Lululemon Athletica Inc. SWOT Analysis / Matrix

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SWOT analysis is a vital strategic planning tool that can be used by Lululemon Athletica Inc. managers to do a situational analysis of the firm . It is a handy technique to analyze the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Lululemon Athletica Inc. is facing in its current business environment.

The Lululemon Athletica Inc. is one of the leading companies in its industry. Lululemon Athletica Inc. maintains its prominent position in market by carefully analyzing and reviewing the SWOT analysis. SWOT analysis an immensenly interactive process and requires effective coordination among various departments within the firm such as – marketing, finance, operations, management information systems and strategic planning.

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The SWOT Analysis framework facilitates an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also known as SWOT Matrix.

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the Lululemon Athletica Inc. to develop four types of strategies:

SO (strengths-opportunities) Strategies
WO (weaknesses-opportunities) Strategies
ST (strengths-threats) Strategies
WT (weaknesses-threats) Strategies

Lululemon Athletica Inc. swot analysis / matrix

SWOT Matrix Strategies Objective

The core purpose of SWOT matrix is to identify the strategies that an organization can utilize to exploit external opportunities, counter threats, and build on & protect Lululemon Athletica Inc. strengths, and eradicate its weaknesses.

Step by Step Guide to Lululemon Athletica Inc. SWOT Analysis

Strengths of Lululemon Athletica Inc. – Internal Strategic Factors

As one of the leading firms in its industry, Lululemon Athletica Inc. has numerous strengths that help it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Lululemon Athletica Inc. are –

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Highly successful at Go To Market strategies for its products.
Successful track record of integrating complimentary firms through mergers & acquisition. It has successfully integrated number of technology companies in the past few years to streamline its operations and to build a reliable supply chain.
Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
Good Returns on Capital Expenditure – Lululemon Athletica Inc. is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
Strong Brand Portfolio – Over the years Lululemon Athletica Inc. has invested in building a strong brand portfolio. The SWOT analysis of Lululemon Athletica Inc. just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
Strong Free Cash Flow – Lululemon Athletica Inc. has strong free cash flows that provide resources in the hand of the company to expand into new projects.
Automation of activities brought consistency of quality to Lululemon Athletica Inc. products and has enabled the company to scale up and scale down based on the demand conditions in the market.
Highly skilled workforce through successful training and learning programs. Lululemon Athletica Inc. is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.

Weakness of Lululemon Athletica Inc. – Internal Strategic Factors

Weakness are the areas where Lululemon Athletica Inc. can improve upon. Strategy is about making choices and weakness are the areas where a firm can improve using SWOT analysis and build on its competitive advantage and strategic positioning.

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Investment in Research and Development is below the fastest growing players in the industry. Even though Lululemon Athletica Inc. is spending above the industry average on Research and Development, it has not been able to compete with the leading players in the industry in terms of innovation. It has come across as a mature firm looking forward to bring out products based on tested features in the market.
Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
Not very good at product demand forecasting leading to higher rate of missed opportunities compare to its competitors. One of the reason why the days inventory is high compare to its competitors is that Lululemon Athletica Inc. is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Lululemon Athletica Inc. needs to put more money in technology to integrate the processes across the board. Right now the investment in technologies is not at par with the vision of the company.
Not highly successful at integrating firms with different work culture. As mentioned earlier even though Lululemon Athletica Inc. is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
The company has not being able to tackle the challenges present by the new entrants in the segment and has lost small market share in the niche categories. Lululemon Athletica Inc. has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
The profitability ratio and Net Contribution % of Lululemon Athletica Inc. are below the industry average.

Opportunities for Lululemon Athletica Inc. – External Strategic Factors

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Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Lululemon Athletica Inc. an opportunity to enter a new emerging market.
The market development will lead to dilution of competitor’s advantage and enable Lululemon Athletica Inc. to increase its competitiveness compare to the other competitors.
Organization’s core competencies can be a success in similar other products field. A comparative example could be - GE healthcare research helped it in developing better Oil drilling machines.
The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Lululemon Athletica Inc. to increase its profitability.
Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Lululemon Athletica Inc..
New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for Lululemon Athletica Inc. to drive home its advantage in new technology and gain market share in the new product category.
Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Lululemon Athletica Inc.’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.
New trends in the consumer behavior can open up new market for the Lululemon Athletica Inc. . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.

Threats Lululemon Athletica Inc. Facing - External Strategic Factors

The demand of the highly profitable products is seasonal in nature and any unlikely event during the peak season may impact the profitability of the company in short to medium term.
Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
Imitation of the counterfeit and low quality product is also a threat to Lululemon Athletica Inc.’s product especially in the emerging markets and low income markets.
Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Lululemon Athletica Inc.
New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Lululemon Athletica Inc. in those markets.
The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.

Limitations of SWOT Analysis for Lululemon Athletica Inc.

Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.

Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Lululemon Athletica Inc.
SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.

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Weighted SWOT Analysis of Lululemon Athletica Inc.

In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.

This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Lululemon Athletica Inc. managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.

Limitation of Weighted SWOT analysis of Lululemon Athletica Inc.

This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.

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Example of Weighted SWOT Analysis

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SWOT Worksheet & Template

If you like to do your own SWOT analysis or want to make your own Weighted SWOT SWOT matrix then feel free to download Fern Fort University SWOT Analysis Template.

References / Citations & Bibliography

M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)