Fall
14
Exhibit 1: The Yoga Apparel Industry - Five Forces
Competition From Rival Sellers
Competition within the industry is centered on the products quality, performance and capabilities with many rival companies selling a comparable product. Competition generally sells their product for much less than Lululemon, ranging from brands like Nike that sells at a bit lower and Athleta pricing themselves 20$ lower (C1). The growth of the yoga sports apparel industry has been huge a people have been using the product for more than just yoga. It has propelled this segment to such growth that other companies have recognized the potential. Competition From Substitute Products
Brands like Nike and other large sports apparel companies have now become big players in the yoga apparel industry and Lululemon ’s direct competitors. The lower priced brands like Athleta yoga pants and others share a similar combination of materials that rival Lululemon.
Competition from rival sellers
Moderate direct competition in yoga market Large competitive sports apparel industry
-Moderate
Competition from potential new entrants
-Low
Competition from producers of substitute products
Low new entry barriers Customer loyalty to recognized brands Industry requires economies of scale Sought after brand names are important Sophisticated technologies are required Healthy distribution network are vital Substitutes have less of the market Substitutes are lower quality
-High
Supplier bargaining power -Low
Customer bargaining power
Intense rivalry among suppliers High volume orders are important suppliers Varied distribution channels required Sizeable number of customers
-High
Competition From Potential New Entrants
Entry into this market is very expensive due to new distribution channels, branding, and building inventory. This is why the risk of new entrants is low, due to the expense and large overhead causing only established companies to compete at the premium level.
Bargaining Power of Suppliers
Bargaining power of the suppliers is low due to the large availability of materials and the level of competition within the suppliers market. With low costs to produce in foreign
countries and the abundance of workers the market has very limited bargaining power. Bargaining Power of the Consumer Consumers always have large bargaining power over companies that are not monopolies because they can choose who, where or why they prefer any company or product to another. The other side to the purchase decision is brand loyalty; Lululemon was one of t he first to expand in the yoga market with Nike and competitors coming Strategic Group Map along later. Lululemon has positioned itself well within the sports apparel industry as a premium yoga and active wear company. Marketing its clothing in the lifestyle market to the young and affluent women with plans to expand greater into the male clothing market as well. Demographics
y t i l a u Q d e v i e c e r P & e c i r P
Geographic Market
Lululemon positions its self towards the fit, hip, affluent young women between 17-34. Lululemon’s attractiveness comes across to women that are looking for premium apparel that is comfortable to wear in an active lifestyle. Targeting women, Lululemon’s product lines are designed with stretchy materials that fit the contours of all body types.
Products
Lululemon offers a diverse and growing selection of premium-priced performance apparel. Lululemon’s products include three trademarked fabrics by the company: Luon, Luxtream, and Silverescent. These fabrics build on the style and popularity of the product while diversifying them from competitors. Plans to e xpanding further in the men’s yoga, running and gym shorts market will be Lululemons next product line expansion (C4)
60.00%
High-Price Strategy
50.00%
Lululemon prices their 40.00% products at a premium, well ahead of their competition 30.00% listing Lululemon on the top of the price axis of the 20.00% perception map. The perceived value of Lululemon 10.00% and the stigma of a must have product has created a 0.00% 2012 2011 2010 2009 willingness to pay the premium price for their product. This high price strategy has proven to be financially successful as shown in the graph.
Operating Profit Margin Net Profit Margin Gross Profit Margin
Key success factors
The most significant factors to the future success of the industry are the factors covering resources, competitive capabilities and product attributes (C3). •Staying current through product development and creation Innovation
Capable Workforce
distribution facilities
Production and manufacturi ng facilities
Extensive Research & Development
Marketing Activities
•Employees, staff and executives are just a small part of what makes the day to day operations of any major company
•Company owned stores, outlets or retailers to distribute the product
•Contracting with manufactures to produce and distribute the products efficiently is of the utmost importance when dealing with large quantities of product.
•This factor is used to better understand the consumer and respond to consumer interests. Research is conducted globally cover demographics, marketplaces and changing interests.
•Marketing is essential to project a brands Image within the industry
Does Lululemon have what it takes in the industry?
Innovation
Using superior materials and equipment in the development of lululemons product has consistently been a driving factor in their success. By using patented and trademarked materials and sewing machines that cost around $25,000 (C2) Lululemon has stayed innovative and trendy in the industry. Capable Workforce
Lululemon has a trained and informative staff that works to educate its customer, not sell to them. Using this education strategy has proven successful for Lululemon and the consumer, as it makes the consumer feel more confortable while shopping. Extensive Distribution Facilities
Lululemon has posited its product to be sold through select yoga studios, health clubs, and fitness centers as a way to promote its product locally. Sales within the company owned retail stores leverage such aspects as displays, customized fixtures and overall decor while keeping select center displays open for short cycles products that keep the store fresh. Production and Manufacturing Facilities
Lululemon has contracted arrangements with suppliers, built strong channels and outsourced its production to be more efficient. Lululemon conducts business on a contract to contact level allowing them to be flexible with suppliers and receive the lowest rates. Research & Development
Developing the product as superior quality is done through superior processes . Lululemon’s active wear is made with anti-microbial wicking fabrics with flat seams, ensuring it is nonabrasive to the wearer. The features of the product are designed with the consumer in mind forming a very desirable product. Market Penetration
According to Chip Wilson (C2), the key to success in the market is getting in first. First mover advantage was a huge success factor in redefining the yoga pants in the 21st century. Lululemon has successfully achieved all necessary key factors in the industry. They have proven their quality, innovation and distribution of their product at an exceptional level.
Citations:
C1) Peterson, Hayley. "Lululemon's Pants Aren't Worth That Much More Than The Competition." Business Insider . Business Insider, Inc, 24 Sept. 2014. Web. 02 Oct. 2014. . C2) "Lululemon: Building the Brand from the Ground – Yoga Mat – up." » Strategy. Strategy Staff, 13 Jan. 2013. Web. 03 Oct. 2014. . C3) "Educating People For Tomorrow." MBA Lectures. MBA Lectures, 7 Jan. 2011. Web. 03 Oct. 2014.
