Question 1
Critically evaluate Lululemon’s competitive environment. Does the company have a source of (sustainable) competitive advantage?
We evaluate the competitive environment of Lululemon Athletico Inc by analyzing the apparel industry through the Porter’s Five Forces model. The analysis is performed for each of the five forces as follows:
Bargaining Power of Suppliers
The number of the suppliers that are competing for the retail business is high therefore; the bargaining power of the suppliers is low. This is the reason that Lululemon Athletico Inc does not have any long-term contracts with its suppliers. This is despite the fact that some of the fabrics of the company come from one supplier and 85% of the merchandise of the company comes from only 10 suppliers(Dijk, 2013). However, still the management of Lululemon Athletico Inc is confident to get its merchandise from the other suppliers if any disruption occurs but the cost might be higher.
Lululemon Athletica Inc Harvard Case Solution & Analysis
Bargaining Power of Buyers
The bargaining power of the buyers is medium in the industry because Lululemon Athletico Inc has the distinctive material and designs as compared to the products of the competitors. However, the customers might be willing to buy the products from the competitors because of the discounts, brand image or the allowance pricing. The market is highly competitive and there are many players(Campos, 2013). Moreover, Lululemon Athletico Inc is not the only dominant player of the market.
Threat of Substitute Products
This threat is high despite the fact that the materials and the high quality of the Lululemon products are difficult to be replicated. A large number of companies are catering to the needs of the customers(Dijk, 2013). However, the low quality of the competitor products and poor materials gives Lululemon Athletico Inc a competitive advantage, as the customers are less likely to switch to suppliers with poor quality.
Threat of New Entrants
The entry barriers in the industry are low so this threat is high. The company does not own any patents over its products or production processes thus the competitors can easily replicate the products of the company. Lululemon Athletico Inc has no long-term contracts with its suppliers therefore; those suppliers can also supply the same material to the competitors of the company. Since, the trend of yoga is increasing; therefore, the sales of sports apparel are also increasing which would encourage the new entrants in the industry(Soni, 2014). However, there are certain factors of Lululemon Athletico Inc that are hard to be replicated by the new entrants such as retail presence and brand equity.
Competitive Rivalry
The competition in the apparel industry is intense and the main competitors of the company are Under Armor, Adidas and Nike. These competitors have higher amount of resources and that have a long history with strong brand image and financial capabilities................
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