22 Jun IDENTIFY ANY EXTERNAL ENVIRONMENTAL FORCES THAT HAVE FUTURE STRATEGIC IMPLICATIONS FOR LULULEMON ATHLETICA, INC.
Read the case study located on page 283 of the section titled Case Studies in your textbook and prepare a 3- to 4-page report in a Microsoft Word document concerning the following situation:
As the end of the year comes to a close, the CEO is evaluating lululemon’s strategic approach and its ability to produce desired results for the company in the future. The CEO has asked you to prepare a report assessing the company’s current situation, reviewing its strategy, and making recommendations to maximize effectiveness.
Your report and overview should address the following key strategic issues: •Establish criteria for judging strategic performance by considering successes and strategies. Use a balanced scorecard framework to make sure that both financial and strategic controls are used to assess performance. •Define the company’s core competencies. •Determine if the company has a sustainable competitive advantage. If you determine that a sustainable advantage exists, support your claim. If you find it lacking, recommend actions that would secure a sustainable competitive advantage. •Identify any external environmental forces that have future strategic implications for lululemon athletica, Inc. •Determine if lululemon’s business strategy provides an integrated and coordinated set of commitments and actions that are based upon the company’s core competencies, guides behavior toward achieving performance goals, and fits existing external environmental conditions. •Evaluate lululemon’s international strategy and its use of alliances to achieve company objectives. •Discuss the company’s organizational structure and if it effectively supports lululemon’s strategy.
Support your responses with examples.
Cite any sources in APA format. below is the Case Study
CASE 22: Iululemon athletica Inc.
Lovei
Rachael Fowler ran cross-country and played tennis in high school. In college, she successfully completed two full marathons. After college, she remained active and health conscious. Now a 37-year-old mother of two boys, Rachael maintains her physical fitness through gym sessions with a personal trainer and by attending yoga classes twice a week. At the end of one yoga session, a friend of hers suggested she purchase some yoga apparel from lululemon. Overhearing the two women talk, the class instructor added that she was a lululemon ambassador and began to rave about the quality and style of lululemon’s products.
“This is how 80 percent of our guests come to know lululemon, through word-of-mouth. Guests are so pleased with the clothes we offer that they can’t help but tell all their friends about it,” explains Laci Levisay, a lululemon associate from a store in Austin, Texas.1 Levisay continues, “For the other 20 percent who walk into lululemon stores with no previous knowledge, store employees look to find out as much as possible about the guests’ lifestyle and then educate them on what products would best suit their needs.”
Choose a Positive Thought
Based in Vancouver, Canada, lululemon athletica provides premium quality athletic apparel at a premium price. One of lululemon’s signature items is its yoga pants, typically sold by competitors for between $25 and $50.2 Yoga pants available in lululemon stores and online range between $78 and $128 with its most popular pair priced recently at $98 – two to three times rivals’ prices.3 However, lululemon’s products sell and they sell fast. Demand for lululemon clothing is so high that stores have trouble keeping new lines in stock. Sheree Waterson, Lulu’s chief product officer conveyed this example, saying, “A hot-pink color named ‘Paris Pink’ that launched in December (of 2011) was supposed to have a two-month lifecycle but sold out its first week.”4 The question then arises as to why customers, or “guests” as lululemon refers to them, are willing to pay high prices for high fashion items that are destined to be soaked in sweat!
It seems the answer to this question resides in lululemon’s ability to connect with its guests on a deeper level than just the typical sales associate–customer relationship. After all, other companies such as Nike, Adidas, and Under Armour not only produce high-tech clothing with the same soft cotton feel, four-way stretch, and moisture-wicking technology that lululemon touts, but do so much less expensively for their end consumers. Ultimately, what competitors cannot duplicate is lululemon’s culture. It is lululemon’s deep understanding of its target market, close relationships with its communities, and an inimitable culture that transforms customers/guests into diehard loyalists.
This is not to say that lululemon does not uphold the highest quality standards in its products. Levisay states, “People will save up if they need to in order to afford our clothing because of the benefits they provide.” She goes on to explain, “It’s silly to spend that much on yoga pants if they’re not going to live up to their promise.”5 Jennifer Black, president of an investment research firm confirms this sentiment saying, “lululemon won’t put stuff in its store just to sell it. They don’t compromise on quality.”
Friends Are More Important than Money
lululemon athletica’s in-depth knowledge of its target audience is an important, firm-specific asset. “Rooted in yoga but expanded into any sweaty pursuit you may have, lululemon creates technical fabrics that work with you instead of against you. Plus, they look cute!” explains Levisay. The stores’ “…guests comprise anyone living a physically active life that strives to achieve balance,”7 although the majority of shoppers are female, have disposable income, and are in the 15- to 65-year-old range.8 Fitness blogs confirm that lululemon “…recognizes this niche market and combines high performance material with attractive product design to create a committed brand following.
One of the strongest examples of lululemon’s focus on culture is the company manifesto, which appears on multiple lululemon products, from bags to water bottles. Explaining the company’s perpetuation of its manifesto, Whitney, a store employee and lululemon blogger writes,
We are sharing a piece of our culture and inspiration as a company. We have traditionally printed our [bags] with the lululemon manifesto, which is a series of statements that embodies our company’s vision, culture and beliefs… [as] a constant reminder of our vision to create components for people to live longer, healthier and more fun lives.
Observe a Plant Before and After Watering
Each and every store employee at lululemon is considered a steward of the company’s culture. From the beginning of the hiring process, throughout training, and continuing throughout employment, each employee is expected to reflect the company’s mission and vision, lululemon athletica’s “…success is reflected in everything within the store experience. The people who work there believe strongly in the lifestyle and what it represents.”11 A focus on employee development is a crucial component of the company’s strategy. In general, a lot of money and effort is put into training store employees. Levisay comments,
Employees don’t exist just to fold clothes or set up displays. They share their knowledge of the clothing and culture with every guest that walks through the door. They have the ability to explain functions of the clothing you would not necessarily recognize; items such as hidden pockets, body support, material that protects against harmful UV rays, and special woven silver that makes the material antibacterial.
Another employee, Samantha Baldwin, clarifies the link between employee and guest. “If your employees are happy and feel supported in their goals, your genuine nature comes across and this allows consumers to buy the experience, buy the product.” This “caring-and-sharing” culture bolsters the high-quality products. Baldwin continues, “It wasn’t just about selling stretchy pants. It was about connecting with people on an authentic level and finding out their story.”
This Is Not Your Practice Life
lululemon athletica was founded in 1998 by Dennis “Chip” Wilson in response to increased female participation in sports and in accordance with his belief in yoga as the optimal way to maintain athletic excellence into an advanced age. Wilson, an avid surfer and snowboarder, had previously parlayed his passions for these sports into building a successful company – Westbeach – that sold snowboarding and skateboarding apparel. After taking a yoga class, Chip fell in love with the practice. Once again melding his athletic passions with his acumen for producing high-end performance apparel, Chip saw the opportunity to produce higher-quality yoga attire.
Wilson noticed that the cotton materials used in yoga apparel were inefficient for the demands placed upon them. He applied his knowledge of materials to design highly technical fabrics that would move and breathe better. Chip opened a design studio and retail store that doubled as a yoga studio at night to pay the rent. Yoga instructors at the studio became product testers, wearing Chip’s designs while teaching, and providing feedback about the product. The first official lululemon store was opened in 2000 in Kitsilano, a beach neighborhood in Vancouver. The first store served as a community hub for multiple aspects of healthy living including nutrition, running, biking, and of course yoga. Realizing the potential for female-centric, high-quality athletic apparel, lululemon began to grow; expanding across Canada for the next couple of years and entering the U.S. market in 2003.
lululemon athletica continued to expand both in North America and overseas and announced its initial public offering in May 2007. In 2009, lululemon expanded its offerings by launching an e-commerce channel and ivivva, a subsidiary specializing in athletic gear for girls 4 to 14 years old.
Dennis “Chip” Wilson
The success of lululemon is attributable to the vision of Dennis “Chip” Wilson. After taking the company public in 2007 and serving as Chief Innovation and Branding Officer, Chip officially turned over the reins in January 2012. During his time with lululemon, he helped the company grow to 147 stores, transformed the brand into a cult following, and provided company focus by developing the lululemon manifesto. He remains chairman of the board and continues to represent lululemon at investor meetings. His successor, Christine Day, has renewed the company’s goals and assembled an exemplary “management team with a complementary mix of retail, design, operations, product sourcing, marketing and information technology experience from leading apparel and retail companies such as Abercrombie & Fitch Co., The Gap, Inc., Nike, Inc., and Speedo International Limited.”
Christine Day
Christine Day joined lululemon as Executive VP of Retail Operations in January 2008 and was promoted to CEO in June 2008. Day was with Starbucks for 20 years, most recently serving as President of the Asia Pacific Group of Starbucks Coffee International. Starbucks and lululemon are very similar in that both are high-growth, international companies focused on cultivating their culture and brand loyalty. Day will focus on brand expansion and developing long-term corporate- and business-level strategies.
John Currie
lululemon athletica’s current Chief Financial Officer (CFO) joined the strategic leadership team in January 2007. Currie has a long history as a financial leader within several companies including CFO of Intrawest Corporate and senior financial positions at a telecommunications service provider. He helped Chip take lululemon public in July 2007 and actively communicates with investors every quarter.
Ten to Fifteen Friends Allows for Real Relationships
Of the nine individuals serving as members of lululemon’s board of directors, seven are independent. These independent directors contribute a vast array of knowledge, including experience in retail markets, finance, and corporate structure. Several have worked with very high-growth companies and companies with strong corporate cultures. The combined skills and knowledge of this board will help guide lululemon through its growth and changes in its strategies. See for background information on additional leaders and board members. Exhibit 1: Other lululemon Leaders
Delaney Schweitzer: Executive VP, Retail Operations North America
Delaney Schweitzer began her career at lululemon in 2002. Since her days as a lululemon educator then manager, Schweitzer has served in various capacities within lululemon, including Director of Training and Culture and Director of Original Intent. Prior to joining lululemon, Schweitzer spent 10 years in the hospitality industry as a general manager. She is a graduate of the Executive Advanced Management Program at Harvard Business School. (Source: Forbes.com. http://people.forbes.com/profile/schweitzer-delaney/142021. Apr 2012).
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