Lululemon case - homework PDF

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Matthias Boehm 1/17/18 Econ 136 Professor Baden SWOT ANALYSIS

Strengths What separates Lululemon from a lot of the other competitors is the fact that the brand itself is sold like a lifestyle, whereas anyone can go out and mindlessly purchase Nike or Adidas clothing. The company does a good job of identifying and addressing their target customers. They claim that their clothing is essential for a balanced lifestyle and their success speaks for their great marketing ability. The prices are fairly expensive, but Lululemon provides high quality clothing using waterproof fabrics with membrane technology. The fact that employees of the company understand a lot about the company itself and typically have immersed themselves in the culture, while going through a lot of training to become more and more knowledgeable, is also very valuable. Another strength is Lululemon’s use of selling channels. Their online sales have increased in recent years. The website displays a unique and niche collection of sports items which are very rare to find in the common market. It is partly made to sell unique items in bulk. Weakness The products are quite pricey in comparison to a lot of other products. Though Lululemon does promote a certain lifestyle, that lifestyle is typically experienced by people who tend to have higher incomes. This narrows down the customers breadth. Another weakness is the inability to promote their brand on social media like other brands. Lululemon’s online presence is significantly lower than the presence of other brands. Mainly female models are portrayed on their social media portals which is also not a good trait. Looking at the financial growth of the company we can see that LULU’s net revenue

increased by impressive 17%. This is mainly due to the new opening of 62 stores. However, the company’s profit increased by disappointing 6% which implies that they have not experienced any cost advantages through economies of scale. In fact, LULU seems to be slowly reaching selling capacities at current operating strategies. Opportunities We live in a period of time where social media is crucial to the retail industry as a whole. Customers want to connect to a brand and it also serves as a means to create customer loyalty. That being said, Lululemon could make a larger investment in its social media efforts to easily reach more customers. Doing more rebate offers on social media could also attract more customers. With the fitness revolution growing and the pursuit for longevity being emphasized more and more through social media, now is a great time for Lululemon to expand. What other companies have been doing is sponsoring major events or getting athletes to endorse their products. Lululemon can capitalize on the social media bandwagon and obtain more celebrity endorsements. Celebrities are followed by people all over the world, so if Lululemon found the ideal celebrity sponsor that can bridge the gap between the “rich” and “poor” the company can grow exponentially, within the next few years. Threats The biggest threat for Lululemon is competition, the switching costs are extremely low for the athletic apparel industry. People who are not satisfied with Lululemon can easily switch over to another brand and they might even save some money in the process. Nike, Adidas, and Under Armour are strong competitors who have been in business for much longer. New competitors still enter the market and many companies are continuously experimenting with enhanced fabrics and their functionality. This could disrupt Lululemons main strengths in the future.

Question 4) What does a SWOT analysis reveal about the overall attractiveness of Lululemon’s

situation? The SWOT analysis in combination with the financial health statistics indicates that Lululemon is in a solid position. It solidified its position in the industry and established a well-known brand name. LULU’s opportunities outweigh its threats and I believe that they will further grow in the upcoming years. Their target customers, being sporty, working women, will remain their main source of activity and the opportunity to seriously expand to men’s clothing is given. Their management team seems competent and heavily engaged in its long-term operations, which attracts outside investors and future business partners....