Lululemon Athletica Company’s Global Market Threats


Lululemon Athletica Inc. is a Canadian apparel company. Chip Wilson established the company in1998. Lululemon Athletica Inc. is a yoga-inspired company and specializes in the production of special clothing used in athletics. The parent company based in British Columbia manages international subsidiaries. According to Silberberg (2013), the company engages in the manufacture of athletic wear, including shorts, performance shirts, yoga accessories, and lifestyle apparel. Lululemon enlightens its employees on the significance of technology and research in the production of garments. It underscores the reason Lululemon Athletica Inc. outshines its competitors. Despite the company’s good performance, it encounters a myriad of challenges that threaten its culture.

Problems and Their Root-Causes

Lululemon is renowned as one of the fastest-growing brands. However, it experiences a multitude of challenges. One of the problems is associated with the political environment of the global apparel market. A majority of Lululemon’s suppliers are from foreign countries. In 2012, about 54% of the company’s products were manufactured in South Asia (Grochala, 2014). As a result, the company is vulnerable to risks associated with political instability in the global market.

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Besides, the company faces competition from larger and well-recognized brands that have a broad product mix and significant target markets. Further, competitors can reproduce Lululemon’s products because they are not patented.

Initially, Lululemon was intended to concentrate on the Canadian market only. The company’s leadership had conducted thorough research of the Canadian market and identified strategic locations for the stores that it intended to establish. Besides, the management of Lululemon had a vast knowledge about Canadian consumers. The company’s leadership opted out of the Canadian market in the last minutes. Under the guidance of Bob Meyer’s and his expansion strategy, the company decided to venture into the United States. It was not a sound decision as the leadership had limited knowledge about the American market.

The company had not even identified strategic locations in the United States. Therefore, it relied on the information gathered in the Canadian market. In the end, the company opened stores in high-cost areas where its products were in weak demand. The move led to Lululemon spending a lot of money on locations. Since the company had taken extended leases, it could not leave the market despite the weak demand for its products. Besides, the company could not recover the money that it spent to open stores.

Another problem that Lululemon faces is competition from other brands. The company faces competition from brands such as Nike, Adidas, and GAP Inc. among others. The cost of the company’s products is almost three times higher than that of rival companies. Some rivals have a steady supply of sports equipment and superior product mix. For example, Nike provides sports-inspired products for both children and adults. The company has advanced manufacturing and marketing channels. According to Gamble, Peteraf, and Thompson (2015), Nike, Adidas, and GAP Inc. conduct a lot of advertising compared to Lululemon. Thus, their brands are recognized in the market.

Lululemon cannot reach all potential customers compared to other brands because it sells its products through wholesale stores. Companies like Nike, Adidas, and GAP Inc. have multiple stores and franchises across the globe. Lululemon does not have multiple retail stores. Thus, it is hard for the company to acquire a big market share. In 2012, the company’s sales volume went down despite its inventory growing by 85%.

Lululemon’s manufacturing technologies are not patented. Thus, competitors can easily reproduce the company’s products. According to Grochala (2014), the intellectual property rights of the fabric, technology, and processes used in the manufacture of the apparel are not unique to Lululemon. Besides, the company’s suppliers own the technology and processes. Therefore, Lululemon cannot obtain intellectual property right for whatever it produces.

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Lululemon’s competitors are at liberty to manufacture and distribute products that are similar in fabric and performance characteristics to those that it produces. The company faces a threat of organizations with good marketing strategies, distribution outlets, and significant financial capabilities duplicating and selling products that are identical to its merchandise in all dimensions. Lululemon’s sales volume and profits could suffer in the process. It may also adversely affect the company’s value as well as its competitive advantages.

Generating Alternative Solutions

Laws and regulations affect the operation of enterprises. Knowing the rules and regulations of a particular country can help eliminate the possibility of lawsuits. Lululemon is an international company. The company can produce and sell products in various countries. It relies on different manufacturing sites located in Taiwan, China, South Korea, Israel, Peru, Vietnam, Cambodia, and Thailand. As a result, the company has to understand the regulations that govern the distribution of products and management of businesses in these areas. Besides, the company requires understanding the tax implications of bringing money earned from abroad back to Canada. It can help Lululemon Athletica Inc. not to violate the laws that govern business management in various countries.

Lululemon has to take different measures to maintain a competitive advantage against major competitors. The company has to create a sustainable business model. Lululemon requires analyzing its capabilities. Knowing the organization’s capacities, resources, and key competencies will enable Lululemon to strategize and mitigate challenges that might arise due to unknown threats and external environment. Part of the resources that the company has and can exploit include experienced and educated workforce. The workforce can assist the business to come up with new technologies and products that can compete in the global market effectively. Lululemon has a reputation to preserve.

Besides, it requires maintaining its innovative culture. Therefore, the company needs to dedicate its financial resources and time to research and development programs that can enable it to produce quality products. The company can also use technology to improve its marketing strategies. For example, Lululemon can manufacture workout clothes that monitor an individual’s breathing and heart rate. Further, with an increasing number of people who shop online, advertising on these platforms can help the company to market its products.

Lululemon should understand the buying behavior of the target customers. The company should be in a position to introduce new and innovative products by predicting future changes in consumers’ purchasing habits and tastes and preferences. Lululemon can achieve this by gathering information from the grassroots through social media, hosting community events, local ambassadors, and in-store community boards. Failure to do so can result in the company losing its market share.

Lululemon should carry out a thorough investigation of the market and locations where it intends to establish stores. The market analysis will enable the company to satisfy the needs of the target customers, thus increasing its sales volume. It will also help the company not to locate stores in environments that are overpriced and with little demand for apparel. Lululemon should consider the laws and distribution and supply chains of the different countries. The company should carry thorough research due to the complexity of the external environment. It will ensure that Lululemon is well-equipped and does not rely only on information from local manufacturers.

Solution That Best Solves the Problem

According to Mohr, Sengupta, and Slater (2009), technological experience is paramount to contemporary organizations. Technology helps an organization to boost its competitive advantage over rivals. Enterprises that quickly adapt to new technology tend to gain more market share than those that rely on traditional ways of management. Technology has made it possible for customers to access information about the products that they require with a limited challenge. On the other hand, companies can use technology to communicate with clients, understand their needs, and deliver products on time. Technology enables businesses to learn and predict potential changes in consumer demand. The companies can also use technology to research the way to improve their products.

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According to Evans, Murray, and Schmalensee (2016), technology plays a significant role in the enhancement of the quality of the products. Lululemon has utilized various techniques to create distinctive brands. Luon is the major material used to manufacture yoga pants. It enables the garment to fit and move freely with the body. Silver Strands are equipped with tank tops to prevent the growth of odor-causing bacteria. Lululemon should liaise with one of the major manufacturers of technological devices such as Sony or Apple to improve its products. The company can collaborate with one of the professional companies to create garments that sense various signals such as body reaction during exercises, location, and performance. Such products would attract many customers.

Lululemon can also use the information gathered through technology to advertise and target consumers. There are multiple marketing channels such as mobile shopping, e-commerce, online stores, and social media. The company can use these platforms to market its merchandise and get feedback from customers on how to improve the products. Further, the technology can help Lululemon to identify target markets in foreign countries, analyze their demands, and use the information to establish stores in those nations.

Action Plan to Implement the Proposed Solution

Technology can be implemented by coming up with programming software for in-store and online shoppers. Customers can use the software to access information about products and to place orders. The company can also avail of an online platform that clients can use to give feedback regardless of their geographical location. The feedback would be vital in helping Lululemon to improve its products in a bid to maintain a customer base. Lululemon can liaise with technological companies that manufacture “smart garments”. The partnership would enable Lululemon to produce garments that can monitor breathing, heart rate, and G-force. It would give Lululemon a competitive edge.

Conclusion

Based on the case study, it is evident that Lululemon faces various problems which include the inability to exploit the global market, competition, and lack of patents for its products. However, these issues can be resolved to give it a competitive edge over other companies that produce almost similar products. Investment in technology is the best solution that can address most of the identified problems. It would enable Lululemon not only to develop quality sportswear but also to conduct market research and sell the products.

References

Evans, D., Murray, S., & Schmalensee, R. (2016). Why online retail sales are much larger than US census data report. Web.

Gamble, J., Peteraf, M., & Thompson, A. (2015). Essentials of strategic management (4th ed.). London: McGraw-Hill.

Grochala, K. (2014). Intellectual property law: Failing the fashion industry and why the “innovative design protection act” should be passed. Web.

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Silberberg, M. (2013). Design patents and Lululemon: A way forward in fashion? Web.

Mohr, J., Sengupta, S., & Slater, S. (2009). Marketing of high-technology products and innovations. New York: Pearson Prentice Hall.

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