Lululemon Case Study

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Threat of new entrants

The threat of new entrants seems moderate.

Due to the industry’s low entry barriers and since the market for upscale yoga and fitness apparel is growing rapidly and highly profitable, new entrants might find it appeal to join the market. Firms like Lululemon who do not have any patents to prevent competitors from imitating their product are vulnerable by the threat of new entrants. In additions, since all Lululemon’s products are outsourced and since the company avoids being in long-term contract with its fabric suppliers or manufacturing sources, manufacturers can easily switch to other retailers.

However, the access into athletic and fitness apparel market is definitely not an open door since there are already established famous brand names which (a) have earned great customer loyalty and, (b) can easily add a product to their existing merchandise that would make it more difficult for the new players to compete. Factors such as brand equity and retail presence obstruct competitors due to Lululemon having a strong position in retail locations and a strong brand image.

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Bargaining power of suppliers

Bargaining power of suppliers is low since Lululemon refrains from having any long-term contract with its suppliers or manufacturing sources and mainly rely on the close working relationships it has had with its partners. Fabrics were sourced from a group of roughly 65 fabric manufactures and some of them are currently provided by only one company. However, Lululemon is confident that it can get merchandises from other suppliers if there is any disruption from current ones, however at a higher cost.

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Threat of substitute products

The threat of substitute products is high. Like Lululemon, many other well-known athletic apparel designers such as Nike, Adidas and Under Armor who offer high-performance, visually appealing, and highly functional products using high-tech fabrics at somewhat lower price. In addition, regardless of Lululemon’s specific styles and brands, there is case in which buyers can choose other clothing items that may not be designed for athletic purpose. However, for the smaller rivals, their lower-performance materials give Lululemon an advantage since the customers are less likely to switch to inferior products.

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Bargaining power of buyers

Bargaining power of buyers is moderate to strong. Buyer's switching costs are low, and there are variety options available to customer within the pricing spectrum. Thus, buyers can easily switch brand if they do not satisfy with Lululemon's products, or they have changed their preference. However, Lululemon’s brand equity and specialty scarcity tactics provide some protection against buyer bargaining power, attract demand and enabe the company to charge premium prices for its product.

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Question 2:

What does your strategic group map of the performance sports apparel industry look like? Is lululemon well positioned? Why or why not?

Lululemon’s positioning had been proved to be successful in the past, presented by strong brand awareness, particularly to Yoga fans, and the rapid growth over years. Thanks to its effective strategies, Lululemon is well positioned compared to its rivals. Lululemon focused on high quality-innovative performance athletic apparel products. The company’s apparel attracts a niche market that focuses on yoga apparel for women and offers consumers a unique combination of style, feel-good comfort, and functionality. In recent years, however, Lululemon has broadened its operations to address the needs of female youth and male athletes, and expanded the product line to wider range of activities. Thus, Lululemon is currently offering a more extensive range of fitness apparel to a larger population segment while keeping its price range at premium level.

After all, Lululemon’s success strategy resulted from its ability to create and consistently transfer unique value proposition to its target customers. To do this, the company has taken many moves such as having the store personnel well-trained and well-educated about the company’s products and core values, recruiting well-regarded Yoga instructors as brand ambassadors, or having design teams work closely with manufacturers to ensure the product quality are consistent with Lululemon standards.

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Question 3:

What do you see as the key success factors in the market for performance-based yoga and fitness apparel?

In the market for performance-based yoga and fitness apparel, fitness-conscious consumers’ purchase decisions are driven by product quality and features, price, distribution capabilities, and brand image and recognition. Thus, the key success factors includes following dynamics:

- Superior product differentiation

- Superior customer interaction

- Clever marketing and advertising

- Strong distribution network building capability

- Superior geographically presence capability

- Superior brand image and recognition building capability

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Question 4:

What does a SWOT analysis reveal about the overall attractiveness of lululemon’s situation?

From my finding, Lululemon has the following key strengths, weaknesses, opportunities and threats

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Strengths

- Product and design quality: The company’s capability to incorporate next-generation fabrics and technologies in their merchandises have created its core competency, tied the brand image to technically-advanced fabrics and innovative features in the customers’ eyes, and enabled the company to charge a premium price for its products.

- Effective culture: Lululemon’s culture helps promote healthy lifestyle