Lululemon’s International

April 4th 14

Table of Contents

INTRODUCTION 3

COMPANY BACKGROUND 4 COMPANY HISTORY 4CURRENT SITUATION 4GLOBAL PRESENCE & FUTURE PLANS 5CORPORATE CULTURE 6

LULULEMON’S MANAGEMENT PRACTICES 7

2

EMPLOYEE LEVEL 7MANAGERIAL LEVEL 8

DISCUSSION 10 SUGGESTIONS 11

CONCLUSION 12

APPENDIX 13

REFERENCES 16

3

4

Lululemon’s International Affair

Introduction

Chip Wilson founded Lululemon Athletica Inc. in 1998 in

Vancouver. They are a prominent designer and retailer of athletic

apparel, operating primarily in North America. Their product

5

portfolio includes yoga-inspired apparel and accessories,

including athletic pants, shorts, tops and jackets. In the course

of few years the company has become a sensation in North America

and even expanded globally by 2009. The company's branded apparel

is sold in about 218 stores around the world. (Lululemon, 2014)

Lululemon’s products are associated primarily with physical

wellness, but there is an aspect of mental and spiritual wellness6

surrounding their brand name as well.

This paper intends to study Lululemon Athletica to determine

how their corporate culture might affect their international

operations and/or future plans for more global expansion. An

interview with a store manager in Portland has been conducted but

the manager has requested to remain anonymous due to privacy and

corporate non-disclosure concerns. Our paper uses a mix of 7

interview content and secondary sources to analyze the behavior

of Lululemon Inc. We begin by discussing company’s background;

detailing company history, its current situation, and its global

presence & future plans along with its corporate culture. This is

followed by their management practices at both the employee and

managerial level. In the end, the paper sums up with a discussion

section that discusses about the findings. This is followed by 8

the suggestions that Lululemon should incorporate in their

manifesto to be successful in the foreign market.

9

Company Background

Company History

Chip Wilson was a yoga class instructor that saw a potential

niche market for technical athletic wear for women. After the

initial products he designed gained a good reputation, he went a

step further and created Lululemon Athletica in 1998. The first

10

store opened in November of 2000, in Kistilano, BC. The idea

behind this store was to create a community hub; a place where

fitness enthusiast could gather for both equipment and learning.

His vision was to open a store that not only sold the apparel but

also taught the customers a healthy way of living and inspired

them to achieve athletic excellence. They discussed about yoga

but as well healthy diets, cycling and other forms of exercises. 11

The concept gained momentum and the company grew exponentially.

Their focus was to add value to the customer rather than just to

create quality goods. (Lululemon Athletica, 2014)

Current Situation

Lululemon is one of the fastest growing brands in Canada.

Currently the company operates about 218 store locations

12

worldwide with an additional online store. (Kowitt & Leahey,

2013) In 2012, the estimated brand value of the company was at

$3.245 billion, it had increased by about 292% compared to its

value in 2010. In the same year the company was also recognized

as one of the top 10 brands in Canada by brand value.

(Krashinsky, 2012). However, the year 2013 was considered a

challenging year for the company as Lululemon incurred losses of 13

about $67 million. These losses were the result of a production

fault and 17% of their stretchy black yoga pants were recalled

off the shelf. (Hsu, 2013) Despite this minor dip, the company’s

income statement witnessed an upturn in profits later on. As of

February 3, 2013, the company’s profit had increased by 34% to

$762.8 million and revenue increased by 37% to $1.4 billion

compared to the previous year (Clifford, 2013.) These statistical14

numbers depict that the company like other corporations believes

in making profit and desires a steady growth. Furthermore, their

corporate mission “Creating components for people to live longer,

healthier, more fun lives” clearly depicts that their aim is not

to merely earn sound profits; it is also important for them to

provide value to their customers and shareholders. (Lululemon

Athletica, 2014) 15

Global Presence & Future Plans

Lululemon’s corporate practices and ultra modern design have

attracted international markets. The company is planning to add

more products to the men’s division and it plans to launch stand-

alone men’s stores by 2016 and expand their business globally

(Ho, 2013). Currently, Lululemon has flagship stores in Canada,

US, Australia and New Zealand. (Kowitt & Leahey, 2013). In 16

addition to their flagship stores, their products are sold in

multi-brands stores across Europe and Asia. Furthermore, the

company’s online store is ready to ship to countries where there

is no physical presence of the company. The website allows

delivery of their products to the Middle East, Africa and South

America. (Lululemon Athletica, 2013) The company has setup a test

boutique in Hong Kong to witness the reaction of Chinese 17

population in respect to premium yoga apparel and accessories.

(Reuters, 2013) Additionally, the new CEO Laurent Potdevin in an

interview with the ‘Globe and Mail’ indicated that the brand has

to offer more than its core products to flourish. They have to

cater to the seasonal and local needs. The brand has to evolve

constantly to make their global presence worthwhile. Also, he

added that the company has struggled over the past five years to 18

find a suitable place for a permanent store in Hong Kong.

Therefore, the company has to adjust its plan to local

environment to speed up the international growth. (Straus, 2014)

We can extrapolate from these facts state that the company

has a burgeoning international plan and is taking measures to

expand it more aggressively. In addition, our interview described

19

some concerns about the international expansion of the company.

The manager stated that the main challenge for Lululemon to

operate globally would be to expand to those countries only where

yoga culture is prevalent. (See Appendix) This statement seems

valid, as the company exists to sell products based on yoga

culture. Their unique selling point is that they retail clothes

that can be best used while performing yoga exercises. Entering 20

countries where yoga culture is not prevalent might not be in the

best interest of the company altogether.

Corporate Culture

Lululemon’s corporate culture from an outsider outsider’s

perspective can appear to be very cult like. This is because

their orientation is towards fitness and they indulge in the

21

retailing of trendy athletic apparel. Elizabeth Licorish, a

former employee stated “the Lululemon culture consists, on the

surface, of catchy manifestos. Lululemon wants you to know it's

elevating the world from mediocrity to greatness and creating

components for people to live long, healthy and fun lives. But,

dig deeper, and you'll learn about Landmark Forum, the ultra-

secretive, eerily cultish educational series, which Lululemon 22

employees are strongly encouraged to attend. Before you're in

line for Landmark, you're bombarded with Brian Tracy motivational

CDs and a book club that culminates with Atlas Shrugged.”

(Licorish, 2013) In addition, many other former employees agree

with this belief and they further add that if one does not

conform to the company’s ideologies, one gets shunted out of the

group. (Anonymous, 2014). This type of culture can be has both 23

positive and negative aspects. The positive aspect of such a

culture is that it promotes a healthy and active lifestyle to

their employees. In addition, the motivation and positivity

training prepares the employees to take higher-level positions in

the company. According to our interview, the manager states that

the culture in the company is very friendly and it promotes a

very positive and very collective environment. (See Appendix) In24

contrast, the potential dark side of such an environment is that

it focuses too much on well-being and forgets to take a more

pragmatic approach to the rest of the world. The fitness culture

exists mainly in urban areas of developed countries (North

America and Europe), which would present a problem for Lululemon

in countries where fitness is not as much of a cultural

phenomenon. This is evident from the fact that the company 25

struggled for five years to find a permanent store in Hong Kong.

(Straus, 2014)

Lululemon’s Management Practices

Lululemon’s management practices can be observed from both a

general (employee) level and upper (managerial) level.

26

Employee level

The management practices of Lululemon at the employee level

are pretty clear and relatively standard. They hire employees

that fit in to their corporate culture and term their sales

associates “educators”. This is because they have to educate

their customers about well-being and healthy lifestyle in

addition to selling apparel. In general Lululemon recruits people27

that are positive, energetic, upbeat and motivated. Also, because

the company has been built on principles of enlightenment and

self-betterment their employees are expected to be open with

their goals and strive towards a more positive and healthy life

style. (Lieber, 2014) Our interview with the manager of the

Portland store further supports this argument. He states that the

candidates the company hires are athletic individuals who are 28

young and energetic. Their staff is comprised of more girls than

guys; and they are encouraged to participate in yoga and fitness

classes so as to synch in with the corporate culture. (See

Appendix) Furthermore, their interview process is very low

pressure. They usually do group interviews and everyone sits in a

circle on the store floor. The potential candidates are

encouraged to discuss their lives, their future goals (fitness 29

and otherwise), their perception towards the brand in general and

perhaps demonstrate their favorite yoga pose. (Shermack, 2014)

These facts merely depict that their hiring process is pretty

straightforward and they require candidates that already fit-in

with their corporate culture. It is evident from their corporate

mission that the individuals they hire should be young, athletic,

30

optimistic and willing to lead to a healthy and a spiritual

lifestyle because they would fit in the most.

Managerial Level

Our first impression of the management of Lululemon is

unfortunately that they are quite unhelpful and unprofessional.

We approached three different managers in the lower mainland for

31

an interview and all three declined after initially accepting our

request. Our opinion is further supported by the negative views

former employees have postulated about the managers. A former

employee at the guest education center of Lululemon in Burnaby

stated that “the upper management I worked with was super

condescending and rude. Not everyone is like this, and I met Chip

a few times and he was super nice. But my direct supervisor and 32

her cronies were total mean girls.” (Anonymous, 2014) Another

former employee in an online post expressed that the corporate

culture of the company is very unique and positive but the

process by which their managers are enrolled and trained is very

weak and unsettling. He further highlighted that the managers

merely regurgitate the corporate mission without following its

true meaning. (Anonymous, 2014) Furthermore, a former employee 33

added that their management system is indeed flawed. She states

that the open criticism and feedback environment created by the

management puts high pressure on employees. Also, this passive

aggressive way of discussing issues often leads to personal

attacks on perceived weaknesses. (Licorish, 2013)

In our interview, the manager highlighted that they do get

specific management training from the company to maintain 34

consistency amongst managers across stores. Also, the management

duties include sales and working on the floor too. Most

discipline involved telling staff not to check their phones or

not to stand around and talk amongst themselves when the store is

quiet. Furthermore, their duties include encouraging the

employees to work hard. (See Appendix) This specific and

consistency based management training might have made them more 35

synched with the overall corporate culture. But this does lead to

less flexibility in their management style. Hence, the outcome is

the rude behavior that is witnessed by their subordinates.

At the same time, one can say that the former employees are

speaking against the company’s management because of their

personal grudges. In contrast, current employees show a similar

concern regarding management’s uncouth behavior. Current 36

employees complain about favoritism and poor leadership from

management. They described that the higher-level management such

as store managers or regional managers have their personal biases

for some employees in regards to internal promotion. This is very

demoralizing for employees that are actually working hard to

climb up the corporate ladder. (Anonymous, 2014) These kinds of

management practices might lead to a strike in economies where 37

factors like collectivism and intergroup relations are really

strong. Countries like India and China is highly rated on factors

like collectivism and intergroup relations. (Smith et. al., 1996)

Therefore, with its current management practices it will be hard

for the company to make a strong impression in such countries.

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Discussion

Based on the evidences we have gathered so far including the

managerial interview and secondary sources, we have identified

certain challenges Lululemon will face. We are certain that their

international expansion plans will witness impediments while

39

expanding aggressively to those countries that do not have the

similar fitness culture as of North America.

Following are two major challenges that Lululemon will face while

hiring on an international level:

40

1. As the company hires a specific type of athletic person,

places where fitness culture is not so prevalent will

mean a very scarce talent pool

2. Lululemon cultivates a very specific corporate culture

(North American) they could face challenges when

attempting to acclimate employees from national cultures

with values that are directly contradictory. 41

Hofstede studied and postulated theories of divergent

cultures. He identified there are certain salient dimensions that

can be used to generally predict the behavior of different

cultures. One of Schwartz’s dimensions is Self-Enhancement vs.

Self-Transcendence; the former is associated with power and

achievement, the latter with benevolence values. (Smith et. al.,

1996) Lululemon generally promotes more spiritual and benevolent 42

behavior in their employees. They can use studies of salient

cultural dimensions to then identify countries where they will

face greater resistance to their ideology, as some countries’

national culture is not aligned with their corporate culture.

43

Suggestions

Currently, Lululemon provides only self-help material to their

employees. These materials in it are not adequate to train their

employees properly.

There are a few suggestions for Lululemon to avoid or to minimize

these challenges:

44

1. Try and relax the cult-like corporate culture, as in some

countries it might be too casual or too flashy.

2. They should try to mandate some exercise classes (specially

yoga) for their employees, which are currently optional.

This will help to maintain a consistency in the employee

training.

45

According to, Laura Klauberg, Vice-president of Global Brand and

Community, Lululemon is attempting to sell a lifestyle. She

described the image of the brand as very positive and inspiring.

Furthermore, she states that the brand “inspires the way they

(people) live their life. It’s about being healthy and living a

great life … It’s the clothes, but it’s more than the clothes.

It’s a lifestyle brand and the clothes are the catalyst to 46

changing people’s lives.” (Klauberg, 2013). Since the company has

little hope of changing national values (and behavior) in order

to suit that ideal lifestyle their focus should be on making sure

that Lululemon becomes more sensitive to the global marketplace

and adjusts their offerings accordingly whilst still maintaining

their corporate mission statement (elevating the world from

mediocrity to greatness). We wholly agree with the new CEO’s view47

that the company has to act locally to become global. (Straus,

2014)

Conclusion

Lululemon’s greatest challenge to overcome is its own

restrictive dogma. As it is represented now Lululemon comes off

as an elitist and inflexible workplace (though albeit one with a 48

positive and uplifting ideology). Operating on a global scale

means a complete know-how of the target market, it’s culture, its

policies and the national’s orientation towards the products. The

company has no alternate than to add/delete products to their

product mix so as to adhere to local standards and norms. At the

same time, maintaining the spirit of their brand. (Francis,

2014). Lululemon has to be more flexible in terms of the 49

management practices and corporate culture in order to adjust to

the local culture of dissimilar countries.

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Appendix

Interview with US Manager (Prefers to remain anonymous) from

Portland Pearl District Lululemon Athletica.

How do you find the overall culture of your store?

51

Oh, it's great, all the staff are friends, they love to hang out

with each other after work they do lots of stuff together.

Do the close friendships ever cause friction, say when staff gets into fights with each

other?

I don't really think they get into fights, working here is group 52

comission so there isn't anything for them to argue about really.

So Lululemon is commission based?

Yeah, about half of sales staff pay gets to be commission,

especially at a busy store like this.

53

What are some of your duties?

Well first I'm responsible for sales, all the staff has to work

on the floor at least one day a week so I fold clothes and help

customers just like everyone else. After that most of what I do

is schedule and making sure everyone is pulling their weight.

54

Do you have to discipline employees often?

Well I have to remind them to not look at their cellphones pretty

often or to stand around just talking when the store is quiet but

that's about it.

How is your staff mix? How many girls’ vs. guys, ages and races?55

I don't really know about races, it's a pretty decent mix. I have

more girls than guys and everyone is mid or early twenties.

Do you have different management practices for girls vs guys?

No, everyone has to work the same and know everything about all 56

the products, everyone has to be able to work in any section.

Do you find that certain staff needs a different approach when being trained?

We hire everyone so they will be able to fit right in, so we do

hire a specific kind of person, obviously we want athletic people

to work in our stores because they know what people need, we also57

want staff to participate in yoga and fitness classes.

So your staff all participates in fitness classes.

Well it’s not mandatory, but it is encouraged.

Do you get a lot of freedom in your management style?58

Well not really, we get training from the company for how to be

managers, they do want us to do things a specific way for

consistency.

What do you think would be the biggest challenge for Lululemon to operate

internationally?

59

Well I think the stores would need to be in countries that

actually do yoga in the first place.

Ok, thank you.

60

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