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Lululemon Athletica Case 1

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East Carolina University strategy presentation. Lululemon. Problem Identification.

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Lululemon Athletica Case 1

  1. 1. lululemon athletica, Inc. STEVEN BAYLEY EMILY BEALE YANA DUBINSKY ELIZABETH PEEDIN MGMT 6722 Dr. Karriker
  2. 2. About lululemon…. —  Designer, retailer of high-end yoga inspired athletic wear with locations in Canada, US, New Zealand, and Australia
  3. 3. About lululemon…. —  Designer, retailer of high-end yoga inspired athletic wear with locations in Canada, US, New Zealand, and Australia —  Began when Chip Wilson opened a design/yoga studio in 1998 in Vancouver, British Columbia
  4. 4. About lululemon…. —  Designer, retailer of high-end yoga inspired athletic wear with locations in Canada, US, New Zealand, and Australia —  Began when Chip Wilson opened a design/yoga studio in 1998 in Vancouver, British Columbia —  Community hub where people learn and discuss physical aspects of healthy living
  5. 5. What does the Lululemon customer look like?
  6. 6. What does the lululemon customer look like? “Other than their poise and perfect coifs, you can identify members of this gym robot army by their brand of clothing. You’ve seen them at your gym, at the Whole Foods and in line for green juices;
  7. 7. What does the lululemon customer look like? “Other than their poise and perfect coifs, you can identify members of this gym robot army by their brand of clothing. You’ve seen them at your gym, at the Whole Foods and in line for green juices; they’re the lululemon ladies!” Read more: http://www.blisstree.com/2013/08/14/fitness/optical-illusion-look-like-alululemon-lady-even-though-youre-poor/#ixzz2gOfyUCB7
  8. 8. What does the lululemon customer look like? —  Woman —  Fit —  Healthy —  Active —  Athletic —  Yoga
  9. 9. What does the lululemon customer look like? —  Woman —  Fit —  Healthy —  Active —  Athletic —  Yoga —  Wealthy
  10. 10. What does the lululemon customer look like? —  Woman —  Fit —  Healthy —  Active —  Athletic —  Yoga —  Wealthy —  Educated —  Sophisticated
  11. 11. Lucky LuLu Lindsey Cooper •  •  •  •  •  •  •  •  32 Marketing Executive University of Richmond alum Married, No Kids (froze eggs at 29, just in case) Orders groceries from Whole Foods online and has them delivered 2400 Sq. Ft. Condo in Chevy Chase, MD with her husband Reed, a senior analyst for The Brookings Institution Just bought a 2014 Toyota Seqouia HHI: 230K
  12. 12. Lululemon Manifesto It is a lifestyle!!! —  The pursuit of happiness is the source of unhappiness —  Dance, sing, floss, and travel —  Practice yoga so you can remain active in physical sports as you age.
  13. 13. The Insight Lucky LuLu’s are addicted to Inconspicuous Consumption
  14. 14. Lululemon Under Prana Armour Athleta Nike New Balance Reebok Old Navy Low Price/Perceived Quality and Image High Athletic Apparel Positioning Niche Adidas Broad Broad v. Niche Market
  15. 15. Competitive Forces —  Competition from rival sellers – vigorous competition from multiple large companies such as Nike, Under Armour , Adidas, Reebok, in addition to multiple smaller ones such as Lorna Jane, Lole, and Gap Athleta
  16. 16. Competitive Forces —  Competition from rival sellers – vigorous competition from multiple large companies such as Nike, Under Armour , Adidas, Reebok, in addition to multiple smaller ones such as Lorna Jane, Lole, and Gap Athleta —  Competition from potential new entrants to industry – Vary: low from new players due to time and funds, high from current apparel designers and retailers like Gap
  17. 17. Competitive Forces —  Competition from rival sellers – vigorous competition from multiple large companies such as Nike, Under Armour , Adidas, Reebok, in addition to multiple smaller ones such as Lorna Jane, Lole, and Gap Athleta —  Competition from potential new entrants to industry – Vary: low from new players due to time and funds, high from current apparel designers and retailers like Gap —  Competition from producers of substitute products – shorts, pants, or other clothing not intended for athletic use
  18. 18. Competitive Forces —  Competition from rival sellers – vigorous competition from multiple large companies such as Nike, Under Armour , Adidas, Reebok, in addition to multiple smaller ones such as Lorna Jane, Lole, and Gap Athleta —  Competition from potential new entrants to industry – Vary: low from new players due to time and funds, high from current apparel designers and retailers like Gap —  Competition from producers of substitute products – shorts, pants, or other clothing not intended for athletic use —  Supplier bargaining power – in introductory phase, high bargaining power due to increased investment and desire to work with leading fabric suppliers; 90% of apparel production in Asia but will use US/Canada production facilities as needed
  19. 19. Competitive Forces —  Competition from rival sellers – vigorous competition from multiple large companies such as Nike, Under Armour , Adidas, Reebok, in addition to multiple smaller ones such as Lorna Jane, Lole, and Gap Athleta —  Competition from potential new entrants to industry – Vary: low from new players due to time and funds, high from current apparel designers and retailers like Gap —  Competition from producers of substitute products – shorts, pants, or other clothing not intended for athletic use —  Supplier bargaining power – in introductory phase, high bargaining power due to increased investment and desire to work with leading fabric suppliers; 90% of apparel production in Asia but will use US/Canada production facilities as needed —  Customer bargaining power – high due to: low cost of switching, buyers ability to delay purchases, multiple other brands from which to choose
  20. 20. SWOT Analysis Strength Trademarked fabrics Community involvement – offered free yoga class on monthly basis Employee training Innovation Style/comfort Multiple green initiatives Quality – products designed to sustain 5 years of intended use while maintaining functional Brand identity
  21. 21. SWOT Analysis Strength Trademarked fabrics Community involvement – offered free yoga class on monthly basis Employee training Innovation Style/comfort Multiple green initiatives Quality – products designed to sustain 5 years of intended use while maintaining functional Brand identity Weakness Narrow product line, High retail price Quality control/supply chain Marketing targeted to mostly yoga instructors/studios Loss of customer service with increased scale Weak brand recognition
  22. 22. SWOT Analysis Strength Trademarked fabrics Community involvement – offered free yoga class on monthly basis Employee training Innovation Style/comfort Multiple green initiatives Quality – products designed to sustain 5 years of intended use while maintaining functional Brand identity Opportunity Expand product line Serve additional market segments Expand into additional geographic markets Increased demand in athletic apparel Fitness craze Weakness Narrow product line, High retail price Quality control/supply chain Marketing targeted to mostly yoga instructors/studios Loss of customer service with increased scale Weak brand recognition
  23. 23. SWOT Analysis Strength Trademarked fabrics Community involvement – offered free yoga class on monthly basis Employee training Innovation Style/comfort Multiple green initiatives Quality – products designed to sustain 5 years of intended use while maintaining functional Brand identity Opportunity Expand product line Serve additional market segments Expand into additional geographic markets Increased demand in athletic apparel Fitness craze Weakness Narrow product line, High retail price Quality control/supply chain Marketing targeted to mostly yoga instructors/studios Loss of customer service with increased scale Weak brand recognition Threats Increased competition from current large players in the market, Copy cats Economy New entrants Risk of banking on niche markets
  24. 24. SWOT Analysis Strength Trademarked fabrics Community involvement – offered free yoga class on monthly basis Employee training Innovation Style/comfort Multiple green initiatives Quality – products designed to sustain 5 years of intended use while maintaining functional Brand identity Opportunity Expand product line Serve additional market segments Expand into additional geographic markets Increased demand in athletic apparel Fitness craze Weakness Narrow product line, High retail price Quality control/supply chain Marketing targeted to mostly yoga instructors/studios Loss of customer service with increased scale Weak brand recognition Threats Increased competition from current large players in the market, Copy cats Economy New entrants Risk of banking on niche markets
  25. 25. Value Chain Supply Chain Management: received real time input from customers, short time to receive and approve samples Operations: streamlined design and development processes. Production is the only activity that is outsourced to low cost countries Distribution: facilities in Vancouver-BC, Sumner, Washington, and Melbourne, Australia; online retail store Sales and marketing: community based, yoga instructors ambassadors, community coordinators Profit Margin: Service: “educators”, “guests”, lululemon manifesto Net PM 17.1% about 15% above industry average
  26. 26. Value Chain Supply Chain Management: received real time input from customers, short time to receive and approve samples Operations: streamlined design and development processes. Production is the only activity that is outsourced to low cost countries Distribution: facilities in Vancouver-BC, Sumner, Washington, and Melbourne, Australia; online retail store Sales and marketing: community based, yoga instructors ambassadors, community coordinators Profit Margin: Service: “educators”, “guests”, lululemon manifesto Net PM 17.1% about 15% above industry average Product R&D, Technology, and System Development • Innovation Driven, based in Canada and US – short time to market • Technology of new fabrics - so far introduced 3 new materials: luon, luxtreme, and silverescent
  27. 27. Value Chain Supply Chain Management: received real time input from customers, short time to receive and approve samples Operations: streamlined design and development processes. Production is the only activity that is outsourced to low cost countries Distribution: facilities in Vancouver-BC, Sumner, Washington, and Melbourne, Australia; online retail store Sales and marketing: community based, yoga instructors ambassadors, community coordinators Profit Margin: Service: “educators”, “guests”, lululemon manifesto Product R&D, Technology, and System Development •  Innovation Driven, based in Canada and US – short time to market •  Technology of new fabrics - so far introduced 3 new materials Human Resources Management •  Customer oriented, coaches, through Yoga instructors, •  Community feeling with sales associates that share the passion Net PM 17.1% about 15% above industry average
  28. 28. Value Chain Supply Chain Management: received real time input from customers, short time to receive and approve samples Operations: streamlined design and development processes. Production is the only activity that is outsourced to low cost countries Distribution: facilities in Vancouver-BC, Sumner, Washington, and Melbourne, Australia; online retail store Sales and marketing: community based, yoga instructors ambassadors, community coordinators Profit Margin: Service: “educators”, “guests”, lululemon manifesto Product R&D, Technology, and System Development •  Innovation Driven, based in Canada and US – short time to market •  Technology of new fabrics - so far introduced 3 new materials Human Resources Management •  Customer oriented, coaches, through Yoga instructors, •  Community feeling with sales associates that share the passion General Administration •  Founder – Wilson was CEO 2000-2005 •  Remained actively involved as head of innovation department untill2012 Net PM 17.1% about 15% above industry average
  29. 29. Key Success Factors —  Community Based Marketing
  30. 30. Key Success Factors —  Community Based Marketing —  Superior Customer Interaction
  31. 31. Key Success Factors —  Community Based Marketing —  Superior Customer Interaction —  Technological Innovation
  32. 32. Community Based Marketing
  33. 33. Strategy —  Focused differentiation •  Focusing on lifestyle perception
  34. 34. Strategy —  Focused differentiation •  Focusing on lifestyle perception •  Creating superior products (features, design, performance)
  35. 35. Strategy —  Focused differentiation •  Focusing on lifestyle perception •  Creating superior products (features, design, performance) •  Striving for innovation and technological advances
  36. 36. Strategy —  Focused differentiation •  Focusing on lifestyle perception •  Creating superior products (features, design, performance) •  Striving for innovation and technological advances •  Emphasizing marketing and brand-building activities
  37. 37. Strategy —  Focused differentiation •  Focusing on lifestyle perception •  Creating superior products (features, design, performance) •  Striving for innovation and technological advances •  Emphasizing marketing and brand-building activities •  Pursuing continuous quality improvement
  38. 38. Growth — GROWTH
  39. 39. Growth — GROWTH —  Net profit increase of 24x over past five years
  40. 40. Growth — GROWTH —  Net profit increase of 24x over past five years —  EPS increase of 21x over past five years
  41. 41. Growth — GROWTH —  Net profit increase of 24x over past five years —  EPS increase of 21x over past five years —  Expanded # of stores by 133 in five years
  42. 42. Improved Operations —  Operating profit increase of 17X in five years —  Improved inventory turnover by 1.4 in five years —  Cash provided by operations increased by $178.2M over past five years —  Average sales per square foot increased by $593M in five years
  43. 43. Valuation Measures —  Net profit increase of 24x over past five years —  EPS increase of 21x over past five years —  Return on equity increased by 10% in five years —  Gross profit margin increase of 5.5% over past five years
  44. 44. Financial Highlights (Most Recent Quarter: Aug 4, 2013) —  Profit Margin: 18.12% (2012: 18.49%) —  Operating Margin: 26.50% (2012: 28.67%) —  Return on Equity: 31.72% (2012: 30.52%) —  Gross Profit: 762.83M (2012: 569.3M) —  Gross profit margin: 5.11 % (2012: 5.69%) —  Diluted EPS: 1.85 (2012: 1.27) —  Operating Cash Flow: 287.52M (2012: 203.6M)
  45. 45. Central Issues/Problems —  Quality control/supply chain – recent issues with recalls
  46. 46. Central Issues/Problems —  Quality control/supply chain – recent issues with recalls —  Narrow focus – primary target: sophisticated and educated women who understand importance of active, healthy lifestyle (although expanding into men’s and youth female athletic wear)
  47. 47. Central Issues/Problems —  Quality control/supply chain – recent issues with recalls —  Narrow focus – primary target: sophisticated and educated women who understand importance of active, healthy lifestyle (although expanding into men’s and youth female athletic wear) —  Missing out on major markets (Europe/Asia/South America)
  48. 48. Central Issues/Problems —  Quality control/supply chain – recent issues with recalls —  Narrow focus – primary target: sophisticated and educated women who understand importance of active, healthy lifestyle (although expanding into men’s and youth female athletic wear) —  Missing out on major markets (Europe/Asia/South America) —  Lack of brand awareness/mass marketing
  49. 49. References —  Gamble, J., Peteraf, M., Strickland, A., Thompson, A. Crafting and executing strategy (2014). McGraw-Hill Education. —  http://www.lululemon.com/education/ —  http://finance.yahoo.com/q/ks?s=LULU+Key+Statistics

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