ADMS Mid-term Sara Khalil PDF

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AP/ADMS1000 H Sara Khalil 218716456 Lululemon – Mid-Term Case Question 1 The threat of new entrants in the sport apparel industry is high. Lululemon has many major competitors who have been in industry for a longer time which results in low switching costs. Many of these competitors are able to buy similar establishments like Mirror, and compete with them. There are also many distribution channels which results in a high threat of entrants. Bargaining power of Lululemon is low. Customers have plenty of other alternatives and switching costs of customers are low. This puts Lululemon in a weaker position. Sport apparel and the online home fitness program can be found in many other businesses, which decrease the criticality of Lululemons products and the services provided by mirror. The bargaining power of buyers is high as the switching costs are relatively low.

As Covid-19 pandemic starts to improve and businesses start to open,

customers can start going to the gym again rather than using online home fitness programs. Customers of Mirror also have many other alternatives to choose from, like NordicTrack Vault, Tempo Studio, Macvon Touch Fitness Mirror, and etc. The threat of substitute services is high. Other retailers and businesses can not only imitate the stay at home fitness program, but also propose to buy Mirror itself. As said previously, there are many competitors of Mirror (NordicTrack Vault, Tempo Studio, Macvon Touch Fitness Mirror, etc), businesses can compete with lululemon by acquiring these establishments and providing similar services. The rivalry among competitors is high. Previously acquiring Mirror, Lululemon has many competitors which are major retailers like Adidas, Under Armour, Prana, Puma, etc, who have been in the industry for a longer time and are very well known.

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AP/ADMS1000 H Sara Khalil 218716456 After acquiring Mirror, their competitors list now also includes “major players in the home fitness sector like Tempo, Echelon Reflect 40, NordicTrack Vault, Apple Fitness+, Zwift, Tonal, and Peloton.” As the number of competitors increase, the rivalry to gain more success and revenue increases as well. Question 2 - a The Corporate level strategy Lululemon first uses is related diversification. Lululemon engages in retailing athletic apparel and accessories. At first, they targeted women who want healthy lifestyles but then they also expanded to providing athletic wear and accessories for men and youth. “Lululemon has expanded its business into new product categories such as personal hygiene, footwear, and more recently home fitness platform.” This is an example of related diversification, in which a business expands out to a related market. Lululemon expanded even further by acquiring Mirror. “In July 2020, Lululemon expanded its reach into the home fitness platform by acquiring fitness provider Mirror for $500 million.” Acquiring Mirror would be an example of Forward integration. By acquiring Mirror, they are giving after-sales services to customers directly. Question 2 - b By expanding its diversification through forward integration, Lululemon would have many benefits as they have secured a distribution channel. Lululemon can come in direct contact with its customers. It can analyze the needs of its customers through live workout classes, improve its production of products and services, and provide the customers with new products which can help them perform exercise more efficiently. This will not only help lululemon reach its vision and mission, “this isn’t just about getting guests to buy apparel, this is about strengthening our community and our brand loyalty, and our relationship with our guests and

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AP/ADMS1000 H Sara Khalil 218716456 memberships,” but it will also improve its reputation and increase its revenue by a great margin. The year Lululemon bought Mirror, “Mirror generated $170 million in revenue.” Question 3 Lululemon’s decision to acquire Mirror was based on the Rational Model of decision making. Initially, Lululemon identified the opportunity they had, which was the acquisition of fitness provider Mirror. Secondly, they had to choose their best decision style, which is to look at how much Lululemon is willing and able to pay to acquire Mirror and how much it is willing to invest in Mirrors future endeavours. “Lululemon expanded its reach into the home fitness platform by acquiring fitness provider Mirror for $500 million.” Thirdly, Lululemon has to develop its alternative solutions, which would be, to acquire different establishments other than Mirror, to invest rather than acquiring, or to not make any decision regarding acquisition at all. Now, Luleulem has to choose their best decision, which would be to analyze which decision would benefit Lululemon the most effectively and efficiently. Lululemon chose to acquire Mirror and implemented this decision by buying Mirror for $500 million. Lastly, they evaluated the outcome of the decision, in which “Mirror generated $170 million in revenue” in the very first year of the acquisition. After seeing Mirror's success, Lululemon continues to invest in its very first acquisition.

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