Lululemon was founded by Chip Wilson who took a commercial yoga class in

Vancouver and was immediately drawn in to the concept. After spending many years in
the surf, skate, and snowboarding business, he found yoga was performed using cotton
clothing and this seemed inappropriate because it neither removed sweat adequately
nor did it allow for maimum fleibility. !iven his passion and epertise in technical
athletic fabrics, he began a movement in yoga clothing where he relied on feedback
from yoga instructors to optimi"e his apparel.
Lululemon was founded in #$$% to meet these goals. &t opened its first store in
'ovember ())) in *itsilano, a beach area of Vancouver +C. +eyond getting feedback
from instructors on how to improve the performance of the apparel, the firm sought to
act as a community hub where people can interact and share the physical and mental
aspects of having a healthy lifestyle.
1. What are the key elements of the strategy that Lululemon is pursuing? What
generic strategy best fits Lululemons strategy?
,he five key elements are-
Grow the company store base in North America
,he strategic ob.ective was to add new stores to strengthen the company/s presence
and then tap into new geographical markets in the Canada and 01
Increase bran awareness
Leveraging the publicity surrounding, the opening of new stores with grass roots
marketing programs. ,his included organi"ing events and partnering with local fitness
coaches.
Introuce new prouct technologies
Continue to focus on developing and offering products that incorporate technology
enhanced fabrics, and performance features that differentiate Lululemon for its
competitor and increase its customer base.
!roaen the appeal of Lululemon proucts
,his is divided in 2 sections
#. Adding men apparel to the line
(. 3panding to product category to items such as athletic bags, undergarments,
sandals, outerwear
2. Adding products suitable additional sports and athletic activities
"#pan beyon North America
3pand their presence in Australia and 4apan. ,hen eventually pursue the Asian and
3uropean markets that offer similar, attractive demographics.
$istincti%e shopping e#pericance
5rovide a distinctive in6store shopping eperience, complemented by strong ties to
fitness instructors, fitness establishments and community events
,he two biggest strategic ad.ustments since ())7 had been to drawback from the use of
franchising and sell directly to the consumers through the company website.
Lululemon fits itself in a ifferentiate niche strategy
&. Is Lululemons strategy effecti%e?
Let/s look at the following to determine if the strategy is effective for Lululemon
,he firm currently has three segments-

'orporate()wne *tores

,he corporate6owned stores segment includes all sales to customers through corporate6
owned stores in 'orth America and Australia. ,his segment is by far Lululemon/s
largest revenue base and will continue to be successful as Lululemon looks to epand
its base in ()#( by opening 2) stores in the 0nited 1tates and ( &vivva Athletica stores
in Canada.
$irect +o 'onsumers
,he 8irect to Consumers segment involves Lululemon/s e6commerce website. Which is
#).9 : of revenue ;()##< comes from this segment. ,he idea behind is to shift from
brick6and6mortar stores to online channels, Lululemon/s commitment to increasing its
presence in e6commerce will help the company epand its customer base and improve
brand awareness.

,ranchise
While previously franchise sales were part of their strategy, the company reported that it
will no longer partake in the business and that it had reacquired its four remaining
franchise stores during fiscal ()##.
*W)+ Analysis
*trength
,rademarked fabrics
Community involvement = offered free yoga class on monthly basis
3mployee training
&nnovation
1tyle>comfort
?ultiple green initiatives
@uality = products designed to sustain A years of intended use while maintaining
functional
+rand identity
Weakness
Bigh retail price
'arrow product line
@uality control>supply chain
?arketing targeted to mostly yoga instructors>studios
Loss of customer service with increased scale
Weak brand recognition
Lack of targeting to men
)pportunity
3pand product line
1erve additional market segments
3pand into additional geographic markets
&ncreased demand in athletic apparel
Citness cra"e
+hreats
&ncreased competition from current large players in the market
Copy cats
3conomy
'ew entrants
Disk of banking on niche markets
Lululemon only went public five years ago and have not entered any new industries
;focusing mostly in the fitness apparel industry<. ,hey have done some corporate
restructuring shortly after the company was formed, Lululemon entered into franchise
agreements and then a .oint venture. ,he idea behind this was based on growing the
brand to meet consumer demand while conserving financial resources.
,his was a very effective strategy and served Lululemon well in establishing themselves
as a multinational company, helping to build on economies of scope, increasing brand
awareness and building a larger customer base. &n ()##, Lululemon finally
repurchased all the franchise organi"ations and now all of their stores are corporate
owned. ,he ultimate motive for closing out the franchise business was to preserve and
maintain control over branding and focus more on e6commerce.
We believe this strategy will work well for Lululemon as it preserves its brand image >
competitive advantage and staying competitive in the online market as well.
-. +op .ey Issues facing the company nees to focus on are/
,he analysis shows us that the retail apparel industry is competitive with very low
barriers to entry. Lululemon/s success will attract new competitors to the industry and
attract interest from eisting competitors. 0ltimately, this is a competitive industry with
limited barriers to entry. ,he athletic apparel industry is very competitive, with well
capitali"ed rivals such as 'ike and !ap, &nc. Lululemon has limited intellectual property
in regards to its performance fabrics and manufacturing processes, therefore the quality
and innovation components of strategy could easily be replicated.
Lululemon/s self reinforcing activities, such as target customer base, tailored products
and community based marketing approach make it very challenging for eisting retailers
to challenge Lululemon in its market from their own store bases. Bowever, there are
limited barriers to entry in this industry and Lululemon should epect new competition to
try to copy its format
+his analysis brings us to issues the company is 0 coul face/
Increasing 'ompetition
8espite occupying a unique niche within the athletic apparel industry, Lululemon has
recently gained competitors in recent years. &.e. +ig companies with large market
capitals such as 'ike, Adidas, and 0nder Armor have dominated the athletic apparel
industry and keep gaining more ground.
With the eception of a commitment to creating innovative products in apparel, these
initiatives are in contrast to Lululemon. &n order to market its products, Lululemon
completely shuns away from print or media advertising and instead focuses on selecting
ambassadors within carefully selected markets. As a result, it/s possible for Lululemon/s
competitors to achieve and maintain brand awareness and market share more quickly
Narrow focus
Lululemon is targeted towards sophisticated and educated women who understand
importance of active, healthy lifestyle. 0nder6Armor, 'ike, and Adidas are targeted
towards men and women of all ages.
New +hreats
Apart from the big name athletic apparel manufacturers, competitors such as !ap/s
Athleta brand, Lucy Activewear &nc. and +ebe 1tores/ +3+3 15ED, collection have
emerged as competitors to Lululemon.
1rice 1oint an 2anufacturing
&n light of the new and old competitors, Lululemon could be forced to sell their products
at lower price thus reducing margins. 5lus Lululemon does not own eclusive
intellectual property rights to the technology for its products. ,his makes it easier for
current and future competitors to manufacture and sell products with similar
performance capabilities and styling.
'ross(country ifferences in emographic3 cultural an market conitions.
+uyer tastes for a particular product or service sometimes differ substantially from
country to country. 1ometimes, product designs suitable in one country are
inappropriate in another because of differing local standards. Lululemon is operating in
an international marketplace and they have to wrestle with whether and how much to
customi"e their products in each different country market to match the tastes and
preferences of local buyers or whether to pursue a strategy of offering a mostly
standardi"ed product worldwide. Cor eample, the clothing for women offered in the
winter season will be different from Canada to Australia and vise versa. Cirstly, Australia
gets hardly any snow and while Canada on the other hand, gets ma.orly hit every
winter. ,herefore, the running gear and the hoodies offered in both countries will vary
because of the temperature and the climate. ?aking products that are closely matched
to local tastes make them more appealing to local buyers, customi"ing Lululemon/s
products country by country may have the effect of raising production and distribution
costs due to the greater variety of designs and components, shorter production runs,
and the complications of added inventory branding and distribution logistics.
,he second issue of transnational strategy incorporates elements of both a globali"ed
and locali"ed approach to strategy making. ,his type of middle ground strategy is called
for when there are relatively high needs for local responsiveness as well as appreciable
benefits to be reali"ed from standardi"ation. ,his strategy that Lululemon is trying to
apply has its own disadvantages, such asF it is more comple and harder to implement,
conflicting goals may be difficult to reconcile and require trade6offs and implementation
more costly and time6consuming.
All ma.or global companies employ the franchising strategy. With the franchising
strategy, the franchisee bears most of the costs and risks of establishing foreign
locationsF while Lululemon would have to epend only the resources to recruit, train,
support, and monitor franchisees. ,he big problem that Lululemon is facing currently
has to bear all costs of stores all around the world. With this, they would have to ensure
that they are providing the products at discounted costs but also having to monitor to
ensure that their standard for stores and customer service and eperience is
maintained.
4. 5ecommenations for management to impro%e performance 0 aress key
issues
,he recommendations we have for management is to improve performance and
address the key issues, are employing a think global and act local strategy
;,ransnational<. ,hey need to ensure that each country does have the required
customi"ations because the demographics, cultural differences and market conditions
vary from country to country. ,hey need to ensure that all their locations follow the
same guidelines and customer satisfaction guidelines like they have for their primary
locations.
1rice point an 2anufacturing
Lululemon does not own any intellectual property to the technology of what processes
their products. &n turn this makes it easy for competitors to imitate their style. ,hrough
analysis, a recommendation to solve this issue would be to patent their processing
system. ,his would be beneficial to the company in such ways asF increasing price
points, which in turn increases overall profits. &t will also allow for a higher competitive
advantage, making it difficult for competing company/s to imitate or copy their style.
*ponsor "%ents an *hows
Lululemon should sponsor some sort of events to gain publicity and increase brand
awareness. 1uch can be done by organi"ing yoga events on a grand scale or some sort
of sporting event. 'ot as high scale as done by its competitors ;'ike sponsors the 5!A
!olf and Adidas sponsors C&CA< 3.g. Lululemon could organi"e a yoga event at the
?etro Convention Ball, ,oronto
"#pan in Asia an "urope
,he company should plan to enhance its 3uropean and Asia market, recruiting new
management talent and initiating an aggressive program to regionali"e this business
utili"ing a consistent brand image throughout 3urope and Asia.
New 'ustomers
Lululemon should find new customers base other than its niche market. A potential
target niche would be adding apparel for golf and tennis into its stores.
Action 1lan to aress issues an impro%e performance
,he following action plan is the recommended steps we believe would be the
appropriate approach to successfully completing these recommendations.
Appeni# 1
6alue 'hain Analysis
*upply 'hain 2anagement
GA different manufacturers, no long6term contracts = can improve quality control and
lower costs by decreasing H and agreeing to contracts
)perations
,ighten inspection and verification processes to ensure another recall does not occur
;see6through pants issue<
$istribution
Cacilities only in Vancouver6+C, 1umner, Washington, and ?elbourne, Australia Limits
Company/s reach
!rowth in online sales can offset
*ales02arketing
8epend on word of mouth and community based marketing 6 can increase marketing
via media ;television, maga"ines, etc.< and other avenues