOW
Bargaining power of
buyers

LOW
Industry
Bargaining power of
buyers

LOW
Bargaining power of
suppliers

LOW
Strong brand recognition
Large number of customers
Strong relationship between store
and customer
Take-it-or-leave-it pricing
approach



Various suppliers and high
competition among them
Diverse distribution channels

Industry
Threat of substitute
products

HIGH
Existence of close
substitute products
increase the propensity of
customers to switch to
alternatives in response
to price increases.
Is there and attractive
substitute which
customers can easily shift
to if the cost is low?



$108 $74 $175
Industry
Industry
Rivalry among
existing competitors

HIGH
Intense competition from the well
capitalized companies like Nike,
Under Armour and newer players
Nike and Adidas, have
considerably larger resources at
their disposal
- making a play within the performance apparel
market to gain market share in this upcoming
product category
These larger companies could
leverage their strong brand
recognition and marketing efforts
to enhance their presence in
international markets
- Lululemon has a limited presence. derives only
6% of its revenues from the international markets


Industry
Industry
Threat of new
entrants

MEDIUM/HIGH
Highly saturated and challenging
industry
Large capital required for
branding and creating product
demand limits entry of new
entrants
The demand for performance
apparel, sports footwear and
accessories is expected to
continue to grow
- Areas of focus: technology, functionality, pricing
and cost of production
Brand and consumer preference
will be keys to continued success

Industry
Trends Changing the Industry


Industry
1. Fashion and Function
2. Sweat working!
Created a powerful new brand
Business strategy is to keep things simple.
A distinctive corporate culture with a mission to
providing 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

Strategy
At a Glance
Strategy
Strategy
Customers are willing to pay a premium for
performance apparel.
Retail Monitor Survey
Strategy
Fashionable and functional
Product Differentiation
Strategy
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 to
condition customers to buy when they see an item
rather than wait. They release new items weekly instead
of seasonally to create this fanatical shopper.
Inventory flow and product differentiation continues to
be what drives Lululemons sales.
How Strategy is Delivered
Strategy
Strategy
Complimentary Saturday morning yoga session on
Church Street, Montclair, NJ.
Connecting with the Community
Strategy
Product implementation is a crucial issue for
Lululemon to manage. Future success will be greatly
affected by:
- How consistently the right product mix gets into their stores and on their
websites worldwide
- How they will manage product differentiation in the long term against
competitors such as Nike and Under Armour

Our Opinion
Strategy
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 a
Percentage 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)
(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
Capabilities
Yoga Tanks Yoga Pants Sports Bra
Lululemon $42 $82 $42
Nike $30 $60 $30
Under Armour $23 $55 $30
Capabilities
Product design
Unique market strategy
Customer service
Value Added
Weaknesses
Increased inspection time
Product mix
Capabilities
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
Industry
Competitors
Strategy
Capabilities



Summary
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