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Lululemon Competitive advantatge and SWOT analysis.
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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