Free Essay Containing Lululemon's Organizational Strategy

Published: 2019-10-28
Free Essay Containing Lululemon's Organizational Strategy
Type of paper:  Essay
Categories:  Company Strategic management
Pages: 7
Wordcount: 1756 words
15 min read

New companies that operate within industries characterized with many players, require the establishment of distinct and renowned brands. The development of a distinct brand also ensures that companies can charge more on their tradable commodities since the products are more upscale. Lululemon has been considering the latter quite elaborately. Subsequently, its main strategy has been the consolidation of a design team that establishes unique fabrics for its customers. Some of her main brands include VitaSea, Luxchange and Luon among others. Besides, the company also has numerous industrial design patents and registrations across the U.S., Canada and Europe which are responsible for safeguarding the companys distinct apparels as well as accessory designs in the industry (Karakowsky & Guriel, 2015, p21).

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The company has also developed distinct product designs and development procedures through adoption of innovative approaches to production. The main strategy of the company is to tap into the customers feedback and adoption of innovative production techniques which helps it generate an immense competitive advantage. The Vancouver-based designers are responsible for generating the companys product. Lululemon has also established new brands such as Silverscent and Luon in collaboration with apparel manufacturers (Stokes, 2008). It has also set pace to develop fabrics which entail features such as the inherent reflexivity and UV protection that are also competitive in the apparel market segment.

The apparel market has very many players which imply a significantly huge competition. As a result, it is imperative for Lululemon to enhance if product identity as far as trend and fashions are concerned. Similarly, the product offering by the company is seasonal. The right anticipation of demand quantities and trends are also very important to sales. For instance, during the first quarter of 2015, the company sold more than proportionate expected number of breathable mesh pants since its design proved quite popular. Subsequently, Lululemon also developed a transitional line between the fall season and summer in 2014 that also reflected a major gain from customers preference. The success of this new line was mainly linked with the novelty, beauty and great traits if the technical products (Karakowsky & Guriel, 2015, p27). Through its progressive strategy development, the company has been able to engage a progressive expansion of its market base.

Lululemon Mission and Culture

The Lululemon Company is mainly geared towards individuals associated with active lifestyles. The company claims its deep roots from Yoga community. As a result, it is among few companies that offer clothing products for Yoga Community in particular. The business operates clothing stores across multiple states across the globe. Its stores provide products lines such as shorts, tops and fitness pants. It has been operating in three main segments consisting of corporate-owned retail stores, wholesales and direct-to-consumers set of e-commerce websites. As at 2014, the company had been operating 254 stores that were predominantly located in Australia, US and Canada among other typical destinations. The Company has about 8,000 workers globally which demonstrates fast growth in the last two decades (Karakowsky & Guriel, 2015, p34). It is also anticipating progressive growth in future. In this regard, the company has focused on the youth component of its market bloc by establishing subsidiary business called Ivivva Athletica purposely to cater for the needs of youths in its market segments.

The growth and expansion of the companys stores into other states has also enabled it to realize significant financial excellence. In particular, Lululemon has witnessed recurrent growth in revenues recording about $1.6 billion in the annual returns of 2013. Within the last four years, the company has consistently boasted of an annual growth in revenues of approximately $300 million. With this level of financial stability, the business structure has changed significantly in recent accounts which are characterized with the hiring of Laurent Potdevin in 2014. This scenario was intended to enhance companys growth strategy with effective decision making processes (Hewapathirana, 2014, p62).

The operations of the company are guided by its mission statement. The mission states, Creating components for people to live longer, healthier, fun lives. The mission is the main guiding principle of the company. Indeed, the business has been putting important measures to reflect the insights of its mission within its corporate culture. For instance, the company provides its store managers with high controls over their stores while the business operates through decentralized corporate culture. Besides, the employees to the company are also hired and conscripted on the basis of fitness into Lululemon corporate culture and personal commitment to the business. In order to align its business with its mission statement, Lululemon terms its employees as educators in order to acknowledge their crucial roles in assisting clients to access active and healthy lifestyles. In the modern placement, the Lululemon stores are mainly geared towards enhanced involvement in community activities and interactions (Larcker & Tayan, 2014, p18). These aspects also constitute the companys corporate social responsibility. In this regard, the culture of Lululemon is revolves around enhancing community social-economic lifestyles through excellent brand or product development within its market space.

Upper Management and Other Issues/Challenges

Lululemon has been operating in a very competitive market space. As a result, the company has suffered significant shocks in the performance of its different stores particularly with changing economic climates. Although the company implemented its ERP and PLM systems, it has continued to experience significant level of inefficiencies within its supply chain. The company has been engaging rapid expansion since 2008 which has continued to manipulate its competitiveness in the apparel industry while at the same time aligning its supply needs and demand. During the third quarter of 2008, majority of the clothing retailers had been suffering from economic downturn. Lululemon was not spared from this fallout since it suffered a significant loss in revenue. However, the loss cumulating in the company during this period was not a product of prevalent market conditions. On the contrary, its business had run short of majority of popular stocks (Lavrence & Lozanski, 2014, p51).

Worse still, the company was unable to make sales until additional popular stocks were replenished into the different retail locations. In particular, this shortage was responsible for poor performance of certain stores of the company in this period. In recent times, product demands have continued to rise past its ability to expand. This implies that the company has grown slower than its product market despite its perceived growth. Subsequently, the company has been coerced into reactionary position as opposed to a proactive one thus limiting its profit generation capacity. After running short of its inventory, Lululemon has been depending grossly on the alternative but very expensive shipment of commodities through air transport from offshore manufacturers. This was a major blow to the companys profit levels that declined drastically. In this regard, this challenge was attributed to poor forecast and sourcing of products that would have otherwise accommodated cheaper on-sea shipping and ultimately reduce the cost of goods the otherwise occurred (Tushman & Lifshitz-Assaf, 2012, p44). In the long-run, the process decreased the companys gross profits and growth margins simultaneously.

During the second quarter of 2009, Lululemon was further compelled into murky operation directions. In particular, the business was coerced into transporting more than 800,000 units of merchandise in order to meet the spiraling rise in demand as well as back-orders. As a result, it reported a drop in profits in the second quarter of the year of 17 percent from the level in the same period of 2008. However, despite the decrease in profit volumes, the companys sales increased by 14 percent although many stores declined their sales by approximately 2 percent during the same period (second quarter of 2009). The main advantage of Lululemon during this period was the existence of numerous stores that were performing at different levels. Besides, other than the reduction in profit margins, the company was relatively fine in retaining its potential to satisfy its affluent consumers. Nevertheless, to raise its profits and promote its expansion strategy, the company must have resolved the supply challenge if they had to maintain a skyrocketing supply capacity (Wolter, 2014, p76).

In order to achieve sound development capacity, the company was yet to enhance its profitability through developing mechanisms that would equate regional demand to supply capacity. To date, Lululemon has not yet tailored its sourcing styles to warmer American weather compared to the Canadians average weather that would effectively enable the company to predict equilibrium regional demands. For instance, the company stores in the coastal region of US have been shrinking progressively due to lack of small sizes of products including size 4 and 8 while the Midwest have been selling out larger products faster. This is partial advantage to the company but exposes its loopholes in the supply chain. Besides, the Lululemons community inclinations approach to marketing also challenges it to meet spurred by different social events such as running groups, city marathons and Yoga events among others (Lakhani & Tushman, 2012, p33-34). For instance, due to this mindset and arrangement that defines the companys marketing strategy, the Chicago based stores have been reporting shortages of running apparels as the marathon dates encroached.

In order to counter negative impacts of community-inclined market orientation, Lululemon launched a new e-commerce site in 2009 where online sales service is done. This is an innovative approach to resolving marketing challenges that the company has been suffering from. Initially, this site represented a change in traditional behavior of strict adherence to established stores as a sales mechanism or community hubs and subsequent provision of individual cultural and retail marketing environment. Nevertheless, the e-commerce site established was perceived as an avenue for further expansion of the companys physical stores during the period of global economic downturn that hit its business badly. However, though this site was established in good intentions, it was later noted that the site had become one of the most frustrating scene for customers since they often lacked products of their preference on the online shopping platform. However, owing to the perceived potential of the online shopping platform, Lululemon has been continuously investing in developing its online shopping experience since 2009 (Creelman, 2015, p164). Due to the novelty of the site, it is not yet clear on the positive or negative implications of the online shopping scene that has been developed towards enhancing business engagement of the company and its distant clients.

Lululemon has also been closely monitored by potential investors. Subsequently, this scenario has resulted into increased number of direct competitors with stores and products similar to its outfits. This has become a major challenge in advancing its competitive capacity in recent times. For instance, some of its competitors such as Gap Inc's Athleta have been expanding aggressively into the US. This is a major...

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