An inside peep into Lululemon's organizational restructure, the new CEO gameplan and LuluLemon aim of achieving vertical and horizontal product differentiation in the sports apparel market.
Goal: The goal of Lululemon was to open more stores and increase sales to $1 billion. There was also a plan to launch an eCommerce operation.
Scope: retail market, small-box retail, women athletic wear, Apparel market, athletic people market, urban affluents (target audience), urban (mix of core and target) and sub-urban (full range).
Competitive Advantage:
- Started from Canadian provinces (British Columbia birthplace, Western Canada, Vancouver) gave them a 5-year head start over American companies
-Healthy relationships with private equity firms such as Advent and Highland international.
-Organic word of mouth marketing strategy
-Top to bottom approach in design, manufacturing, retail clothes.
Showroom Strategy:
a) 3 days for sales in weekday
b) Rest community activities (finding ambassadors, building studios, making demand for marketplace)
Threat of Entry: - Vertical model of distribution, not selling in wholesale markets.
-More capital and training involvement in the model.
Power of Suppliers: Inventory management activities disrupted by delayed supply.
Power of buyers: The decreasing consumer confidence and growing uncertainties in the global markets affected pricing policy.
Threat of substitutes: Differentiated product and material that Lululemon produced placed it strategically well in the market.
Rivalry among existing competitors: - A lot of Canadian firms transitioning into the US
-Sports Authority bought only from Nike
Identifying gaps: - Not proper orientation/ onboarding program for employees.
- Lululemon was struggling to implement new inventory systems to keep pace with demands of the existing marketplace.
Describe Critical tasks: -Groom pants(Four way stretch, moved with body and inseam, preshrunk and could withstand 5 years of strenuous work)
-Shape warmer jacket made up of luan material produced only by Lululemon at the time.
-Feedback from athletes and community regularly incorporated into strategy
-Ambassadors in form of fitness enthusiasts and yoga instructors to provide feedback for product development.
-Foundation training based on different specializations that the employees connected with making it a sort of hedgehog scheme.
Check for organizational congruency: -People with the organization were not aligned according to the new CEO because cross-functional barriers had eroded the sense of teamwork within the organization, resulting in an inability to achieve compromise.
- The company manifesto acted as an attracting and screening procedure for both customers and employees. This also established the company culture.
- Also established metrics on factors such as quality (what it meant to people working in the company)
Develop solutions and take corrective action: -Running out of different sizes in different areas.
-Garments found with seaweed derivative.
Observe the response and learn from the consequences: The company rolled out a new inventory system and spent around $1 M on direct sales website. Tried to take the hit away from blaming the economy.
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