Expansion Strategies Of Lululemon Athletica Company

Description of the Venture

Discuss about the expansion strategies of the Lululemon Athletica Company and how it is going to expand and manage its operations on the long run.

The expansion of a business in the international market is considered to be a vital step for the companies as it brings in huge success within the organization. However, after analyzing the facts, it can be said that the best mode of entry into the international company for Lululemon Athletica would be licensing. This entry mode will prove to be highly advantageous for the company. International agreement of licensing allows the firms to manufacture exclusively and non-exclusively, the products of the proprietors. However, the products are manufactured for a certain period of time in the specific market (Dabic, González-Loureiro and Harvey 2015).

Moreover, the foreign entry mode market allows the licensor at the home country to make limited resources or rights available to the host country’s licensee. In simpler terms, it is the contractual agreement between the companies of various countries, through which the company grants permission to the other company that is abroad. The companies have the right to utilize a productive procedure, a registered brand or patent, intangible assets or trade secrets and a royalty and both (Grewal et al. 2013). Therefore, the licensee generally sells the service or product in domestic market along with same characteristics, which it was before.

According to Gunnigle (2014), expanding a business and that too, on an international platform can be an exciting proposition. It gives a hint that the business is doing well and it is ready to expand and grow on to the next level. However, very often any business requires financial support in order to implement the ideas of expansion. The professional business plan assists in outlining the details of the expansion and can earn money, required for the growth of the company. Lululemon Ahletica should form a proper business plan which should provide details about the competition. In addition to this, it should include similarities and differences in the services, marketing tactics and target market.  

Moreover, it is important for the organization to provide the management team with proper information as per Han, Lee and Lee (2014). On a similar note, while planning for the business expansion it is immensely important to provide with the financial details of the business, current statements which show expenses, income and the net worth. In addition to this, it is important to outline the costs for the expansion and the projected profits over the upcoming years. McDonnell, Lavelle and Gunnigle (2014) examined that if the expansion is about opening a new venture at an international market, it is important to include blueprints for the proposed plan.

Literature Review

There are several expansion theories, which are applicable in this case of Lululemon Company’s expansion plan. It is important to analyze the strengths as well as weaknesses of the competitors before taking any further step. According to the tortoise theory of business expansion, it can be said that the firm should run the business in a phased manner on the basis of the break-even factor of the previous business. In addition to this, moving to the second phase helps in ensuring the fact that the business sustains on a long term. Moreover, according to the business model, it is important to kick start the resources including growth capital and funding (Roh, Hong and Min 2014).

Another theory of business expansion involves potential drawbacks and benefits. The three stage theory of the international expansion explains the link between performance and multi-nationality within the service sector. In addition to this, spreading central and common overheads over more and more nations is immensely important for the international expansion. This is highly critical in the research and development intensive industries, which require amortization of the procedure from more than few markets (Samaha, Beck and Palmatier 2014).

Formulating the expansion strategies is one of the important factors, which the firm needs to consider while expanding their business. Lululemon Athletica needs to increase their sales as well as products within the international markets. This is a very common tactic and might require a bigger area, improved marketing techniques, different strategies of pricing and others. In addition to this, the company can also introduce new products and services in order to offer its international customers, with a huge variety to choose from (Dabic, González-Loureiro and Harvey 2015). However, generating customer feedback is also important in order to expand in a risk free way.

The company can also develop a new segment in the market and move into the new geography. Moreover, these areas might have uncertainties and require cost outlays. In addition to this, moving the products into some new demographic segments and categories require proper research in the market, new strategies of marketing and beta testing. Therefore, the management of the new locations is highly important. It might absorb a significant amount of attention and time, but the methods are inevitable. Lululemon Company will be adopting the strategy of licensing as it carry lesser risks and the company can sell distribution, production and manufacturing rights.

Assessment of Associated Theories

The licensing mode of entry refers to the network based services, which lets the company carry out their expansion strategies without lesser risk factors. However, on discussing about the operations of the entry mode, it is important to conduct a thorough research of the market. It is important to carefully analyze the factors, which needs to be done before entering the international market for choosing the most profitable markets. The operations overview includes the laws as well as regulations of the international platform, conditions of the infrastructure, legal framework and property rights, cultural and political factors as well (Roh, Hong and Min 2014).

Licensing will allow the Lululemon Company to use legally protected technology and products. In addition to this, it will enable the business to conduct their market research in a very particular manner, for the agreed time period and within the agreed territory. However, it can be said that the operations will be very easy and lesser risks will be involved in this. In this type of entry mode, communication is highly involved. Moreover, the financial risks will be transferred to the licensee. It also ensures better resource utilization, with easier appointment, low labor costs and lesser investment involved (Han, Lee and Lee 2014).

(Table: Financial Statement

Source: Created by Author)

Different companies utilize different types of strategies in order to enter the international markets. However, it is highly important to maintain certain ethics in order to sustain in the markets. Licensing is the entry mode, which is utilized by various companies as it easier and risk free, to some extent. The company should export the commodities to the external markets in order to gain international markets through the large number of shares. However, the company should maintain some ethics at the time of exporting materials and abide by the rules and regulations of the international markets. Moreover, there are different laws at different countries, which the company should strictly maintain. Lululemon Company should conduct thorough analysis before entering the markets and maintain the ethics in order to sustain at the international platform (Grewal et al. 2013).

(Figure: Timeline)

Source: Created by Author

References

Dabic, M., González-Loureiro, M. and Harvey, M., 2015. Evolving research on expatriates: what is ‘known’after four decades (1970–2012). The International Journal of Human Resource Management, 26(3), pp.316-337.

Grewal, R., Kumar, A., Mallapragada, G. and Saini, A., 2013. Marketing channels in foreign markets: control mechanisms and the moderating role of multinational corporation headquarters–subsidiary relationship. Journal of Marketing Research, 50(3), pp.378-398.

Gunnigle, A.M.J.L.P., 2014. Human Resource Management in Multinational Enterprises: Evidence from a Late Industrializing Economy.

Han, J.J., Lee, H. and Lee, J., 2014. How and where to offshore: a productivity comparison at the firm level. Applied Economics, 46(15), pp.1704-1715.

McDonnell, A., Lavelle, J. and Gunnigle, P., 2014. Human resource management in multinational enterprises: Evidence from a late industrializing economy. Management International Review, 54(3), pp.361-380.

Roh, J., Hong, P. and Min, H., 2014. Implementation of a responsive supply chain strategy in global complexity: The case of manufacturing firms. International Journal of Production Economics, 147, pp.198-210.

Samaha, S.A., Beck, J.T. and Palmatier, R.W., 2014. The role of culture in international relationship marketing. Journal of Marketing, 78(5), pp.78-98.

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