Case Study Description of lululemon athletica: Chip Wilson's New Venture
Chip Wilson is trying to decide if he should pursue his current venture, a yoga wear retailing concept or return to being chief executive officer of Westbeach Snowboard, a firm he found two decades ago. This case is the first in a series of seven lululemon athletica cases that focus on decision-making using real-options analysis. Other cases in the series are: 906M37, 906M38, 906M39, 906M40, 906M41 and 906M42.
Swot Analysis of "lululemon athletica: Chip Wilson's New Venture" written by Eric A. Morse, Ken Mark includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Athletica Lululemon facing as an external strategic factors. Some of the topics covered in lululemon athletica: Chip Wilson's New Venture case study are - Strategic Management Strategies, and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the lululemon athletica: Chip Wilson's New Venture casestudy better are - – digital marketing is dominated by two big players Facebook and Google, technology disruption, increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%, competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, supply chains are disrupted by pandemic ,
banking and financial system is disrupted by Bitcoin and other crypto currencies, talent flight as more people leaving formal jobs, etc
Introduction to SWOT Analysis of lululemon athletica: Chip Wilson's New Venture
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in lululemon athletica: Chip Wilson's New Venture case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Athletica Lululemon, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Athletica Lululemon 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: Chip Wilson's New Venture can be done for the following purposes –
1. Strategic planning using facts provided in lululemon athletica: Chip Wilson's New Venture case study
2. Improving business portfolio management of Athletica Lululemon
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Athletica Lululemon
Strengths lululemon athletica: Chip Wilson's New Venture | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Athletica Lululemon in lululemon athletica: Chip Wilson's New Venture Harvard Business Review case study are -
Innovation driven organization
– Athletica Lululemon is one of the most innovative firm in sector. Manager in lululemon athletica: Chip Wilson's New Venture Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Sustainable margins compare to other players in Leadership & Managing People industry
– lululemon athletica: Chip Wilson's New Venture firm has clearly differentiated products in the market place. This has enabled Athletica Lululemon to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Athletica Lululemon to invest into research and development (R&D) and innovation.
Highly skilled collaborators
– Athletica Lululemon 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: Chip Wilson's New Venture HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to lead change in Leadership & Managing People field
– Athletica Lululemon 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 Athletica Lululemon in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Superior customer experience
– The customer experience strategy of Athletica Lululemon in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– Athletica Lululemon has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Athletica Lululemon to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of Athletica Lululemon
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Athletica Lululemon does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Strong track record of project management
– Athletica Lululemon is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High switching costs
– The high switching costs that Athletica Lululemon has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Ability to recruit top talent
– Athletica Lululemon is one of the leading recruiters in the industry. Managers in the lululemon athletica: Chip Wilson's New Venture are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Learning organization
- Athletica Lululemon 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 Athletica Lululemon is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in lululemon athletica: Chip Wilson's New Venture Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Athletica Lululemon 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.
Weaknesses lululemon athletica: Chip Wilson's New Venture | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of lululemon athletica: Chip Wilson's New Venture are -
Increasing silos among functional specialists
– The organizational structure of Athletica Lululemon is dominated by functional specialists. It is not different from other players in the Leadership & Managing People segment. Athletica Lululemon needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Athletica Lululemon to focus more on services rather than just following the product oriented approach.
Need for greater diversity
– Athletica Lululemon 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study lululemon athletica: Chip Wilson's New Venture, it seems that the employees of Athletica Lululemon don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Lack of clear differentiation of Athletica Lululemon products
– To increase the profitability and margins on the products, Athletica Lululemon needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to strategic competitive environment developments
– As lululemon athletica: Chip Wilson's New Venture HBR case study mentions - Athletica Lululemon 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.
Slow decision making process
– As mentioned earlier in the report, Athletica Lululemon 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. Athletica Lululemon 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 harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Athletica Lululemon is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study lululemon athletica: Chip Wilson's New Venture can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the lululemon athletica: Chip Wilson's New Venture HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Athletica Lululemon has relatively successful track record of launching new products.
Products dominated business model
– Even though Athletica Lululemon has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - lululemon athletica: Chip Wilson's New Venture should strive to include more intangible value offerings along with its core products and services.
Low market penetration in new markets
– Outside its home market of Athletica Lululemon, firm in the HBR case study lululemon athletica: Chip Wilson's New Venture needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Interest costs
– Compare to the competition, Athletica Lululemon has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Opportunities lululemon athletica: Chip Wilson's New Venture | 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: Chip Wilson's New Venture are -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Leadership & Managing People industry, but it has also influenced the consumer preferences. Athletica Lululemon can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Building a culture of innovation
– managers at Athletica Lululemon can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Leadership & Managing People segment.
Leveraging digital technologies
– Athletica Lululemon 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Leadership & Managing People industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Athletica Lululemon 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. Athletica Lululemon 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Athletica Lululemon is facing challenges because of the dominance of functional experts in the organization. lululemon athletica: Chip Wilson's New Venture case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Athletica Lululemon in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Leadership & Managing People segment, and it will provide faster access to the consumers.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Athletica Lululemon 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: Chip Wilson's New Venture, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Athletica Lululemon to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Using analytics as competitive advantage
– Athletica Lululemon 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: Chip Wilson's New Venture - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Athletica Lululemon to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– Athletica Lululemon can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. lululemon athletica: Chip Wilson's New Venture suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Loyalty marketing
– Athletica Lululemon has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Athletica Lululemon 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 Athletica Lululemon to hire the very best people irrespective of their geographical location.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Athletica Lululemon can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats lululemon athletica: Chip Wilson's New Venture 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: Chip Wilson's New Venture are -
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Athletica Lululemon business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that Athletica Lululemon is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Athletica Lululemon 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: Chip Wilson's New Venture .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Athletica Lululemon with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Consumer confidence and its impact on Athletica Lululemon demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Athletica Lululemon can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Athletica Lululemon in the Leadership & Managing People industry. The Leadership & Managing People 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.
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.
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 Athletica Lululemon in the Leadership & Managing People sector and impact the bottomline of the organization.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Athletica Lululemon.
Technology acceleration in Forth Industrial Revolution
– Athletica Lululemon has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Athletica Lululemon needs to keep up with the evolution of technology in the Leadership & Managing People sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Environmental challenges
– Athletica Lululemon 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. Athletica Lululemon can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
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. Athletica Lululemon needs to understand the core reasons impacting the Leadership & Managing People industry. This will help it in building a better workplace.
Weighted SWOT Analysis of lululemon athletica: Chip Wilson's New Venture 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: Chip Wilson's New Venture 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: Chip Wilson's New Venture 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: Chip Wilson's New Venture 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: Chip Wilson's New Venture 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 Athletica Lululemon needs to make to build a sustainable competitive advantage.