Lulu - A Different Kind of Cost Leadership

A cost leadership business strategy “focuses on gaining advantages by reducing its economic costs below all of its competitors” (Barney 159).  In the apparel industry, all competitors attempt to gain this advantage by outsourcing manufacturing overseas (Soni).  However, as one of the higher priced brands in the industry, Lulu can’t compete on the cost leadership platform in the traditional sense, simply because Lulu will most likely never offer prices that are lower than Lucy, Adidas, Reebok, etc.

 While Barney discusses the importance of both market economies and diseconomies, Lulu employs a slightly different strategy – leveraging a “relatively high inventory turnover ratio compared to rival firms…[implying] that either the stock sells out really fast in its stores or the inventory levels are kept low deliberately” (Soni).  Thus, while consumer costs may not be the lowest in comparison to competitors, Lulu is finding ways to find cost advantages within its actual strategy.

Works Cited:

Soni, P. (2014, December 15). Company Overview: An Investor's Key Guide to Lululemon Athletica. Retrieved March 7, 2015, from http://marketrealist.com/2014/12/lululemons-profit-margins-trumping-companys-peers/