East Carolina University MBA program presentation. Strategic Recommendations for Lululemon moving forward, Expansion Strategy, Image Management, Financials, Quality Control, Marketing, Positioning, Value Chain Analysis and SWOT.

1. Steven Bayley
Emily Beale
Yana Dubinsky
Elizabeth Peedin
MGMT 6722
Dr. Karriker

2. 




Designer and retailer of high end yoga and
athletic apparel founded by Chip Wilson in
Canada.
Targeting upper and upper middle
classes, mostly women with health and yoga
lifestyle awareness
Promoting community hub feeling in its
stores and designed to develop high brand
loyalty
Operates in North America, Australia and
New Zealand
Main competitors: Nike, Adidas, Under
Armor, Athleta and New Balance

3. 

HQ in British Columbia, Canada with main design team

Reaches out to potential clients via yoga studios and
instructors
Preliminary manufacturing in North America with mass
production in low cost countries - China and Taiwan

4.  Community Based Marketing
 Superior Customer Interaction
 Technological Innovation
 Growing market of Fitness and Yoga apparel
consumers
Gamble, J., Peteraf, M., Strickland, A., Thompson, A. (2014). Crafting and executing strategy. McGraw-Hill Education.
Who is lululemon athletica? (2013). Retrieved October 1, 2013 from http://www.lululemon.com/about/

5. Supply Chain
Operations
Distribution
Sales/Marketing
Tighten inspection
Facilities only in
Depend on word of
45 different
and verification
Vancouver-
mouth and
manufacturers, no
processes to ensure
BC, Sumner, Washin
community based
long-term contracts
another recall does
gton, and
marketing - can
– can improve
not occur (see-
Melbourne, Australi
increase marketing
quality control and
through pants issue)
a limits company’s
via media
reach
(television, magazin
Growth in online
es, etc.) and other
sales can offset
avenues
Management
lower costs by
decreasing # and
agreeing to
contracts

6. http://finance.yahoo.com/echarts?s=LULU+Interactive#symbol=lulu;range=5y;compare=addyy+nke+ua;
indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

7. http://finance.yahoo.com/
* Data retrieved on November 12, 2013

8.  Quality control issues impacting brand image
 Narrow focus in both consumer segment and product line
 Limited brand recognition and limited geographic market
References:
Gamble, J., Peteraf, M., Strickland, A., Thompson, A. (2014). Crafting and executing strategy. McGraw-Hill Education.
Who is lululemon athletica? (2013). Retrieved October 1, 2013 from http://www.lululemon.com/about/

9. 
March 18th – Lululemon recalled yoga pants that were stretching too
thin and becoming see-through



lululemon CEO of 5.5 years stepped down 3 months later
Estimate cost of recall - $67M in Revenue
November 11th – A second quality issue surfaced with yoga pants

Chip Wilson blames wearer’s “thick thighs” for stretching the limits of
Lulu pants
Bhasin, Kim. "Christine Day Steps Down As Lululemon CEO." The Huffington Post. TheHuffingtonPost.com, 10 June 2013. Web. 20 Nov.
2013. <http://www.huffingtonpost.com/2013/06/10/christine-day-steps-down-lululemon-ceo_n_3417495.html>.
By Jeff Macke Retrieved November 11th, 2013http://finance.yahoo.com/blogs/breakout/lululemon-latest-flap-exposes-ceo-sozzi130053275.html
Peterson, Hayley. "The Sheer Yoga Pants That Lululemon Recalled Are Back In Stores And Selling For $92." Yahoo Finance. Business
Insider, 12 Nov. 2013. Web. 01 Dec. 2013. <http://finance.yahoo.com/news/sheer-yoga-pants-lululemon-recalled-211224149.html>.

10. 
Producing most of its items in low cost countries like China and
Taiwan requires certain attention to quality if the company wants
to continue benefiting from high operating profit due to low costs
of good sold. That’s associated with certain risks.
Having company’s employed quality inspectors on payroll that clearly
understands and comply with company’s standard is one way to
address it.
Costs – average salary for US quality inspector: $31,000 x 45 facilities
= $1.39M

Insulting potentials customers should not be company’s motto
when they seek growth.
Asking Chip Wilson not to go on the record.
Costs - $0.

11. Selected Income Statement Proforma
Proforma w Proforma
Data
quality
recall
Year
2013
2013
2013
Net Revenues
1421
1354
1421
Cost of Goods Sold
584
583
583
Gross Profit
837
771
838
Selling, general and
administrative expences
381
381
381
Operating profit
456
390
457
•
•
•
Historical Data From LULU
income statament
2012 2011 2010 2009
1001
712
453 354
432
317
230 174
569
395
223 179
282
287
213
182
136
87
The Proforma estimate was based of 42% average growth of Net Revenue
35% on average growth of Costs of Good Sold
35% on average growth of Selling, general and administrative expenses
Gamble, J., Peteraf, M., Strickland, A., Thompson, A. Crafting and executing strategy (2014). McGraw-Hill Education.
118
61

12. 
SWOT



Identified limited consumer base and narrow product line as
weaknesses
Missing opportunity for potential revenue growth by meeting
broader range of consumers and broader range of customer
needs
Five competitive forces analysis

Strong competition from rivals so taking advantage of any and
all opportunities to meet or surpass them is imperative

13. 
Expand more into the men and children consumer
segments & into fitness activities other than yoga and
running

In 30 days:

Using current business processes gather information from
ambassadors, r&d team members and market intelligence
sources to identify fitness activities other than yoga and running
for women, men or children




Stick to focused product strategy and
premium positioning
Take advantage of patented fabrics and
product technologies
Complete cost-benefit analysis for the
top three fitness activities identified
Cost is negligible since processes and
people are already in place

14. 
Expand more into the men and children consumer
segments & into fitness activities other than yoga and
running

In 31-150 days:

Introduce new products to market



Cost: Minimum (design occurs within; developed using existing
fabrics; can use existing manufacturers and distribution system)
Projected Revenue: at least 5% of total sales within two years
Successfully executed for men’s clothing and
ivivva (children’s clothing)


Men’s 15% of sales (8% less than 2 yrs ago)
Ivivva (children’s brand) opened at MOA in October
certified yoga & fitness instructors: team research and development. (n.d) retrieved Dec 01 2013, from lululemon athletica Web Site:
http://www.lululemon.com/community/rd_team
Ngo, N (2013, Oct, 21). Lululemon sibling ivivva opens at Mall of America. retrieved Dec 01 2013, from Saint Paul pioneer press Web Site:
http://www.twincities.com/shopping/ci_24355967/lululemon-sibling-ivivva-opens-at-mall-america
Warnica, R (2013, Apr, 8). Lulu for Him?. retrieved Dec 01 2013, from Canadian Business Web Site: http://www.canadianbusiness.com/companiesand-industries/lulu-for-him/

15. 


Missing out on major markets (Europe/Asia/South America)

Because the value of the brand itself is built on a cultural
connection with its North American consumer base, it will be
difficult to translate these brand values to other cultures in
Asia, Europe, and Latin America without altering the brand’s
meaning
Lack of brand awareness/mass marketing
Although Lululemon has a solid grasp of their consumer in the
North American market, in order to facilitate further
growth, international expansion is a must

16. 



Markets chosen for expansion should be
carefully selected to ensure the brand
maintains its air of exclusivity and aspirational
price point.
The social climate of potential markets should
also be investigated to ensure the values of the
upscale market segment are aligned with the
company’s vision.
South Korea, Brazil, and Russia may be a
better cultural fit than Western Europe
Because the value of the brand itself is built on
a cultural connection with its North American
consumer base, it will be difficult to translate
these brand values to other cultures in
Asia, Europe, and Latin America without
altering the brand’s meaning.
Who is lululemon athletica? (2013). Retrieved October 1, 2013 from
http://www.lululemon.com/financials.cfm

17. • Continuing growth in Russian Apparel Market
• Open Markets continue to lose share, in line with governmental strategy,
increased activities among developers, and rising living standards and disposable
income in Russia
• Growing childrens-wear market, that has become more differentiated and
segmented, much like apparel for adults (Recommend expanding ivivva)
• Russians are increasingly interested in sporting activities
• Sports apparel purchased for everyday wear due to influence of fashion trends
• Sportswear in Russia increased by 20% in 2012 to reach RUB 228 Billion.
• Sportwear apparel category in Russia outperformed Western Europe in both 2012,
and across the 2008-2012 period.
"Sportswear in Russia." Weblog post. 7756414. Euromonitor
International, 28 Aug. 2013. Web. 01 Dec. 2013.

18. • International Specialty Retailers of Private Label Apparel (SPA)
continue to record rapid growth in terms of both retail value
and outlet numbers
• SPA’s setting trends, forcing domestic manufacturers to change
brand concept to keep up
• Private label brands from CJO Shopping (SL RIAHHA, Fidelia)
winning market share with high functionality items
like heat generating underwear & licensing agreements
with designer labels to enhance image.
• Despite a mature market, internet retailing continues
to grow rapidly
• Advanced Mobile Commerce shopper capabilities present
dynamic opportunities
• $2.5 Billion Sportswear market
"Apparel in South Korea." Apparel in South Korea. Euromonitor
International, July 2013. Web. 01 Dec. 2013.

19. • Growing sales of sophisticated Value-added products
• Super Premium and Luxury apparel players entering market targeting
upper middle class and wealthier consumers
• Unique opportunities for long term market exposure and solidifying positioning
in the athletic apparel market provided by 2014 World Cup and 2016 Olympics
• $35 Billion dollar sportswear market that is growing
with Brazils rapidly expanding middle and upper classes
"Apparel in Brazil." Apparel in Brazil. Euromonitor
International, July 2013. Web. 29 Nov. 2013.

20. 
Lululemon should stick with its current strategy of
community based initiatives as it expands to new markets.

Because only the portions of the brand manifesto that
relate to the local culture will be highlighted in each
market, and marketing instituted at the store
level, opportunities for misunderstandings will be
minimized.

21. *
Apparel in Brazil." Apparel in Brazil. Euromonitor International, July 2013. Web. 29 Nov. 2013.
*
Certified yoga & fitness instructors: team research and development. (n.d) retrieved Dec 01 2013, from
lululemon athletica Web Site: http://www.lululemon.com/community/rd_team
*
Gamble, J., Peteraf, M., Strickland, A., Thompson, A. Crafting and executing strategy (2014). McGraw-Hill
Education.
*
"Salary Search." Job Search. N.p., n.d. Web. 30 Nov. 2013. <http://www.indeed.com/salary>.
*
Ngo, N (2013, Oct, 21). Lululemon sibling ivivva opens at Mall of America. retrieved Dec 01 2013, from Saint
Paul pioneer press Web Site: http://www.twincities.com/shopping/ci_24355967/lululemon-sibling-ivivva-opensat-mall-america
*
Warnica, R (2013, Apr, 8). Lulu for Him?. retrieved Dec 01 2013, from Canadian Business Web Site:
http://www.canadianbusiness.com/companies-and-industries/lulu-for-him/
*
Who is lululemon athletica? (2013). Retrieved October 1, 2013 from http://www.lululemon.com/about/
*
"Yahoo Finance - Business Finance, Stock Market, Quotes, News." Yahoo Finance. N.p., n.d. Web. 12 Nov. 2013.
*
Peterson, Hayley. "The Sheer Yoga Pants That Lululemon Recalled Are Back In Stores And Selling For $92." Yahoo Finance.
Business Insider, 12 Nov. 2013. Web. 01 Dec. 2013. <http://finance.yahoo.com/news/sheer-yoga-pants-lululemonrecalled-211224149.html>.