Lululemon's exploration of England - Case Study Example

Lululemon’s Exploration of England Introduction Businesses explore their key resources and set of skills when a decision about foreign expansion is made. The internal analysis of firm’s capabilities and resources helps the management to make key decisions regarding the business. This report presents the internal analysis of Lululemon Athletica, which is a sports apparel manufacturing organization from Canada (Lululemon Athletica, 2013). For internal analysis, the author of the report has used VRIO framework and Value Chain Framework to analyze the internal capabilities of the business to sustain highly competitive environment in England. VRIO Analysis VRIO framework is a tool for analyzing a business’s internal strength to cater a particular market. When a firm uses VRIO framework for its internal analysis, it evaluates all the resources and capabilities of a business, ignoring the strategic position of the business. The term VRIO is an acronym for: 1. V: Question of firm’s value 2. R: Question of firm’s rarity 3. I: Question of firm’s Imitability 4. O: Question of firm’s organization (Kazmi, 2012). VRIO Analysis of Lululemon Athletica Question of Lululemon’s Value Lululemon is multinational sports apparel brands incorporated in Canada, Australia and United States of America. The strength that the company has gained by operating in these three countries has added to the experience and skills required to compete at international level with sports specialty brands. Moreover, the work force that the company possesses also provides an opportunity to Lululemon to prosper in England’s premium sports market. The financial strength of the company at the moment also adds to the value of its capability to compete with other premium brands in England. Keeping in view the trends in the English premium sports apparel market, a number of opportunities are present to be exploited by Lululemon such as technological advancements, cultural fusion, strong economic outlook and opportunities for international marketing through international events in the country (Lululemon Athletica, 2012). Question of Lululemon’s Rarity Lululemon would have competitive advantage over its competitors in England as it is already serving a customer base which is looking for premium priced sports apparel. Moreover, Lululemon also provides its customers on-sight physical exercise facility, running clubs and yoga sessions to familiarize the customers with the athletic environment and why it is necessary for them to have yoga and athletic sportswear of Lululemon. Moreover, Lululemon also creates rarity in the sense, that it offers its products in its own stores, thus establishing a vertical retail strategy that allows the company to have more control over its operations than others (Lululemon Athletica, 2012). Question of Imitability of Lululemon’s Products and Strategies Lululemon is a premium brand offered at premium prices which makes it near to impossible for the competitors to imitate. Lululemon believes on community involvement in its business and thus allows others to imitate its products or technology used to manufacture products. This business practice is in alignment with Lululemon’s “doing-the-right-thing” initiative. The aim was to support community members to take active part in achieving excellence in healthy habits. But the competitors find it difficult to imitate Lululemon’s products or strategies because it is very costly and requires great set of skills to produce a Lululemon’s product (Lululemon Athletica, 2012). Question of Lululemon’s Organization The way Lululemon has structured its organizational hierarchy facilitates smooth functioning of the business. The head-quarter is stationed in Canada where the product designing and concept manipulation is carried out. Moreover, the headquarters also handles the financial controlling function of the business. Whereas the business in Australia, New Zealand and United States is handled by the respective authorities in these countries so as to provide these subsidiaries autonomy over their business practices. This is beneficial in a manner, that it provides a room to the business to adopt the local taste and social structure to market products in an efficient manner. Although, the control of business related matter is in the hand of management of these local subsidiaries, but the product manufacturing and financial controlling is still taken care by the head office. Lastly, the human resource matters pertaining to hiring and performance management of decision makers in international subsidiaries are also handled by the head office which makes it easier for the directors in Canada to take important business related decisions (Lululemon Athletica, 2012). Value-Chain Analysis “The value chain is the structure of activities for transforming inputs into outputs customers’ value – including primary and support activities” (Kotler, 2007) Being a premium sports and athletics apparel brand, Lululemon acquires premium quality fabric and raw material for the production of its offerings to the customers. This is the reason that the company does not compromise on the quality of the material that is coming in the factor for production purposes. In this scenario, Lululemon’s relationships with the suppliers remain very stagnant. As most of the suppliers could not keep up with the requirements of Lululemon, the company keeps the number of suppliers at the lower level (Eggertson, 2012). The material received from the suppliers is then sent to the production units. Besides having its own production facilities, majority of the products offered to the customers by Lululemon are manufactured at third party manufacturers’ facilities. Again, when the quality inspection and maintenance stage arrive, Lululemon depends upon its third-party manufacturers to inspect the products and then forward these products to the distribution channels (Eggertson, 2012). For the sake of adding value for the customers and the community, Lululemon has developed and established a distribution mechanism which emits low percentage of carbon dioxide. Lululemon depends upon its fuel efficient distribution mechanism to make the products available at its retail stores. These stores are located at premium locations in the desired cities and are established keeping in view the customer facilitation aspect of the distribution mechanism (Eggertson, 2012). After all the internal efforts, the last stage in the value chain of Lululemon is the marketing and promotion of its products so that the target audience is educated about product benefits and usage. These marketing campaigns are conducted at grass root level by using traditional marketing channels such as magazine advertisements in sports, health and fitness magazines, newspapers, billboard advertising in playgrounds and stadiums. The most fruitful marketing medium that the company has identified is the social network marketing channels such as the Facebook, twitter and visual ads on YouTube (Eggertson, 2012). Since its business initiation, Lululemon has been phenomenal in business growth and expansion. In this regard, it became difficult for the company to meet the supply and demand requirements of its products in the stores. Customers started to complain about the non availability of Lululemon products. In this scenario, to meet the customer demands by forecasting the supply requirements well before 2 or 3 months in advance, Lululemon partnered with Vitech Business Group Inc. In the words of Vitech’s Vice President of Marketing and Sales, Andrew Wright: “Partnering with Vitech to use our supply chain knowledge and experience to implement Vocollect’s Voice technology will give Lululemon the edge they need to be a leader in the athletic apparel market.” (Arora, 2010) Conclusion To conclude the paper, the author would like to assert that the internal capabilities and resources of Lululemon Athletica are in accordance with the demand of consumers in England’s premium sports apparel industry. Moreover, it is advised that the company should carry out external analysis like PESTEL or Porter’s Five Competitive Forces framework to compare the internal strengths with the external business opportunities and market environment. References List Arora, N. (2010, November 27). Nikita Aroras Blog. Retrieved October 9, 2013, from blogs.ubc.ca: http://blogs.ubc.ca/nikitaarora/2010/11/27/how-lululemon-tripled-its-profits-by-improving-supply-chain-management/ Eggertson, C. (2012, November 28). Lululemon Athletica Organizational Analysis. Retrieved October 9, 2013, from prezi.com: http://prezi.com/k3nxmzsbnx81/sgma-lululemon-athletica-inc/ Kazmi. (2012). Strategic Management & Business Policy . New Delhi: Tata McGraw-Hill Education. Kotler, P. (2007). Framework for Marketing Management. New Delhi: Pearson Education India. Lululemon Athletica. (2012). Annual Report . Vancouver: Lululemon Athletica. Lululemon Athletica. (2013). About Us. Retrieved October 9, 2013, from media.lululemon.com: http://media.lululemon.com/?id=190 Read More