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Individual Case Study – Chipotle
BUSI 690 – Policy and Strategy in Global Competition
1
CHIPOTLE
Individual Case Study – Chipotle
Executive Summary
Chipotle Mexican Grill, Inc. is one of the leading quick-service
restaurant chains in the US and
operates 2,622 restaurants. The company’s existing strategy and
business model indicate that it
operates firm-owned restaurants and focuses on delivering high-
quality food at low prices
everyday to customers. The company has been successful but
faces numerous complaints
regarding food contamination. This report presents a new
mission statement appropriate for its
businesses and carries an internal analysis of the company.
Based on the internal and financial
analysis, two alternative strategies have been proposed, and
projections based on the
recommended strategy to open up new casual dining restaurants
in the US are presented in this
report. It is suggested that the new strategy will increase the
company’s profitability and generate
a positive net present value.
Existing Mission, Objectives, and Strategies
The company’s existing mission is “food with integrity”
[CITATION Chi201 l 1033 ] which
implies that it ensures that its supplies are from sustainable
sources without the use of chemicals
that could have harmful effects on humans. The primary goal of
the company is to “focus on safe
and delicious food made with better ingredients” [CITATION
Chi202 l 1033 ]. Its strategy
remained to have a small menu that offers limited choices of
healthy, nutritious, and good quality
food items at competitively low prices. Furthermore, its focus is
on expanding the network on its
restaurants in the United States until recently, as the company
has launched its online and mobile
food ordering systems. It relies on providing efficient customer
service and carrying out strong
advertising and marketing programs to communicate with
customers and increase its sales.
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CHIPOTLE
A New Mission Statement
The new mission statement of Chipotle is to (1) serve customers
(2) healthy and delicious food
(3) without boundaries (4) by using sustainable food production
technologies (5) and consistently
growing its business (6) by expanding its network and following
ethical practices (7) and
challenging its competitors (8) by giving best quality food and
value and services (9) by its
highly trained employees.
Analysis Of the Firm’s Existing Business Model
The existing business model of Chipotle focuses on providing
enhanced food experience to its
customers. The key to the company’s business model is that it
was not based on the standards of
Quick Service Restaurants (QSR) and offered a new approach to
the business that challenged
other companies in the market. The company operates a large
network of more than two
thousand restaurants in the United States and thirty restaurants
in internal markets. Its business
model is based on a simple menu with a limited number of
options available to customers at
comparatively low prices. The reason for this approach is that it
aims to deliver high-quality food
quickly and efficiently for its customers rather than giving them
greater choices with a lack of
focus on maintaining the level of quality and cleanliness. The
company only operates company-
owned restaurants and does not offer franchise opportunities.
The model is also based on low-
profit margins and greater sales volume. The company
maintains low risk and margins on its
products and also has a low-pricing strategy to attract customers
and also gain their loyalty to the
brand. Chipotle also treats its employees differently as it is
noted that the company pays them
higher sales and wages as compared to other companies.
Moreover, the company has diversified
its point of sale by developing an online ordering website and a
mobile app.
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CHIPOTLE
SWOT Analysis
4
CHIPOTLE
Internal Factor Evaluation (IFE) Matrix.
External Factor Evaluation (EFE) Matrix.
5
CHIPOTLE
SWOT Bivariate Strategy Matrix
Boston Consulting Group (BCG) Matrix
Competitive Forces Analysis, Competitive Profile Matrix
(CPM), and Competitor’s Ratio
Analysis
6
CHIPOTLE
Competitive forces analysis.
FP
SP
Defensive
Conservative Aggressive
Competitive
CP IP
7
-7.0 -5.0 -3.0 -1.0 1.0 3.0 5.0 7.0
-7.0
-5.0
-3.0
-1.0
1.0
3.0
5.0
7.0
CHIPOTLE
Competitive Profile Matrix (CPM).
Competitor’s Ratio Analysis.
The competitor selected for review in this section is
McDonald’s Corporation, which is a leading,
global chain of QSR. The key ratios of two years, 2018 and
2019 are presented in the following
table:
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CHIPOTLE
The profitability ratios indicate that the company operated at
healthy profit margins in both
years. The ratio values improved in 2019 as compared to 2018,
which was a positive sign for the
company’s shareholders[CITATION Reu201 l 1033 ]. The net
profit margin of 28.8% and 28.5%
in 2018 and 2019 respectively implied that the company had
strong profitability, which was
added to its retained earnings that could be used for further
expansion and product development.
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CHIPOTLE
The DuPont analysis indicates that the company’s asset turnover
declined in 2019, which implies
that the company only generated $0.52 in sales in that year as
compared to $0.63 in 2018 from
the use of its assets. The liquidity position of the company
weakened in 2019 as its current ratio,
and quick ratio values fell below 1. However, the cash cycle of
McDonald’s reduced from 2.3 in
2018 to 2.0 in 2019. Moreover, the times interest earned also
reduced as the company’s interest
obligations increased more than proportional to the increase in
its operating income. The
company’s long-term borrowing increased as a proportion to its
equity. It implies that the
solvency position of McDonald’s was weak in both years, with a
further decline in 2019. The
receivables turnover of the company also reduced in 2019,
which is the reason it took a long time
to receive cash from its credit sales. On the other hand, the
inventory turnover of McDonald’s
was significantly high, as in the case of the QSR business, and
it only held inventory for less than
two days. The payable turnover had a similar trend as
receivables. The ROIC of the company
also declined from 19.8% in 2018 to 16.5% in 2019, which
implies that its investment capital
increases but did not generate a high return as compared to the
previous year.
Historical Financial Statements
This section of the report performs trend analysis of Chipotle’s
financial statements for the last
three years and also calculates deltas between those years.
Income Statement
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CHIPOTLE
Note. Annual standardized in millions of U.S. dollars.
It is noted that the company;’s revenue increased by 14.83% in
2019 as compared to 8.68% in
2018. On the other hand, its cost of sales increased by 12.61%
in 2019 as compared to 6.34% in
2018. There was a significant increase in the company’s selling,
general, and administrative
expenses in 2019. Furthermore, there was a 5.35% increase in
unusual income generated from
restructuring, impairment, and gain on sale of operating assets
in 2019. The company did not
have any debt-related interest expense, and its interest income
from investments increased by
41.58% in 2019. The net profit of the company increased by
$173.6 million in 2019 as compared
to just $0.3 million in 2018[ CITATION Chi204 l 1033 ].
Balance Sheet
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CHIPOTLE
Note. Annual standardized in millions of U.S. dollars.
The trend analysis of the company’s balance sheet indicates that
its total assets increased by
$2.83901 billion in 2019 as compared to $219.8 million in 2018.
It shows that the company
significantly invested in the expansion of its restaurant's
network. Moreover, the company’s cash
and cash equivalents increased by 92.24% in 2019 due to the
sharp increase in its operating
income. As the company’s sales increased in 2019, the value of
its receivables also soared by
73.84% in 2019. The company did not have any debt, and its
total liabilities increased by
315.14% in 2019 as compared to just 20.99% in 2018. The
significant increase in its liabilities
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CHIPOTLE
was due to the other liabilities related to the purchase of
properties for new restaurants. Finally, it
is noted that the company’s total equity increased by 16.77% in
2019 as compared to 5.64% in
2018. The company bought back treasury stocks, and this is the
reason that its retained earnings
only increased by 13.51% in 2019 as compared to 7.36% in
2018 [ CITATION Chi204 l 1033 ].
Cash Flow
Note. Annual standardized in millions of U.S. dollars.
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CHIPOTLE
The cash flow statement analysis indicates that the cash from
operating activities increased by
$100 million in 2019, but the increase in 2018 was higher at
$154.5 million. The reason for this
difference was due to the increase in the company’s working
capital in 2019, which meant that a
significant amount of its cash was stuck in non-cash generating
activities. In the last two years,
the company had made significant investments in buying new
properties, which are now
managed by a separate entity, in expanding its sales network.
The company had already repaid its
debt and was also buying back its stocks, which led to a cash
outflow of $190.6 million, $160.9
million, and $285.9 million in 2019, 2018, and 2017
respectively. The company’s free cash flow
has improved over the last three years. In 2019, it increased by
16.01% and rose by 33.52% in
2018 [ CITATION Chi204 l 1033 ].
Ratio Analysis
Chipotle’s key financial ratios and their values for the last three
years are provided in the
following table:
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CHIPOTLE
The profitability analysis of the company indicates that its
profitability improved in 2019 as
compared to 2018[ CITATION Reu0a l 1033 ]. The operating
margin of the company had
declined in 2018 due to the case of food contamination.
However, it has taken major steps to get
back the confidence of its customers by making improvements
in its food management processes
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CHIPOTLE
and also dealing with the issue effectively through media,
including social media. The net profit
margin of the company increased by 2.8% in 2019 after it fell
by 0.4% in 2018. The company’s
ROE was 22.4% in 2019 as compared to 12.1% and 12.7% in
2018 and 2017, respectively. It
indicates that the company’s asset turnover and net profit
margin increased substantially in the
last year. The liquidity position weakened in 2019 as the values
of both the current ratio and
quick ratio gradually declined over the last three years but
remained above the value of one. It is
noted that the company did not have external borrowing, and its
assets were financed by internal
equity and capital raised from the stock market. The receivable
turnover of Chipotle declined in
the last three years as its sales increased. The inventory
turnover also reduced in those years, but
it had a high value similar to McDonald’s. Chipotle paid its
suppliers in almost 36 days in 2019,
and this strategy was the same in 2017 and 2018 as well. The
ROIC increased by 1.60% in 2019
as compared to a 0.60% decline in 2018.
Alternative Strategies
The two proposed strategies based on the the company analysis
are provided in the following
along with their justification and advantages for Chipotle.
Investment in Casual Dinning Restaurants
This strategy is recommended on the basis that the company
keeps its focus on the US market
and diversifies its revenue channels by opening up casual dining
restaurants that have a different
theme and menu from its QSR restaurants. The company has
tested this strategy already by
opening up Tasty Made burger restaurant and has opened up
more than 200 restaurants. Further
expansion of similarly casual dining restaurants can help the
company to overcome its
weaknesses of targeting a small customer segment and also
avoid disruptions in its revenue that
are commonly caused by complaints about food contamination
in its Chipotle restaurants. The
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CHIPOTLE
management will be able to pursue this strategy based on its
experience and keep the risk of
failure low as compared to the other strategy proposed.
Expansion of International Business
The company does not have a significant international presence
other than 30 restaurants
opening in Canada, the United Kingdom, France, and Germany.
Chipotle can globally expand its
network of restaurants and target emerging markets like China
and India that have more
significant potential for international brands. Although this
strategy will increase the risk level of
business and the company will have to invest in R&D to
develop products that suit consumer
tastes in those countries, the potential increase in its revenue
and profitability is significantly
high. It will also assist the company to be less dependent on the
US market and also benefit from
the localization of its strategy in international markets.
Pro-Forma Financial Statements
The projected income statement with and without the new
strategy is provided in the following.
The ‘without strategy’ projections are based on the company’s
recent quarterly report and the
‘with strategy’ projectsions are developed using the estimated
increase in revenue of 3%.
Income Statement
Note. Annual standardized in millions of U.S. dollars.
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CHIPOTLE
Balance Sheet
Note. Annual standardized in millions of U.S. dollars.
Cash Flow
Note. Annual standardized in millions of U.S. dollars.
Ratio Analysis
Net Present Value Analysis
Based on the estimated invement of $300 million and the
expected increase in the company’s
EBIT between with and without strategy estimations, the Net
Present Value (NPV) is calculated
in the following:
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CHIPOTLE
The proposed strategy is expected to have a positive NPV.
Therefore, the company should accept
it and go ahead with expanding its network by opening new
casual dinning restaurants in the US.
EPS/EBIT Analysis
Specific Recommended Strategy and Long Term Objectives
Based on the current strategy and practices of Chipotle, it is
recommended that the company
expands its network in the US by opening up casual dining
restaurants. The justification of
proposing this strategy is that the company has no significant
experience of the international
markets, and it has halted its franchise policy, which means that
its risk level will phenomenally
increase if it decides to own and operate its restaurants in
different countries. The management of
operations will become challenging, and this could lead to a
significant financial loss and also
negatively affect its position in the US market. The company
can develop new brands and offer a
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CHIPOTLE
healthy casual dining experience to US customers by innovating
its products and give better
choices to customers in the US. The company can invest $300
million in opening 100 new
locations, which will allow the company to experience an
increase of three percent in its revenue.
The new strategy can be implemented over the next three years,
as depicted below.
Proposed New Business Model
The proposed business model is based on the creation of
different segments and a flatter
organizational structure. The company can hire key personnel to
manage different brands and
restaurant chains. The new business model will allow
significant investment in research and
development of new products that will increase the scope of
operations and target different
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CHIPOTLE
groups of customers other than low-income earners who are
mainly served at Chipotle
restaurants. The company will have different teams to work on
the marketing and advertising
strategies for its new brands and restaurants. The focus on the
company will be expanding its
network and diversify its revenue channels. The company will
have stricter controls over its
supplies and food preparation and hold its employees
accountable after giving them the
necessary training.
References
Chipotle. (2020a). Day after day we’re committed. Retrieved
from
https://www.chipotle.com/food-with-integrity
Chipotle. (2020b). Chipotle - Food sategy overview. Retrieved
from
https://www.chipotle.com/foodsafety
Chipotle. (2020c). Chipotle Announces First Quarter 2020
Results. Retrieved from
https://ir.chipotle.com/2020-04-21-Chipotle-Announces-First-
Quarter-2020-Results
Chipotle Mexican Grill. (2020). Chipotle Mexican Grill, Inc. -
SEC Form 10K . Retrieved from
https://ir.chipotle.com/sec-filings
Reuters. (2020a). Chipotle Mexican Grill. Retrieved from
Reuters
Reuters. (2020b). McDonald's Corp. Retrieved from Reuters
21
References
A Political Economy of Communication
Week 6 – CMNS 130
Caio cardoso
Objectives
To understand:
Fundamental characteristics and principles that inform a
political economy approach to media/technology
The importance of social relations in explaining transition from
broadcast to narrowcast
Labour and the process of commodification as central to
identifying historical change in capitalism
A Political Economy of Communication
Media audience today is increasingly fragmented; it is not like
the mass media audience constructed by the radio and television
age
Marketing and audience research techniques are increasingly
sophisticated
Focus on the individual consumer
Major corporations have ability to repackage content and cross -
promote it over several delivery platforms, facilitated by data
gathered through digitized commercial surveillance
A Political Economy of Communication, cont’d
Digitization used to extend capitalism
Most powerful media companies move away from a single-
business model towards vertically and horizontally integrated
giants
Spread globally and control everything:
Newspapers to satellite television
The entertainment industry
The Internet and telecommunications
Exchange of communication
A Political Economy of Communication, cont’d
Political economy – study of social and power relations of the
production, consumption and distribution of resources
Much of current debate on communication policy focuses on
ownership and control:
Who owns and controls your media?
Who owns your access to technology and the hardware/software
you use?
Who owns and controls your information?
Why Political Economy?
Critical communication scholarship is socially conscious
Questions the social structures and processes that allow
inequality to deepen and conflict to increase
Media content that marginalizes people or glorifies greed and
sensationalizes destruction and violence is not democratic
Why Political Economy? cont’d
Political economy of communication should take into account
the social whole and question the whole phenomenon of media
as interconnected:
The history and structure of the communications industry
Issues of ownership and control
Repeated ideologies in the content
History and application of technology
Communication delivery systems and platforms
Cultural contexts that surround both production and
consumption
Aim not just to study media and communication, but to take
responsibility for and contribute to it and change it, instead of
accepting structured position of worker or consumer
A Brief History of Political Economy
Dominant civilizations become so via the technology of
communication (print, money, electricity, railways)
Study of political economy first rose to prominence during the
early years of the Industrial Revolution when economists came
to terms with the rise of capitalism as a global system of
production and exchange
Adam Smith (1723–90) – The Wealth of Nations formulated
theory of the division of labour. A manufacturing operation
would be more productive if the production process was
simplified and each worker concentrated on a single task
A Brief History of Political Economy, cont’d
Economic theory is still largely based on false assumption that
markets will always find their point of equilibrium under
conditions of perfect competition
But competition tends to result in a very small number of global
corporations.
Marx noted the exploitative nature of capitalism, arguing that
the entrepreneurs expropriated surplus from the workers who
laboured to produce it so that a profit could be made
A Brief History of Political Economy, cont’d
Capitalism divides and structures human relationships into
hierarchies based on social class
The owners of the means of production versus those who must
sell their labour for a wage
Industrial Revolution – a series of fundamental changes to the
mode of production (from feudalism to capitalism) that
developed over 100 years
Shift from an industrial society (based on natural resources like
oil, gas, or wood) to an information or knowledge society (one
based on purportedly infinite resources)
A Brief History of Political Economy, cont’d
Underpinned by use and development of digital technologies,
changing how and what we consider labour, as well as on how
we think and act as social beings
Like the Industrial Revolution, the basis of the economic system
is still capitalism, such that political economists suggest the
term “digital capitalism”
Political Economy Methodology
Logical principles that inform a political economy approach:
Focuses on concentration of ownership and control of resources
Analyzes conflict between capital and labour, and challenges
assumption that governments are neutral in economic and
communication issues
Emphasizes importance of structural factors in the
communication environment
Questions size, scope, and geographic spread of markets for
goods and services
Seeks to identify the social whole – the ideas, processes,
practices, organizations, and regulations that affect or structure
this environment
Value, Capital, and the Media
Dialectic of digital economy plays out between the social
relations of political economy and media technologies
Abstract concept of value is created, distributed, consumed, and
stored
Media industries produce commodified meaning, producing two
types of value in the economic exchange:
Commercial value, measured by rates of profit and the value of
capital invested
Social, political, and attitudinal value (ideas about how we view
human nature, social relations, and politics)
Value, Capital, and the Media, cont’d
Basic principle of political economy: Every commodity has a
use value (based on social utility) and an exchange value (based
on money)
Commodification – the process of turning non-commercial
material into saleable products
Means and modes of communication are necessary public
resources; they are commodified when they become a product
for sale
Value, Capital, and the Media, cont’d
“Commodity fetishism” – we see the product, not the resources,
particularly the labour, that went into it
Labour is the source of all value in society
Labour theory of value (Marx) – the value of a commodity is
equal to the value of the labour time consumed in its
manufacture
Surplus value – when the total amount of labour embedded in a
commodity is greater than the price paid for that labour
Part of surplus value is used for personal consumption, part is
reinvested in capital and new labour in order for the process of
accumulation to continue
Value, Capital, and the Media, cont’d
New machinery and technologies contain more embedded human
labour time than previous models
Ratio of labour power to nature involved in design, engineering,
manufacturing, and marketing rises, creating conditions for
economic crises
These crises are periodic and ongoing; they are a constant
feature of the capitalist mode of production and a key social
force driving change
Financialization – A process that subordinates use value to
exchange value
Media as Both “Base” and “Superstructure”
The media are both a business and a producer of ideas and
values
Base refers to the economic realm of production
Superstructure refers to the rest of civil society (culture,
politics, and ideology) that “rests” on the base
Both base and superstructure are dynamic process of “mutual
constitution” (each affects the other)
Hegemony and Communicative Process
The communication process helps corporations manage
international operations, respond to changing market conditions,
and overcome restraints of space and time in order to maximize
control over the international value chain of production,
distribution, marketing, and consumption
Globalization:
Notion that economic development proceeds best on the basis of
a single worldwide market that sources materials and labour
from anywhere in the world at the lowest possible cost
Refers to the ongoing restructuring of capitalism to extend
control over resources and extract surplus value
Hegemony and Communicative Process, cont’d
How do media and communicative practices relate to and exist
within political and other social structures?
Hegemony – the active process of a dominant social class
winning the support of subordinate classes for its continued rule
(with ideological memes)
Important to identify what the structures of domination are
(political, economic, and social) and the possibility for agency
(the ability of humans to challenge, change, or reject
domination)
Emphasis on competition and glorification of the individual as
epitomized by the entrepreneurs and celebrities are hegemonic
indicators of success
Hegemony, Subversion, and Mimetic Mutation
Hegemony is not a fixed relationship; it is mutable through
forces acting on the emotional dialectic
An emergent or oppositional dialectic is “counter-hegemonic”
and can pull ideologies in contradictory directions
Consensus versus deviance versus limited controversy
Hegemonic ideas exist in the sphere of consensus and dominate
the sphere of limited controversy
Counter-hegemonic ideas begin life in the sphere of deviance
and migrate into the sphere of consensus through mimetic
mutation and social struggle, or remain in sphere of deviance
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Communication and Social Change (CMNS 130)
Winter 2022 - Midterm Exam
Exam Rules:
• This is an open book exam where you can use all course
readings, notes, worksheets and
lectures to help you, as well as other relevant sources. (Avoid
google and Wikipedia, please!)
• Please cite all your sources in APA style
• You may NOT communicate with or collaborate with any
others about your work.
• You understand that all work will be submitted to TurnitIn
plagiarism checking software OR
your handwriting will be compared to your other work during
the term
• You agree that you are the only author of the work you
submit.
• Trust yourself to read and understand the questions, and write
your own thoughts and opinions,
supported by class material and readings. You can do it!!
• Questions? email: [email protected]
Part 1: Mini-Essay Instructions
• Objective: Analyze a communication practice to social
realities
• You may use TV, radio, newspaper…
• Write a mini-essay (900-1300 words, double-spaced) using the
guidelines provided
• Include your name and student number at the top of your file
and in your file name (ex. Harman
000 000 0000). If you forget to write your name or student
number, I will deduct points!
• Format: As you would with an assignment, upload on Canvas
under “Final Exam Upload” in Word or PDF.
mailto:[email protected]
QUESTION
WITHOUT USING SOCIAL MEDIA AS AN EXAMPLE,
ANSWER TO THE FOLLOWING
QUESTION
What are possible consequences of media using its audience as a
commodity? Use at least one group that
was treated like a product by media and the effects of that.
SUGESTION OF STRUCTURE TO YOUR ANSWER
Guidelines: Use the following points, answering the questions
in paragraphs
I. The platform: Introduction (about 100-150 words)
a) Choose a communication object (TV, radio, newspaper)
b) Why did you choose this object? Why is it important to study
in a communication and social
change class? How did your relationship with this object
change?
c) Identify the main theme in this object you would like to
explore (the impact of that object in
society)
d) Write a brief summary of your main points about this object
– this will be your thesis.
(example of introduction draft: For this essay I have chosen the
memes with the “Hotline Bling” (2015)
music video, by Drake, because it makes interesting comments
on issues certain social groups refuse or
accept in their own identity. The use of memes is a crucial part
of society nowadays, and through that
we can express refusal or acceptance of certain behaviours and
norms that differentiates this from an
older generation, that may not even know Drake. Thus, while
this meme reinforces generational links it
also plays an important role in stressing different attitudes
towards everyday life.)
II. The Communications Object and the Culture Industries (100-
200 words)
Situate (put) the object in the discussions of the Culture
Industry and discuss.
a) Describe every important aspect of that product in its
context;
b) Discuss each part in relation to your communication object in
1-3 sentences using concepts from the
text.
(example: Drake is a rapper, whose songs approach new aspects
of society, like[…]. However,
according to the Culture Industry perception (Pearson, 2020)
pop music, like this, can be used to […])
III. Social Changes (about 300-500 words)
Choose at least ONE of the following social group with which
you will analyze your object. You
should analyze how your object approaches the chosen aspects
and can influence people over
history:
• age
• class
• gender
• sexuality
• race and ethnicity
• identity
• disability and health
• national framing
• religion
(In my example: The aforementioned conflict between different
generations expressed in this meme
usages can be merged with perceptions of how we rely on those
messages to express parts of our
identities…)
IV. Theoretical Perspectives (about 200-400 words)
Choose some of the following theoretical perspectives or
models to add a deep analysis your cultural
object and what it represents: How would the theory or theorist
explain your cultural object?
• Cultural Studies – Stuart Hall and the British Cultural Studies
• Critical studies – Frankfurt School and the Critical Studies
• Strong Effects Theories – Hypodermic Needle/Magic Bullet or
the Mass Society
• Limited Effects perspective – Two-Step Flow and Lazarsfeld’s
perspective
(Example: Adorno and Horkheimer (2018) would point that the
repetition of formulas on the RAP
music, with lyrics mentioning their wealth and power is also
present in the meme reproduction on
social status…)
V. Reflection and Summary (about 100-150 words)
Summarize your main thoughts about your analysis of the
communicational object, including: What makes
this object unique or special as a source of information about
communications?
• What can this object tell us about the society we live in and
about the specific theoretical
dimensions you discussed?
• What can be learned from studying communications platforms
in this way?
VI. Academic Sources and Citations – Include a “References”
list at the end of your work
• All sources must be relevant to your topic and from 2010 or
later (unless classics, such as
The Communist Manifesto or Orientalism)
• APA style – ex. (Lee, 2018) or (Lee, 2018, p. 3). Please use
Alexander College’s APA Citation
Guide to help you
• 2 in-text citations per paragraph
• 3-5+ academic references, including books, journal articles,
and high-quality websites etc.
• The textbook counts as a source, as do the journal articles
used in class
https://alexandercollege.ca/web-2018/wp-
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2020.pdf
https://alexandercollege.ca/web-2018/wp-
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RUBRICS
Mini-Essay Rubric
Your mini-essay score will be used as 2/3 of your final exam
mark. Final exam grades may not be
available on Canvas.
The following scale will be used to assess your mini-essay:
Answers to all the
questions are
Complete,
Insightful, and
Original
/15
exceptionally
well done
13-15
very
well done
11-12
Adequately
done
8-9
not very
well done
6-7
Poorly
done
4-5
almost
never/
not at all
0-3
Answers use
appropriate
Theoretical Terms
and Concepts
/15
many
13-15
quite a few
11-12
some
8-9
few
6-7
very few
4-5
almost
none/
none
0-3
Writing: logical
structure +
meaning is clear
/5
exceptionally
clear
5
very clear
4
clear
3
not very
clear
2
somewhat
unclear
1
not clear
at all
0
APA in-text
citations
References
/5
5 or more
recent,
academic
references
2+ citations/
paragraph
5
4 recent,
academic
references
2 citations/
paragraph
4
3 recent,
academic
references
2 citations
in most
paragraphs
3
2 recent,
academic
references
1 or fewer
citations/
paragraph
2
1 recent,
academic
reference
1 or fewer
citations/
paragraph
1
no
references
no
citations
0
Total = /40
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Mini-Essay Rubric
The following scale will be used to assess your interview
responses:
Answers to all the
questions
demonstrate a high
level of
understanding
(are Complete,
Insightful, and
Original)
/10
exceptionally
well done
9-10
very
well done
7-8
Adequately
done
5-6
not very
well done
3-4
Poorly
done
1-2
Can’t
answer
question
0
Answers use
appropriate
Theoretical Terms
and Concepts
/10
many
9-10
quite a few
7-8
some
5-6
few
3-4
very few
1-2
No
Concepts
Used
0
Total = /20
Your interview score will be used as 30% of your final exam
mark. Final exam grades may not be
available on Canv
Winter 2022 - Midterm ExamOverview:Exam Rules:Exam time
limit: from Friday, February 11th, 11:59 AM until Sunday,
February 13th, 11:59 AM (2 days)Part 1- Mini-Essay Deadline:
Please upload on Canvas by 11:59 am, Sunday, February
13th.Part 1: Mini-Essay InstructionsI. The platform:
Introduction (about 100-150 words)II. The Communications
Object and the Culture Industries (100-200 words)III. Social
Changes (about 300-500 words)IV. Theoretical Perspectives
(about 200-400 words)V. Reflection and Summary (about 100-
150 words)VI. Academic Sources and Citations – Include a
“References” list at the end of your workMini-Essay RubricPart
show your student IDMini-Essay Rubric
CASE STUDY: PROJECTIONS, NPV, COMPILATION
ASSIGNMENT 1
CASE STUDY: PROJECTIONS, NPV, COMPILATION
ASSIGNMENT 11
Case Study Assignment: Lululemon Athletica Inc.
BUSI 690
Policy and Strategy in Global Competition
3/2/2022
Author Note
Patrick Donacien
I have no known conflict of interest to disclose.
Correspondence concerning this article should be addressed to
Patrick donacien
Email: [email protected]
Case Study Assignment: Lululemon Athletica Inc.
Executive Summary
Lululemon Athletica Inc. is one of the leaders in selling athletic
apparel worldwide. The company focuses on healthy living and
ensures their clothing provides comfort while performing
strenuous activities. Lululemon is a yoga inspired clothing store
but also makes a variety of other clothing. Some of the items
include T-shirts, sweatshirts, pants, and shorts. The company
wants its customers to know that they sell a lifestyle vice just
selling clothing. As of February 2020, the company has 491
stores in 17 countries and an online presence on its website
(Thompson & Harris, 2022). The company was founded in
1998 in Vancouver, Canada, by Chip Wilson. In the store, he
sold clothing that he and his wife created. With the success that
he received at this location; Chip decided the company. Chip’s
intent was to create quality products to people who intend to
live a healthy lifestyle.
Currently, the company has seen success as an international
brand with about 300 stores that spans across Canada, the
United States, India, Israel, China, and many other countries
worldwide. The brand became so popular that mall
owners/operators began seeking leasing options for the foot
traffic they knew would come with the partnership. The
company has seen success but not with seeing issues and
problems. An ethics issue was discovered at their Youngone
factory located in Bangladesh. The female workers at this
facility reported verbal abuse, being beaten, being forced to
work overtime, and being underpaid (Logan, 2019). Another
issue was when the company was forced to pull certain yoga
pants form its stores after finding out it was see-through when
the individual bent over. This report offers a new mission
statement appropriate for the brand and aligns with its business
strategy. Based on the financial analysis conducted, alternative
strategies have been proposed to ensure continues success of the
company.
Existing mission, objectives, and strategies
Lululemon's mission statement states, "To elevate the world
from mediocrity to greatness." The company's mission is to
"Creating components for people to live longer, healthier, fun
lives." Their mission/mission statement suggests that the
company has a different perspective from other athletic brands
and any other businesses. The statement indicates that the
company wishes to give its customers a lifestyle rather than
another company with a brand.
Objectives
Elevate the world by realizing its full potential. Inspire change
by transforming its industry and creating a healthier world. The
company has a set of values that puts quality first. The aim is to
provide customer satisfaction and ensure the customer receives
what they were told they would receive. This shows that the
brand is committed to changing as the world changes and the
styles change as they maintain their lifestyle of comfort
clothing. An example of this would be the convenience of
shopping online.
Strategies
The company aims to grow the business in North America,
where most of its revenue comes from. Once the company has
grown in North America, they would like to expand to other
countries even more than they are currently doing. Another
strategy would be to increase their brand awareness online and
through their customer service. Another strategy the company
wants to introduce is increasing their new product technology.
The company also introduced its pickup in-store option when
customers order online. Doing this gives customers the comfort
of shopping at home but still receiving the same experience of
shopping in-store. The company has seen sales increase by 45%,
and direct-to-consumer revenue jumped to 155% in Quarter 2 of
2020.
New Mission Statement
· Customers: The study suggests that the company targets men
and women in middle
upper class and higher. The company initially targeted women
that were interested in yoga. As the study stated, this is the case
that yoga paved the way for their company to expand. In 2013,
the company aggressively took more consideration for their
male customers. Their focus was an age group of men concerned
about living a healthier lifestyle.
· Products or services: The firms' major products are athletic
wear and mainly catered to
their female customers. Their attire allows its customers to
accomplish activities feeling comfortable but trendy. The yoga
pants that the company sells promote fitness and encourage a
particular lifestyle. Lululemon's product innovation uses
updated technology that makes the customer feel comfortable.
The technology used in their products makes it easier to
consume sweat and is breathable. Their services allow them to
partner with yoga studios and run clubs.
· Markets: As the case study suggests, the company continues to
add Lululemon stores in
its primary United States market and as well as worldwide. The
company included 16 new stores in China throughout the years
and planned to add more in 2020. The company also opened
stores in Japan, Germany, France, the United Kingdom,
Malaysia, Netherlands, South Korea, and many other countries.
As clearly illustrated, the expansion allowed the company to
report incredible advancements with their strategic progress in
geographical market expansion.
· Technology: As indicated in the case study, the company
continues to improve
In the technological area. The company focused on creating and
providing products that introduced fabrics with technological
improvements and performance-enhancing features throughout
the years. These technological upgrades to their products have
assisted the company in expanding its market share worldwide.
Customers enjoy wearing Lululemon's products because of its
technology and how it makes them feel about themselves. As
the company makes new products, they continue to incorporate
technology within their product lines.
· Concern for survival, growth, and profitability: The company
understands that the
the only way they will survive in this market is through
expansion. Direct-to-consumer sales through their website have
become a critical component for the company. As indicated in
the reading, in 2011 the lululemon's e-commerce sales increased
from $106.3 million to $1.14 billion in the financial year ending
2019. During the pandemic, Lululemon's majority of retail
outlets in the domestic market were closed. Like many other
businesses that figured it out, ordering online became the way
to continue profit. This showed that the company could adjust
through diversity overcome slight roadblocks and profit.
· Philosophy:The company takes its philosophy stance seriously
as it aligns with its core
values and its mission. As it states, it allows "people with the
components to live longer, healthier and more fun life."
Lululemon is set up to and has arranged to operate the company
in the methodology in which it is stated within their mission.
The company attempts to manage its staff ethically and
encourages all to follow its motto. Ensuring the company is
managed accordingly starts with the staff then the suppliers to
ensure the products are produced and sold within company
standards.
· Self-concept: Lululemon's specific product design and its
processes for innovation is the
The reason it can make quality products. This is believed to be
the key to its competitive strength. Lululemon had to make
well-designed products that offer a comfortable fit and
competitive pricing to be competitive and set itself apart in this
competitive athletic apparel market. Within this market, the
company competes with brands such as Nike, Adidas, Reebok,
and Under Armor, as stated in the strategic group map within
this paper. Additionally, the company sets itself apart by
focusing on the customer and what they want. Lululemon
understands the importance of customer relationship
management and promoting brand loyalty. This is part of their
strategic market approach.
· Concern for public image: Yes, the company is responsive to
community needs through
its business processes. One way it does this is by "Omni Guest
Experiences." It uses a marketing strategy that connects them
with people who shop at its stores. The company creates
opportunities through communities to live "sweatlife" and live
long healthy lives. Through this avenue, people can connect.
The company also takes part in dealing with environmental
issues by following environmental protection protocols in its
supply chain and within the community.
· Concern for employees: es, employees are an asset to the firm.
Lululemon
provides its staff members with a supportive and encouraging
working environment. It aims to encourage its employees to set
goals in their personal and professional life. The employees are
valuable assets of the company, and it shows in the numerous
employee programs that lululemon offers. Some of these
programs include personal development workshops and goal -
coaching courses, just to name a few.
SWOT Analysis
A successful company such as Lululemon Inc needs to identify
its areas of concern. To do so, it first needs to be identifying
their issues by creating a SWOT matrix to include the four
categories. When thoroughly conducted, the chart will show the
company the improvements it needs to improve its sales or
achieve sales goals.
Strength
Lululemon was created to create apparel for people to live
healthier lives and have fun doing so. The first thing someone
needs prior to starting a business is vision. In 1998, Wilson had
a vision to "elevate the world from mediocrity to greatness"
(Thompson & Harris., 2022, pg. C-81). The company hoped to
serve their customer at all costs and be a leader in customer
satisfaction. Understanding this, their strength is the detail they
put in their clothing. Their fabric's comfortable fit and feel has
made them a trusted brand. The technology that the company
puts in its line cannot be duplicated. The clothing prevents odor
as the material restricts bacteria and can be washed often
without worrying about washing away (Thompson & Harris,
2022).
Another strength the company possesses is being aware of its
brand and the market. From the date of conception, the company
has never switched or changed who they were. Lululemon Inc.
has gained notoriety from its competitors as well as customers.
Due to brand awareness, the company has jumped from 40% in
sales in 2020. Wilson has also created a strong relationship
within the community. The company's mission statement
resonated with its core audience.
Weaknesses
The company's weaknesses may be attributes that they stressed
with their strengths. Lululemon has a reputation for creating
comfortable and excellent quality clothing. This is all too
apparent because it is part of its mission statement and sales
strategy. In 2013, the company saw issues with one of their
pants lines that recalled the item. Another recall occurred in
2015 where the tops were said to have an issue with the neck
area. All these concerns with the clothing did do not reflect
their mission statement.
Another weakness the company has is its pricing compared
to all its competitors' prices. The company has set itself as a
high-end company, while its competitors like Under Armor sell
affordable clothing with the same comfortable quality. Another
weakness would be the constraints on the company with supply
chain issues.
Opportunities
When speaking of opportunities, the company has left an
opening in the market for its competitors. Through the years,
Lululemon has focused on women's apparel. The company's
competitors have seen significant gains with men's athletic
apparel, which has accounted for over half of their sales. In
2020, research showed that more men are shopping for athletic
gear than women. Men are now accounting for more of the sales
than women. With the growth of men's athletic apparel, the
company should try to focus on shifting its focus on capitalizing
on the recent surge of sales. CEO Laurent Potdevin stated, "
Retail is evolving at an increasingly rapid pace" Potdevin
added, saying, "consumers now connect with brands in a way
that is driven by experiences, rather than transactions" (Shaw,
2016).
A great opportunity for the company would be to open more
stores in the United States. In 2020, the U.S will lead apparel
sales within the market with sales of 160 billion dollars. In
2021. According to the article, "The market is growing
enormously, as people are progressively enticed by the product's
capability to offer sweat-wicking and breathability and
enhancement of physical movement" (Fortune Business, 2021).
Threats
The critical threat that should be listed is the threat of other
companies. The price of their competitors is reasonable and
well below that of Lululemon's. The price of yoga pants was
20% lower than that of their competitors. Other stores also
provide significant discounts that Lululemon does not. Another
threat is that Lululemon does not provide a wide range of sizes
like its competitors. The company typically caters to smaller
sizes like sizes 2 to 12. At the same time, other stores like
Under Armor sell XL and XX clothing. The final threat might
be the possibility of a company creating better quality at a
better price than Lululemon. The company must remain vigilant
and continue looking for better quality at an affordable cost.
SWOT Analysis Chart
Strengths (Internal Factors)
Weaknesses (Internal Factors)
· Lululemon Inc. is not only one
of the most prominent t and fastest Athletic clothing apparel
globally, it is also one of the most profitable and respectable
brands.
· Lululemon Inc has a signature line of
Yoga apparel is often imitated but cannot be duplicated in
quality or price.
· The company leads the market in brand
Awareness from 40% in 2020.
· The company has a strong relationship
within the community.
· The company must deal with Recalls that
goes again their mission statement.
· Clothing not fitting comfortable or pilling
in the inner thigh.
· Shirt tops are a threat to safety.
· Using third-party suppliers within their
distribution supply chain. Causing time delays
Opportunities (external factors)
Threats (external factors)
· The company should focus on Men’s
clothing to capitalize on the surge of men’s interest in athletic
apparel.
· The company should capitalize on the
massive numbers that North American generates for sports
apparel by opening more North America stores.
· Lululemon has many competitors in
the athletic clothing arena, such as Under Armor, Athleta,
Adidas, and Nike.
· Many of its competitors offer more sizes
of clothing. Those companies cover a more comprehensive
range of customers that Lululemon cannot reach.
Tows Matrix
The TOW Matrix listed will assist in the strategic planning
that Lululemon can use to enhance its strengths, eliminate its
weaknesses, and avoid the challenges identified within the
threats. The Matrix shows how the company can benefit from
opportunities to enhance its profit margins.
TOW Matrix Chart
TOWS MATRIX
LULULEMON INC.
Strength – S (Internal)
1. An existing Brand
2. A loyal customer base
3. Brand awareness
Weaknesses – W (Internal)
1. Company Recalls/ Brand perception
2. Clothing issues
3. Third-party support
Opportunities – O (External)
1. Cross-selling
2. New Markets
3. New services
Strengths/Opportunities SO
Leverage the strength to maximize the opportunities at hand. =
Attaching strategies
Weaknesses/Opportunities WO
Counter weakness through exploiting opportunities = Build
strengths for attacking strategy
Threats – T
1. New competitors
2. Old competitors
3. Customer choices
ST Strategies
Leverage strengths to minimize threats = Defensive strategy
WT Strategies
Counter weakness and threats = Build strengths for defensive
strategy
Strategic Group Map
The strategic group map of Lululemon depicts a brand that all
belongs to the athletic apparel market. The prices, the quality of
the brand, and the customer's viewpoint then its reality the
group map depicts them as such. Lululemon has made a name
for the brand by having good quality products. The company
also has a substantial female following. The Under Armer and
Columbia company is more well-known and caters to a broader
market with more sports apparel. Nike, Adidas, and Reebok are
the signature brand. They are well known in sports and highly
marketable within sports franchises. As shown on the map,
these companies are highly favored and have a competitive edge
over the other companies. The companies listed are highly
competitive and are some of the world's most recognized brands
within the market. As listed, "The annual revenue of these three
competitors approaches $50 billion, with Nike achieving
revenues of more than $25 billion, Adidas nearly $20 billion,
and Under Armor topping $2 billion" (Jensen et al., 2016, para.
2).
Strategic Group Map Diagram
PESTLE’s Analysis
Political
The company was able to stay ahead of the tariffs bill enacted
for China. The company has limited its exposure to China as the
U.S placed a levy of 15% on most clothing from China. The
company was well ahead of the bill, shifting to other locations.
Economical
Canada remains a stable country with no significant economic
issues that could affect the companies' earnings. This also
factors the pandemic that plagued the country and the rest of the
world. Its Canadian clients are willing to spend their money,
and the company is thriving within that market
Social
Certain social factors drive every market. This will determine
how customers and clients respond to the market. The company
could use yoga as a feel-good experience and create an
experience for their customers. Also, In the wake of Covid-19,
people stopped going to the stores and started buying products
and merchandise online. The company was able to capitalize on
and improve its online presence. Store sales suffered due to
closures, but the company's online business surged 70%,
accounting for 54% of overall sales compared with 27% a year
earlier (Terlep, 2020).
Technological
The company has invested accurately in the latest technology
through sound and deliberate strategic moves. This strategic
step has given the company the ability to improve the efficiency
of its product and maintain customer satisfaction. Doing this
has also secured their competitive advantage over their
competitors.
Legal
Not all companies can follow all rules and regulations dictated
by certain regions that they operate in, but lululemon has
followed the legal stipulations by law. They have remained
compliant with regulations as required to operate. They have
avoided fines that would affect their bottom line.
Environmental
Lululemon strives to lead from the front in limiting emissions
within the atmosphere. The company also manages its waste
accurately before it goes out in the environment. They
understand that if they do not respect the environment, it may
negatively affect their reputation.
PESTLE Chart
Political
Economical
1. Tariffs on Chinese goods
1. Stable economy
2. COVID 19
Social
Technological
1. Using Yoga as a feel-good idea across the world.
2. COVID 19.
1. Constant technological innovations to enhance customer
satisfaction.
2. Technolgy for fit and performance.
Legal
Environmental
1. Ensuring tax laws are adequate in all regions.
1. Limit waste footprint
2. Balancing greenhouse emissions
3. Accountability for raw materials
Porter’s Five Force’s Chart
Competitive Rivalry
Lululemon has multiple competitors, and they are aware of that.
Some of these competitors are Nike, Adidas, Reebok, and Under
Armor, just to name a few. As far as cost, Lululemon prices are
higher than their competitors, and the company does not provide
discounts on their product, unlike its competitors, which offer a
more comprehensive range of discounts.
Supplier Power
Lululemon has a great partnership with its suppliers. This is due
to having multiple suppliers throughout different countries with
which they have created a strong relationship. Due to their
strategic approach, lululemon has enforced strict ethical
manufacturing practices within the facilities.
Buyer Power
Lululemon does not offer discounts on its apparels at their main
store. The company does provide discounts on merchandise but
only at their few outlet stores. The company prices on their
products are much higher than their competitors, but it is due to
the material and fabrics they use to make their products. The
company states that premium raw material is what they use, and
the cost of those materials is much more than what their
competitors are using.
Threat of Substitution
Many athletic gear producers within this market, such as
Nike, Adidas, and Reebok. These companies make it easier for
lululemon customers to stay loyal to the company. The loyal
consumers of the lululemon company would consider these
companies as substitutes. Meaning their quality would never
match up to those of lululemon.
Threat of New Entry
The possibility of new entry within the industry of high-quality
athletic gear is low. This is because the apparel market requires
a large amount of capital even to begin. If a new entrant
attempted to step into the market, the new company would need
much money to compete.
Porter’s Five Force’s Chart
Threat of new entrants
Legal Constraints
-Low entry barriers due to the internet
-No cultural barrier, athletic clothing worn by many
-Environmental
Conditions
-Buyer Choice
-Brand loyalty
-Product service quality
Industry Rivalry
Nike, Adidas, Under Armor and many others.
-increase material pricing
-relationship with customers
-Product service quality
Bargaining power
of consumers
Bargaining power
of suppliers
-An attractive industry to get into.
-Trendy clothing and comfortable.
-Many customers for that market
Threat of substitute products
Analyzing the company's overall performance over the last three
years, the metrics indicate an up trajectory, which can be seen
clearly in the horizontal analysis of the organization. The
historical financial analysis of the company, together with
comparisons of its ratios and those of competitors, indicates a
lot financially about lululemon. As indicated in lesson one, the
top competitors for the analysis are Adidas and Nike. Looking
at the company's profitability, it is doing better than its
competitors, and this is because it has a higher gross profit
margin and net profit margin than the others. The data indicated
shows that the company can increase shareholder wealth
because the investors can pay net profits through dividends
(Zorn et al., 2018). Looking at the return on Equity and the
Return on Assets, Nike has a higher rate than Lululemon. When
talking about weaknesses, the data shows that the company
needs to increase its productivity and put its assets and equity
from its investors into work (Rashid, 2018). Looking at the
company's profitability over the last three years, it is evide nt
that it is increasing in profit. These numbers give the company
an idea of possible growth if it wants to expand even further.
Regarding the company's liquidity position, the charts
indicate it is doing better than its competitors also. The
business's liquidity is slightly improving, and with the current
ratio of above two over the years, it means that the company has
been able to settle its short-term obligations quickly. Lululemon
has stable financial leverage due to its operations being
financed by more considerable equity than debt, which is a
precarious option for any company in the instance the company
is unable to pay the debt. In a scenario like this, the company
would need to sell off its assets to pay debts (Zeller et al.,
2019). Lululemon has an average collection period of only five
days; this means that the company collects its payments for
sales within five days.
When reviewing all the financial information, its financial
position can support its strategic choice to introduce its new
product technology. With the improvement of its technology by
offering in-store pick options, this could increase profits. For
lululemon, this strategic direction of the company could lead to
placing stores more geographically. Exposing to new markets
translates to new clients, new customers, and new investors.
Balance Sheet
Income Statement
Statement of Cashflows
Ratio Analysis
Alternative strategies
List two or more alternative strategies…
Advantages
Disadvantages
Projected Financial Statements 3 Years in the Future
Income Statement
Balance Sheet
Statement of Cash Flows
Projected Ratios
Cost Analysis
Net Present Value (NPV) Analysis
Implementation Strategy
Recommended Strategies and Objectives
Reason of Chosen Strategy
Advantages/Benefits to Organizational Success and
Sustainability
References
Fortune Business (2021). Apparel & Footwear.
https://www.fortunebusinessinsights.com/sportswear-market-
102571
Jensen, J. A., Wakefield, L., Cobbs, J. B., & Turner, B. A.
(2016). Forecasting sponsorship costs:
marketing intelligence in the athletic apparel industry.
Marketing Intelligence & Planning, 34(2),
https://www.proquest.com/central/docview/1776674712/DBA5D
AE211F4463FPQ/6?accountid=12085
Press, T. C. (2020). Lululemon withholds 2020 forecast due to
COVID-19 as Q4
profits rise - BNN Bloomberg.
https://www.bnnbloomberg.ca/lululemon- withholds-2020-
forecast-due-to-covid-19-as-q4-profits-rise-1.1413041
Rashid, C. A. (2018). Efficiency of financial ratios analysis for
evaluating companies’
liquidity. International Journal of Social Sciences &
Educational Studies, 4(4), 110.
Shaw, H. (2016). Lululemon sales jump with athleticwear
frenzy; Lululemon sees sales jump 14
% in Q2. The London Free Press.
https://www.proquest.com/central/docview/2232496237/FE71A
A3F095B4545PQ/1?accountid=12085
Terlep, S. (2020). Lululemon Sales Slump on Closings. Wall
Street Journal
https://www.proquest.com/central/docview/2412018933/FE71A
A3F095B4545PQ/2?accountid=12085
Thompson, A. A., Harris, R.D. (2022) Lululemon athletica’s
strategy in 2020: Is the recent
growth in retail stores, revenues, and profitability sustainable?
(23RD ed.). McGraw-Hill
References
Zeller, T., Kostolansky, J., & Bozoudis, M. (2019). An IFRS-
based taxonomy of financial
ratios. Accounting Research Journal.
Zorn, A., Esteves, M., Baur, I., & Lips, M. (2018). Financial
ratios as indicators of economic
sustainability: A quantitative analysis for Swiss dairy
farms. Sustainability, 10(8), 2942.
.
CONSOLIDATED BALANCE SHEETS - USD ($) $ in
Thousands
Percentage
Change between
2020 and 2021
Percentage
change
between
2019 and
2020
2021 line
items as a
percentage
of Total
assets
2020 line
items as a
percentage
of total
assets
2019 line
items as a
percentage
of total
assets
Vertical Analysis
202120202019
Current assets
Cash and cash
equivalents115051710935058813205.21%24.08%27.49%33.32%
42.28%
Accounts
receivable62399402193578655.15%12.39%1.49%1.23%1.72%
Inventories64723051851340484224.82%28.08%15.46%15.80%1
9.42%
Prepaid and receivable income
taxes139126851594938563.37%72.44%3.32%2.60%2.37%
Prepaid expenses and other current
assets125107705425794977.35%21.73%2.99%2.15%2.78%
Total current
assets21243791807938142928217.50%26 .49%50.76%55.10%68.
56%
Property and equipment,
net74568767169356723711.02%18.41%17.82%20.47%27.21%
Right-of-use lease
assets7348356896646.55%17.56%21.02%0.00%
Goodwill38687724182242391499.86%-0.24%9.24%0.74%1.16%
Intangible assets, net8008024133128.22%1.91%0.01%0.00%
Deferred income tax assets67313143526549-
78.59%18.40%0.16%0.96%1.27%
Other non-current
assets106626562013740489.72%50.25%2.55%1.71%1.79%
Total
assets41852153281354208471127.55%57.40%100.00%100.00%
100.00%
Current liabilities
Accounts payable1722467999795533115.32%-
16.26%4.12%2.44%4.58%
Accrued inventory liabilities14956634416241135.75%-
60.94%0.36%0.19%0.78%
Other accrued
liabilities21191111264188.13%5.06%3.43%0.00%
Accrued compensation and related
expenses130171133688109181-2.63%22.45%3.11%4.07%5.24%
Current lease liabilities16609112849729.26%3.97%3.92%0.00%
Current income taxes payable83572643667412-68.39%-
60.78%0.20%0.81%3.23%
Unredeemed gift card
liability1558481204139941229.43%21.13%3.72%3.67%4.77%
Other current liabilities235981240211269890.28%-
89.00%0.56%0.38%5.41%
Total current
liabilities88317862041850047742.35%23.97%21.10%18.91%24.
01%
Non-current lease
liabilities6325906114643.45%15.11%18.63%0.00%
Non-current income taxes payable431504822642099-
10.53%14.55%1.03%1.47%2.02%
Deferred income tax
liabilities58755434321424935.28%204.81%1.40%1.32%0.68%
Other non-current liabilities897655968191160.40%-
93.17%0.21%0.17%3.93%
Total
liabilities1626649132913663873622.38%108.09%38.87%40.51
%30.64%
Commitments and contingencies
Stockholders' equity
Undesignated preferred stock, $0.01 par value: 5,000 shares
authorized; none issued and outstanding000
Exchangeable stock, no par value: 60,000 shares authorized;
5,203
and 6,227 issued and outstanding000
Special voting stock, $0.000005 par value: 60,000 shares
authorized;
5,203 and 6,227 issued and outstanding000
Common stock, $0.005 par value: 400,000 shares authorized;
125,150 and 124,122 issued and
outstanding6266216080.81%2.14%0.01%0.02%0.03%
Additional paid-in
capital3886673555413152859.32%12.77%9.29% 10.84%15.12%
Retained
earnings23464281820637134689028.88%35.17%56.06%55.48%
64.61%
Accumulated other comprehensive loss-177155-224581-216808-
21.12%3.59%-4.23%-6.84%-10.40%
Total stockholders'
equity25585661952218144597531.06%35.01%61.13%59.49%69
.36%
Total liabilities and stockholders'
equity41852153281354208471127.55%57.40%100.00%100.00%
100.00%
Horizontal Analysis
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE
INCOME - USD ($) shares in Thousands, $ in Thousands
Percentage
Change
between 2020
and 2021
Percentage
Change
between 2019
and 2020
2021 line items
as a percentage
of total
revenue
2020 line
items as a
percentage of
Total revenue
2019 line items
as a percentage
of total
revenue
202120202019
Income Statement [Abstract]
Net
revenue44018793979296328831910.62%21.01%100.00%100.00
%100.00%
Cost of goods
sold19378881755910147203210.36%19.28%44.02%44.13%44.7
7%
Gross
profit24639912223386181628710.82%22.41%55.98%55.87%55.
23%
Selling, general and administrative
expenses16090031334247111037920.59%20.16%36.55%33.53%
33.77%
Amortization of intangible assets5160297217693.10%-
59.72%0.12%0.00%0.00%
Acquisition-related expenses29842000.68%
Income from operations819986889110705836-
7.77%25.97%18.63%22.34%21.46%
Other income (expense), net-63682839414-107.68%-12.01%-
0.01%0.21%0.29%
Income before income tax expense819350897393715250-
8.70%25.47%18.61%22.55%21.75%
Income tax expense230437251797231449-
8.48%8.79%5.23%6.33%7.04%
Net income588913645596483801-
8.78%33.44%13.38%16.22%14.71%
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment47426-7773-73885-
710.14%-89.48%1.08%-0.20%-2.25%
Comprehensive income636339637823409916-
0.23%55.60%14.46%16.03%12.47%
Basic earnings per share4.524.953.63-
8.69%36.36%0.00%0.00%0.00%
Diluted earnings per share4.54.933.61-
8.72%36.57%0.00%0.00%0.00%
Basic weighted-average number of shares outstanding (in
shares)130289130393133413-0.08%-2.26%2.96%3.28%4.06%
Diluted weighted-average number of shares outstanding (in
shares)130871130955133971-0.06%-2.25%2.97%3.29%4.07%
Horizontal Analysis Vertical Analysis
Percentage
change between
2020 and 2021
Percentage
change
between 2019
and 2020
2021 line items as
a percentage of
the ending cash
balance
2020 line items
as a percentage
of ending cash
balance
2019 line
items as a
percentage of
ending cash
balance
202120202019
Cash flows from operating activities
Net income588913645596483801-
8.78%33.44%51.19%59.04%54.90%
Adjustments to reconcile net income to net cash provided by
operating
activities: 0.00%0.00%0.00%
Depreciation and
amortization18547816193312248414.54%32.21%16.12%14.81%
13.90%
Stock-based compensation
expense50797455932856811.41%59.59%4.42%4.17%3.24%
Derecognition of unredeemed gift card liability-13696-11939-
685914.72%74.06%-1.19%-1.09%-0.78%
Settlement of derivatives not designated in a hedging
relationship4485-1925-14876-332.99%-87.06%0.39%-0.18%-
1.69%
Deferred income
taxes34908241291678644.67%43.74%3.03%2.21%1.90%
Changes in operating assets and liabilities: 0.00%0.00%0.00%
Inventories-96548-117591-85942-17.90%36.83%-8.39%-
10.75%-9.75%
Prepaid and receivable income taxes-53966-35775-
43750.85%8086.50%-4.69%-3.27%-0.05%
Prepaid expenses and other current assets-70999-53754-
2854632.08%88.31%-6.17%-4.92%-3.24%
Other non-current assets-49056-27852-210776.13%1221.88%-
4.26%-2.55%-0.24%
Accounts payable82663-1481071962-658.16%-120.58%7.18%-
1.35%8.17%
Accrued inventory liabilities8046-95984312-183.83%-
322.59%0.70%-0.88%0.49%
Other accrued
liabilities91115142769416538.24%51.61%7.92%1.31%1.07%
Accrued compensation and related expenses-66922532641600-
126.42%-39.12%-0.58%2.32%4.72%
Current and non-current income taxes payable-24125-
3413746428-29.33%-173.53%-2.10%-3.12%5.27%
Unredeemed gift card
liability47962332892488544.08%33.77%4.17%3 .04%2.82%
Right-of-use lease assets and current and non-current lease
liabilities13267174220-23.85%1.15%1.59%0.00%
Other current and non-current
liabilities1078491333130418.08%-70.82%0.94%0.84%3.55%
Net cash provided by operating
activities80333666931674277920.02%-
9.89%69.82%61.21%84.28%
Cash flows from investing activities 0.00%0.00%0.00%
Purchase of property and equipment-229226-283048-225807-
19.02%25.35%-19.92%-25.88%-25.62%
Settlement of net investment hedges-14607347-16216-
4309.51%-102.14%-1.27%0.03%-1.84%
Acquisition, net of cash acquired-45258100-39.34%0.00%0.00%
Other investing activities8824293-771-79.45%-
656.81%0.08%0.39%-0.09%
Net cash used in investing activities-695532-278408-
242794149.82%14.67%-60.45%-25.46%-27.55%
Cash flows from financing activities 0.00%0.00%0.00%
Proceeds from settlement of stock-based
compensation152631817017650-
16.00%2.95%1.33%1.66%2.00%
Taxes paid related to net share settlement of stock-based
compensation-32388-21944-877947.59%149.96%-2.82%-2.01%-
1.00%
Repurchase of common stock-63663-173399-598340-63.29%-
71.02%-5.53%-15.86%-67.89%
Other financing activities00-745-100.00%0.00%0.00%-0.08%
Net cash used in financing activities-80788-177173-590214-
54.40%-69.98%-7.02%-16.20%-66.97%
Effect of exchange rate changes on cash29996-1550-18952-
2035.23%-91.82%2.61%-0.14%-2.15%
Increase (decrease) in cash and cash equivalents57012212185-
109181-73.13%-294.34%4.96%19.40%-12.39%
Cash and cash equivalents, beginning of
period109350588132099050124.08%-
11.02%95.04%80.60%112.39%
Cash and cash equivalents, end of
period115051710935058813205.21%24.08%100.00%100.00%10
0.00%
Horizontal Analysis Vertical Analysis
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
AdidasNike202120202019
Change of Ratios
between 2020 and
2021
Change of
Ratios between
2019 and 2020
Ratio Analysis
Profitability Ratios
Gross profit
margin52%45.97%55.98%55.87%55.23%0.10%0.64%
Operating profit margin6.80%15.48%18.63%22.34%21.46%-
3.72%0.88%
Net profit margin9.52%13.32%13.38%16.22%7.04%-
2.85%9.19%
Return on total assets9.70%16.73%14.07%19.67%23.21%-
5.60%-3.53%
Return on stockholder's
equity21.60%48.26%23.02%33.07%33.46%-10.05%-0.39%
Earnings per share2.343.641.471.611.21-0.140.40
Liquidity Ratios
Current Ratio1.662.72.412.912.86-50.87%5.82%
Quick Ratio1.341.771.672.082.05-0.410.03
Working capital1241201118752092880553681258715
Leverage Ratios
Debt to asset ratio0.470.270.390.410.31-1.64%9.87%
Debt to equity Ratio0.312.890.640.680.44-4.51%23.91%
Longterm debt to equity ratio0.630.290.220.107.46%12.04%
Times-interest-earned ratio
Activity Ratios
Days of inventory92 days54484563
Inventory turnover2.273.976.807.678.12-0.87-0.45
Average collection period54410
Price earnings ratio29.8538.4144.7443.7643.650.980.11
Lululemon
BUSI 690
Page 1 of 3
CASE STUDY: PROJECTIONS, NPV, COMPILATION
ASSIGNMENT INSTRUCTIONS
OVERVIEW
Continue working on the individual case study started in Case
Study 1: Matrices Assignment
of ABC Corporation. Complete this portion of the case study:
Case Study 3: Projections, NPV,
Compilation Assignment (3rd and final assignment).
A formal, in-depth case study analysis requires you to utilize
the entire strategic management
process. Assume your group is a consulting team asked by the
ABC Corporation to analyze its
external/internal environment and make strategic
recommendations. You must include exhibits
to support your analysis and recommendations.
INSTRUCTIONS
The completed case study must include these components, with
portions to be submitted over
several modules as the Case Study 1: Matrices Assignment, the
Case Study 2: Historical
Financial Analysis Assignment, and the Case Study 3:
Projections, NPV, Compilation
Assignment.
• Cover page (must include the company name, your name, the
date of submission, and a
references page; the document must follow current APA
guidelines)
• A total of 12 - 15 pages (for all there parts, combined) of
narrative text, this does not
include the financial statements, reference pages, or matrices
• Reference page (follow current APA guidelines)
• Historical Financial Statements, Proforma Financial
Statements, NPV Calculations and a
Cost Sheet for the strategy in an Excel document
• Matrices, which must be exhibits/attachments in the appendix
and not part of the body of
the analysis (The Strategy Club has excellent
templates/examples for exhibits and
matrices).
You will use the information completed in Case Study 1:
Matrices, and
Case Study 2: Historical Financial Analysis as part of your Case
Study 3: Projections, NPV,
Compilation Assignment final document. Be sure to make any
corrections to Part One and Part
Two based on feedback given on each of the assignments.
Your Case Study 3: Projections, NPV, Compilation Assignment
paper must include:
Case Study 1: 1-7
1. Executive Summary – this should be no more than one page
and provide the reader
with an overview of what will be contained in the following
pages. The problem and
strategic solution being recommended should be in this
summary.
2. Existing mission, objectives, and strategies
3. A new mission statement (include the number of the
component in parenthesis
before addressing that component)
4. Analysis of the firm’s existing business model
5. SWOT Analysis
6. TOWS Matrix
7. Competitive forces analysis
BUSI 690
Page 2 of 3
Case Study 2: 8-10
8. Historical Financial Statements (Income Statement, Balance
Sheet, and Statement of
Cash Flows) from the 3 most current years for the firm
9. Historical Ratio Analysis
10. Competitors Ratio Analysis
Note from student: Parts 1-10 are already completed as they
were part of case
study’s 1 and 2. These parts are being uploaded to show what
was previously done in
order to complete part 3 accurately. Requesting assistance with
part 3 only (highlight
in yellow).
Case Study 3: 11-18
11. Alternative strategies (giving advantages and disadvantages
for each). There should
be at least two alternative strategies identified and discussed.
12. Projected Financial Statements (Income Statement, Balance
Sheet and Statement of
Cash Flows) for 3 years into the future. This must be broken
down by year into two
(2) columns: 1 column without your strategy and 1 column with
your strategy. The
without column should serve as the basis for your with strategy
column and only
those financial statement accounts that will be changed, based
on your strategy,
should be impacted.
13. Include Projected ratios for the without and with strategy by
year. Discuss how
these ratios compare and contrast with the historical findings.
14. Cost Analysis completed on an Excel tab that outlines the
cost that will be incurred
to implement the strategy. This information should correspond
with the With
Strategy on the Projected Financial Statements, linking of cells
to the financial
statements is encouraged.
15. Net Present Value analysis of proposed strategy’s new cash
flow – you may also use
Excel to solve for this. From the income statement the change
in operating income
between your with and without strategy should serve as your
cash inflow for each
year.
NOTE: To construct the first cash flow (cf1) the new revenue
from your strategy(s) must
be discounted back to the present value by calculating EBIT
(Operating Income on the
Income Statement) and that figure will be your cfn for each
year. cf0 (initial cost of your
strategy), cf1 (discounted cash flow first year), r (opportunity
cost of capital, the rate of
the next best alternative use of cash/debt/equity resources).
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(1+�)1
+
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(1+�)2
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BUSI 690
Page 3 of 3
16. Implementation strategy – how and when will the strategy
be implemented, this
should outline the who, how, what, and when of the
implementation process.
17. Specific recommended strategy and long term objectives
Explain why you chose the strategy, discuss the
advantages/benefits to
organizational success and sustainability. Incude a discussion
of the challenges or
disadvantages that may arise as a result of the strategic choice.
18. Text must accompany all data for each section explaining
the information on the
spreadsheet that was calculated. This will be completed in
current APA level for
each component.
Place the results of the case study analysis in a Word document
include matrices as appendices
and a reference page. Submit a separate Excel document for
your Historical financials,
Projections, NPV, and Cost of the strategy.
Criteria Ratings Points
Executive
Summary
8 to >6.0 pts
Advanced
• Provides a clear
overview of the
paper’s contents.
• Contains enough
information about the
case study.
• Captures the
purpose and the main
recommendation(s) in
1–2 sentences.
• Provides key
evidence for the
major points.
• Closes with a brief
summary and
rationale for the
chosen strategy.
6 to >5.0 pts
Proficient
• Provides an overview of
the paper’s contents.
• Contains some
information about the case
study. • Captures most of
the purpose and the main
recommendation(s) in 1–2
sentences. • Provides
most key evidence for the
major points. • Closes with
a brief summary that
contains some rationale for
the chosen strategy.
5 to >0.0 pts
Developing
• Provides a less than
clear overview of the
paper’s contents.
• Lacking in information
about the case study.
• Captures some of the
purpose and the main
recommendation(s) in 1–2
sentences. • Provides
some key evidence for
the major points. • Brief
summary and rationale
are lacking in content for
the chosen strategy.
0 pts
Not
Present
8 pts
Alternative
Strategies
10 to >8.0 pts
Advanced
Lists two or more
alternative strategies
(giving advantages
and alternatives for
each).
8 to >7.0 pts
Proficient
Lists 1 or more alternative
strategies giving some
advantages and
alternatives for each.
7 to >0.0 pts
Developing
Lists less than 2
alternative strategies and
gives a minimum amount
of advantages and
alternatives for each.
0 pts
Not
Present
10 pts
Pro-Forma
Financial
Statements
30 to >26.0 pts
Advanced
• Includes and
analyzes Pro-Forma
Financial Statements
(I/S, B/S and
Statement of Cash
Flows) with deltas out
3 years. • Each
Pro-Forma year has 2
columns: 1 with
strategy and 1
column without
strategy. • Includes
Pro-Forma ratios for
the first year out with
deltas contrasting
from the
26 to >20.0 pts
Proficient
• Includes and analyzes
Pro-Forma Financial
Statements (I/S, B/S and
Statement of Cash Flows)
with deltas out 3 years with
minor errors. • Each
Pro-Forma year has 2
columns: 1 with strategy
and 1 column without
strategy, with 2-5 minor
errors. • Includes most of
the Pro-Forma ratios for
the first year out with deltas
contrasting from the most
current year’s ratios.
20 to >0.0 pts
Developing
• Includes and analyzes
Pro-Forma Financial
Statements (I/S, B/S and
Statement of Cash Flows)
with deltas out 3 years.
• Each Pro-Forma year
has 2 columns: 1 with
strategy and 1 without
strategy, there are greater
than 6 errors. • Includes
some of the Pro-Forma
ratios for the first year out
with deltas contrasting
from the most current
year’s ratios.
0 pts
Not
Present
30 pts
Case Study: Projections, NPV, Compilation Grading Rubric |
BUSI690_B06_202220
Criteria Ratings Points
NPV and Cost
Analysis
20 to >16.0 pts
Advanced
• Develops an NPV
figure/table. • Clearly
articulates the cost of
the strategy (-cf0).
• Clearly articulates
the subsequent
Pro-Forma cash
flows (cf) for the NPV
analysis.
• Thoroughly
analyzes the NPV.
16 to >11.0 pts
Proficient
• Develops an NPV
figure/table, some minor
errors. • Articulates the
cost of the strategy (-cf0).
• Articulates the
subsequent Pro-Forma
cash flows (cf) for the NPV
analysis. • Analyzes the
NPV.
11 to >0.0 pts
Developing
• Develops an NPV
figure/table, calculation is
incorrect or missing key
components. • Discusses
but does not include
details of the cost of the
strategy (-cf0).
• Discusses the
Pro-Forma cash flows (cf)
for the NPV, lacks detail
and thoughtful analysis.
• Discusses the NPV,
analysis should be further
developed.
0 pts
Not
Present
20 pts
Implementation
of Strategic
Plan
10 to >8.0 pts
Advanced
• Includes an
actionable timetable
agenda for
accomplishing the
new strategy.
• Addresses the key
items of who, what,
how, and when of the
implementation
process.
8 to >7.0 pts
Proficient
• Includes a timetable
agenda, with most details,
for accomplishing the new
strategy. • Addresses
most of the key items of
who, what, how, and when
of the implementation
process.
7 to >0.0 pts
Developing
• Includes a basic
timetable agenda for
accomplishing the new
strategy, additional details
are needed. • Addresses
some of the key items of
who, what, how, and
when of the
implementation process.
0 pts
Not
Present
10 pts
Recommended
Strategies and
Objectives
20 to >17.0 pts
Advanced
• Thoroughly
analyzes the new
strategy. • States and
discusses the cost to
implement the new
strategy. • Explains
the benefits of the
new strategy for long
term organizational
success. • Outlines
the challenges and/or
disadvantages of the
strategic choice.
17 to >15.0 pts
Proficient
• Analyzes the new
strategy. • States and
discusses the cost to
implement the new
strategy, minor details
missing. • Explains the
benefits of the new
strategy for long term
organizational success.
• Outlines the challenges
and/or disadvantages of
the strategic choice.
15 to >0.0 pts
Developing
• Thoroughly analyzes
the new strategy. • States
and discusses the cost to
implement the new
strategy, missing details.
• Explains the benefits of
the new strategy for long
term organizational
success. • Outlines the
challenges and/or
disadvantages of the
strategic choice.
0 pts
Not
Present
20 pts
Case Study: Projections, NPV, Compilation Grading Rubric |
BUSI690_B06_202220
Criteria Ratings Points
Grammar,
Spelling,
Format, and
References
42 to >35.0 pts
Advanced
Proper spelling and
grammar are used.
APA format including
a cover page,
citations and
references are
correct. Matrices
were included and
properly labeled.
35 to >30.0 pts
Proficient
Between 1–4 spelling,
grammar, format or citation
errors are present.
Matrices were mostly
included but there were a
few errors or missing a few
data items.
30 to >0.0 pts
Developing
Between 5–9 spelling,
grammar, format or
citation errors are present.
Some matrices were
included but there were
errors or missing data.
0 pts
Not
Present
More
than 10
spelling,
grammar,
format, or
citation
errors are
present.
42 pts
Total Points: 140
Case Study: Projections, NPV, Compilation Grading Rubric |
BUSI690_B06_202220
Attached you will find a document (an example) of a historical
financial spreadsheet for another case
study company (Costco). These spreadsheets are useful as an
“example” and should aid you in
generating one for lululemon. Don't forget that a narrative
should accompany and explain the
spreadsheet results.
CASE STUDY: MATRICES ASSIGNMENT - LULULEMON
INC. 1
Case Study – Matrices Assignment, Lululemon Inc.
BUSI 690
Policy and Strategy in Global Competition
Close Comments
Good work on this week’s assignment!
The SWOT analysis did not include the IFE and/or EFE matrix
as indicated within the rubric. Also,
you provided no or little narrative analysis (articulation), as
noted in an announcement and grading
rubric, for the TOWS analysis found. Ensure you provide
narrative for all charts or diagrams as
noted within the grading rubric.
https://canvas.liberty.edu/courses/211049/grades
CASE STUDY: MATRICES ASSIGNMENT - LULULEMON
INC. 2
Case Study – Matrices Assignment, Lululemon Inc.
Lululemon Athletica Inc. is considered to be one of the leaders
of athletic apparel within
the athletic market. The company makes a variety of clothing
that their customers enjoy. Some
of the items include T-shirts, pants, shorts, and their popular
yoga pants. The company has been
known to sell a lifestyle vice selling athletic apparel. As of
February 2020, the company has 491
stores in 17 countries and an online presence on its website
(Thompson & Harris, 2022).
In 1998, Chip Wilson founded the lululemon company. Chip
previously owed a surf and
snowboard company and later transitioned into clothing.
Starting a clothing company came to
mind when Chip was taking a yoga class in Vancouver and
realized the need for comfortable
clothing while performing yoga. With no hesitation, Chip
opened a yoga studio in 1998 that also
sold clothing. The company's first actual store was opened in
Vancouver, Canada, in November
2000 and called Lululemon. In the store, he sold clothing that
he and his wife created. With the
incredible and unexpected success that the store developed,
Wilson decided to expand. He
believed that the expansion would allow him to provide quality
products to people who intend to
live a healthy lifestyle. Expanding would also allow him to
provide his staff members the
opportunity to experience a fulfilling lifestyle by providing
them with a meaningful salary.
Today, design facilities and stores can be found in Canada, the
United States, India, Israel,
China, and many other countries worldwide.
After years of being in business, it was apparent that Lululemon
Apparel was starting to
become a brand name within the yoga and athletic wear world.
The brand became so popular that
mall owners/operators began seeking leasing options for the
foot traffic they knew would come
with the partnership.
CASE STUDY: MATRICES ASSIGNMENT - LULULEMON
INC. 3
Lululemon Inc. is very strategic when it comes to sales. The
company sells its
merchandise through several retail stores and has an online
presence. Five years after opening its
first store, the company had expanded and had a total of 27
company-owned stores and two
franchise stores. In 2005, the company saw its sales increase to
$85 million. Wilson saw his
dreams come through by providing comfortable clothing and
creating jobs for others.
To assist in the company's expansion, Lululemon had to sell 48
percent of the company
to two private investors. Due to the expansion, Lululemon
Athletica Inc was born. The company
ended 2006 with 41 owned stores, ten franchise stores, net
revenues of $149 million, and net
income of $7.7 million, and in 2007, the company went public.
Lululemon has dominated the
athletic apparel industry and has become a brand name
associated with style, sports, and fitness.
The company has built a reputation worldwide and has seen
enormous revenue each year.
Existing mission, objectives, and strategies
Lululemon's mission statement states, "To elevate the world
from mediocrity to
greatness." The company's mission is to "Creating components
for people to live longer,
healthier, fun lives." Their mission/mission statement suggests
that the company has a different
perspective from other athletic brands and any other businesses.
The statement indicates that the
company wishes to give its customers a lifestyle rather than
another company with a brand.
Objectives
Elevate the world by realizing its full potential. Inspire change
by transforming its
industry and creating a healthier world. The company has a set
of values that puts quality first.
The aim is to provide customer satisfaction and ensure the
customer receives what they were told
they would receive. This shows that the brand is committed to
changing as the world changes
CASE STUDY: MATRICES ASSIGNMENT - LULULEMON
INC. 4
and the styles change as they maintain their lifestyle of comfort
clothing. An example of this
would be the convenience of shopping online.
Strategies
The company aims to grow the business in North America,
where most of its revenue
comes from. Once the company has grown in North America,
they would like to expand to other
countries even more than they are currently doing. Another
strategy would be to increase their
brand awareness online and through their customer service.
Another strategy the company wants
to introduce is increasing their new product technology. The
company also introduced its pickup
in-store option when customers order online. Doing this gives
customers the comfort of shopping
at home but still receiving the same experience of shopping in-
store. The company has seen sales
increase by 45%, and direct-to-consumer revenue jumped to
155% in Quarter 2 of 2020.
New Mission Statement
• Customers: The study suggests that the company targets men
and women in middle
upper class and higher. The company initially targeted women
that were interested in yoga. As
the study stated, this is the case that yoga paved the way for
their company to expand. In 2013,
the company aggressively took more consideration for their
male customers. Their focus was an
age group of men concerned about living a healthier lifestyle.
• Products or services: The firms' major products are athletic
wear and mainly catered to
their female customers. Their attire allows its customers to
accomplish activities feeling
comfortable but trendy. The yoga pants that the company sells
promote fitness and encourage a
particular lifestyle. Lululemon's product innovation uses
updated technology that makes the
customer feel comfortable. The technology used in their
products makes it easier to consume
sweat and is breathable. Their services allow them to partner
with yoga studios and run clubs.
CASE STUDY: MATRICES ASSIGNMENT - LULULEMON
INC. 5
• Markets: As the case study suggests, the company continues to
add Lululemon stores in
its primary United States market and as well as worldwide. The
company included 16 new stores
in China throughout the years and planned to add more in 2020.
The company also opened stores
in Japan, Germany, France, the United Kingdom, Malaysia,
Netherlands, South Korea, and many
other countries. As clearly illustrated, the expansion allowed
the company to report incredible
advancements with their strategic progress in geographical
market expansion.
• Technology: As indicated in the case study, the company
continues to improve
In the technological area. The company focused on creating and
providing products that
introduced fabrics with technological improvements and
performance-enhancing features
throughout the years. These technological upgrades to their
products have assisted the company
in expanding its market share worldwide. Customers enjoy
wearing Lululemon's products
because of its technology and how it makes them feel about
themselves. As the company makes
new products, they continue to incorporate technology within
their product lines.
• Concern for survival, growth, and profitability: The company
understands that the
the only way they will survive in this market is through
expansion. Direct-to-consumer sales
through their website have become a critical component for the
company. As indicated in the
reading, in 2011 the lululemon's e-commerce sales increased
from $106.3 million to $1.14
billion in the financial year ending 2019. During the pandemic,
Lululemon's majority of retail
outlets in the domestic market were closed. Like many other
businesses that figured it out,
ordering online became the way to continue profit. This showed
that the company could adjust
through diversity overcome slight roadblocks and profit.
CASE STUDY: MATRICES ASSIGNMENT - LULULEMON
INC. 6
• Philosophy: The company takes its philosophy stance
seriously as it aligns with its core
values and its mission. As it states, it allows "people with the
components to live longer,
healthier and more fun life." Lululemon is set up to and has
arranged to operate the company in
the methodology in which it is stated within their mission. The
company attempts to manage its
staff ethically and encourages all to follow its motto. Ensuring
the company is managed
accordingly starts with the staff then the suppliers to ensure the
products are produced and sold
within company standards.
• Self-concept: Lululemon's specific product design and its
processes for innovation is the
The reason it can make quality products. This is believed to be
the key to its competitive
strength. Lululemon had to make well-designed products that
offer a comfortable fit and
competitive pricing to be competitive and set itself apart in this
competitive athletic apparel
market. Within this market, the company competes with brands
such as Nike, Adidas, Reebok,
and Under Armor, as stated in the strategic group map within
this paper. Additionally, the
company sets itself apart by focusing on the customer and what
they want. Lululemon
understands the importance of customer relationship
management and promoting brand loyalty.
This is part of their strategic market approach.
• Concern for public image: Yes, the company is responsive to
community needs through
its business processes. One way it does this is by "Omni Guest
Experiences." It uses a marketing
strategy that connects them with people who shop at its stores.
The company creates
opportunities through communities to live "sweatlife" and live
long healthy lives. Through this
avenue, people can connect. The company also takes part in
dealing with environmental issues
by following environmental protection protocols in its supply
chain and within the community.
CASE STUDY: MATRICES ASSIGNMENT - LULULEMON
INC. 7
• Concern for employees: es, employees are an asset to the firm.
Lululemon
provides its staff members with a supportive and encouraging
working environment. It aims to
encourage its employees to set goals in their personal and
professional life. The employees are
valuable assets of the company, and it shows in the numerous
employee programs that lululemon
offers. Some of these programs include personal development
workshops and goal-coaching
courses, just to name a few.
SWOT Analysis
A successful company such as Lululemon Inc needs to identify
its areas of concern. To
do so, it first needs to be identifying their issues by creating a
SWOT matrix to include the four
categories. When thoroughly conducted, the chart will show the
company the improvements it
needs to improve its sales or achieve sales goals.
Strength
Lululemon was created to create apparel for people to live
healthier lives and have fun
doing so. The first thing someone needs prior to starting a
business is vision. In 1998, Wilson
had a vision to "elevate the world from mediocrity to greatness"
(Thompson & Harris., 2022, pg.
C-81). The company hoped to serve their customer at all costs
and be a leader in customer
satisfaction. Understanding this, their strength is the detail they
put in their clothing. Their
fabric's comfortable fit and feel has made them a trusted brand.
The technology that the company
puts in its line cannot be duplicated. The clothing prevents odor
as the material restricts bacteria
and can be washed often without worrying about washing away
(Thompson & Harris, 2022).
Another strength the company possesses is being aware of its
brand and the market. From
the date of conception, the company has never switched or
changed who they were. Lululemon
Inc. has gained notoriety from its competitors as well as
customers. Due to brand awareness, the
CASE STUDY: MATRICES ASSIGNMENT - LULULEMON
INC. 8
company has jumped from 40% in sales in 2020. Wilson has
also created a strong relationship
within the community. The company's mission statement
resonated with its core audience.
Weaknesses
The company's weaknesses may be attributes that they stressed
with their strengths.
Lululemon has a reputation for creating comfortable and
excellent quality clothing. This is all
too apparent because it is part of its mission statement and sales
strategy. In 2013, the company
saw issues with one of their pants lines that recalled the item.
Another recall occurred in 2015
where the tops were said to have an issue with the neck area.
All these concerns with the clothing
did do not reflect their mission statement.
Another weakness the company has is its pricing compared to
all its competitors' prices.
The company has set itself as a high-end company, while its
competitors like Under Armor sell
affordable clothing with the same comfortable quality. Another
weakness would be the
constraints on the company with supply chain issues.
Opportunities
When speaking of opportunities, the company has left an
opening in the market for its
competitors. Through the years, Lululemon has focused on
women's apparel. The company's
competitors have seen significant gains with men's athletic
apparel, which has accounted for over
half of their sales. In 2020, research showed that more men are
shopping for athletic gear than
women. Men are now accounting for more of the sales than
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Individual Case Study – ChipotleBUSI 690 – Policy and Stra

  • 1. Individual Case Study – Chipotle BUSI 690 – Policy and Strategy in Global Competition 1 CHIPOTLE Individual Case Study – Chipotle Executive Summary Chipotle Mexican Grill, Inc. is one of the leading quick-service restaurant chains in the US and operates 2,622 restaurants. The company’s existing strategy and business model indicate that it operates firm-owned restaurants and focuses on delivering high- quality food at low prices everyday to customers. The company has been successful but faces numerous complaints regarding food contamination. This report presents a new mission statement appropriate for its businesses and carries an internal analysis of the company. Based on the internal and financial
  • 2. analysis, two alternative strategies have been proposed, and projections based on the recommended strategy to open up new casual dining restaurants in the US are presented in this report. It is suggested that the new strategy will increase the company’s profitability and generate a positive net present value. Existing Mission, Objectives, and Strategies The company’s existing mission is “food with integrity” [CITATION Chi201 l 1033 ] which implies that it ensures that its supplies are from sustainable sources without the use of chemicals that could have harmful effects on humans. The primary goal of the company is to “focus on safe and delicious food made with better ingredients” [CITATION Chi202 l 1033 ]. Its strategy remained to have a small menu that offers limited choices of healthy, nutritious, and good quality food items at competitively low prices. Furthermore, its focus is on expanding the network on its restaurants in the United States until recently, as the company has launched its online and mobile food ordering systems. It relies on providing efficient customer service and carrying out strong
  • 3. advertising and marketing programs to communicate with customers and increase its sales. 2 CHIPOTLE A New Mission Statement The new mission statement of Chipotle is to (1) serve customers (2) healthy and delicious food (3) without boundaries (4) by using sustainable food production technologies (5) and consistently growing its business (6) by expanding its network and following ethical practices (7) and challenging its competitors (8) by giving best quality food and value and services (9) by its highly trained employees. Analysis Of the Firm’s Existing Business Model The existing business model of Chipotle focuses on providing enhanced food experience to its customers. The key to the company’s business model is that it was not based on the standards of Quick Service Restaurants (QSR) and offered a new approach to the business that challenged
  • 4. other companies in the market. The company operates a large network of more than two thousand restaurants in the United States and thirty restaurants in internal markets. Its business model is based on a simple menu with a limited number of options available to customers at comparatively low prices. The reason for this approach is that it aims to deliver high-quality food quickly and efficiently for its customers rather than giving them greater choices with a lack of focus on maintaining the level of quality and cleanliness. The company only operates company- owned restaurants and does not offer franchise opportunities. The model is also based on low- profit margins and greater sales volume. The company maintains low risk and margins on its products and also has a low-pricing strategy to attract customers and also gain their loyalty to the brand. Chipotle also treats its employees differently as it is noted that the company pays them higher sales and wages as compared to other companies. Moreover, the company has diversified its point of sale by developing an online ordering website and a mobile app.
  • 5. 3 CHIPOTLE SWOT Analysis 4 CHIPOTLE Internal Factor Evaluation (IFE) Matrix. External Factor Evaluation (EFE) Matrix. 5 CHIPOTLE SWOT Bivariate Strategy Matrix Boston Consulting Group (BCG) Matrix Competitive Forces Analysis, Competitive Profile Matrix (CPM), and Competitor’s Ratio Analysis 6
  • 6. CHIPOTLE Competitive forces analysis. FP SP Defensive Conservative Aggressive Competitive CP IP 7 -7.0 -5.0 -3.0 -1.0 1.0 3.0 5.0 7.0 -7.0 -5.0 -3.0 -1.0 1.0 3.0 5.0
  • 7. 7.0 CHIPOTLE Competitive Profile Matrix (CPM). Competitor’s Ratio Analysis. The competitor selected for review in this section is McDonald’s Corporation, which is a leading, global chain of QSR. The key ratios of two years, 2018 and 2019 are presented in the following table: 8 CHIPOTLE The profitability ratios indicate that the company operated at healthy profit margins in both years. The ratio values improved in 2019 as compared to 2018, which was a positive sign for the company’s shareholders[CITATION Reu201 l 1033 ]. The net profit margin of 28.8% and 28.5% in 2018 and 2019 respectively implied that the company had strong profitability, which was
  • 8. added to its retained earnings that could be used for further expansion and product development. 9 CHIPOTLE The DuPont analysis indicates that the company’s asset turnover declined in 2019, which implies that the company only generated $0.52 in sales in that year as compared to $0.63 in 2018 from the use of its assets. The liquidity position of the company weakened in 2019 as its current ratio, and quick ratio values fell below 1. However, the cash cycle of McDonald’s reduced from 2.3 in 2018 to 2.0 in 2019. Moreover, the times interest earned also reduced as the company’s interest obligations increased more than proportional to the increase in its operating income. The company’s long-term borrowing increased as a proportion to its equity. It implies that the solvency position of McDonald’s was weak in both years, with a further decline in 2019. The receivables turnover of the company also reduced in 2019, which is the reason it took a long time
  • 9. to receive cash from its credit sales. On the other hand, the inventory turnover of McDonald’s was significantly high, as in the case of the QSR business, and it only held inventory for less than two days. The payable turnover had a similar trend as receivables. The ROIC of the company also declined from 19.8% in 2018 to 16.5% in 2019, which implies that its investment capital increases but did not generate a high return as compared to the previous year. Historical Financial Statements This section of the report performs trend analysis of Chipotle’s financial statements for the last three years and also calculates deltas between those years. Income Statement 10 CHIPOTLE Note. Annual standardized in millions of U.S. dollars. It is noted that the company;’s revenue increased by 14.83% in 2019 as compared to 8.68% in
  • 10. 2018. On the other hand, its cost of sales increased by 12.61% in 2019 as compared to 6.34% in 2018. There was a significant increase in the company’s selling, general, and administrative expenses in 2019. Furthermore, there was a 5.35% increase in unusual income generated from restructuring, impairment, and gain on sale of operating assets in 2019. The company did not have any debt-related interest expense, and its interest income from investments increased by 41.58% in 2019. The net profit of the company increased by $173.6 million in 2019 as compared to just $0.3 million in 2018[ CITATION Chi204 l 1033 ]. Balance Sheet 11 CHIPOTLE Note. Annual standardized in millions of U.S. dollars. The trend analysis of the company’s balance sheet indicates that its total assets increased by $2.83901 billion in 2019 as compared to $219.8 million in 2018. It shows that the company
  • 11. significantly invested in the expansion of its restaurant's network. Moreover, the company’s cash and cash equivalents increased by 92.24% in 2019 due to the sharp increase in its operating income. As the company’s sales increased in 2019, the value of its receivables also soared by 73.84% in 2019. The company did not have any debt, and its total liabilities increased by 315.14% in 2019 as compared to just 20.99% in 2018. The significant increase in its liabilities 12 CHIPOTLE was due to the other liabilities related to the purchase of properties for new restaurants. Finally, it is noted that the company’s total equity increased by 16.77% in 2019 as compared to 5.64% in 2018. The company bought back treasury stocks, and this is the reason that its retained earnings only increased by 13.51% in 2019 as compared to 7.36% in 2018 [ CITATION Chi204 l 1033 ]. Cash Flow Note. Annual standardized in millions of U.S. dollars.
  • 12. 13 CHIPOTLE The cash flow statement analysis indicates that the cash from operating activities increased by $100 million in 2019, but the increase in 2018 was higher at $154.5 million. The reason for this difference was due to the increase in the company’s working capital in 2019, which meant that a significant amount of its cash was stuck in non-cash generating activities. In the last two years, the company had made significant investments in buying new properties, which are now managed by a separate entity, in expanding its sales network. The company had already repaid its debt and was also buying back its stocks, which led to a cash outflow of $190.6 million, $160.9 million, and $285.9 million in 2019, 2018, and 2017 respectively. The company’s free cash flow has improved over the last three years. In 2019, it increased by 16.01% and rose by 33.52% in 2018 [ CITATION Chi204 l 1033 ].
  • 13. Ratio Analysis Chipotle’s key financial ratios and their values for the last three years are provided in the following table: 14 CHIPOTLE The profitability analysis of the company indicates that its profitability improved in 2019 as compared to 2018[ CITATION Reu0a l 1033 ]. The operating margin of the company had declined in 2018 due to the case of food contamination. However, it has taken major steps to get back the confidence of its customers by making improvements in its food management processes 15 CHIPOTLE and also dealing with the issue effectively through media, including social media. The net profit margin of the company increased by 2.8% in 2019 after it fell by 0.4% in 2018. The company’s
  • 14. ROE was 22.4% in 2019 as compared to 12.1% and 12.7% in 2018 and 2017, respectively. It indicates that the company’s asset turnover and net profit margin increased substantially in the last year. The liquidity position weakened in 2019 as the values of both the current ratio and quick ratio gradually declined over the last three years but remained above the value of one. It is noted that the company did not have external borrowing, and its assets were financed by internal equity and capital raised from the stock market. The receivable turnover of Chipotle declined in the last three years as its sales increased. The inventory turnover also reduced in those years, but it had a high value similar to McDonald’s. Chipotle paid its suppliers in almost 36 days in 2019, and this strategy was the same in 2017 and 2018 as well. The ROIC increased by 1.60% in 2019 as compared to a 0.60% decline in 2018. Alternative Strategies The two proposed strategies based on the the company analysis are provided in the following along with their justification and advantages for Chipotle.
  • 15. Investment in Casual Dinning Restaurants This strategy is recommended on the basis that the company keeps its focus on the US market and diversifies its revenue channels by opening up casual dining restaurants that have a different theme and menu from its QSR restaurants. The company has tested this strategy already by opening up Tasty Made burger restaurant and has opened up more than 200 restaurants. Further expansion of similarly casual dining restaurants can help the company to overcome its weaknesses of targeting a small customer segment and also avoid disruptions in its revenue that are commonly caused by complaints about food contamination in its Chipotle restaurants. The 16 CHIPOTLE management will be able to pursue this strategy based on its experience and keep the risk of failure low as compared to the other strategy proposed. Expansion of International Business
  • 16. The company does not have a significant international presence other than 30 restaurants opening in Canada, the United Kingdom, France, and Germany. Chipotle can globally expand its network of restaurants and target emerging markets like China and India that have more significant potential for international brands. Although this strategy will increase the risk level of business and the company will have to invest in R&D to develop products that suit consumer tastes in those countries, the potential increase in its revenue and profitability is significantly high. It will also assist the company to be less dependent on the US market and also benefit from the localization of its strategy in international markets. Pro-Forma Financial Statements The projected income statement with and without the new strategy is provided in the following. The ‘without strategy’ projections are based on the company’s recent quarterly report and the ‘with strategy’ projectsions are developed using the estimated increase in revenue of 3%. Income Statement
  • 17. Note. Annual standardized in millions of U.S. dollars. 17 CHIPOTLE Balance Sheet Note. Annual standardized in millions of U.S. dollars. Cash Flow Note. Annual standardized in millions of U.S. dollars. Ratio Analysis Net Present Value Analysis Based on the estimated invement of $300 million and the expected increase in the company’s EBIT between with and without strategy estimations, the Net Present Value (NPV) is calculated in the following: 18 CHIPOTLE The proposed strategy is expected to have a positive NPV.
  • 18. Therefore, the company should accept it and go ahead with expanding its network by opening new casual dinning restaurants in the US. EPS/EBIT Analysis Specific Recommended Strategy and Long Term Objectives Based on the current strategy and practices of Chipotle, it is recommended that the company expands its network in the US by opening up casual dining restaurants. The justification of proposing this strategy is that the company has no significant experience of the international markets, and it has halted its franchise policy, which means that its risk level will phenomenally increase if it decides to own and operate its restaurants in different countries. The management of operations will become challenging, and this could lead to a significant financial loss and also negatively affect its position in the US market. The company can develop new brands and offer a 19 CHIPOTLE
  • 19. healthy casual dining experience to US customers by innovating its products and give better choices to customers in the US. The company can invest $300 million in opening 100 new locations, which will allow the company to experience an increase of three percent in its revenue. The new strategy can be implemented over the next three years, as depicted below. Proposed New Business Model The proposed business model is based on the creation of different segments and a flatter organizational structure. The company can hire key personnel to manage different brands and restaurant chains. The new business model will allow significant investment in research and development of new products that will increase the scope of operations and target different 20 CHIPOTLE groups of customers other than low-income earners who are mainly served at Chipotle restaurants. The company will have different teams to work on
  • 20. the marketing and advertising strategies for its new brands and restaurants. The focus on the company will be expanding its network and diversify its revenue channels. The company will have stricter controls over its supplies and food preparation and hold its employees accountable after giving them the necessary training. References Chipotle. (2020a). Day after day we’re committed. Retrieved from https://www.chipotle.com/food-with-integrity Chipotle. (2020b). Chipotle - Food sategy overview. Retrieved from https://www.chipotle.com/foodsafety Chipotle. (2020c). Chipotle Announces First Quarter 2020 Results. Retrieved from https://ir.chipotle.com/2020-04-21-Chipotle-Announces-First- Quarter-2020-Results Chipotle Mexican Grill. (2020). Chipotle Mexican Grill, Inc. - SEC Form 10K . Retrieved from https://ir.chipotle.com/sec-filings
  • 21. Reuters. (2020a). Chipotle Mexican Grill. Retrieved from Reuters Reuters. (2020b). McDonald's Corp. Retrieved from Reuters 21 References A Political Economy of Communication Week 6 – CMNS 130 Caio cardoso Objectives To understand: Fundamental characteristics and principles that inform a political economy approach to media/technology The importance of social relations in explaining transition from broadcast to narrowcast Labour and the process of commodification as central to identifying historical change in capitalism A Political Economy of Communication Media audience today is increasingly fragmented; it is not like the mass media audience constructed by the radio and television
  • 22. age Marketing and audience research techniques are increasingly sophisticated Focus on the individual consumer Major corporations have ability to repackage content and cross - promote it over several delivery platforms, facilitated by data gathered through digitized commercial surveillance A Political Economy of Communication, cont’d Digitization used to extend capitalism Most powerful media companies move away from a single- business model towards vertically and horizontally integrated giants Spread globally and control everything: Newspapers to satellite television The entertainment industry
  • 23. The Internet and telecommunications Exchange of communication A Political Economy of Communication, cont’d Political economy – study of social and power relations of the production, consumption and distribution of resources Much of current debate on communication policy focuses on ownership and control: Who owns and controls your media? Who owns your access to technology and the hardware/software you use? Who owns and controls your information? Why Political Economy? Critical communication scholarship is socially conscious
  • 24. Questions the social structures and processes that allow inequality to deepen and conflict to increase Media content that marginalizes people or glorifies greed and sensationalizes destruction and violence is not democratic Why Political Economy? cont’d Political economy of communication should take into account the social whole and question the whole phenomenon of media as interconnected: The history and structure of the communications industry Issues of ownership and control Repeated ideologies in the content History and application of technology Communication delivery systems and platforms Cultural contexts that surround both production and consumption Aim not just to study media and communication, but to take responsibility for and contribute to it and change it, instead of accepting structured position of worker or consumer A Brief History of Political Economy Dominant civilizations become so via the technology of communication (print, money, electricity, railways) Study of political economy first rose to prominence during the early years of the Industrial Revolution when economists came
  • 25. to terms with the rise of capitalism as a global system of production and exchange Adam Smith (1723–90) – The Wealth of Nations formulated theory of the division of labour. A manufacturing operation would be more productive if the production process was simplified and each worker concentrated on a single task A Brief History of Political Economy, cont’d Economic theory is still largely based on false assumption that markets will always find their point of equilibrium under conditions of perfect competition But competition tends to result in a very small number of global corporations. Marx noted the exploitative nature of capitalism, arguing that the entrepreneurs expropriated surplus from the workers who laboured to produce it so that a profit could be made A Brief History of Political Economy, cont’d Capitalism divides and structures human relationships into hierarchies based on social class
  • 26. The owners of the means of production versus those who must sell their labour for a wage Industrial Revolution – a series of fundamental changes to the mode of production (from feudalism to capitalism) that developed over 100 years Shift from an industrial society (based on natural resources like oil, gas, or wood) to an information or knowledge society (one based on purportedly infinite resources) A Brief History of Political Economy, cont’d Underpinned by use and development of digital technologies, changing how and what we consider labour, as well as on how we think and act as social beings Like the Industrial Revolution, the basis of the economic system is still capitalism, such that political economists suggest the term “digital capitalism” Political Economy Methodology Logical principles that inform a political economy approach: Focuses on concentration of ownership and control of resources Analyzes conflict between capital and labour, and challenges
  • 27. assumption that governments are neutral in economic and communication issues Emphasizes importance of structural factors in the communication environment Questions size, scope, and geographic spread of markets for goods and services Seeks to identify the social whole – the ideas, processes, practices, organizations, and regulations that affect or structure this environment Value, Capital, and the Media Dialectic of digital economy plays out between the social relations of political economy and media technologies Abstract concept of value is created, distributed, consumed, and stored Media industries produce commodified meaning, producing two types of value in the economic exchange: Commercial value, measured by rates of profit and the value of capital invested Social, political, and attitudinal value (ideas about how we view human nature, social relations, and politics)
  • 28. Value, Capital, and the Media, cont’d Basic principle of political economy: Every commodity has a use value (based on social utility) and an exchange value (based on money) Commodification – the process of turning non-commercial material into saleable products Means and modes of communication are necessary public resources; they are commodified when they become a product for sale Value, Capital, and the Media, cont’d “Commodity fetishism” – we see the product, not the resources, particularly the labour, that went into it Labour is the source of all value in society Labour theory of value (Marx) – the value of a commodity is equal to the value of the labour time consumed in its manufacture
  • 29. Surplus value – when the total amount of labour embedded in a commodity is greater than the price paid for that labour Part of surplus value is used for personal consumption, part is reinvested in capital and new labour in order for the process of accumulation to continue Value, Capital, and the Media, cont’d New machinery and technologies contain more embedded human labour time than previous models Ratio of labour power to nature involved in design, engineering, manufacturing, and marketing rises, creating conditions for economic crises These crises are periodic and ongoing; they are a constant feature of the capitalist mode of production and a key social force driving change Financialization – A process that subordinates use value to exchange value Media as Both “Base” and “Superstructure” The media are both a business and a producer of ideas and values Base refers to the economic realm of production
  • 30. Superstructure refers to the rest of civil society (culture, politics, and ideology) that “rests” on the base Both base and superstructure are dynamic process of “mutual constitution” (each affects the other) Hegemony and Communicative Process The communication process helps corporations manage international operations, respond to changing market conditions, and overcome restraints of space and time in order to maximize control over the international value chain of production, distribution, marketing, and consumption Globalization: Notion that economic development proceeds best on the basis of a single worldwide market that sources materials and labour from anywhere in the world at the lowest possible cost Refers to the ongoing restructuring of capitalism to extend control over resources and extract surplus value Hegemony and Communicative Process, cont’d How do media and communicative practices relate to and exist within political and other social structures?
  • 31. Hegemony – the active process of a dominant social class winning the support of subordinate classes for its continued rule (with ideological memes) Important to identify what the structures of domination are (political, economic, and social) and the possibility for agency (the ability of humans to challenge, change, or reject domination) Emphasis on competition and glorification of the individual as epitomized by the entrepreneurs and celebrities are hegemonic indicators of success Hegemony, Subversion, and Mimetic Mutation Hegemony is not a fixed relationship; it is mutable through forces acting on the emotional dialectic An emergent or oppositional dialectic is “counter-hegemonic” and can pull ideologies in contradictory directions Consensus versus deviance versus limited controversy Hegemonic ideas exist in the sphere of consensus and dominate the sphere of limited controversy Counter-hegemonic ideas begin life in the sphere of deviance
  • 32. and migrate into the sphere of consensus through mimetic mutation and social struggle, or remain in sphere of deviance .MsftOfcThm_Accent1_Fill { fill:#4472C4; } .MsftOfcThm_Accent1_Stroke { stroke:#4472C4; } .MsftOfcThm_Accent1_Fill { fill:#4472C4; } .MsftOfcThm_Accent1_Stroke { stroke:#4472C4; } 1 2
  • 41. Communication and Social Change (CMNS 130) Winter 2022 - Midterm Exam Exam Rules: • This is an open book exam where you can use all course readings, notes, worksheets and lectures to help you, as well as other relevant sources. (Avoid google and Wikipedia, please!) • Please cite all your sources in APA style • You may NOT communicate with or collaborate with any others about your work. • You understand that all work will be submitted to TurnitIn plagiarism checking software OR your handwriting will be compared to your other work during the term • You agree that you are the only author of the work you submit. • Trust yourself to read and understand the questions, and write your own thoughts and opinions, supported by class material and readings. You can do it!! • Questions? email: [email protected]
  • 42. Part 1: Mini-Essay Instructions • Objective: Analyze a communication practice to social realities • You may use TV, radio, newspaper… • Write a mini-essay (900-1300 words, double-spaced) using the guidelines provided • Include your name and student number at the top of your file and in your file name (ex. Harman 000 000 0000). If you forget to write your name or student number, I will deduct points! • Format: As you would with an assignment, upload on Canvas under “Final Exam Upload” in Word or PDF. mailto:[email protected] QUESTION
  • 43. WITHOUT USING SOCIAL MEDIA AS AN EXAMPLE, ANSWER TO THE FOLLOWING QUESTION What are possible consequences of media using its audience as a commodity? Use at least one group that was treated like a product by media and the effects of that. SUGESTION OF STRUCTURE TO YOUR ANSWER Guidelines: Use the following points, answering the questions in paragraphs I. The platform: Introduction (about 100-150 words) a) Choose a communication object (TV, radio, newspaper) b) Why did you choose this object? Why is it important to study in a communication and social change class? How did your relationship with this object change? c) Identify the main theme in this object you would like to
  • 44. explore (the impact of that object in society) d) Write a brief summary of your main points about this object – this will be your thesis. (example of introduction draft: For this essay I have chosen the memes with the “Hotline Bling” (2015) music video, by Drake, because it makes interesting comments on issues certain social groups refuse or accept in their own identity. The use of memes is a crucial part of society nowadays, and through that we can express refusal or acceptance of certain behaviours and norms that differentiates this from an older generation, that may not even know Drake. Thus, while this meme reinforces generational links it also plays an important role in stressing different attitudes towards everyday life.) II. The Communications Object and the Culture Industries (100- 200 words) Situate (put) the object in the discussions of the Culture Industry and discuss. a) Describe every important aspect of that product in its context; b) Discuss each part in relation to your communication object in 1-3 sentences using concepts from the text.
  • 45. (example: Drake is a rapper, whose songs approach new aspects of society, like[…]. However, according to the Culture Industry perception (Pearson, 2020) pop music, like this, can be used to […]) III. Social Changes (about 300-500 words) Choose at least ONE of the following social group with which you will analyze your object. You should analyze how your object approaches the chosen aspects and can influence people over history: • age • class • gender • sexuality • race and ethnicity • identity • disability and health • national framing • religion
  • 46. (In my example: The aforementioned conflict between different generations expressed in this meme usages can be merged with perceptions of how we rely on those messages to express parts of our identities…) IV. Theoretical Perspectives (about 200-400 words) Choose some of the following theoretical perspectives or models to add a deep analysis your cultural object and what it represents: How would the theory or theorist explain your cultural object? • Cultural Studies – Stuart Hall and the British Cultural Studies • Critical studies – Frankfurt School and the Critical Studies • Strong Effects Theories – Hypodermic Needle/Magic Bullet or the Mass Society • Limited Effects perspective – Two-Step Flow and Lazarsfeld’s perspective (Example: Adorno and Horkheimer (2018) would point that the repetition of formulas on the RAP music, with lyrics mentioning their wealth and power is also present in the meme reproduction on social status…)
  • 47. V. Reflection and Summary (about 100-150 words) Summarize your main thoughts about your analysis of the communicational object, including: What makes this object unique or special as a source of information about communications? • What can this object tell us about the society we live in and about the specific theoretical dimensions you discussed? • What can be learned from studying communications platforms in this way? VI. Academic Sources and Citations – Include a “References” list at the end of your work • All sources must be relevant to your topic and from 2010 or later (unless classics, such as The Communist Manifesto or Orientalism) • APA style – ex. (Lee, 2018) or (Lee, 2018, p. 3). Please use Alexander College’s APA Citation Guide to help you • 2 in-text citations per paragraph • 3-5+ academic references, including books, journal articles, and high-quality websites etc. • The textbook counts as a source, as do the journal articles used in class https://alexandercollege.ca/web-2018/wp-
  • 48. content/uploads/2020/01/APA-Citations-Style-Guide-Winter- 2020.pdf https://alexandercollege.ca/web-2018/wp- content/uploads/2020/01/APA-Citations-Style-Guide-Winter- 2020.pdf RUBRICS Mini-Essay Rubric Your mini-essay score will be used as 2/3 of your final exam mark. Final exam grades may not be available on Canvas. The following scale will be used to assess your mini-essay: Answers to all the questions are Complete, Insightful, and Original /15 exceptionally well done
  • 49. 13-15 very well done 11-12 Adequately done 8-9 not very well done 6-7 Poorly done 4-5 almost never/
  • 50. not at all 0-3 Answers use appropriate Theoretical Terms and Concepts /15 many 13-15 quite a few 11-12 some 8-9 few 6-7
  • 51. very few 4-5 almost none/ none 0-3 Writing: logical structure + meaning is clear /5 exceptionally clear 5 very clear 4 clear
  • 52. 3 not very clear 2 somewhat unclear 1 not clear at all 0 APA in-text citations References /5 5 or more recent,
  • 53. academic references 2+ citations/ paragraph 5 4 recent, academic references 2 citations/ paragraph 4 3 recent, academic references 2 citations in most paragraphs 3
  • 54. 2 recent, academic references 1 or fewer citations/ paragraph 2 1 recent, academic reference 1 or fewer citations/ paragraph 1 no references no citations 0
  • 55. Total = /40 Part 2: Interview Instructions • Interviews will be held personally in two occasions, via Zoom • You must be available on camera and show your student ID • Interview time 3-5 minutes • Find your time on the list published on Canvas in advance, please be available on Zoom 5-10 minutes before your time • You will be asked 2-3 questions about your mini-essay • You will not receive the questions in advance • To prepare, understand your mini-essay and sources well – why did you write what you wrote? • You may bring your notes and sources to the interview Mini-Essay Rubric The following scale will be used to assess your interview responses:
  • 56. Answers to all the questions demonstrate a high level of understanding (are Complete, Insightful, and Original) /10 exceptionally well done 9-10 very well done 7-8 Adequately
  • 59. Total = /20 Your interview score will be used as 30% of your final exam mark. Final exam grades may not be available on Canv Winter 2022 - Midterm ExamOverview:Exam Rules:Exam time limit: from Friday, February 11th, 11:59 AM until Sunday, February 13th, 11:59 AM (2 days)Part 1- Mini-Essay Deadline: Please upload on Canvas by 11:59 am, Sunday, February 13th.Part 1: Mini-Essay InstructionsI. The platform: Introduction (about 100-150 words)II. The Communications Object and the Culture Industries (100-200 words)III. Social Changes (about 300-500 words)IV. Theoretical Perspectives (about 200-400 words)V. Reflection and Summary (about 100- 150 words)VI. Academic Sources and Citations – Include a “References” list at the end of your workMini-Essay RubricPart show your student IDMini-Essay Rubric CASE STUDY: PROJECTIONS, NPV, COMPILATION ASSIGNMENT 1 CASE STUDY: PROJECTIONS, NPV, COMPILATION ASSIGNMENT 11 Case Study Assignment: Lululemon Athletica Inc.
  • 60. BUSI 690 Policy and Strategy in Global Competition 3/2/2022 Author Note Patrick Donacien I have no known conflict of interest to disclose. Correspondence concerning this article should be addressed to Patrick donacien Email: [email protected] Case Study Assignment: Lululemon Athletica Inc. Executive Summary Lululemon Athletica Inc. is one of the leaders in selling athletic apparel worldwide. The company focuses on healthy living and ensures their clothing provides comfort while performing strenuous activities. Lululemon is a yoga inspired clothing store but also makes a variety of other clothing. Some of the items include T-shirts, sweatshirts, pants, and shorts. The company wants its customers to know that they sell a lifestyle vice just selling clothing. As of February 2020, the company has 491 stores in 17 countries and an online presence on its website (Thompson & Harris, 2022). The company was founded in 1998 in Vancouver, Canada, by Chip Wilson. In the store, he sold clothing that he and his wife created. With the success that he received at this location; Chip decided the company. Chip’s intent was to create quality products to people who intend to
  • 61. live a healthy lifestyle. Currently, the company has seen success as an international brand with about 300 stores that spans across Canada, the United States, India, Israel, China, and many other countries worldwide. The brand became so popular that mall owners/operators began seeking leasing options for the foot traffic they knew would come with the partnership. The company has seen success but not with seeing issues and problems. An ethics issue was discovered at their Youngone factory located in Bangladesh. The female workers at this facility reported verbal abuse, being beaten, being forced to work overtime, and being underpaid (Logan, 2019). Another issue was when the company was forced to pull certain yoga pants form its stores after finding out it was see-through when the individual bent over. This report offers a new mission statement appropriate for the brand and aligns with its business strategy. Based on the financial analysis conducted, alternative strategies have been proposed to ensure continues success of the company. Existing mission, objectives, and strategies Lululemon's mission statement states, "To elevate the world from mediocrity to greatness." The company's mission is to "Creating components for people to live longer, healthier, fun lives." Their mission/mission statement suggests that the company has a different perspective from other athletic brands and any other businesses. The statement indicates that the company wishes to give its customers a lifestyle rather than another company with a brand. Objectives Elevate the world by realizing its full potential. Inspire change by transforming its industry and creating a healthier world. The company has a set of values that puts quality first. The aim is to provide customer satisfaction and ensure the customer receives what they were told they would receive. This shows that the brand is committed to changing as the world changes and the styles change as they maintain their lifestyle of comfort
  • 62. clothing. An example of this would be the convenience of shopping online. Strategies The company aims to grow the business in North America, where most of its revenue comes from. Once the company has grown in North America, they would like to expand to other countries even more than they are currently doing. Another strategy would be to increase their brand awareness online and through their customer service. Another strategy the company wants to introduce is increasing their new product technology. The company also introduced its pickup in-store option when customers order online. Doing this gives customers the comfort of shopping at home but still receiving the same experience of shopping in-store. The company has seen sales increase by 45%, and direct-to-consumer revenue jumped to 155% in Quarter 2 of 2020. New Mission Statement · Customers: The study suggests that the company targets men and women in middle upper class and higher. The company initially targeted women that were interested in yoga. As the study stated, this is the case that yoga paved the way for their company to expand. In 2013, the company aggressively took more consideration for their male customers. Their focus was an age group of men concerned about living a healthier lifestyle. · Products or services: The firms' major products are athletic wear and mainly catered to their female customers. Their attire allows its customers to accomplish activities feeling comfortable but trendy. The yoga pants that the company sells promote fitness and encourage a particular lifestyle. Lululemon's product innovation uses updated technology that makes the customer feel comfortable. The technology used in their products makes it easier to consume sweat and is breathable. Their services allow them to partner with yoga studios and run clubs.
  • 63. · Markets: As the case study suggests, the company continues to add Lululemon stores in its primary United States market and as well as worldwide. The company included 16 new stores in China throughout the years and planned to add more in 2020. The company also opened stores in Japan, Germany, France, the United Kingdom, Malaysia, Netherlands, South Korea, and many other countries. As clearly illustrated, the expansion allowed the company to report incredible advancements with their strategic progress in geographical market expansion. · Technology: As indicated in the case study, the company continues to improve In the technological area. The company focused on creating and providing products that introduced fabrics with technological improvements and performance-enhancing features throughout the years. These technological upgrades to their products have assisted the company in expanding its market share worldwide. Customers enjoy wearing Lululemon's products because of its technology and how it makes them feel about themselves. As the company makes new products, they continue to incorporate technology within their product lines. · Concern for survival, growth, and profitability: The company understands that the the only way they will survive in this market is through expansion. Direct-to-consumer sales through their website have become a critical component for the company. As indicated in the reading, in 2011 the lululemon's e-commerce sales increased from $106.3 million to $1.14 billion in the financial year ending 2019. During the pandemic, Lululemon's majority of retail outlets in the domestic market were closed. Like many other businesses that figured it out, ordering online became the way to continue profit. This showed that the company could adjust through diversity overcome slight roadblocks and profit. · Philosophy:The company takes its philosophy stance seriously as it aligns with its core values and its mission. As it states, it allows "people with the
  • 64. components to live longer, healthier and more fun life." Lululemon is set up to and has arranged to operate the company in the methodology in which it is stated within their mission. The company attempts to manage its staff ethically and encourages all to follow its motto. Ensuring the company is managed accordingly starts with the staff then the suppliers to ensure the products are produced and sold within company standards. · Self-concept: Lululemon's specific product design and its processes for innovation is the The reason it can make quality products. This is believed to be the key to its competitive strength. Lululemon had to make well-designed products that offer a comfortable fit and competitive pricing to be competitive and set itself apart in this competitive athletic apparel market. Within this market, the company competes with brands such as Nike, Adidas, Reebok, and Under Armor, as stated in the strategic group map within this paper. Additionally, the company sets itself apart by focusing on the customer and what they want. Lululemon understands the importance of customer relationship management and promoting brand loyalty. This is part of their strategic market approach. · Concern for public image: Yes, the company is responsive to community needs through its business processes. One way it does this is by "Omni Guest Experiences." It uses a marketing strategy that connects them with people who shop at its stores. The company creates opportunities through communities to live "sweatlife" and live long healthy lives. Through this avenue, people can connect. The company also takes part in dealing with environmental issues by following environmental protection protocols in its supply chain and within the community. · Concern for employees: es, employees are an asset to the firm. Lululemon provides its staff members with a supportive and encouraging working environment. It aims to encourage its employees to set
  • 65. goals in their personal and professional life. The employees are valuable assets of the company, and it shows in the numerous employee programs that lululemon offers. Some of these programs include personal development workshops and goal - coaching courses, just to name a few. SWOT Analysis A successful company such as Lululemon Inc needs to identify its areas of concern. To do so, it first needs to be identifying their issues by creating a SWOT matrix to include the four categories. When thoroughly conducted, the chart will show the company the improvements it needs to improve its sales or achieve sales goals. Strength Lululemon was created to create apparel for people to live healthier lives and have fun doing so. The first thing someone needs prior to starting a business is vision. In 1998, Wilson had a vision to "elevate the world from mediocrity to greatness" (Thompson & Harris., 2022, pg. C-81). The company hoped to serve their customer at all costs and be a leader in customer satisfaction. Understanding this, their strength is the detail they put in their clothing. Their fabric's comfortable fit and feel has made them a trusted brand. The technology that the company puts in its line cannot be duplicated. The clothing prevents odor as the material restricts bacteria and can be washed often without worrying about washing away (Thompson & Harris, 2022). Another strength the company possesses is being aware of its brand and the market. From the date of conception, the company has never switched or changed who they were. Lululemon Inc. has gained notoriety from its competitors as well as customers. Due to brand awareness, the company has jumped from 40% in sales in 2020. Wilson has also created a strong relationship within the community. The company's mission statement
  • 66. resonated with its core audience. Weaknesses The company's weaknesses may be attributes that they stressed with their strengths. Lululemon has a reputation for creating comfortable and excellent quality clothing. This is all too apparent because it is part of its mission statement and sales strategy. In 2013, the company saw issues with one of their pants lines that recalled the item. Another recall occurred in 2015 where the tops were said to have an issue with the neck area. All these concerns with the clothing did do not reflect their mission statement. Another weakness the company has is its pricing compared to all its competitors' prices. The company has set itself as a high-end company, while its competitors like Under Armor sell affordable clothing with the same comfortable quality. Another weakness would be the constraints on the company with supply chain issues. Opportunities When speaking of opportunities, the company has left an opening in the market for its competitors. Through the years, Lululemon has focused on women's apparel. The company's competitors have seen significant gains with men's athletic apparel, which has accounted for over half of their sales. In 2020, research showed that more men are shopping for athletic gear than women. Men are now accounting for more of the sales than women. With the growth of men's athletic apparel, the company should try to focus on shifting its focus on capitalizing on the recent surge of sales. CEO Laurent Potdevin stated, " Retail is evolving at an increasingly rapid pace" Potdevin added, saying, "consumers now connect with brands in a way that is driven by experiences, rather than transactions" (Shaw, 2016). A great opportunity for the company would be to open more stores in the United States. In 2020, the U.S will lead apparel sales within the market with sales of 160 billion dollars. In
  • 67. 2021. According to the article, "The market is growing enormously, as people are progressively enticed by the product's capability to offer sweat-wicking and breathability and enhancement of physical movement" (Fortune Business, 2021). Threats The critical threat that should be listed is the threat of other companies. The price of their competitors is reasonable and well below that of Lululemon's. The price of yoga pants was 20% lower than that of their competitors. Other stores also provide significant discounts that Lululemon does not. Another threat is that Lululemon does not provide a wide range of sizes like its competitors. The company typically caters to smaller sizes like sizes 2 to 12. At the same time, other stores like Under Armor sell XL and XX clothing. The final threat might be the possibility of a company creating better quality at a better price than Lululemon. The company must remain vigilant and continue looking for better quality at an affordable cost. SWOT Analysis Chart Strengths (Internal Factors) Weaknesses (Internal Factors) · Lululemon Inc. is not only one of the most prominent t and fastest Athletic clothing apparel globally, it is also one of the most profitable and respectable brands. · Lululemon Inc has a signature line of Yoga apparel is often imitated but cannot be duplicated in quality or price. · The company leads the market in brand Awareness from 40% in 2020.
  • 68. · The company has a strong relationship within the community. · The company must deal with Recalls that goes again their mission statement. · Clothing not fitting comfortable or pilling in the inner thigh. · Shirt tops are a threat to safety. · Using third-party suppliers within their distribution supply chain. Causing time delays Opportunities (external factors) Threats (external factors) · The company should focus on Men’s clothing to capitalize on the surge of men’s interest in athletic apparel. · The company should capitalize on the massive numbers that North American generates for sports apparel by opening more North America stores. · Lululemon has many competitors in the athletic clothing arena, such as Under Armor, Athleta, Adidas, and Nike. · Many of its competitors offer more sizes of clothing. Those companies cover a more comprehensive range of customers that Lululemon cannot reach. Tows Matrix The TOW Matrix listed will assist in the strategic planning that Lululemon can use to enhance its strengths, eliminate its weaknesses, and avoid the challenges identified within the threats. The Matrix shows how the company can benefit from
  • 69. opportunities to enhance its profit margins. TOW Matrix Chart TOWS MATRIX LULULEMON INC. Strength – S (Internal) 1. An existing Brand 2. A loyal customer base 3. Brand awareness Weaknesses – W (Internal) 1. Company Recalls/ Brand perception 2. Clothing issues 3. Third-party support Opportunities – O (External) 1. Cross-selling 2. New Markets 3. New services Strengths/Opportunities SO Leverage the strength to maximize the opportunities at hand. = Attaching strategies Weaknesses/Opportunities WO Counter weakness through exploiting opportunities = Build strengths for attacking strategy Threats – T
  • 70. 1. New competitors 2. Old competitors 3. Customer choices ST Strategies Leverage strengths to minimize threats = Defensive strategy WT Strategies Counter weakness and threats = Build strengths for defensive strategy Strategic Group Map The strategic group map of Lululemon depicts a brand that all belongs to the athletic apparel market. The prices, the quality of the brand, and the customer's viewpoint then its reality the group map depicts them as such. Lululemon has made a name for the brand by having good quality products. The company also has a substantial female following. The Under Armer and Columbia company is more well-known and caters to a broader market with more sports apparel. Nike, Adidas, and Reebok are the signature brand. They are well known in sports and highly marketable within sports franchises. As shown on the map, these companies are highly favored and have a competitive edge over the other companies. The companies listed are highly competitive and are some of the world's most recognized brands within the market. As listed, "The annual revenue of these three competitors approaches $50 billion, with Nike achieving revenues of more than $25 billion, Adidas nearly $20 billion, and Under Armor topping $2 billion" (Jensen et al., 2016, para. 2).
  • 71. Strategic Group Map Diagram PESTLE’s Analysis Political The company was able to stay ahead of the tariffs bill enacted for China. The company has limited its exposure to China as the U.S placed a levy of 15% on most clothing from China. The company was well ahead of the bill, shifting to other locations. Economical Canada remains a stable country with no significant economic issues that could affect the companies' earnings. This also factors the pandemic that plagued the country and the rest of the world. Its Canadian clients are willing to spend their money, and the company is thriving within that market Social Certain social factors drive every market. This will determine how customers and clients respond to the market. The company could use yoga as a feel-good experience and create an experience for their customers. Also, In the wake of Covid-19, people stopped going to the stores and started buying products and merchandise online. The company was able to capitalize on and improve its online presence. Store sales suffered due to closures, but the company's online business surged 70%, accounting for 54% of overall sales compared with 27% a year earlier (Terlep, 2020). Technological The company has invested accurately in the latest technology through sound and deliberate strategic moves. This strategic step has given the company the ability to improve the efficiency of its product and maintain customer satisfaction. Doing this has also secured their competitive advantage over their competitors. Legal Not all companies can follow all rules and regulations dictated by certain regions that they operate in, but lululemon has followed the legal stipulations by law. They have remained compliant with regulations as required to operate. They have
  • 72. avoided fines that would affect their bottom line. Environmental Lululemon strives to lead from the front in limiting emissions within the atmosphere. The company also manages its waste accurately before it goes out in the environment. They understand that if they do not respect the environment, it may negatively affect their reputation. PESTLE Chart Political Economical 1. Tariffs on Chinese goods 1. Stable economy 2. COVID 19 Social Technological 1. Using Yoga as a feel-good idea across the world. 2. COVID 19. 1. Constant technological innovations to enhance customer satisfaction. 2. Technolgy for fit and performance. Legal Environmental 1. Ensuring tax laws are adequate in all regions. 1. Limit waste footprint 2. Balancing greenhouse emissions 3. Accountability for raw materials
  • 73. Porter’s Five Force’s Chart Competitive Rivalry Lululemon has multiple competitors, and they are aware of that. Some of these competitors are Nike, Adidas, Reebok, and Under Armor, just to name a few. As far as cost, Lululemon prices are higher than their competitors, and the company does not provide discounts on their product, unlike its competitors, which offer a more comprehensive range of discounts. Supplier Power Lululemon has a great partnership with its suppliers. This is due to having multiple suppliers throughout different countries with which they have created a strong relationship. Due to their strategic approach, lululemon has enforced strict ethical manufacturing practices within the facilities. Buyer Power Lululemon does not offer discounts on its apparels at their main store. The company does provide discounts on merchandise but only at their few outlet stores. The company prices on their products are much higher than their competitors, but it is due to the material and fabrics they use to make their products. The company states that premium raw material is what they use, and the cost of those materials is much more than what their competitors are using. Threat of Substitution Many athletic gear producers within this market, such as Nike, Adidas, and Reebok. These companies make it easier for lululemon customers to stay loyal to the company. The loyal consumers of the lululemon company would consider these companies as substitutes. Meaning their quality would never match up to those of lululemon. Threat of New Entry The possibility of new entry within the industry of high-quality athletic gear is low. This is because the apparel market requires
  • 74. a large amount of capital even to begin. If a new entrant attempted to step into the market, the new company would need much money to compete. Porter’s Five Force’s Chart Threat of new entrants Legal Constraints -Low entry barriers due to the internet -No cultural barrier, athletic clothing worn by many -Environmental Conditions -Buyer Choice -Brand loyalty -Product service quality Industry Rivalry Nike, Adidas, Under Armor and many others. -increase material pricing -relationship with customers
  • 75. -Product service quality Bargaining power of consumers Bargaining power of suppliers -An attractive industry to get into. -Trendy clothing and comfortable. -Many customers for that market Threat of substitute products Analyzing the company's overall performance over the last three years, the metrics indicate an up trajectory, which can be seen clearly in the horizontal analysis of the organization. The historical financial analysis of the company, together with comparisons of its ratios and those of competitors, indicates a lot financially about lululemon. As indicated in lesson one, the top competitors for the analysis are Adidas and Nike. Looking at the company's profitability, it is doing better than its
  • 76. competitors, and this is because it has a higher gross profit margin and net profit margin than the others. The data indicated shows that the company can increase shareholder wealth because the investors can pay net profits through dividends (Zorn et al., 2018). Looking at the return on Equity and the Return on Assets, Nike has a higher rate than Lululemon. When talking about weaknesses, the data shows that the company needs to increase its productivity and put its assets and equity from its investors into work (Rashid, 2018). Looking at the company's profitability over the last three years, it is evide nt that it is increasing in profit. These numbers give the company an idea of possible growth if it wants to expand even further. Regarding the company's liquidity position, the charts indicate it is doing better than its competitors also. The business's liquidity is slightly improving, and with the current ratio of above two over the years, it means that the company has been able to settle its short-term obligations quickly. Lululemon has stable financial leverage due to its operations being financed by more considerable equity than debt, which is a precarious option for any company in the instance the company is unable to pay the debt. In a scenario like this, the company would need to sell off its assets to pay debts (Zeller et al., 2019). Lululemon has an average collection period of only five days; this means that the company collects its payments for sales within five days. When reviewing all the financial information, its financial position can support its strategic choice to introduce its new product technology. With the improvement of its technology by offering in-store pick options, this could increase profits. For lululemon, this strategic direction of the company could lead to placing stores more geographically. Exposing to new markets translates to new clients, new customers, and new investors. Balance Sheet Income Statement
  • 77. Statement of Cashflows Ratio Analysis Alternative strategies List two or more alternative strategies… Advantages Disadvantages Projected Financial Statements 3 Years in the Future Income Statement Balance Sheet Statement of Cash Flows
  • 78. Projected Ratios Cost Analysis Net Present Value (NPV) Analysis Implementation Strategy Recommended Strategies and Objectives Reason of Chosen Strategy Advantages/Benefits to Organizational Success and Sustainability
  • 79. References Fortune Business (2021). Apparel & Footwear. https://www.fortunebusinessinsights.com/sportswear-market- 102571 Jensen, J. A., Wakefield, L., Cobbs, J. B., & Turner, B. A. (2016). Forecasting sponsorship costs: marketing intelligence in the athletic apparel industry. Marketing Intelligence & Planning, 34(2), https://www.proquest.com/central/docview/1776674712/DBA5D AE211F4463FPQ/6?accountid=12085 Press, T. C. (2020). Lululemon withholds 2020 forecast due to COVID-19 as Q4 profits rise - BNN Bloomberg. https://www.bnnbloomberg.ca/lululemon- withholds-2020- forecast-due-to-covid-19-as-q4-profits-rise-1.1413041 Rashid, C. A. (2018). Efficiency of financial ratios analysis for evaluating companies’ liquidity. International Journal of Social Sciences & Educational Studies, 4(4), 110. Shaw, H. (2016). Lululemon sales jump with athleticwear frenzy; Lululemon sees sales jump 14 % in Q2. The London Free Press. https://www.proquest.com/central/docview/2232496237/FE71A A3F095B4545PQ/1?accountid=12085 Terlep, S. (2020). Lululemon Sales Slump on Closings. Wall
  • 80. Street Journal https://www.proquest.com/central/docview/2412018933/FE71A A3F095B4545PQ/2?accountid=12085 Thompson, A. A., Harris, R.D. (2022) Lululemon athletica’s strategy in 2020: Is the recent growth in retail stores, revenues, and profitability sustainable? (23RD ed.). McGraw-Hill References Zeller, T., Kostolansky, J., & Bozoudis, M. (2019). An IFRS- based taxonomy of financial ratios. Accounting Research Journal. Zorn, A., Esteves, M., Baur, I., & Lips, M. (2018). Financial ratios as indicators of economic sustainability: A quantitative analysis for Swiss dairy farms. Sustainability, 10(8), 2942. . CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands Percentage Change between 2020 and 2021 Percentage change between 2019 and 2020 2021 line items as a percentage of Total assets 2020 line
  • 81. items as a percentage of total assets 2019 line items as a percentage of total assets Vertical Analysis 202120202019 Current assets Cash and cash equivalents115051710935058813205.21%24.08%27.49%33.32% 42.28% Accounts receivable62399402193578655.15%12.39%1.49%1.23%1.72% Inventories64723051851340484224.82%28.08%15.46%15.80%1 9.42% Prepaid and receivable income taxes139126851594938563.37%72.44%3.32%2.60%2.37% Prepaid expenses and other current assets125107705425794977.35%21.73%2.99%2.15%2.78% Total current assets21243791807938142928217.50%26 .49%50.76%55.10%68. 56% Property and equipment, net74568767169356723711.02%18.41%17.82%20.47%27.21% Right-of-use lease assets7348356896646.55%17.56%21.02%0.00% Goodwill38687724182242391499.86%-0.24%9.24%0.74%1.16% Intangible assets, net8008024133128.22%1.91%0.01%0.00% Deferred income tax assets67313143526549- 78.59%18.40%0.16%0.96%1.27% Other non-current assets106626562013740489.72%50.25%2.55%1.71%1.79%
  • 82. Total assets41852153281354208471127.55%57.40%100.00%100.00% 100.00% Current liabilities Accounts payable1722467999795533115.32%- 16.26%4.12%2.44%4.58% Accrued inventory liabilities14956634416241135.75%- 60.94%0.36%0.19%0.78% Other accrued liabilities21191111264188.13%5.06%3.43%0.00% Accrued compensation and related expenses130171133688109181-2.63%22.45%3.11%4.07%5.24% Current lease liabilities16609112849729.26%3.97%3.92%0.00% Current income taxes payable83572643667412-68.39%- 60.78%0.20%0.81%3.23% Unredeemed gift card liability1558481204139941229.43%21.13%3.72%3.67%4.77% Other current liabilities235981240211269890.28%- 89.00%0.56%0.38%5.41% Total current liabilities88317862041850047742.35%23.97%21.10%18.91%24. 01% Non-current lease liabilities6325906114643.45%15.11%18.63%0.00% Non-current income taxes payable431504822642099- 10.53%14.55%1.03%1.47%2.02% Deferred income tax liabilities58755434321424935.28%204.81%1.40%1.32%0.68% Other non-current liabilities897655968191160.40%- 93.17%0.21%0.17%3.93% Total liabilities1626649132913663873622.38%108.09%38.87%40.51 %30.64% Commitments and contingencies Stockholders' equity Undesignated preferred stock, $0.01 par value: 5,000 shares
  • 83. authorized; none issued and outstanding000 Exchangeable stock, no par value: 60,000 shares authorized; 5,203 and 6,227 issued and outstanding000 Special voting stock, $0.000005 par value: 60,000 shares authorized; 5,203 and 6,227 issued and outstanding000 Common stock, $0.005 par value: 400,000 shares authorized; 125,150 and 124,122 issued and outstanding6266216080.81%2.14%0.01%0.02%0.03% Additional paid-in capital3886673555413152859.32%12.77%9.29% 10.84%15.12% Retained earnings23464281820637134689028.88%35.17%56.06%55.48% 64.61% Accumulated other comprehensive loss-177155-224581-216808- 21.12%3.59%-4.23%-6.84%-10.40% Total stockholders' equity25585661952218144597531.06%35.01%61.13%59.49%69 .36% Total liabilities and stockholders' equity41852153281354208471127.55%57.40%100.00%100.00% 100.00% Horizontal Analysis CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME - USD ($) shares in Thousands, $ in Thousands Percentage Change between 2020 and 2021 Percentage Change between 2019 and 2020 2021 line items
  • 84. as a percentage of total revenue 2020 line items as a percentage of Total revenue 2019 line items as a percentage of total revenue 202120202019 Income Statement [Abstract] Net revenue44018793979296328831910.62%21.01%100.00%100.00 %100.00% Cost of goods sold19378881755910147203210.36%19.28%44.02%44.13%44.7 7% Gross profit24639912223386181628710.82%22.41%55.98%55.87%55. 23% Selling, general and administrative expenses16090031334247111037920.59%20.16%36.55%33.53% 33.77% Amortization of intangible assets5160297217693.10%- 59.72%0.12%0.00%0.00% Acquisition-related expenses29842000.68% Income from operations819986889110705836- 7.77%25.97%18.63%22.34%21.46% Other income (expense), net-63682839414-107.68%-12.01%- 0.01%0.21%0.29% Income before income tax expense819350897393715250- 8.70%25.47%18.61%22.55%21.75% Income tax expense230437251797231449- 8.48%8.79%5.23%6.33%7.04%
  • 85. Net income588913645596483801- 8.78%33.44%13.38%16.22%14.71% Other comprehensive income (loss), net of tax: Foreign currency translation adjustment47426-7773-73885- 710.14%-89.48%1.08%-0.20%-2.25% Comprehensive income636339637823409916- 0.23%55.60%14.46%16.03%12.47% Basic earnings per share4.524.953.63- 8.69%36.36%0.00%0.00%0.00% Diluted earnings per share4.54.933.61- 8.72%36.57%0.00%0.00%0.00% Basic weighted-average number of shares outstanding (in shares)130289130393133413-0.08%-2.26%2.96%3.28%4.06% Diluted weighted-average number of shares outstanding (in shares)130871130955133971-0.06%-2.25%2.97%3.29%4.07% Horizontal Analysis Vertical Analysis Percentage change between 2020 and 2021 Percentage change between 2019 and 2020 2021 line items as a percentage of the ending cash balance 2020 line items as a percentage of ending cash balance 2019 line items as a percentage of ending cash balance
  • 86. 202120202019 Cash flows from operating activities Net income588913645596483801- 8.78%33.44%51.19%59.04%54.90% Adjustments to reconcile net income to net cash provided by operating activities: 0.00%0.00%0.00% Depreciation and amortization18547816193312248414.54%32.21%16.12%14.81% 13.90% Stock-based compensation expense50797455932856811.41%59.59%4.42%4.17%3.24% Derecognition of unredeemed gift card liability-13696-11939- 685914.72%74.06%-1.19%-1.09%-0.78% Settlement of derivatives not designated in a hedging relationship4485-1925-14876-332.99%-87.06%0.39%-0.18%- 1.69% Deferred income taxes34908241291678644.67%43.74%3.03%2.21%1.90% Changes in operating assets and liabilities: 0.00%0.00%0.00% Inventories-96548-117591-85942-17.90%36.83%-8.39%- 10.75%-9.75% Prepaid and receivable income taxes-53966-35775- 43750.85%8086.50%-4.69%-3.27%-0.05% Prepaid expenses and other current assets-70999-53754- 2854632.08%88.31%-6.17%-4.92%-3.24% Other non-current assets-49056-27852-210776.13%1221.88%- 4.26%-2.55%-0.24% Accounts payable82663-1481071962-658.16%-120.58%7.18%- 1.35%8.17% Accrued inventory liabilities8046-95984312-183.83%- 322.59%0.70%-0.88%0.49% Other accrued liabilities91115142769416538.24%51.61%7.92%1.31%1.07% Accrued compensation and related expenses-66922532641600- 126.42%-39.12%-0.58%2.32%4.72%
  • 87. Current and non-current income taxes payable-24125- 3413746428-29.33%-173.53%-2.10%-3.12%5.27% Unredeemed gift card liability47962332892488544.08%33.77%4.17%3 .04%2.82% Right-of-use lease assets and current and non-current lease liabilities13267174220-23.85%1.15%1.59%0.00% Other current and non-current liabilities1078491333130418.08%-70.82%0.94%0.84%3.55% Net cash provided by operating activities80333666931674277920.02%- 9.89%69.82%61.21%84.28% Cash flows from investing activities 0.00%0.00%0.00% Purchase of property and equipment-229226-283048-225807- 19.02%25.35%-19.92%-25.88%-25.62% Settlement of net investment hedges-14607347-16216- 4309.51%-102.14%-1.27%0.03%-1.84% Acquisition, net of cash acquired-45258100-39.34%0.00%0.00% Other investing activities8824293-771-79.45%- 656.81%0.08%0.39%-0.09% Net cash used in investing activities-695532-278408- 242794149.82%14.67%-60.45%-25.46%-27.55% Cash flows from financing activities 0.00%0.00%0.00% Proceeds from settlement of stock-based compensation152631817017650- 16.00%2.95%1.33%1.66%2.00% Taxes paid related to net share settlement of stock-based compensation-32388-21944-877947.59%149.96%-2.82%-2.01%- 1.00% Repurchase of common stock-63663-173399-598340-63.29%- 71.02%-5.53%-15.86%-67.89% Other financing activities00-745-100.00%0.00%0.00%-0.08% Net cash used in financing activities-80788-177173-590214- 54.40%-69.98%-7.02%-16.20%-66.97% Effect of exchange rate changes on cash29996-1550-18952- 2035.23%-91.82%2.61%-0.14%-2.15% Increase (decrease) in cash and cash equivalents57012212185-
  • 88. 109181-73.13%-294.34%4.96%19.40%-12.39% Cash and cash equivalents, beginning of period109350588132099050124.08%- 11.02%95.04%80.60%112.39% Cash and cash equivalents, end of period115051710935058813205.21%24.08%100.00%100.00%10 0.00% Horizontal Analysis Vertical Analysis CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands AdidasNike202120202019 Change of Ratios between 2020 and 2021 Change of Ratios between 2019 and 2020 Ratio Analysis Profitability Ratios Gross profit margin52%45.97%55.98%55.87%55.23%0.10%0.64% Operating profit margin6.80%15.48%18.63%22.34%21.46%- 3.72%0.88% Net profit margin9.52%13.32%13.38%16.22%7.04%- 2.85%9.19% Return on total assets9.70%16.73%14.07%19.67%23.21%- 5.60%-3.53% Return on stockholder's equity21.60%48.26%23.02%33.07%33.46%-10.05%-0.39% Earnings per share2.343.641.471.611.21-0.140.40 Liquidity Ratios Current Ratio1.662.72.412.912.86-50.87%5.82% Quick Ratio1.341.771.672.082.05-0.410.03 Working capital1241201118752092880553681258715 Leverage Ratios
  • 89. Debt to asset ratio0.470.270.390.410.31-1.64%9.87% Debt to equity Ratio0.312.890.640.680.44-4.51%23.91% Longterm debt to equity ratio0.630.290.220.107.46%12.04% Times-interest-earned ratio Activity Ratios Days of inventory92 days54484563 Inventory turnover2.273.976.807.678.12-0.87-0.45 Average collection period54410 Price earnings ratio29.8538.4144.7443.7643.650.980.11 Lululemon BUSI 690 Page 1 of 3 CASE STUDY: PROJECTIONS, NPV, COMPILATION ASSIGNMENT INSTRUCTIONS OVERVIEW Continue working on the individual case study started in Case Study 1: Matrices Assignment of ABC Corporation. Complete this portion of the case study: Case Study 3: Projections, NPV, Compilation Assignment (3rd and final assignment). A formal, in-depth case study analysis requires you to utilize the entire strategic management process. Assume your group is a consulting team asked by the ABC Corporation to analyze its
  • 90. external/internal environment and make strategic recommendations. You must include exhibits to support your analysis and recommendations. INSTRUCTIONS The completed case study must include these components, with portions to be submitted over several modules as the Case Study 1: Matrices Assignment, the Case Study 2: Historical Financial Analysis Assignment, and the Case Study 3: Projections, NPV, Compilation Assignment. • Cover page (must include the company name, your name, the date of submission, and a references page; the document must follow current APA guidelines) • A total of 12 - 15 pages (for all there parts, combined) of narrative text, this does not include the financial statements, reference pages, or matrices • Reference page (follow current APA guidelines) • Historical Financial Statements, Proforma Financial Statements, NPV Calculations and a Cost Sheet for the strategy in an Excel document • Matrices, which must be exhibits/attachments in the appendix and not part of the body of
  • 91. the analysis (The Strategy Club has excellent templates/examples for exhibits and matrices). You will use the information completed in Case Study 1: Matrices, and Case Study 2: Historical Financial Analysis as part of your Case Study 3: Projections, NPV, Compilation Assignment final document. Be sure to make any corrections to Part One and Part Two based on feedback given on each of the assignments. Your Case Study 3: Projections, NPV, Compilation Assignment paper must include: Case Study 1: 1-7 1. Executive Summary – this should be no more than one page and provide the reader with an overview of what will be contained in the following pages. The problem and strategic solution being recommended should be in this summary. 2. Existing mission, objectives, and strategies 3. A new mission statement (include the number of the component in parenthesis before addressing that component) 4. Analysis of the firm’s existing business model
  • 92. 5. SWOT Analysis 6. TOWS Matrix 7. Competitive forces analysis BUSI 690 Page 2 of 3 Case Study 2: 8-10 8. Historical Financial Statements (Income Statement, Balance Sheet, and Statement of Cash Flows) from the 3 most current years for the firm 9. Historical Ratio Analysis 10. Competitors Ratio Analysis Note from student: Parts 1-10 are already completed as they were part of case study’s 1 and 2. These parts are being uploaded to show what was previously done in order to complete part 3 accurately. Requesting assistance with part 3 only (highlight in yellow). Case Study 3: 11-18
  • 93. 11. Alternative strategies (giving advantages and disadvantages for each). There should be at least two alternative strategies identified and discussed. 12. Projected Financial Statements (Income Statement, Balance Sheet and Statement of Cash Flows) for 3 years into the future. This must be broken down by year into two (2) columns: 1 column without your strategy and 1 column with your strategy. The without column should serve as the basis for your with strategy column and only those financial statement accounts that will be changed, based on your strategy, should be impacted. 13. Include Projected ratios for the without and with strategy by year. Discuss how these ratios compare and contrast with the historical findings. 14. Cost Analysis completed on an Excel tab that outlines the cost that will be incurred to implement the strategy. This information should correspond with the With Strategy on the Projected Financial Statements, linking of cells to the financial
  • 94. statements is encouraged. 15. Net Present Value analysis of proposed strategy’s new cash flow – you may also use Excel to solve for this. From the income statement the change in operating income between your with and without strategy should serve as your cash inflow for each year. NOTE: To construct the first cash flow (cf1) the new revenue from your strategy(s) must be discounted back to the present value by calculating EBIT (Operating Income on the Income Statement) and that figure will be your cfn for each year. cf0 (initial cost of your strategy), cf1 (discounted cash flow first year), r (opportunity cost of capital, the rate of the next best alternative use of cash/debt/equity resources). a. ��� = −��0 + ��1 (1+�)1 + ��2
  • 95. (1+�)2 + ��3 (1+�)3 … ��� (1+�)� BUSI 690 Page 3 of 3 16. Implementation strategy – how and when will the strategy be implemented, this should outline the who, how, what, and when of the implementation process. 17. Specific recommended strategy and long term objectives Explain why you chose the strategy, discuss the advantages/benefits to organizational success and sustainability. Incude a discussion of the challenges or disadvantages that may arise as a result of the strategic choice.
  • 96. 18. Text must accompany all data for each section explaining the information on the spreadsheet that was calculated. This will be completed in current APA level for each component. Place the results of the case study analysis in a Word document include matrices as appendices and a reference page. Submit a separate Excel document for your Historical financials, Projections, NPV, and Cost of the strategy. Criteria Ratings Points Executive Summary 8 to >6.0 pts Advanced • Provides a clear overview of the paper’s contents. • Contains enough information about the case study. • Captures the
  • 97. purpose and the main recommendation(s) in 1–2 sentences. • Provides key evidence for the major points. • Closes with a brief summary and rationale for the chosen strategy. 6 to >5.0 pts Proficient • Provides an overview of the paper’s contents. • Contains some information about the case study. • Captures most of the purpose and the main recommendation(s) in 1–2 sentences. • Provides most key evidence for the major points. • Closes with a brief summary that contains some rationale for the chosen strategy. 5 to >0.0 pts Developing • Provides a less than clear overview of the paper’s contents.
  • 98. • Lacking in information about the case study. • Captures some of the purpose and the main recommendation(s) in 1–2 sentences. • Provides some key evidence for the major points. • Brief summary and rationale are lacking in content for the chosen strategy. 0 pts Not Present 8 pts Alternative Strategies 10 to >8.0 pts Advanced Lists two or more alternative strategies (giving advantages and alternatives for each). 8 to >7.0 pts Proficient
  • 99. Lists 1 or more alternative strategies giving some advantages and alternatives for each. 7 to >0.0 pts Developing Lists less than 2 alternative strategies and gives a minimum amount of advantages and alternatives for each. 0 pts Not Present 10 pts Pro-Forma Financial Statements 30 to >26.0 pts Advanced • Includes and analyzes Pro-Forma Financial Statements (I/S, B/S and Statement of Cash Flows) with deltas out
  • 100. 3 years. • Each Pro-Forma year has 2 columns: 1 with strategy and 1 column without strategy. • Includes Pro-Forma ratios for the first year out with deltas contrasting from the 26 to >20.0 pts Proficient • Includes and analyzes Pro-Forma Financial Statements (I/S, B/S and Statement of Cash Flows) with deltas out 3 years with minor errors. • Each Pro-Forma year has 2 columns: 1 with strategy and 1 column without strategy, with 2-5 minor errors. • Includes most of the Pro-Forma ratios for the first year out with deltas contrasting from the most current year’s ratios. 20 to >0.0 pts Developing • Includes and analyzes
  • 101. Pro-Forma Financial Statements (I/S, B/S and Statement of Cash Flows) with deltas out 3 years. • Each Pro-Forma year has 2 columns: 1 with strategy and 1 without strategy, there are greater than 6 errors. • Includes some of the Pro-Forma ratios for the first year out with deltas contrasting from the most current year’s ratios. 0 pts Not Present 30 pts Case Study: Projections, NPV, Compilation Grading Rubric | BUSI690_B06_202220 Criteria Ratings Points NPV and Cost Analysis 20 to >16.0 pts Advanced
  • 102. • Develops an NPV figure/table. • Clearly articulates the cost of the strategy (-cf0). • Clearly articulates the subsequent Pro-Forma cash flows (cf) for the NPV analysis. • Thoroughly analyzes the NPV. 16 to >11.0 pts Proficient • Develops an NPV figure/table, some minor errors. • Articulates the cost of the strategy (-cf0). • Articulates the subsequent Pro-Forma cash flows (cf) for the NPV analysis. • Analyzes the NPV. 11 to >0.0 pts Developing • Develops an NPV figure/table, calculation is incorrect or missing key components. • Discusses but does not include details of the cost of the
  • 103. strategy (-cf0). • Discusses the Pro-Forma cash flows (cf) for the NPV, lacks detail and thoughtful analysis. • Discusses the NPV, analysis should be further developed. 0 pts Not Present 20 pts Implementation of Strategic Plan 10 to >8.0 pts Advanced • Includes an actionable timetable agenda for accomplishing the new strategy. • Addresses the key items of who, what, how, and when of the implementation process. 8 to >7.0 pts
  • 104. Proficient • Includes a timetable agenda, with most details, for accomplishing the new strategy. • Addresses most of the key items of who, what, how, and when of the implementation process. 7 to >0.0 pts Developing • Includes a basic timetable agenda for accomplishing the new strategy, additional details are needed. • Addresses some of the key items of who, what, how, and when of the implementation process. 0 pts Not Present 10 pts Recommended Strategies and Objectives
  • 105. 20 to >17.0 pts Advanced • Thoroughly analyzes the new strategy. • States and discusses the cost to implement the new strategy. • Explains the benefits of the new strategy for long term organizational success. • Outlines the challenges and/or disadvantages of the strategic choice. 17 to >15.0 pts Proficient • Analyzes the new strategy. • States and discusses the cost to implement the new strategy, minor details missing. • Explains the benefits of the new strategy for long term organizational success. • Outlines the challenges and/or disadvantages of the strategic choice.
  • 106. 15 to >0.0 pts Developing • Thoroughly analyzes the new strategy. • States and discusses the cost to implement the new strategy, missing details. • Explains the benefits of the new strategy for long term organizational success. • Outlines the challenges and/or disadvantages of the strategic choice. 0 pts Not Present 20 pts Case Study: Projections, NPV, Compilation Grading Rubric | BUSI690_B06_202220 Criteria Ratings Points Grammar, Spelling, Format, and References
  • 107. 42 to >35.0 pts Advanced Proper spelling and grammar are used. APA format including a cover page, citations and references are correct. Matrices were included and properly labeled. 35 to >30.0 pts Proficient Between 1–4 spelling, grammar, format or citation errors are present. Matrices were mostly included but there were a few errors or missing a few data items. 30 to >0.0 pts Developing Between 5–9 spelling, grammar, format or citation errors are present. Some matrices were included but there were errors or missing data.
  • 108. 0 pts Not Present More than 10 spelling, grammar, format, or citation errors are present. 42 pts Total Points: 140 Case Study: Projections, NPV, Compilation Grading Rubric | BUSI690_B06_202220 Attached you will find a document (an example) of a historical financial spreadsheet for another case study company (Costco). These spreadsheets are useful as an “example” and should aid you in generating one for lululemon. Don't forget that a narrative should accompany and explain the spreadsheet results.
  • 109. CASE STUDY: MATRICES ASSIGNMENT - LULULEMON INC. 1 Case Study – Matrices Assignment, Lululemon Inc. BUSI 690 Policy and Strategy in Global Competition
  • 110. Close Comments Good work on this week’s assignment! The SWOT analysis did not include the IFE and/or EFE matrix as indicated within the rubric. Also, you provided no or little narrative analysis (articulation), as noted in an announcement and grading rubric, for the TOWS analysis found. Ensure you provide narrative for all charts or diagrams as noted within the grading rubric. https://canvas.liberty.edu/courses/211049/grades CASE STUDY: MATRICES ASSIGNMENT - LULULEMON INC. 2 Case Study – Matrices Assignment, Lululemon Inc.
  • 111. Lululemon Athletica Inc. is considered to be one of the leaders of athletic apparel within the athletic market. The company makes a variety of clothing that their customers enjoy. Some of the items include T-shirts, pants, shorts, and their popular yoga pants. The company has been known to sell a lifestyle vice selling athletic apparel. As of February 2020, the company has 491 stores in 17 countries and an online presence on its website (Thompson & Harris, 2022). In 1998, Chip Wilson founded the lululemon company. Chip previously owed a surf and snowboard company and later transitioned into clothing. Starting a clothing company came to mind when Chip was taking a yoga class in Vancouver and realized the need for comfortable clothing while performing yoga. With no hesitation, Chip opened a yoga studio in 1998 that also sold clothing. The company's first actual store was opened in Vancouver, Canada, in November 2000 and called Lululemon. In the store, he sold clothing that he and his wife created. With the incredible and unexpected success that the store developed, Wilson decided to expand. He
  • 112. believed that the expansion would allow him to provide quality products to people who intend to live a healthy lifestyle. Expanding would also allow him to provide his staff members the opportunity to experience a fulfilling lifestyle by providing them with a meaningful salary. Today, design facilities and stores can be found in Canada, the United States, India, Israel, China, and many other countries worldwide. After years of being in business, it was apparent that Lululemon Apparel was starting to become a brand name within the yoga and athletic wear world. The brand became so popular that mall owners/operators began seeking leasing options for the foot traffic they knew would come with the partnership. CASE STUDY: MATRICES ASSIGNMENT - LULULEMON INC. 3 Lululemon Inc. is very strategic when it comes to sales. The company sells its merchandise through several retail stores and has an online presence. Five years after opening its
  • 113. first store, the company had expanded and had a total of 27 company-owned stores and two franchise stores. In 2005, the company saw its sales increase to $85 million. Wilson saw his dreams come through by providing comfortable clothing and creating jobs for others. To assist in the company's expansion, Lululemon had to sell 48 percent of the company to two private investors. Due to the expansion, Lululemon Athletica Inc was born. The company ended 2006 with 41 owned stores, ten franchise stores, net revenues of $149 million, and net income of $7.7 million, and in 2007, the company went public. Lululemon has dominated the athletic apparel industry and has become a brand name associated with style, sports, and fitness. The company has built a reputation worldwide and has seen enormous revenue each year. Existing mission, objectives, and strategies Lululemon's mission statement states, "To elevate the world from mediocrity to greatness." The company's mission is to "Creating components for people to live longer,
  • 114. healthier, fun lives." Their mission/mission statement suggests that the company has a different perspective from other athletic brands and any other businesses. The statement indicates that the company wishes to give its customers a lifestyle rather than another company with a brand. Objectives Elevate the world by realizing its full potential. Inspire change by transforming its industry and creating a healthier world. The company has a set of values that puts quality first. The aim is to provide customer satisfaction and ensure the customer receives what they were told they would receive. This shows that the brand is committed to changing as the world changes CASE STUDY: MATRICES ASSIGNMENT - LULULEMON INC. 4 and the styles change as they maintain their lifestyle of comfort clothing. An example of this would be the convenience of shopping online. Strategies The company aims to grow the business in North America,
  • 115. where most of its revenue comes from. Once the company has grown in North America, they would like to expand to other countries even more than they are currently doing. Another strategy would be to increase their brand awareness online and through their customer service. Another strategy the company wants to introduce is increasing their new product technology. The company also introduced its pickup in-store option when customers order online. Doing this gives customers the comfort of shopping at home but still receiving the same experience of shopping in- store. The company has seen sales increase by 45%, and direct-to-consumer revenue jumped to 155% in Quarter 2 of 2020. New Mission Statement • Customers: The study suggests that the company targets men and women in middle upper class and higher. The company initially targeted women that were interested in yoga. As the study stated, this is the case that yoga paved the way for their company to expand. In 2013, the company aggressively took more consideration for their male customers. Their focus was an
  • 116. age group of men concerned about living a healthier lifestyle. • Products or services: The firms' major products are athletic wear and mainly catered to their female customers. Their attire allows its customers to accomplish activities feeling comfortable but trendy. The yoga pants that the company sells promote fitness and encourage a particular lifestyle. Lululemon's product innovation uses updated technology that makes the customer feel comfortable. The technology used in their products makes it easier to consume sweat and is breathable. Their services allow them to partner with yoga studios and run clubs. CASE STUDY: MATRICES ASSIGNMENT - LULULEMON INC. 5 • Markets: As the case study suggests, the company continues to add Lululemon stores in its primary United States market and as well as worldwide. The company included 16 new stores in China throughout the years and planned to add more in 2020. The company also opened stores in Japan, Germany, France, the United Kingdom, Malaysia,
  • 117. Netherlands, South Korea, and many other countries. As clearly illustrated, the expansion allowed the company to report incredible advancements with their strategic progress in geographical market expansion. • Technology: As indicated in the case study, the company continues to improve In the technological area. The company focused on creating and providing products that introduced fabrics with technological improvements and performance-enhancing features throughout the years. These technological upgrades to their products have assisted the company in expanding its market share worldwide. Customers enjoy wearing Lululemon's products because of its technology and how it makes them feel about themselves. As the company makes new products, they continue to incorporate technology within their product lines. • Concern for survival, growth, and profitability: The company understands that the the only way they will survive in this market is through expansion. Direct-to-consumer sales through their website have become a critical component for the
  • 118. company. As indicated in the reading, in 2011 the lululemon's e-commerce sales increased from $106.3 million to $1.14 billion in the financial year ending 2019. During the pandemic, Lululemon's majority of retail outlets in the domestic market were closed. Like many other businesses that figured it out, ordering online became the way to continue profit. This showed that the company could adjust through diversity overcome slight roadblocks and profit. CASE STUDY: MATRICES ASSIGNMENT - LULULEMON INC. 6 • Philosophy: The company takes its philosophy stance seriously as it aligns with its core values and its mission. As it states, it allows "people with the components to live longer, healthier and more fun life." Lululemon is set up to and has arranged to operate the company in the methodology in which it is stated within their mission. The company attempts to manage its
  • 119. staff ethically and encourages all to follow its motto. Ensuring the company is managed accordingly starts with the staff then the suppliers to ensure the products are produced and sold within company standards. • Self-concept: Lululemon's specific product design and its processes for innovation is the The reason it can make quality products. This is believed to be the key to its competitive strength. Lululemon had to make well-designed products that offer a comfortable fit and competitive pricing to be competitive and set itself apart in this competitive athletic apparel market. Within this market, the company competes with brands such as Nike, Adidas, Reebok, and Under Armor, as stated in the strategic group map within this paper. Additionally, the company sets itself apart by focusing on the customer and what they want. Lululemon understands the importance of customer relationship management and promoting brand loyalty. This is part of their strategic market approach. • Concern for public image: Yes, the company is responsive to community needs through
  • 120. its business processes. One way it does this is by "Omni Guest Experiences." It uses a marketing strategy that connects them with people who shop at its stores. The company creates opportunities through communities to live "sweatlife" and live long healthy lives. Through this avenue, people can connect. The company also takes part in dealing with environmental issues by following environmental protection protocols in its supply chain and within the community. CASE STUDY: MATRICES ASSIGNMENT - LULULEMON INC. 7 • Concern for employees: es, employees are an asset to the firm. Lululemon provides its staff members with a supportive and encouraging working environment. It aims to encourage its employees to set goals in their personal and professional life. The employees are valuable assets of the company, and it shows in the numerous employee programs that lululemon offers. Some of these programs include personal development
  • 121. workshops and goal-coaching courses, just to name a few. SWOT Analysis A successful company such as Lululemon Inc needs to identify its areas of concern. To do so, it first needs to be identifying their issues by creating a SWOT matrix to include the four categories. When thoroughly conducted, the chart will show the company the improvements it needs to improve its sales or achieve sales goals. Strength Lululemon was created to create apparel for people to live healthier lives and have fun doing so. The first thing someone needs prior to starting a business is vision. In 1998, Wilson had a vision to "elevate the world from mediocrity to greatness" (Thompson & Harris., 2022, pg. C-81). The company hoped to serve their customer at all costs and be a leader in customer satisfaction. Understanding this, their strength is the detail they put in their clothing. Their fabric's comfortable fit and feel has made them a trusted brand. The technology that the company
  • 122. puts in its line cannot be duplicated. The clothing prevents odor as the material restricts bacteria and can be washed often without worrying about washing away (Thompson & Harris, 2022). Another strength the company possesses is being aware of its brand and the market. From the date of conception, the company has never switched or changed who they were. Lululemon Inc. has gained notoriety from its competitors as well as customers. Due to brand awareness, the CASE STUDY: MATRICES ASSIGNMENT - LULULEMON INC. 8 company has jumped from 40% in sales in 2020. Wilson has also created a strong relationship within the community. The company's mission statement resonated with its core audience. Weaknesses The company's weaknesses may be attributes that they stressed with their strengths. Lululemon has a reputation for creating comfortable and excellent quality clothing. This is all too apparent because it is part of its mission statement and sales
  • 123. strategy. In 2013, the company saw issues with one of their pants lines that recalled the item. Another recall occurred in 2015 where the tops were said to have an issue with the neck area. All these concerns with the clothing did do not reflect their mission statement. Another weakness the company has is its pricing compared to all its competitors' prices. The company has set itself as a high-end company, while its competitors like Under Armor sell affordable clothing with the same comfortable quality. Another weakness would be the constraints on the company with supply chain issues. Opportunities When speaking of opportunities, the company has left an opening in the market for its competitors. Through the years, Lululemon has focused on women's apparel. The company's competitors have seen significant gains with men's athletic apparel, which has accounted for over half of their sales. In 2020, research showed that more men are shopping for athletic gear than women. Men are now accounting for more of the sales than