Lululemon Case Study

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Lululemon Athletica is a popular “lifestyle brand” that didn’t have the risk management to back up what occurred to them in 2013. This company was founded in 1998, by Dennis “Chip” Wilson. In 2008, Christine Day, joined the company as CEO, who pushed the strategy of “planned scarcity”. This strategy boosted demand by intentionally keeping their key products in short supply. They became so successful, and were able to charge prices as high as $100 for a standard pair of yoga pants. They were able to rank third in retail in the United States after Apple and Tiffany. Lululemon also was known for its limited number of suppliers, for example, their luon fabric is supplied by a single manufacturer in Taiwan. Those fibers used in the luon fabric were …show more content…
CEO Christine Day came out to clarify that this problem that the consumers were experiencing were due to inadequate testing of the product. The company then announced several steps they would take in order to improve product quality, improve testing, leadership and organizational changes, and greater oversight of suppliers. The company estimated that the black Luon yoga pants would be fully stocked within 90 days, and that their CPO, Sheree Waterson, would be stepping down. In June 2013, Lululemon restocked the Luon yoga pants, and announced that they put the fabric through a total of 15 tests. They also announced changes in shape of the pattern to ensure that the fabric will fit the body and not be stretched beyond its capability. That same month, Christine Day, announced her resignation as CEO. Stocks fell 17.5% on the news, causing to wipe out the company $2 billion in market value in one trading session. Shortly after, Wall Street Journal, reported that Chairman Chip Wilson sold $50 million in Lululemon stock through prearranged 10b5-1 trading plans the same day that Day informed the board of her

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