Case Study Description of Lululemon Athletica Inc.
Near the end of November 2013, Lululemon Athletica (Lululemon) became the subject of a viral firestorm after a series of negative events seriously ruptured the company's reputation. The company found itself facing its worst quality control problem to date, with a recall of 17 per cent of its Luon pants due to issues with sheerness. In addition, the company's chief executive officer had stepped down. Was Lululemon destined to follow Blackberry as another example of a failed Canadian company, or could it resurrect its former glory by facing its critics head on?
Swot Analysis of "Lululemon Athletica Inc." written by Dante Pirouz, Kelly Huang Arman includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Lululemon Athletica facing as an external strategic factors. Some of the topics covered in Lululemon Athletica Inc. case study are - Strategic Management Strategies, and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Lululemon Athletica Inc. casestudy better are - – increasing household debt because of falling income levels, supply chains are disrupted by pandemic , increasing energy prices, technology disruption, competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs, customer relationship management is fast transforming because of increasing concerns over data privacy,
banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization, etc
Introduction to SWOT Analysis of Lululemon Athletica Inc.
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Lululemon Athletica Inc. case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lululemon Athletica, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lululemon Athletica operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Lululemon Athletica Inc. can be done for the following purposes –
1. Strategic planning using facts provided in Lululemon Athletica Inc. case study
2. Improving business portfolio management of Lululemon Athletica
3. Assessing feasibility of the new initiative in Sales & Marketing field.
4. Making a Sales & Marketing topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Lululemon Athletica
Strengths Lululemon Athletica Inc. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lululemon Athletica in Lululemon Athletica Inc. Harvard Business Review case study are -
Organizational Resilience of Lululemon Athletica
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Lululemon Athletica does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Low bargaining power of suppliers
– Suppliers of Lululemon Athletica in the sector have low bargaining power. Lululemon Athletica Inc. has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Lululemon Athletica to manage not only supply disruptions but also source products at highly competitive prices.
Ability to lead change in Sales & Marketing field
– Lululemon Athletica is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Lululemon Athletica in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Learning organization
- Lululemon Athletica is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Lululemon Athletica is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Lululemon Athletica Inc. Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Digital Transformation in Sales & Marketing segment
- digital transformation varies from industry to industry. For Lululemon Athletica digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Lululemon Athletica has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Operational resilience
– The operational resilience strategy in the Lululemon Athletica Inc. Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Effective Research and Development (R&D)
– Lululemon Athletica has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Lululemon Athletica Inc. - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Highly skilled collaborators
– Lululemon Athletica has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Lululemon Athletica Inc. HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Cross disciplinary teams
– Horizontal connected teams at the Lululemon Athletica are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Successful track record of launching new products
– Lululemon Athletica has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Lululemon Athletica has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Sustainable margins compare to other players in Sales & Marketing industry
– Lululemon Athletica Inc. firm has clearly differentiated products in the market place. This has enabled Lululemon Athletica to fetch slight price premium compare to the competitors in the Sales & Marketing industry. The sustainable margins have also helped Lululemon Athletica to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Lululemon Athletica is present in almost all the verticals within the industry. This has provided firm in Lululemon Athletica Inc. case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Weaknesses Lululemon Athletica Inc. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lululemon Athletica Inc. are -
High bargaining power of channel partners
– Because of the regulatory requirements, Dante Pirouz, Kelly Huang Arman suggests that, Lululemon Athletica is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Lululemon Athletica supply chain. Even after few cautionary changes mentioned in the HBR case study - Lululemon Athletica Inc., it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Lululemon Athletica vulnerable to further global disruptions in South East Asia.
Workers concerns about automation
– As automation is fast increasing in the segment, Lululemon Athletica needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Low market penetration in new markets
– Outside its home market of Lululemon Athletica, firm in the HBR case study Lululemon Athletica Inc. needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow decision making process
– As mentioned earlier in the report, Lululemon Athletica has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Lululemon Athletica even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Slow to strategic competitive environment developments
– As Lululemon Athletica Inc. HBR case study mentions - Lululemon Athletica takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Need for greater diversity
– Lululemon Athletica has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High cash cycle compare to competitors
Lululemon Athletica has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Lack of clear differentiation of Lululemon Athletica products
– To increase the profitability and margins on the products, Lululemon Athletica needs to provide more differentiated products than what it is currently offering in the marketplace.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Lululemon Athletica Inc., in the dynamic environment Lululemon Athletica has struggled to respond to the nimble upstart competition. Lululemon Athletica has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Lululemon Athletica Inc., is just above the industry average. Lululemon Athletica needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Opportunities Lululemon Athletica Inc. | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Lululemon Athletica Inc. are -
Leveraging digital technologies
– Lululemon Athletica can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Lululemon Athletica in the consumer business. Now Lululemon Athletica can target international markets with far fewer capital restrictions requirements than the existing system.
Creating value in data economy
– The success of analytics program of Lululemon Athletica has opened avenues for new revenue streams for the organization in the industry. This can help Lululemon Athletica to build a more holistic ecosystem as suggested in the Lululemon Athletica Inc. case study. Lululemon Athletica can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Lululemon Athletica can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Better consumer reach
– The expansion of the 5G network will help Lululemon Athletica to increase its market reach. Lululemon Athletica will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Lululemon Athletica can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Learning at scale
– Online learning technologies has now opened space for Lululemon Athletica to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Sales & Marketing industry, but it has also influenced the consumer preferences. Lululemon Athletica can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Sales & Marketing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Lululemon Athletica can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Lululemon Athletica can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Lululemon Athletica can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Lululemon Athletica Inc., to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Using analytics as competitive advantage
– Lululemon Athletica has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Lululemon Athletica Inc. - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lululemon Athletica to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Lululemon Athletica in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Sales & Marketing segment, and it will provide faster access to the consumers.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Lululemon Athletica to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Lululemon Athletica to hire the very best people irrespective of their geographical location.
Threats Lululemon Athletica Inc. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Lululemon Athletica Inc. are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Lululemon Athletica Inc., Lululemon Athletica may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Sales & Marketing .
High dependence on third party suppliers
– Lululemon Athletica high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Lululemon Athletica will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Lululemon Athletica in the Sales & Marketing sector and impact the bottomline of the organization.
Environmental challenges
– Lululemon Athletica needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Lululemon Athletica can take advantage of this fund but it will also bring new competitors in the Sales & Marketing industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Lululemon Athletica in the Sales & Marketing industry. The Sales & Marketing industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Stagnating economy with rate increase
– Lululemon Athletica can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Lululemon Athletica can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Lululemon Athletica Inc. .
Shortening product life cycle
– it is one of the major threat that Lululemon Athletica is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Increasing wage structure of Lululemon Athletica
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Lululemon Athletica.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Lululemon Athletica needs to understand the core reasons impacting the Sales & Marketing industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Lululemon Athletica Inc. Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Lululemon Athletica Inc. needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Lululemon Athletica Inc. is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Lululemon Athletica Inc. is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Lululemon Athletica Inc. is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Lululemon Athletica needs to make to build a sustainable competitive advantage.