Business Strategy Case Study: Lululemon Athletica

In the startup phase of Lululemon Athletica they had a high bargaining power. This was due to a desire to work with leading fabric suppliers and increased investments. A majority of their apparel production was in Asia however they are willing to use Canada as well as the United States for production facilities as they are required. There are many suppliers competing for retailer’s business. Common materials used in apparel making such as rubber and cotton are readily available. This gives Lululemon a lot of choice in picking who they want to buy supplies from. In this situation, the suppliers have a low level of bargaining power.

In Columbia Sportswear raw materials are the main supplies that are used to make the majority of the industry’s

This encourages a very competitive battle among companies. One way a customer has very high bargaining power they are a regular customer within and industry, purchasing large amounts of that companies output.

Buyers are constantly seeking to find the lowest costs. It is so easy for a consumer to switch to another brand if they are at all dissatisfied with the current product. So as a group, the customers of Lululemon have a high level of bargaining power. This is why it is so crucial for Lululemon to create and build relationships with customers in order to make them customers for life. There is a large variety of sports apparel brands making the buying power of consumers high. With a variety of sports apparel brands the difference between their products might not be that different after all. This makes it very important for Columbia has to create brand loyalty within their customers. Sportswear is usually used in extreme or rugged conditions so buyers become very concerned with the quality of the product in which they are purchasing. This forces Columbia as well as its competitors to maintain their strong brand reputation in all items

However, the company still has to compete in the industry. The threat of substitute products, despite their very specific styles and brands, is very high for Lululemon. This is due to the buyer’s ability to easily wear competitors clothing items.

Columbia has a very low/high threat of substitute products. Columbia develops their own technologies posing a low threat. On the other end they have a high threat because their competitors could take a new direction into performance outdoor apparel. Columbia focuses on innovative ideas and the quality of their products to differentiate them in the competition.

FOUR CRITERIA OF SUSTAINABLE COMPETITIVE ADVANTAGE Not every capability is a core competence, although every core competence is a capability. In order for a capability to be a core competence it must possess the four core competencies. The four core competencies are capabilities that are valuable, rare, costly to intimidate and non-substitutable. When a competitor lacks resources to attempt imitation or when a company cannot duplicate benefits of a firm’s strategy is when a sustainable competitive advantage exists.

VALUABLE

Valuable capabilities help a firm neutralize threats or exploit