Contemporary Organization Evaluation- Lululemon Athletica

Contemporary Organization Evaluation- Lululemon Athletica

Lululemon Athletica is an organization that provides athletic apparel for individuals who lead active lifestyles. The company is based in Vancouver, Canada. It has different branches in various countries. The main product lines include shorts, fitness pants, tops, and jackets. All these products are designed for sporting activities, including yoga, gym activities, running, and many more. Lululemon operates in three main segments: corporate and retail, and consumer-to-consumer via the company’s websites, and wholesale. In 2014, the company had 254 outlets in the United States, Australia, New Zealand, and Canada. At the time, the athletic outlet employed at least 8,000 individuals around its global outlets. The company has experienced tremendous growth over the last two decades leading to the establishment of a subsidiary that is designed for the youthful market segment, Ivivva Athletica (Zaratti, 2021). Financial success has been inevitable for Lululemon as the physical expansion continues. Over a period of four years, the company has recorded revenue increments of about $300 million (Lululemon: Encouraging a Healthier Lifestyle, n.d). Such growth, especially during the COVID-19 pandemic, is baffling for an organization that does not offer discounts and sells its products at rates that are higher than the competitors’.

The event that led to the change

The COVID-19 pandemic has tilted most businesses towards the most dreaded direction: loss of revenue, reduction in client base, retrenchment of employees, or closure. Businesses that have managed to stay afloat have enjoyed remarkable profits while experiencing intense changes within the organization. Since its start, businesses have lacked control over the pace of events, the government’s regulations, and the need to comply (McKinsey & Company, 2021). Most businesses were unprepared for such an occurrence, while the rest lacked mechanisms to go through the eventuality. However, some businesses, such as Lululemon, have posted remarkable growth during this period, causing an interest in the manner in which changes were handled. In 2020, Lululemon’s value increased by 40 percent. This value increment occurred despite the extended closure of outlets and quarantine regulations. Online sales in the same year increased by 40 percent. Revenues grew by 22 percent from 2019 and settled at $1.12 billion (Lululemon: Encouraging a Healthier Lifestyle, n.d). The revenue postings were experienced amidst shop closures, stay-at-home directives, work-from-home policies, and diminished outdoor activities, especially in public places. While the company already had an online sales platform, its physical stores still represented a significant source of revenue from walk-in, wholesale, and corporate clients. Such growth evokes an interest in Lululemon’s organizational change process due to the global reduction of business activities and revenues.

Disruptions at Lululemon and strategic actions

When Covid-19 set in, Lululemon encountered various disruptions at its physical stores. First, Lululemon had to shut down its physical stores to comply with the government’s regulations and protect its workforce from the pandemic. While the closure was temporary, Lululemon committed to closing its shops for longer until it was safe to reopen (Lululemon Athletica, 2020). This extended closure led to the loss of sales from the physical outlets. The extended closure was strategic in assuring stakeholders of the company’s commitment to their safety and compliance.

Secondly, the company incurred fixed costs during the entire period when physical stores were shut down. Lululemon’s employees received their full salaries even when shops were closed. To make this possible, the executive team had to forgo 20 percent of their remuneration for three months. The Board of Directors also had to sacrifice their retainers. Lululemon used the cost savings to set up a fund dubbed ‘We Stand Together Fund’. The fund’s purpose was to help employees who were affected severely by the crisis and encountered financial hardships (Lululemon Athletica, 2020).

Thirdly, the supply chain was also affected negatively due to reduced demand for products stocked by Lululemon. The lack of sufficient material for the production of goods crippled activities. Despite the reduced demand for sportswear, Lululemon still incurred the full cost of ordered goods prior to delivery. In cases of canceled orders, the company incurred the full cost of material that the supplier had already purchased. Any delays by vendors were not penalized, and payment terms were not changed. Lululemon still paid the vendors within 30 days (Lululemon Athletica, 2020). These instances demonstrate the extensive expenses that Lululemon incurred during the pandemic. Despite the pandemic’s severity and uncertainty for businesses, Lululemon chose unusual strategies to handle resistance from employees and suppliers during this period.

Effects of the change

The pandemic affected the stakeholders differently. First, the suppliers experienced difficulties as the orders for products dipped. This led to a loss of revenue because Lululemon also reduced its orders to match the demand during this period. The clients who preferred to walk into the stores experienced difficulties purchasing due to the closure of physical stores. The shareholders had fewer dividends as sales reduced, and the company’s resources were committed to more urgent issues such as paying salaries. The employees suffered financial hardship despite the continued remuneration. For instance, the senior team had to accept a reduction of salaries by 20 percent, which affected their financial health. The other employees had a difficult time after the 3 months grace period ended (Lululemon Athletica, 2020).

At the departmental level, Lululemon experienced different changes. First, the company identified a growth opportunity during the crisis. Online sales presented an ideal growth opportunity because people worked from home for an extensive period. It was possible to sell sportswear for physical exercise through the company’s website. The company took advantage and reinforced the digital technologies that were necessary to support online sales. It also strengthened the existing partnerships and increased the customer base. There was a 35 percent increment in online sales during this period (Freund, 2020). This increment in sales confirms that Lululemon handled the pandemic in a strategic manner, leading to continuous growth, an experience that other establishments barely achieved.

Most importantly, the omnichannel client experience improved the traffic and conversion to Lululemon’s website. The omnichannel guest experience allows shoppers to pick up the shopping process from where they left off through the seamless connection of various channels. In addition, Lululemon also provided Points of Sale outside the stores’ entrances. Clients could make purchases from these points. Clients could also chat with the employees online and receive assistance, which led to actual purchases. According to the company’s Chief Financial Officer, Meghan Frank, the omnichannel experience facilitated most of the traffic and conversions on the online platforms. Digital sales accounted for at least 43 percent of the gross revenue that Lululemon received during the third quarter (Kohan, 2020).

Recommendation

Covid-19 caused significant mental distress among individuals due to the disruption of routines. Despite offering financial assistance to employees, the company should set up a framework that addresses the mental aspects that are likely to delay the recovery of individuals, especially those who have been affected directly by the disease. To navigate the emotive issue of mental health, Lululemon should train employees on the various elements that pertain to their mental wellness. This step will combat any mental stigma that may arise due to a lack of awareness. The management should then follow up the training with individual sessions that are offered on a regular basis. Individuals’ mental wellness can be assessed by professionals, and any diagnoses addressed in good time (McKinsey & Company, 2021). This approach should alleviate negative aspects that may arise from mental illness or instability among employees.

References

Freund, J. (2020, May). Lululemon shares hit an all-time high on strength of ‘work at home wear’. Fortune.

Kohan, S. E. (2020). Lululemon Looks Unstoppable As It Delivers 22% Revenue Increase In Q3. Forbes.

Lululemon Athletica. (2020). Lululemon: COVID-19 and our Supply Chain. Retrieved from https://pnimages.lululemon.com/content/dam/lululemon/www-images/Sustainabilty/COVID19_statement_supply%20chain_280520.pdf

Lululemon Athletica. (2020). To our Lululemon community. Retrieved from https://pnimages.lululemon.com/content/dam/lululemon/lululemon_store_closure_communications_update_april2020.pdf

Lululemon: Encouraging a Healthier Lifestyle. (n.d). Retrieved from https://danielsethics.mgt.unm.edu/pdf/lululemon-lifestyle.pdf

McKinsey & Company. (2021, July). COVID-19: Implications for business. Retrieved from McKinsey & Company: https://www.mckinsey.com/business-functions/risk/our-insights/covid-19-implications-for-business#

Zaratti, G. (2021). How Lululemon legitimized leggings as the new business casual.

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In today’s fast-paced and global community, most organizations are faced with constant change. Research contemporary organizations that are currently responding to significant changes within the industry, such as disruptive technology, state, government, or industry regulations, environmental constraints, judicial or legislative rulings, etc.

Contemporary Organization Evaluation- Lululemon Athletica

Choose one organization from your research that has recently responded to major change or is currently responding to change. Write a paper (1,250-1,500 words) discussing how well the organization is responding to the change dynamics. Include the following:

Describe the organization and the change to which it is responding.
Discuss the degree to which the change has been disruptive and how the organization has responded to the dynamics created by this change.
Evaluate the strategies the organization used in its change plan and determine the level of success the organization experienced with the strategies.
Determine the effect the change had on stakeholders, and to what degree stakeholders have resisted. Assess how well stakeholder resistance was addressed.
Evaluate the overall implications the change had on interdepartmental collaboration.
In your opinion, how well did the leaders of the organization respond and prepare for the change? What worked and what did not work with the strategies they implemented?
What modifications would you suggest the leaders of the organization make in order to better address the change dynamics? What additional strategies would you recommend to assist the organization through this change?
Prepare this assignment according to the guidelines found in the APA Style Guide, located in the Student Success Center. An abstract is not required.

This assignment uses a rubric. Please review the rubric prior to beginning the assignment to become familiar with the expectations for successful completion.