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Strategy: Fitness Apparel Industry Analysis & Recommendation

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Fitness Apparel Industry Porter’s 5 Enforcers: Nahar Chowdhury, Xuanying (Shirley) He, Rishi Daryanani, Xi (Lorraine) Chen, Ailin (Eileen) Chen
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Page 1: Strategy: Fitness Apparel Industry Analysis & Recommendation

Fitness Apparel Industry

Porter’s 5 Enforcers: Nahar Chowdhury,

Xuanying (Shirley) He, Rishi Daryanani,

Xi (Lorraine) Chen, Ailin (Eileen) Chen

Page 2: Strategy: Fitness Apparel Industry Analysis & Recommendation

OverviewAgenda

• Introduction• Industry analysis • Firm analysis • Technology • Resources • Scope • Issues and recommendations

Intro Industry Analysis

Firm Analysis Tech Resources Scope Recommendation

1

Page 3: Strategy: Fitness Apparel Industry Analysis & Recommendation

Intro Industry Analysis

Firm Analysis Tech Resources Scope Recommendation

Fitness Apparel IndustryClothes specifically sold and marketed to be worn during fitness or wilderness related activities; i.e. playing sports, running, yoga, camping, hiking

Top Industry Firms

Industry Size$153 Billion Global Market Cap1

Industry Trends“…active wear is suddenly chic”2

Fitness clothing is no longer limited to the gym and gym related activates.

Industry Overview

2

Page 4: Strategy: Fitness Apparel Industry Analysis & Recommendation

Intro Industry Analysis

Firm Analysis Tech Resources Scope Recommendation

Leader Firm

“ A designer, distributor, and retailer of technical athletic apparel…which create transformational experiences … leading a balanced and fun life ”3

3

Page 5: Strategy: Fitness Apparel Industry Analysis & Recommendation

Intro Industry Analysis

Firm Analysis Tech Resources Scope Recommendation

“As one of the largest outdoor and active lifestyle apparel and footwear companies in the world, our products have earned an international reputation for innovation, quality and performance. ” 4

Client Firm

4

Page 6: Strategy: Fitness Apparel Industry Analysis & Recommendation

Intro Industry Analysis

Firm Analysis Tech Resources Scope Recommendation

Industry Profitability– Industry average profitability : average ROS Years 2010-2014– Positive industry influence on profits

Analysis of Financial Performance (Based on Return on Sales)

4.00%

Economic Average

Industry Influence

ClientStrategy Influence

5.88%

Colombia's Profitability

Industry Profitability

17.18%

Lululemon's Profitability

LeaderStrategy Influence

7.99%+3.99%

+9.19%

-2.11%

Analysis of Financial Performance - Industry

5

Page 7: Strategy: Fitness Apparel Industry Analysis & Recommendation

Intro Industry Analysis

Firm Analysis Tech Resources Scope Recommendation

Firm Facts

2 Geographic Categories: US & Canada

Profitability: ROS 17.18%

Sales Revenue: 2.06 Billion in 2015

Key Products : Yoga Pants and Mats

Brand Image: Healthy Lifestyle

4 Geographic Categories: US & Canada, Latin America, Asia Pacific, Europe & Middle East

Profitability: ROS 5.88%

Sales Revenue: 2.3 Billion in 2015

Key Products : Skiing and Snowboarding Apparel

Brand Image: Tough & Durable & Affordable

All Facts and Figures are taken form annual reports and 10-K fillings6

Page 8: Strategy: Fitness Apparel Industry Analysis & Recommendation

Intro Industry Analysis

Firm Analysis Tech Resources Scope Recommendation

Analysis of Financial Performance - Industry

• Key buyers:• Department stores, consumers

• Low Brand loyalty5 ↑• Low switching cost ↑• High price sensitivity ↑

High Buyer Power

• Key Rivals:• Nike, VF, Adidas, Under Armour, Columbia,

Lululemon,• Concentration C6 = 15.4% ↑• CAGR 5.2% ↓• Brand Recognition ↓• Comparison shopping6↑

Moderate Rivalry

7

Page 9: Strategy: Fitness Apparel Industry Analysis & Recommendation

Intro Industry Analysis

Firm Analysis Tech Resources Scope Recommendation

Trends & Dynamics Impact on 5 Forces

• Rivalry ↓

• Substitute ↑• Buyer Power ↓

• Rivalry ↑

Total Impact on Industry P

Trend #1 Fitness clothing to becoming more casual and fashionable7.

• Substitute ↑

• Rivalry ↑

Trend #3Less sports participation in the U.S market8.

Trend #2Companies are developing fitness apps and other wearable technology9.

Advanced 5 Forces Analysis (I) - Industry

8

Page 10: Strategy: Fitness Apparel Industry Analysis & Recommendation

Intro Industry Analysis

Firm Analysis Tech Resources Scope Recommendation

Greater buyer power

Lower perceived

value Weaker brand image

Department stores

Buyers value

quality more

Low switching

cost

Advanced 5 Forces Analysis (II)

9

Page 11: Strategy: Fitness Apparel Industry Analysis & Recommendation

Intro Industry Analysis

Firm Analysis Tech Resources Scope Recommendation

Cost Leadership Differentiation

Broad Market

Narrow Market

Positioning

10

Page 12: Strategy: Fitness Apparel Industry Analysis & Recommendation

Average Lululemon Columbia $-

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

$80.00

$90.00

Industry WTP and Cost

Other R&D Marketing CostsCost of Goods Sold Margin

$68.75

$51.94

$77.75

$46.36

$63.82$61.74

Total Cost

Intro Industry Analysis

Firm Analysis Tech Resources Scope Recommendation

WTP & Costs Drivers - Industry

WTP

Quality

Technology

Brand

Trends

Retail Experience

Costs

Marketing & Sales

Production

Distribution Networks

R & D

Patent Expenses

WTP and Cost figures come from the average of the best selling product lines

11

Page 13: Strategy: Fitness Apparel Industry Analysis & Recommendation

Intro Industry Analysis

Firm Analysis Tech Resources Scope Recommendation

Strategic Activities

• Building brand image: healthy lifestyle

• Building a community

• Thorough product testing

• Design: • Trademarked fabric • Luon, Swift, Luxtreme10

12

Page 14: Strategy: Fitness Apparel Industry Analysis & Recommendation

Intro Industry Analysis

Firm Analysis Tech Resources Scope Recommendation

WTP & Cost Drivers

WTP

Quality

Community-based

Marketing11

First mover in athleisure12

Free yoga & self defense

classes

Cost

Grassroots ad campaign

Low distribution

Partnership in R&D

Less legal expenses

13

Page 15: Strategy: Fitness Apparel Industry Analysis & Recommendation

Positioning

Brand loyalty

Charge premium

prices

Sustained profits

Intro Industry Analysis

Firm Analysis Tech Resources Scope Recommendation

Achieving High Profits

• High disposable income• Niche market

• Grassroots marketing• Consistent design & development

14

Page 16: Strategy: Fitness Apparel Industry Analysis & Recommendation

Intro Industry Analysis

Firm Analysis Tech Resources Scope Recommendation

Strategic Activities

• Autonomous design team & R&D spending

• Strictly managed inventory

• Multiple distribution channels

• Lower dependency on cold weather

15

Page 17: Strategy: Fitness Apparel Industry Analysis & Recommendation

Intro Industry Analysis

Firm Analysis Tech Resources Scope Recommendation

WTP & Cost Drivers

WTP

“Tested Tough” ad campaign15

Functionality

Technology13

Cost

Marketing16

R&D

Patent expenses

Distribution14

COGS

16

Page 18: Strategy: Fitness Apparel Industry Analysis & Recommendation

Intro Industry Analysis

Firm Analysis Tech Resources Scope Recommendation

Lower Than Average Profitability

Low ROS

Poor marketing

Failing cost leadership

strategyDepend on

cold weather

17

Page 19: Strategy: Fitness Apparel Industry Analysis & Recommendation

Production TechnologyIndustry Production TechnologyIntro Industry

AnalysisFirm

Analysis Tech Resources Scope Recommendation

Disruptive

Sustaining

Complementary asset

Product Design → Manufacturing → Distribution → Wholesale & Retail → Customers17

Columbia’s Patented Technologies, Process & Design:• Omni-Tech, Outdry, Omni-Wick Evap, Omni-Heat18

Omni-Heat Electric (Columbia): • Traditional vs. Conductive material • + electronic elements• Discontinued in 201319

Fitness tracker/Smartwatch: • Workout accessories

Marketing Channel:• Columbia’s weak brand image

• Hard to capture full value of innovations

Industry is subject to incremental innovation

18

Page 20: Strategy: Fitness Apparel Industry Analysis & Recommendation

Intro Industry Analysis

Firm Analysis Tech Resources Scope Recommendation

Valuable Rare Costly to imitate

Capture value

Sustainable competitive advantage

Firm-level Analysis: Resources

• Omni Heat Technology Patent• Global Presence

• Design Patent• Brand Value

19

Page 21: Strategy: Fitness Apparel Industry Analysis & Recommendation

Horizontal Scope

• Fitness Apparel• Skiing• Snowboarding• Fishing• Adventure travel

• Premium Footwear

• Hiking• Climbing

• Trail Running• Lifestyle Apparel

Horizontal scope – Narrow21Horizontal Scope – Wide20

• Fitness Apparel• Yoga• Run

Intro Industry Analysis

Firm Analysis Tech Resources Scope Recommendation

20

Page 22: Strategy: Fitness Apparel Industry Analysis & Recommendation

1999 2012 2013 2014$0.00

$500.00

$1,000.00

$1,500.00

$2,000.00

$2,500.00

Net Sale

Acquired BrandsColumbia

Intro Industry Analysis

Firm Analysis Tech Resources Scope Recommendation

COGS/Rev S&G/Rev0%

10%20%30%40%50%60% 55%

32%

54%

35%

Cost/Revenue Ratio

19992015

Better-off Test ✔ No Cost Savings

• Little impact on cost saving

Increase in WTP

• Positive incremental net sales

Wide Horizontal Scope

Ownership Test ✔ Ownership benefits > Contract benefits

• Confident to allocate capital• Costly to enforce contract • Avoid binging up new competitors

21

All Facts and Figures are taken form annual reports and 10-K fillings

Page 23: Strategy: Fitness Apparel Industry Analysis & Recommendation

Intro Industry Analysis

Firm Analysis Tech Resources Scope Recommendation

Manufacture

Distribution

Consumers

Better-Off Test✔ Increase WTP• Build brand connection with

customer• Marketing purposes

Vertical Scope

Ownership Test✔ Increase WTP• Control layout• Improve retail experience• More control over customer

service

22

Product Design

Retail

Wholesale

Owned

Contract

Retail

22

Page 24: Strategy: Fitness Apparel Industry Analysis & Recommendation

Intro Industry Analysis

Firm Analysis Tech Resources Scope Recommendation

Assessment of Strategic IssuesIndustry-Level Issues

• Be a leader in innovation• More focused acquisitions

New technolog

y

• Partner up with media channels: Discovery & National Geographic

• Emphasis on adventurous lifestyle

Less sports participatio

n23

Page 25: Strategy: Fitness Apparel Industry Analysis & Recommendation

Assessment of Strategic IssuesFirm-Level Issues

Key Challenges• Higher buyer power • Weather constraint • Weak brand image

Key Horizontal Scope Issues• Acquire professional fitness sporting goods brands

Key Vertical Scope Issue • Stockouts at department stores

How can Columbia respond • All-around professional sporting goods brand • Develop summer sports-related product lines • NEW MARKETING STRATEGY • NEW APPROACH TO MANAGEMENT

Intro Industry Analysis

Firm Analysis Tech Resources Scope Recommendation

24

Page 26: Strategy: Fitness Apparel Industry Analysis & Recommendation

• Retail stores with trained employees• Control customer service

New Marketing Strategy

Marketing

Community

Retail

• Focus on adventurous lifestyle

• Interaction between customers and the firm • Host events or trips to popular skiing/fishing spots

Intro Industry Analysis

Firm Analysis Tech Resources Scope Recommendation

25

Page 27: Strategy: Fitness Apparel Industry Analysis & Recommendation

“We're a family business gone global.”23

• MotherGERT BOYLE24

Chairman of the Board

• SonTIM BOYLE

Chief Executive Officer, Director

• GrandsonJOSEPH P. BOYLE Senior VP Brand Merchandising &

Design

• Snowboarder, surfer

Laurent Potdevin26

Chief executive officer

• Skier, runner, cyclist

Stuart HaseldenChief financial

officer

• Runner, cyclist, iron man triathlon

Duke StumpExecutive VP,

community and brand

“We are passionate about sweating every day and we want the world to know it.”25

Assessment of Strategic IssuesFirm-Level Issues - Management Team

Columbia should hire executives with sports experience

Intro Industry Analysis

Firm Analysis Tech Resources Scope Recommendation

26

Page 28: Strategy: Fitness Apparel Industry Analysis & Recommendation

Intro Industry Analysis

Firm Analysis Tech Resources Scope Recommendation

• Strategic position Failing cost leadership strategy Columbia’s quality & innovation does not drive up

WTP • Recommendations

Leader in innovation Marketing with focus on adventurous lifestyle New talents in management

• Columbia is vulnerable to imitation North Face(VF) and Patagonia could imitate

Assessment of Strategic IssuesConclusion

27

Page 29: Strategy: Fitness Apparel Industry Analysis & Recommendation

Intro Industry Analysis

Firm Analysis Tech Resources Scope Recommendation

Thank You!!! & Questions?

Assessment of Strategic IssuesConclusion

28

Page 30: Strategy: Fitness Apparel Industry Analysis & Recommendation

From SI 422 Course Packet

• Internal Analysis: Resources, Capabilities and Activities

• Choosing Corporate and Global Scope

• The Five Forces

1 Statista. “Global Sports Apparel Market from 2015 to 2020.” Accessed March 10, 2016 http://www.statista.com/statistics/412667/global-sports-apparel-market-projected-development/

2 Fortune. “Athletic Apparel: Outperforming the competition in 2014.” Accessed March 10, 2016 http://fortune.com/2014/12/25/athletic-apparel-top-performer/

3 Lululemon. “Annual Report 2015.” Accessed March 10, 2016 http://investor.lululemon.com/secfiling.cfm?filingID=1397187-16-89&CIK=1397187

4 Columbia . “Annual Report 2015.” Accessed March 10, 2016 http://investor.columbia.com/secfiling.cfm?filingID=1050797-16-20

5 Mintel. “Fitness Clothing – Issues & Insights.” Accessed March 10, 2016 http://academic.mintel.com.ezproxy.bu.edu/display/679801/

6 Nike. “Annual Report 2015.” Accessed March 10, 2016 http://s1.q4cdn.com/806093406/files/doc_financials/2015/ar/docs/nike-2015-form-10K.pdf

7 Fortune. “Athletic Apparel: Outperforming the competition in 2014.” Accessed March 10, 2016 http://fortune.com/2014/12/25/athletic-apparel-top-performer/

8 IBISWorld. “Sporting goods stores in the US.” Accessed March 10, 2016 http://clients1.ibisworld.com.ezproxy.bu.edu/reports/us/industry/default.aspx?entid=1079

9 Certona. “Hitting a Home Run in the Athletic Apparel Industry.” Accessed March 10, 2016 http://www.certona.com/hitting-a-home-run-in-the-athletic-apparel-industry

10 Lululemon. “Fabrics and Technologies.” Accessed March 10, 2016 http://www.lululemon.com/education/fabricsandtechnologies

11 Market Realist. “ Lululemon Builds Brands Through Unique Marketing Strategies.” Accessed March 10, 2016 http://marketrealist.com/2014/12/lululemon-builds-brands-unique-marketing-strategies/

12 Business Insider. “Lululemon’s Secrets for Beating all the Competition.” Accessed March 10, 2016 http://www.businessinsider.com/lululemon-and-the-rise-of-athleisure-2015-7

Bibliography

Page 31: Strategy: Fitness Apparel Industry Analysis & Recommendation

13 Columbia Sportswear Company. “Columbia Sportswear Previews Omni-Freeze ZERO.” Accessed March 10, 2016 http://investor.columbia.com/releasedetail.cfm?ReleaseID=68195514 Youtube. “Columbia Sportswear CEO Timothy Boyle-Mad Money-CNBC.” Accessed March 10, 2016 https://www.youtube.com/watch?v=SYXb14dnunM 15 The Oregonian. “Columbia Sportswear’s Biggest-ever ad Campaign.” Accessed March 10, 2016 http://www.oregonlive.com/playbooks-profits/index.ssf/2015/10/columbia_sportswears_biggest-e.html16 Vault. “Columbia Sportswear Company Overview.” Accessed March 10, 2016 http://www.vault.com/company-profiles/general-consumer-products/columbia-sportswear-company/company-overview.aspx17 Wikinvest. “Columbia Sourcing and Manufacturing.” Accessed April 10, 2016 http://www.wikinvest.com/stock/Columbia_Sportswear_Company_(COLM)/Sourcing_Manufacturing#toc18 Columbia Sportswear Company. “Technologies.” Accessed April 10, 2016 https://www.columbia.com/technology-landing.html 19 Snewsnet. “Columbia Suspends Future Omni Heat Electric Program After Recall.” Accessed April 10, 2016 http://www.snewsnet.com/news/columbia-suspends-future-omni-heat-electric-program-after-recall/20 Columbia Sportswear Company. “Company Profile.” Accessed March 10, 2016. http://investor.columbia.com/index.cfm 21 Lululemon Athletica. “Products.” Accessed March 10, 2016. http://shop.lululemon.com/products/category/women?mnid=mn;Uswomen 22 Slideshare. “Lululemon Strategy Report.” Accessed March 10, 2016. http://www.slideshare.net/azizghani0/lululemon-strategy-report-5142677323 Columbia Sportswear Company. “Columbia History.” Accessed April 10, 2016 http://www.columbia.com/About-Us_History.html24 Columbia Sportswear Company. “Officers and Directors.” Accessed April 10, 2016 http://www.columbia.com/About-Us_Officers-And-Directors.html25 Lululemon. “The Lululemon Manifesto.” Accessed April 10, 2016 http://www.lululemon.com/about/manifesto26 Lululemon. “Management & Board of Directors.” Accessed April 10, 2016 http://investor.lululemon.com/management.cfm27 Encyclopedia. “Columbia Sportswear Company History.” Accessed March 10, 2016 http://www.encyclopedia.com/topic/Columbia_Sportswear_Company.aspx 28 The Oregonian. “Columbia Sportswear Files Omni Heat Patent Infringement Lawsuit.” Accessed March 10, 2016 http://www.oregonlive.com/playbooks-profits/index.ssf/2013/12/columbia_sportswear_files_omni.html29 Fortune. “Smart Apparel.” Accessed April 10, 2016 http://fortune.com/2015/09/11/smart-wearables-fitness/30 Lululemon Athletica. “Strategic Sales.” Accessed March 10, 2016 http://info.lululemon.com/about/stratsales31 Vault. “About Columbia Sportswear Company.” Accessed March 10, 2016http://www.vault.com/company-profiles/general-consumer-products/columbia-sportswear-company/company-overview.aspx

Lululemon, “Annual Reports.” Accessed March 10, 2016 http://investor.lululemon.com/annuals.cfmColumbia Sportswear Company. “Annual Reports.” Accessed March 10, 2016 http://investor.columbia.com/annuals.cfm

Bibliography

Page 32: Strategy: Fitness Apparel Industry Analysis & Recommendation

Backup Slides

Page 33: Strategy: Fitness Apparel Industry Analysis & Recommendation

Exhibit 1 ROS Calculation

Page 34: Strategy: Fitness Apparel Industry Analysis & Recommendation

Exhibit 2 Concentration Calculation

Page 35: Strategy: Fitness Apparel Industry Analysis & Recommendation

Firm Infrastructure: 3 main executive offices and 4 distribution centers

Human Resources: Strong networking support for Lululemon Brand ambassadors.

Inbound Logistics

Research and Development teams focus on the development of new designs and testing out the fabric and material for quality maintenance.

Operations

Distribution centers in Ohio, Washington, British Columbia and Melbourne transport products to Lululemon retailers and directly to customers through e-commerce sales.

Marketing and Sales

Sales are made in Lululemon retailers. Brand ambassadors promote the brand across the three countries. Grassroots marketing campaign.

Technology Development: Development of e-commerce information systems.

Procurement: Lease of some retail locations and short term contracts with suppliers.

Outbound Logistics Service

Lululemon sends its designs to different suppliers for different products. Manufacturing is outsourced to carefully selected firms. Finished products are shipped Lululemon to distribution centers

Free information sessions on health. Free yoga and self defense classes.

Value Chain Analysis

Page 36: Strategy: Fitness Apparel Industry Analysis & Recommendation

Intro Industry Analysis Firm Tech Resource

s Scope Recommendation

IndustryRivalrySuppliers Buyers

Potential Entry

SubstitutesPower of Suppliers – Low key Suppliers

• independent manufacturers in Indonesia, China, Vietnam, Mexico, Taiwan, India and Bangladesh and etc.

• Very low supplier concentration ↓ • Low amount by each supplier ↓• Commodity inputs ↓• Firms contracts with numerous

suppliers ↓• Suppliers could forward integrate ↑

Threat of Entry – Moderate Potential entrants:

• Casual apparel companies • Fashion companies • Apparel Manufactures

• Light regulation ↑• Low capital Intensity ↑• Economies of scale & scope ↓• Low technological change ↑• Hard to access department stores ↓

Extent of Rivalry – Moderate key Rivals

• Nike, VF, Adidas, Under Armour, Puma, Colombia, Lululemon

• CAGR 5.2% ↓• Low concentration C3=32% ↑• Brand Recognition ↓• Companies often engage in price wars ↑

Power of Buyers – High

Identify key Buyers• Department stores and

consumers • Low switching costs ↑• Low brand loyalty ↑• Low chance of backward integration ↓• High price sensitivity ↑

Threat of Substitutes – Moderate

Identify key substitutes• Casual apparel

• Low switching cost • Large amount and variety of substitutes • Force costs up• Lower buyer propensity

Analysis of Industry Environment

Page 37: Strategy: Fitness Apparel Industry Analysis & Recommendation

Valuable • Well-known in yoga fans, first mover in yoga apparel industry, brand loyalty

Rare?

• Hard to imitate the entire brand due to the established reputation in the industry

Costly to imitate

• Brand value is costly to imitate

Capture Value

• Loyal customers allow Lululemon to capture value

Intro Industry Analysis Firm Tech Resources Scope Non-

Market CSR RecommendationIntro Industry

Analysis Firm Tech Resources Scope Non-Market CSR Recomme

ndation

Valuable • Higher WTP

Rare• With patent protection

Costly to imitate

• Other firms have to work around the patent

Capture value

• Long-term contract with Taiwanese supplier and distributor

Sustainable Competitive Advantage

Firm-level Analysis Resource #1 Patented Design

Sustainable Competitive Advantage

Firm-level AnalysisResource #2: Brand Value

Page 38: Strategy: Fitness Apparel Industry Analysis & Recommendation

Valuable

• Revenue from oversea market constitutes about 40% of the overall revenue

Rare

• Limited sports apparel companies entering markets overseas due to the high capital requirement

Costly to imitate

• Need large amount of resources and coordination

Capture value?

• Distribution and retail network is well structured. • Distribute in over 30 countries27

Valuable

• Water proof, breathable material that increase customers WTP

Rare• With patent protection28

Costly to

imitate

• Other firms have to work around it

Capture value

• Contributed to firms’s growth in net sales

Sustainable Competitive Advantage Sustainable Competitive Advantage

Firm-level Analysis Resource #1 Global Presence

Firm-level Analysis Resource #2 Patent: Omni-Heat Reflective material

Intro Industry Analysis Firm Tech Resources Scope Non-

Market CSR Recommendation

Page 39: Strategy: Fitness Apparel Industry Analysis & Recommendation

Columbia’s Production Technology

• Role of innovation• Industry is subject to incremental innovation

• Companies constantly develop innovative technologies & products that provide better performance benefits needed by consumers

• Sustaining innovation• Fitness Tracker/Smartwatch29

• Work-out Helper

• Most recent disruptive innovation• Omni-heat Electirc

• Traditional Fabric vs Conductive Fabric + Electronic Elements• Delivering heat on demand

• Columbia should be a leader of new technology• “…To earn an international reputation for innovation, quality and performance…” – Columbia’s

Mission Statement• 2013 Columbia suspended its Omni-Heat Electric program after having to recall its jackets due

to a wiring malfauncing and possible hurn hazard• Risk averse management

• Complementary assets• Marketing Channel

• Columbia’s ineffective marketing campaign• Hard to increase WTP of its innovative products

Page 40: Strategy: Fitness Apparel Industry Analysis & Recommendation

Save Cost? – No Higher R&D Lower distribution and sales costs

Boost WIP? - Yes Higher increase in Revenue than in

Cost High quality products Strong brand image & brand loyalty

2009 2010 2011 2012 2013 2014 $-

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000

$1,800,000

Net Revenue COGS SG&A

Better-off Test ✔

Ownership > Contract Confident to allocate capital Costly to make contract when acquired

business units become profitable Avoid binging up new competitors

Ownership Test ✔

Intro Industry Analysis Firm Tech Resources Scope Recommenda

tion

Narrow Horizontal Scope – Lululemon

All Facts and Figures are taken form annual reports and 10-K fillings

Page 41: Strategy: Fitness Apparel Industry Analysis & Recommendation

Intro Industry Analysis

Firm Analysis Tech Resources Scope Recommendation

Manufacturing

Distribution

Consumers

Better-Off Test✔ Increase WTP• Product Design

Key factor in success of products

• Manufacturing Control on product quality

• Retail • Build brand connection

with customers• Marketing

Vertical Scope

Ownership Test✔ Cost Saving• Owned - Design Team

Control innovation

• Contract – manufacturers:CapEx.,Labor Cost

Increase WTP• Owned – Retail Store

• Control layout• Improve retail experience

Product Design

Retail

Wholesale

Owned

Contract

Page 42: Strategy: Fitness Apparel Industry Analysis & Recommendation

Columbia Sportswear CompanyWholesale > Retail

❖ Primarily sold through wholesale distributors to specialty outdoor and sporting goods stores31

Lululemon Athletica Retail > Wholesale

❖ Primarily sold through Lululemon-owned stores as well as online

❖ Selectively strategic sales (Wholesale Program) through certified partners to offer its products to high-end health club and yoga studio30

Advantage: large degree of control over merchandising

and marketing Brand message is strong and consistent at

all consumer touching pointsDisadvantage: Not too recognized within the mass market

Recommendation:With its wide range of distribution, Columbia can put more effort in its retail stores Creates a stronger adventurous

community feeling

Intro Industry Analysis Firm Tech Resources Scope Non-

Market CSR Recommendation

Difference in Vertical Strategy

Page 43: Strategy: Fitness Apparel Industry Analysis & Recommendation

Non-Market Strategy

Page 44: Strategy: Fitness Apparel Industry Analysis & Recommendation

• Be a leader in innovation• More focused acquisitions

New technology

• Partner up with media channels: Discovery & National Geographic

• Emphasis on adventurous lifestyle

Less sports participation

• Other firms such as Adidas & Nike follow consumer preference• Lobby for more PE classes

Fitness clothing going

casual

Changing Trend


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