Overview of Geographic, Cultural, Political, Economic, and Legal Risks/Benefits:
Lululemon is one of the premier workout wear companies in the world. What makes Lululemon so sensational is that they are a luxury brand that is truly bright colored and high quality. So far, Lululemon has made many successful attempts as they opened luxurious storefronts all over the globe. Given that Lululemon is a Canadian company, it is quite surprising that they have been so successful within other markets than their home market. In fact, Lululemon has been quite successful in the United States, New Zealand, and Australia, (Lululemon History, 2016). This year, Lululemon is planning on expanding their operations in Hong Kong, Europe, and Singapore, (Lululemon History, 2016). Based on this model, it is highly likely that Lululemon would do quite well in Greece. The reason for this is that there is an enormous sector of the luxury fitness conscious market that is in Greece that would be an ideal target market for Lululemon to pursue. This paper will discuss the probability of Lululemon having a great deal of success in the Greek market.
Greece has a great deal of geographical potential for Lululemon. The reason for this is that Greece is not too far from other markets that Lululemon has targeted to penetrate this year. For example, Lululemon has an entrance plan in place to tackle major European cities in order to capture the European luxury workout wear customer as well, (Lululemon History, 2016). There is a very high potential for Lululemon to also move to wealthy European cities such as: Paris, Vienna, Madrid, London, and many more. Additionally, there is an enormous potential for the market in Germany as well. The reason that these geographic market potentials are relevant to Greece is that once Lululemon moves their prospective operations to these sectors, it will be quite easy for them to also extend their operations to the Greek market as well given that they will only need one prospective distribution center given that Europe is so close together. That being said, with the prestige of Lululemon already being available in major north American cities, there is a high probability that the European consumer has been exposed to this through visits or extended marketing.
Culturally speaking, Lululemon has a great deal of potential in the Greek market due to the fact that they are a producer of yoga wear and yoga is a major part of the culture in Europe due to the high European emphasis on caring for one’s self and exercise. Additionally, the Greek culture is greatly conducive to the bright colors and prints that Lululemon has to offer their customers with their respective clothing lines. The other aspect that Lululemon can bring to Greece is the notion that they are a luxury brand. The Greek consumer is greatly attracted to prestige overall and, thus, this will go quite far for Lululemon in Greece and Europe overall. That being said, Lululemon has to be quite careful of their recent see through pants scandal that transpired in the United States recently. What happened was that Lululemon had a line of defective pants that they were selling without proper quality controls, (Lululemon Athletica’s Projections and Conference Calls, 2016). Lululemon has to be careful about how the Greek culture would react to this because they may view this slip of as tacky or poorly produced for a luxury brand. However, if Lululemon is diligent about mitigating this risk in their marketing, they should have a great deal of success in appealing to the Greek consumer.
Relating to politics, Greece is not a very stable political market for Lululemon to consider entering because it has been experiencing major economic and political problems in recent years. In fact, Greece is one of the economies that has been accredited with bringing down the European Union. The Greek government is not very reliable and also greatly encourages foreign direct investment due to the benefit that it provides to the economy, yet there are not a plethora of protections for the prospective foreign investor. If there was one aspect to be concerned about in Greece, it would have to be related to having a Greek staff or manager involved in the incorporation process of a business. That being said, there is not a high level of risk for Lululemon in this regard given that they can explore other foreign direct investment opportunities that do not involve physically setting up a corporate entity in Greece directly so that they do not have to deal with Greece’s unstable economy by investing heavily within the country.
Since the economic downturn of 2008, the Greek economy has come a long way, yet it is still not at what it was. This is partially due to the fact that the Greek government does not enforced their citizens to pay taxes. What ends up happening is that they government goes not have any capital to keep the country afloat without external help. The Euro is one of the most incredible currencies in the world; however, it is being held up by France and Germany and surely not Greece. Any prospective foreign direct investor that is considering a joint venture or licensing strategy is wise to tread carefully with entering Greece’s market because of the sheer economic risk that currently exists in Greece.
The Greek legal system actually has a great deal of influence from the West, which creates a potential wonderful advantage to the foreign direct investor in fact, there is also a very high level of English spoken in the country with business professionals that is getting better by the day. This is an enormous asset to potential legal disputes that may arise in the process of foreign direct investment in the aspect that Lululemon would not have to worry about being limited by linguistic and legal cultural barriers that can arise in many foreign jurisdictions. That being said, Lululemon would also have the potential to have arbitration clauses in other European powerhouses should a dispute arise such as London and Zurich. This is a great advantage for Lululemon to consider as they consider entering the Greek market.
Country Review of the Market:
There is a plethora of potential for Lululemon to prosper in Greece. That being said, it is essential for Lululemon to start their market entry by having a limited foreign direct investment to start off due to Greece’s economic volatility at the present moment. The reason for this is that many companies invest too much too quickly in order to start off their marketing and operations in a new market. It is because of this that Lululemon needs to put one foot into the market in order to ascertain whether their projections match the actual potential for success within the Greek market.
In this respect, I would propose an entry for Lululemon to start by having storefronts in the wealthier parts of Greece to include ritzy parts of Athens and also resort sectors of the Greek Isles that attract wealthy tourists from all over the globe. Within these sectors, Lululemon would do quite well due to the trendy natures of these areas and their plethora of yoga studios, spas, and high end workout centers that attract both Greece’s and the world’s elite. This would be a good place to test the prospective satellite storefronts to see how they would fare in the Greek market.
Lululemon would conduct a standard marketing campaign at their target luxury consumer by entering into the luxury gyms and supermarkets to attract who they are looking for. Lululemon has an advantage in that their target consumer is a very limited sector of the market and thus, they do not have to appeal to the marketing masses. The pricing model would be identical to how they have priced in Hong Kong, New Zealand, Australia, and Singapore in that they would likely start their pants at the standard $98 per pair and correspond their tops to be priced at $75 prospectively, (Lululemon Athletica’s Industry Overview Financial Conditions and Financial Statements, 2016).
Business Review:
Lululemon is known for their upscale workout wear for both women and men. Even though they are working on their men’s line, Lululemon still has prominence in this sector and their products would be highly marketable in the Greek market. That being said, Lululemon currently competes with Gap, Nike, Adidas, Under Armour, and Uniqlo in Europe, (Lululemon Athletica’s Industry Overview Financial Conditions and Financial Statements, 2016). Even though these other retailers are prospectively a great competitor for Lululemon, they are not catered to the exact target customer of Lululemon with the exception of Under Armour, (Lululemon Athletica’s Industry Overview Financial Conditions and Financial Statements, 2016). The reason that these other companies do not relate to Lululemon is that they are targeting a middle grade customer that both Lululemon and Under Armour do not serve. Even though Under Armour is a similar product catered to a luxury customer, Under Armour is targeted at more of the outdoor customer, that is different than Lululemon’s Starbucks consuming yoga participant wealthy consumer, (Lululemon Athletica’s Industry Overview Financial Conditions and Financial Statements, 2016). In fact, there is no exact equivalent of Lululemon’s status in Greece, which is precisely why they would thrive in their isolated sector of the market.
(Under Armour’s Industry Overview Financial Conditions and Financial Statements Data, 2016).
What is incredible about Lululemon is that their home market is not actually their strongest market, which is quite unusual in the business world. The United States is actually where Lululemon has the majority of their stores, (Lululemon Athletica’s Industry Overview Financial Conditions and Financial Statements, 2016). These corresponding storefronts are one of Lululemon’s main profit sources and what has made them so successful was Lululemon’s isolated market entry strategy in which they target the wealthier areas of United States cities that have the upscale gym client that Lululemon’s products cater to, (Lululemon Athletica’s Industry Overview Financial Conditions and Financial Statements, 2016). This is precisely how Lululemon entered into Australia and New Zealand. Even though their profits fell this year after opening so many storefronts, their profits are projected to come back as the new stores open and have increased revenues, (Lululemon Athletica’s Industry Overview Financial Conditions and Financial Statements, 2016). This is not unusual as a company invests in many new storefronts in foreign markets in one year. Lululemon is unique in that they have zero liabilities, which makes them able to reinvest in their business, (Lululemon Athletica’s Industry Overview Financial Conditions and Financial Statements, 2016). This is precisely why they have been able to open so many storefronts in many foreign markets. In fact, they are also focusing on targeting the European elite for their new strategy and have even entered into Singapore and Hong Kong, (Lululemon Athletica’s Industry Overview Financial Conditions and Financial Statements, 2016). Below pictured is a break down of how Lululemon’s prospective products are divided up:
(Lululemon Athletica’s Industry Overview Financial Conditions and Financial Statements, 2016).
Decision to Conduct International Business in the Country:
Greece presents a fresh market opportunity for Lululemon. That being said, I would tread with caution before entering into the Greek market due to the poor economic and political situation. As with any market strategy in a market that is so different from North America, it is best to not enter in full force without testing the waters first. Many companies do this too quickly and end up losing a great deal of capital. What I would suggest to Lululemon is to utilize their intended distribution channels for their push to get into Europe in the European geographic area in order to get their products to Greece so they do not have to invest in a distribution center right away in Greece physically. This way, they would be able to invest in their storefronts and shipping the products to Greece and see how the marketing and retail goes.
This import/ export strategy would be a good way to avoid the joint venture and licensing strategy that requires Lululemon to have too high of a commitment to the Greek market that they may not prospectively be ready for based on their initial penetration of the market. After one to two years, it is highly recommended that Lululemon consider expanding their storefronts and investing in a distribution center in Greece should the economic and political prospects improve. If they do this, Lululemon will be able to explore other elite Greek Isles in order to reach their target luxury workout wear consumer. That being said, Lululemon would need to carefully evaluate the potential of this market to be conducive to their business model before getting a distribution center in Greece. Lululemon is lucky in that they are already establishing themselves in the European market. This gives Lululemon a significant advantage in that they can invest the least and reap the most benefits of their initial foreign direct investment without relying on too many parties that are outside of their business.
Many companies make a critical error by licensing their products to a local company for production. The reason for this is quality control. When you are dealing with a luxury brand such as Lululemon, there is a certain quality that has to be maintained. Referring back to the example of the see through pants example that occurred within the United States, this transpired due to a lack of quality control. Thus, it is important that there is a proper quality control implemented when penetrating any prospective new market. For Lululemon, there has to be a certain standard maintained if there is going to be a future of the prestige of the brand within a given market.
In Lululemon’s case, when they are potentially debating between the joint venture and licensing strategy, the joint venture aspect will likely be best so that they can ensure that the quality of their brand is in fact maintained. By having a joint venture, Lululemon can implement their brand after their initial launch phase through independent storefronts into having a local distribution center and take the expansion country wide. In Greece, having a local company on the ground that Lululemon can trust and having the cultural expertise would be an enormous asset to Lululemon. However, Lululemon has to ensure that Greece’s economy can within stand this before they deicide to embark upon a joint venture investment strategy there.
In considering both the joint venture and licensing strategy, Lululemon has to be careful that the local firm will not take their technology. Within Europe, there is respect for intellectual property, but Lululemon does have to be quite careful of this so that they are not subject to trade secrets being leaked to counterfeiters or the local company taking over their brand within Greece and the European Union overall. However, there is always a risk of this when entering the new markets, it is likely that Lululemon could be safer if they kept the operations directly related to their business independent of a local subsidiary. If they do this, they will mitigate their risk for any local company to compromise their quality, steal their innovation or reopen a similar brand that can directly compete with them in the Greek or European market overall.
Concluding Remarks:
In the coming years, it will not be surprising to see Lululemon in elite cities all over the world. The reason for this is that they have sensational products that are perfect for their ideal target consumer. Regarding Lululemon’s potential in Greece, based on their success in penetrating the United States, New Zealand, Australia, Hong Kong, Singapore, and the like, Lululemon has a wonderful potential to dip their toes into the Greek market and to see how their products ultimately fare with their target consumer. Lululemon has the perfect position to consider growing their business to luxury markets all over the world and they should absolutely give the Greek luxury consumers a chance.
The only aspects that Lululemon has to consider is how they are going to both enter and maintain their strategy in the Greek market. It is likely that Lululemon is going to be benefited by keeping their operations separate and giving their business a chance to flourish without local involvement. Even though Greece has a great deal of potential down the road, it is arguably not a politically stable market currently. Lululemon would do best by being the sole owner of their brand within Greece and growing it with their own devices as they have in other markets all over the globe.
Works Cited
Lululemon Athletica’s History. (2016). Retrieved from: http://www.lululemon.com/about/history?mnid=ftr;company_history
Lululemon Athletica’s Industry Overview Financial Conditions and Financial Statements. (2016). Retrieved from: http://www.sec.gov/Archives/edgar/data/1397187/000139718716000089/lulu-20160131x10k.htm
Lululemon Athletica’s Projections and Conference Calls. (2016). Retrieved from: http://investor.lululemon.com/?mnid=ftr;investors
Under Armour’s Industry Overview Financial Conditions and Financial Statements Data. (2016). Retrieved from: http://www.sec.gov/Archives/edgar/data/1336917/000133691716000064/ua-20151231x10k.htm
