Lululemon Athletica Case Study

 

Introduction

Lululemon was founded in the year 1998 by now Founder and Chairman Chip Wilson as a speciality retailer which de

signed, manufactured and sold women’s athletic apparel that was

yoga inspired. The company presented a unique blend of culture where employees educated customers about the technology and research that went into their fabrics and why they were  better than competitors. Employees were valued and the company soon began to expand. The company had opened a total of 20 stores in Canada by the year 2005 and had become the most favourite athletic brand with combined revenue of $ 40 million. The company then under the leadership of Bob (Former Reebok CEO) undertook an aggressive expansion strategy in Canada and the U.S. By 2008, the company had more than 35 stores and combined revenue of $350 million. The company however faced several issues and the

company’s cultur 

e began to fall apart as the new CEO Christine Dale stepped in. In light of this discussion, the current report is aimed at relying on management accounting theories and identifying three unique problems that Lululemon is faced with. The report also attempts to identify causes of these problems and their consequences for the organization.

Cross Boarder Expansion and Location Control

The very first control problem based on management accounting theory that could be identified in the case consists of controlling locations where Lululemon stores would open in the U.S. A management accounting system in literature is defined as system that has been specifically and uniquely designed for an organization. This system is responsible for the provision of all necessary information that the organization might need for making decisions. In other words, management accounting systems in an organization are responsible for the provision of reliable and accurate information to the organizational management (Broadbent, 2012). In accordance with the Contingency Theory of Management Accounting, this uniquely designed accounting management system for an organization is contingent on situational or circumstantial factors in which a firm is progressing. The theory also suggests that circumstances in which every organization progresses are distinct and they largely impact mechanism, adoption and sophistication of effective accounting management system. Six circumstantial factors have been defined in accordance with the contingency theory. These include the external environment, mission and strategies, technology, firm interdependence,  business unit and knowledge of observable factors (Carter et al, 2010).

Lululemon Case StudyQuestion 1The strength of competitive forces that lulu lemon is faced with in it in the market for performance-based yoga and fitness apparel is fair or moderate. This can be analyzed using the followingPorters five force competitive analysis. Threat of new entrants in the market for performance based yoga and fitness apparel.The likelihood of new entrants in this market is very high due to attractiveness of the opportunity for growth. As indicated by the rapid growth of lulu lemon there is great opportunity for growth in this market. The new entrant’s threat however will be neutralized by the strong brand, high innovation and unique strategy the lululemon has put in place. So the competitive forces new entrants are weak despite high chances of new entrants since lululemon will have competitive edge over them. According to the article the market seem to be growing so even if there are new entrants the lulu lemon will still not be threatened as they can only limit growth of lululemon.Threat of close substitutes.Lulu lemon is facing a strong threat of close substitutes from both upcoming brands such as Athleta and Bebe. Also already large and established brands such as Nike, Adidas and Reebok are competing with the lululemon for same market. This is not a very strong competitive force as the lululemon has been thriving with these competitors still in the market. Therefore, unless the competitors change their strategies coupled with failure of lululemon to respond, then this competitive force is fairly strong. This is so because as shown in the article lululemon has a highly perceived product differentiation;high level of innovation and its products are of high quality.Buyers bargaining power.Customer bargaining power is a competitive force because customers can put a firm under pressure. In this case the customer bargaining power is low as most of lululemon customers acts independently. Lululemon also sells most of it products to final buyer through the company owned retail 1

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