Business Strategy

 FIVE INDUSTRY FORCES

FORCE	EXPLANATION	FORCE STRENGTH	IS RESPONSE
Rivalry Among Competitors	Who is their biggest rival? Nike	High – Nike has a massive following as well as a wide variety of products	Product Implementation: Unique fabrics, strong app and website, and Lululemon Studio classes help differentiate and build brand loyalty.
Threat of New Entrants	How easy is it to enter the athletic wear industry? Not easy	Low – There are a lot of lead companies (Nike, Adidas, Athleta, etc.) that Lululemon has to compete with so the threat of new entry is low, but the threat of the current competition is high	Barriers to Entry: Strong branding, exclusive materials, and digital platforms (app, Studio) create high entry barriers
Substitute Products/Services	Can other brands substitute for this product?	High - There are many alternatives that meet similar needs in different ways. For example, fast fashion like H&M which offers cheaper athleisure options	Lock-In: Membership perks, unique fabrics, and community classes (via app) encourage customer retention.
Bargaining Power of Suppliers	Who does Lululemon buy from?	High - They source from 26 different countries and buy unique materials.	Process Implementation: Long-term ethical supplier relationships managed with IS for quality control and sourcing flexibility.
Bargaining Power of New Customers	Price Negotiation?	Low - Lululemon sells at a premium price and targets the higher end of the market.	Lock-In: Rewards, exclusive sales, and personalized app offers help retain customers and maintain loyalty.

Is the industry profitable? The Lululemon industry is very profitable. This is due to their strong brand image, their diversified product base, and their brand Membership Loyalty offerings. Constantly updating their technology and products to keep up with trends and need advancements has allowed them to keep their premium pricing and their buyers.

COMPETITIVE STRATEGY

Using Porter's four competitive strategies, it's clear that Lululemon focuses on the focus differentiation strategy. They strive to offer premium fabrics including Luon, Silver, and Nulu which differentiates them from the rest of their competitors. Having these premium fabrics provides their customers with products that are guaranteed to be comfortable and simultaneously durable, which makes the client more comfortable with the higher prices that come with the products. They also do an excellent job at promoting their brand as a lifestyle brand, since their typical consumer is a health and wellness minded person who prefers purchasing products that align with their values. Their premium shopping experience which includes no questions asked returns, knowledgeable staff, and exclusivity differentiates them from the rest of the athletic wear industry. Consumers' brand loyalty is also a big part of how they differentiate themselves.

Lululemon addresses the threats from the 5 forces several different ways. First, they address the threat of rival brands such as Nike by focusing on a niche market that looks for higher value and higher quality products. Next, new entrants by offering a superior product at a price that most competitors would not be able to produce for consumers, which prevents them from having the opportunity to do so. Next, although there is a threat of substitute products that consumers can choose, Lululemon’s strong brand, quality, and customer experience recues the likeliness of consumers switching.  Lululemon offers a product that is not easily replaceable, and consumers will think twice about switching for a less expensive option. The bargaining power of suppliers can create a threat, but lululemon has long term relationships and contracts with their suppliers to not have to worry about suppliers reducing the quality or raising the prices of supplies. While consumers ultimately hold the power as a buyer, they do not have the ability to shop around and find a quality product for the price and service that comes with it.

                                                                Value Chain

For a company to be successful, it needs to be able to generate sales, and selling is not only about the product but also the process behind it. Every company has different strategies to stay competitive, but what all of them need is to organize and structure to succeed in the market. For this, they use the value chain, which according to the book is a network of value-creating activities that help them deliver high-quality products and services to their customers. “The value chain is formed by five primary activities and four support activities” (Kroenke & Boyle, 2020). Next is lululemon’s value chain. 

Business Process

A business process is a set of activities that generate value by transforming inputs into outputs (Kroenke & Boyle, 2020). These processes are typically divided into two categories: structured and dynamic.

At Lululemon, the structured business process is how inventory is handled in stores, and it’s the same in every location. When stores get a new shipment, they already know how many boxes to expect. Employees follow clear steps to open the boxes, sort the items, and put them in the right places in the back or on the sales floor. During the day, they check what needs to be restocked and move items as needed. At the end of the day, they count the inventory to make sure everything matches. This process helps keep the store running smoothly and makes sure products are available for guests.

The dynamic business process is seen in how Lululemon does marketing. Unlike inventory, marketing is flexible and changes often. Lululemon promotes new products, shares information about their clothing, and connects with their community through things like social media, ads, and brand ambassadors. They work with athletes and influencers to show off their products. The marketing process changes depending on trends, customer feedback, and seasons. It helps the brand stay fresh, interesting, and connected to what guests care about.

The Information Systems Lululemon Operates With

The employees at Lululemon utilize a couple of information systems in their daily work operations. For supply chain management & inbound logistics, they have a structured process they do that keeps track of what they’re receiving from warehouses to their store, this way they know what’s currently available to sell to customers. Lululemon uses a system called Radio Frequency Identification (RFID), which is a technology system that identifies products through radio waves and electromagnetic fields. When Lululemon stores receive a shipment, the employees scan them immediately with handheld RFID readers. Once the shipment is scanned, it’s automatically updated into the inventory tracking system, the Nedap iD Cloud platform.

       

For lululemon, IS plays a very important role in their operations ensuring they run smoothly. They use Oracle Cloud, which helps them stay updated with the latest technology, improve data analysis, and take advantage of machine learning and AI. (Oracle, n.d)
             

Lululemon also incorporates a dynamic process for their marketing process, for this they use social media apps like TikTok everyday. On TikTok, Lululemon's marketing team is able to post daily content for consumer engagement and study data analytics. TikTok provides data analytics after every posted video which helps Lululemon’s team figure out what video styles work best for gaining more customers.

Product Implementation

Lululemon has its basic internet necessities that clothing brand sellers have like a social media, website, and app that can keep you up with their latest news. They have a different view from most clothes and see themselves more as a lifestyle. They keep up with customers and fan base by always keeping them in the loop and keeping the brand in mind with lululemon studio. This website gets members of the community to do classes for strength, cardio, and yoga. With these more unique classes it can reach out to more people who workout from home while keeping Lululemon in their mind.

Process Implementation

Lululemon has a very strong presence in the internet with lots of different systems to have an advantage over their competitors. First is their app, giving a way for customers to interact with, and browse the catalogue easier. Also having a website with similar purposes, but the app can give better deals. Moving onto the membership program this is one of Lululemon's strongest implementations. To lock in customers and buyers (establish loyalty and trust so they return to your brand) the membership gives benefits such as partner perks, early access to product drops, exchange or credit on Sale items, select peloton classes, membership events, receipt-free returns, free hemming. A recommendation for this process implementation is to include a rewards program, while having exclusive sales is appealing, being appealing to build points would make the customers want to come back. Lululemon has a selection of long-term suppliers, locking in Suppliers (becoming a significant partner) is more different than most as Lululemon is trying to be more ethical and while maintaining high quality clothing.  Often switching from supplier to supplier in different locations depending on what product they are making. Looking at the barriers for entry (making it more difficult for possible companies to enter the competition) Lululemon brands itself more as a lifestyle focusing more on having a larger group of people want to be a part of it. Being extremely active in social media they are now recognized as being the higher quality with more unique style brand. Having a strong presence makes it more difficult for other brands trying to be a similar high quality/price to gain that similar type of traction. Moving on to establishing alliances Lululemon is attempting to become a more online selling retailer it partnered up with Peloton having their brand worn for all sessions to spread awareness through live recordings. While being a limited partnership if lululemon can successfully work with Peloton and keep it going they can continue with the information system. Lastly, Lululemon is reducing costs (having a good information system to reach suppliers and buyers) by having a stronger focus towards online advertising and selling which overall is cheaper than most methods of advertising.