Lululemon, a Canadian athletic apparel retailer, has been focused on improving their supply chain with new technologies and data after inventory issues impacted margin in 2015. The threat of substitutes for the Lululemon brand is high. shortage of good talent for the company in the upcoming years. background-color: rgb(247, 247, 247); 2020. They are looking to use data on consumer preferences and trends to better stage the development of products to respond more rapidly. planning, management information systems etc. It has been successful in past, in most of the initiatives it has taken in new markets. On the other side, Lululemons retail strategy is focused on creating a unique in-store experience that engages customers and promotes a sense of community around the brand. Leonard-Barton, D. (1992). @media (min-width:550px) { When designing and making these clothes, Lululemon pays attention to every detail, and also makes use of technical fabrics. operate globally. these. Lululemon gets the raw material from 65 suppliers, and 30% of Lululemon products are made from trademarked Luon fabric, which comes from a single supplier [2]. padding: 0px 0px 0px 0px; } #text-4181721094 { Strengths-Opportunities (SO) strategies that involve using strengths to take advantage of opportunities. Trade barriers have been reduced on the import of goods. That said, because Lululemon is not only creating the apparel but also often setting athletic apparel fashion trends, I would not recommend JIT manufacturing. Fast fashion retailers like Zara do operate under the JIT principle, but I believe they are able to do this in part because they are vertically integrated (Zara manufacturers about 50% of its SKUs at company-owned factories), and can leverage information transfer more easily throughout the supply chain. Chat with us Technological developments: technology comes with numerous benefits among many departments. #col-2117527906 > .col-inner { Contact performance. My concern with the approach is that RFID tracking and inventory control is still a lagging indicator. low price, making it affordable for its customers. Lululemon Athletica Inc as customer attracted to this new technology can be lost to competitors, decreasing or retrenchment. active users. Lululemon Athletica Inc as its cost of inputs would remain low for the next two years. Lululemon Athletica Inc vulnerable to external threats if these few products suffer for any reason. Bartol. Activewear was one of the winning industries of 2020, accounting for 40% of all online sales [1]. All Lululemon products are made only in Lululemon Low amounts of spending on research and development as compared to the competition. Notwithstanding the price growth, sales of these items between May and August 2020 were 152% higher than sales between January to April [9]. The Lululemon mission statement is focused on creating components for people to live longer, healthier, fun lives. Lululemon strongly benefitted from its strong balance sheet and liquidity. Its an important trade off, especially relevant in the post-COVID scenario! Transport Industry: the transport industry has been flourishing in the past few years, and shows growth Conglomeration. on a few products makes This will then be an integrated supply chain ecosystem. can target in order to gain market share. The framework provides a qualitative and comprehensive strategic analysis to evaluate the competitive analysis beyond the current competition. Substitute products available are also increasing, which is threat collectively for the whole industry as The strategy behind Lululemon's breakout tech product, Mirror, appears to be working. changes that take place in the competitive environment. officials. Provide incentives, increase engagement, or provide a better work environment to retain talent. The famous athletic apparel company Lululemon has won the hearts of yoga lovers and fitness fans worldwide. It is fascinating that many of the initiatives that you mention were put forth during the pandemic and built around the existing context, but I wonder how many of these changes would have had to happen regardless of the situation as brick and mortar retail migrates towards ecommerce. #text-1809244667 { This means that The government has also announced a subsidy on the sale of environmentally friendly goods in this sector. Any issues or lag with its supply chain can directly impact the companys performance. 9 Lululemon will be able to react and adequately stock current trends while limiting discounting by having a quicker feedback cycle. The current support phase involves continuing operations, amplifying customers engagement, providing support to ambassadors and compensating employees. It has a high employee turnover rate, with low employee motivation and working morale. height: 150px; With vertical diversification, companies target their suppliers and distributors. 4, Lululemon has made significant efforts towards improving supply chain management. So, it is no surprise that the company is continuously finding ways to develop innovative and high-quality athletic wear which are functional and fashionable. Most of the technology advancements made have been to receive better data throughout the process so that the orders to the manufacturers can be more reflective of consumer needs. } } Privacy Policy } growing economy or a weakness if the economy is going through a recession. } Press Esc to cancel. Weaknesses. event : evt, Likely they ought to be optimizing to have suppliers as close to the country of final sale as possible after solving for country specific manufacturing costs. increased as other industries that provide inputs for this company also have suffered from increasing fuel Pickton, D. W., & Wright, S. (1998). #image_1338287259 { Leveraging the Lululemon brand is key to securing suppliers and making them dependent on Lululemons orders. } To answer your question whether or not Just-In-Time manufacturing is a viable option for retailers, I do believe that it is a great option only if the company is vertically integrated to some extent. The bargaining power of suppliers is high as Lululemon does not operate any manufacturing facility. padding-top: 20px; padding-bottom: 0px; This reliance } production. #gap-1104835077 { #col-1167392981 > .col-inner { However, Lululemon is the pioneer of the athleisure brand, and the company has a long history of creating innovative products. Internet: there has been an increase in the number of internet users all over the world. Moreover, though Lululemons clothing is designed for function and athletes, its clothing has attractive style. Although I acknowledge the strong cash position of Lululemon was an asset to respond to the changing customer needs in the last year, I am still wondering if the acquisition of the Mirror was the best investment for Lululemon. We are here to help. Suppliers: The bargaining power of suppliers has increased over the years with the decrease in the number } India: Pearson Education India. Lululemon is on the right track to diversify the material source and manufacturing facility to lower the suppliers bargaining power. #section_149894842 .ux-shape-divider--bottom svg { Its products have maintained quality over the years and are still valued by customers, who find it as good 101-109. The company specializes in designing, manufacturing, and selling high-quality performance apparel and accessories, primarily catering to the yoga, running, and fitness markets. In this article, we do a SWOT Analysis of Lululemon. Dyson, R. G. (2004). This lists down the products. Happy to discuss about that in class or offline, if you have time! there is an opportunity for meet the needs of these customers. It can extend its things. #4 Finally, the DTC Segment Has Been Operating At A Higher Margin Too, Starting with our forecast for Lululemons revenues as detailed above, we estimate the companys adjusted EPS for full-year 2019 is to be around $4.63. Consumer tastes are changing, and this puts pressure on companies to constantly change their products to The company uses AWS CloudFormation templates to define its complete development environment. Was paying 500M USD for Mirror worth this investment or would a further diversification of the product portfolio pay-off more in the long run? means that it has more people leaving the job, and as a result, it is spending more on training and } It has a skilled labour force that is highly qualified, innovative and diversified. Conglomeration. Integration: Lululemon Athletica Inc's current structure and culture have resulted in the failure of various mergers Another reason for the importance of supply chain digitization is that Lululemon does not manufacture any of its products or raw materials; relying completely on their suppliers. has a strong asset base. The growth in consumer spending in the economy is likely to increase consumption for Lululemon Athletica Inc's Now, whether or not Lululemon wants to take on the costly burden of integration is a question for management given that there current outsourcing model does hold some advantages as cases like Li & Feng have shown us in class. Lack of diversification makes it difficult for An efficient supply chain is crucial to minimize cost, increase quality, and improve delivery speed. leading to certain circumstances where there isnt enough cash flow as required leading to unnecessary The fluctuating interest rates in the country do not provide a stable financial and economic environment. Weihrich, H. (1982). This could be changing positions regarding horizontal breadth of products, vertical integration, or geographical coverage. Englewood Cliffs, NJ: Prentice-Hall. Corporate Social Responsibility of Lululemon Athletica Inc, Lululemon Athletica Inc 5C Marketing Analysis, The vision statement of Lululemon Athletica Inc, Organizational Culture of Lululemon Athletica Inc, Lululemon Athletica Inc Generic and Intensive Growth Strategies, Lululemon Athletica Inc PESTEL & Environment Analysis, Lululemon Athletica Inc Porter Five Forces Analysis, Value Chain Analysis Of Lululemon Athletica Inc, Marketing Strategy Of Lululemon Athletica Inc, Blue Ocean Strategy of Lululemon Athletica Inc, Hofstede Cultural Model of Lululemon Athletica Inc, Porters Diamond Model of Lululemon Athletica Inc, Mckinsey 7s Framework Of Lululemon Athletica Inc, Resource Based View Of The Firm - Lululemon Athletica Inc, VRIN/VRIO Analysis Of Lululemon Athletica Inc, Net Present Value (NPV) Analysis of Lululemon Athletica Inc, 2947-Lamb-Weston-Holdings-Inc-Swot-Analysis, 2953-Mondelez-International-Inc-Swot-Analysis, 2954-Mercer-International-Inc-Swot-Analysis, 2945-Liberty-TripAdvisor-Holdings-Inc-Swot-Analysis, 2944-Long-Island-Iced-Tea-Corp-Swot-Analysis, 2939-Lindblad-Expeditions-Holdings-Inc-Swot-Analysis, 2938-Lifevantage-Corporation-Swot-Analysis, 2937-Leggett-Platt-Incorporated-Swot-Analysis. width: 82%; This makes its Regulations have loosened in recent years making it easier for businesses to carry out their operations. vertical integration. Its products are available in company-owned stores, through its online platform, and at select partner locations. Competition within the industry is increasing. It manages design, production, shipment, display, promotion, sales, and feedback itself, relying only diminutively on outsourcing. @media (min-width:550px) { Swot Analysis Examples Website: Lululemon Athletica Inc has a well-functioning and interactive website that draws a large number of internet industry pose a threat to Lululemon The company did not say whether the move was linked to the string of controversial headlines Wilson had generated. These are: The main objective of the SWOT analysis is to help in identifying the strategies that can be used by the Market products at low prices by offering discounts. #section_149894842 .ux-shape-divider--top svg { It operates its retail stores located in major cities worldwide. development expenditure within the industry, it is spending way less than a few players within the industry While responsiveness to customer preferences is important both to capture sales and reduce inventory holding and/or discounting, I believe part of Lululemons value proposition is to show customers designs and outfits they otherwise would not think to purchase by having them modeled in stores or seen in major cities. } The fact that membership programs encourage customers to make recurring purchases is one of their main advantages. #section_861715186 { Internet users are increasing around the world. Partnerships: Strategic partnerships are established by Lululemon Athletica Inc with its suppliers, dealers, retailers In this business model, constant exchange of communication optimizes inventories by rapidly reacting to consumer tastes on limited items on display, focusing only on producing items with positive reaction from end-customers. text-align: left; #row-1877857626 > .col > .col-inner { } Lululemon reported revenues of $1.12 billion, up 22% from 2019, with online sales accounting for 45% of total revenues, and an e-commerce business growth of 93% [3]. Very interesting to see how a consumer goods company leveraged digital. Interest rates are low, which provides an investment opportunity for large projects. Apart from just the well know impact of consolidation and digitization on inventory management and better ability to scale distribution, it is also important towards the brand core values. The key source of competitive advantage is brand loyalty. obligations, is lower than the industry average. For example, leggings price increased by 5% and sport bras by 12% [8]. First, it was vertically integrated, which meant that the company really owned the brand from top to bottom. Lululemons Sustainability Strategy. This vertical integration approach gives Zara a lot of control over how it operates. })(); Copyright 2019 Daniel Pereira - The Business Model Analyst. Lululemon Athletica Inc can focus on these environmentally friendly products and make use of this opportunity. Having a vertical integration model also means that the company can quickly respond to any change in consumer demands. In April, Lululemon set a five-year-strategic plan with an aggressive goal for its international business: to quadruple sales generated outside of North America by 2023. Lululemon also introduced free sport challenges in partnership with the app Strava, such as the Move and Stay Connected challenge, to create a worldwide community. In this post [ show] More on this: How Do I Reject A Uniqlo Order? In Zara stores, customers can always find new productsbut theyre in limited supply. and other stakeholders. This robust vertical integration strategy enables Uniqlo to replenish the stock in a matter of days and improve products within weeks. }, Business Model Examples and Types Using the Business Model Canvas for Detailed Analyssis, #gap-1341824070 { Before we dive deep into the SWOT analysis, let us get the business overview of Lululemon. This being said, to your point on diversification of supplier place, there are also added expenses in not consolidating sourcing of goods to capture economies of scale. This strategy creates scarcity and makes Lululemon an exclusive high-end product. #section_1749395338 { The workload is a high per worker as there are fewer workers than the actual work required. The popularity has increased as more people work from home and choose more comfortable and stylish apparel than formal attires. making sales through these. Lululemon Athletica Inc has a Strong Distribution network with a large number of outlets. The company was established in 1998 by Canadian businessman Chip Wilson as a small shop in Vancouver focusing on producing premium yoga clothing that not only made practicing yoga simpler but also made the wearer seem fashionable. Lululemon Athletica Inc is carefully reviewing its SWOT analysis and using it to make strategic decisions. WebIn 1998 in Vancouver, Canada Lululemon was developed and defined as a yoga-inspired, technical athletic apparel company for women and men. following the recession. In the medium term, I believe Lululemon should be taking actions to more greatly empower the parties upstream in their supply chain. font-size: 1.1rem; This has reduced the costs of transportation, which is beneficial for Lululemon Athletica Inc as With regards to the Mirror acquisition I am a bit undecided perhaps Lululemon had the acquisition already on its radar, but the increased popularity of home-workouts might have speed up the process? } Lululemon has a low entry barrier, high bargaining power of suppliers, low bargaining power of buyers, high threat of substitutes, and intense rivalry. padding: 30px 0px 0px 0px; } For example, a large number of outlets can be a strength in a This will reduce the costs incurred on inputs for A solid social media presence, community, endorsement, and online marketing will enhance the brand value. Related: Market Entry Strategies: Exporting vs Overseas Production What is Horizontal Integration? THREAT OF NEW ENTRANTS. http://www.businessinsider.com/lululemon-changes-in-2016-2016-1, http://investor.lululemon.com/financials.cfm, https://info.lululemon.com/sustainability/responsible-supply-chain, Transforming Ford: Supplying Mobility in a Digital World, https://hbswk.hbs.edu/archive/zara-s-secret-for-fast-fashion, https://www.supplychaindive.com/news/retail-supply-chain-shift-turn-times-holidays/510607/. Michael Porter developed the framework in 1980 as a Harvard Business School Professor. A Canadian founded the company Lululemon in 1998. affect the business when combined. 3 As seen in the Beer Challenge, without vertical integration, it is difficult to manage the flow of goods across all these different parties. In this strategy, companies focus on diversifying within the supply chain. Exchange Rate: the exchange rate keeps fluctuating and this affects a company like Lululemon Athletica Inc that has Key to Lululemons success during the COVID-19 outbreak are a number of interlinked factors. Lululemon has made significant efforts towards improving supply chain management. (function() { be sold at a low price (S2, S4, O4). By continuing to use our site, you accept our use of cookies, Privacy Policy, and Term of Service. As of 2018, Lululemons DTC business was responsible for less than 3% of the companys total capital expenditure. promotional messages by Lululemon Athletica Inc. Strategic Change, 7(2), In order to do so, Lululemon is opening stores in Europe and Asia at an aggressive pace -- of the 45 to 50 stores Lululemon is projecting it will open this year, about 30 of those will be Thanks for the analysis, Francisco! Andrews, K. (1980). Leave this field empty if you're human: It really highlights how important strategy is in allowing companies to weather unforeseen events like economic downturns and global pandemics. After hours, Lululemon converts the store to a yoga studio to maintain solid communities and offer service beyond apparel products. } Lululemon Athletica Inc SWOT analysis lists down the strengths, weaknesses, opportunities and threats to any organisation, Lululemon also operates on a vertical integration model, which controls every part of its supply chain. CEO McDonald acknowledged that investments in RFID inventory-tracking technology reduced the need of flushing out inventory [7]. On the companys website, there is further information about health and well-being, including videos of exercises.
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