Introduction Kessia Williams Industry Attractiveness Dana Nguyen Strategy Ajish Varghese Internal Capabilities Michael Barrett Summary

Introduction

Industry Attractiveness

Strategy

Internal Capabilities

SummaryFinal Presentation:Lululemon Athletica

MGMT 561October 17, 2013IntroductionLululemon 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 AttractivenessThe Industry and the EconomicsSales Trends

IndustrySports Meets Fashion

IndustryCelebrity Collaborations

IndustryKate Hudson for Five Forces that Shape the IndustryRivalry among existing competitors

HIGHThreat of substitute products

HIGHThreat of new entrants

HIGHBargaining power of suppliers

LOWBargaining power of buyers

LOWIndustryBargaining power of buyers

LOWBargaining 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$175Industry

IndustryRivalry 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

IndustryIndustry

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

IndustryTrends Changing the Industry

IndustryFashion and FunctionSweat 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

StrategyAt a Glance

Strategy

Strategy

Customers are willing to pay a premium for performance apparel. Retail Monitor Survey

Strategy Fashionable and functionalProduct 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 DeliveredStrategy

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 ArmourOur OpinionStrategyInternal CapabilitiesLuluNikeUA201220112012201120122011Return on Equity36.35%36.98%22.00%21.80%15.80%15.40%Gross Profit Margin55.67%56.88%43.59%43.50%47.92%48.40%SG&A Expense as a Percentage of Revenue28.20%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 RevenueCGSGross ProfitSG&A2009452,898,000229,812,000223,086,000136,161,0002010711,704,000316,757,000394,947,000212,784,000Percent Increase57.14%37.83%77.04%56.27%LululemonCapabilities

CapabilitiesYoga TanksYoga PantsSports BraLululemon$42$82$42Nike$30$60$30Under Armour$23$55$30Capabilities Product design Unique market strategy Customer serviceValue AddedWeaknesses Increased inspection time Product mixCapabilitiesCapabilities 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