Question

Cultural Concerns in International Expansion: lululemon athletica

1.The Canadian-based company lululemon athletica has successfully entered international markets. Its expansion so far has been to countries that share a common language and similar cultures, including the United States, Australia, and New Zealand. The company has been apprehensive about expanding to markets with different cultural attitudes. The leadership is now prepared for this next international expansion and has decided to enter the Chinese market.

You have been asked to be a part of the team developing the international strategy for the Chinese market. First, determine which approach to international strategy will best serve lululemon and be responsive to the company’s fears about cultural sensitivity.

a. Transnational strategy

b. Global strategy

2. Export vs. Wholly Owned Subsidiary

You have decided to pursue a transnational strategy in order to maximize lululemon’s local responsiveness for Chinese consumers. The key to profitability in the Chinese market will be lululemon’s ability to leverage its network of suppliers to maintain high-quality products, even if the overall pricing structure must be lower to appeal to the Chinese consumer. The entry mode into China that will best accomplish this is through:

a. Exporting from an existing network of suppliers

b. Establishing a wholly owned subsidiary that includes manufacturing, marketing, and retail operations

3. Exporting

You have chosen a transnational strategy so that your company can adapt to the needs of individual markets—in this case, China. To introduce your product into the Chinese market, you believe exporting offers the best mode of entry. Exporting will give you the greatest amount of control over the quality of your products and help you control costs because the products will be coming from your existing suppliers. However, you have not addressed any concerns that the team has raised about the liability of foreignness and the ability of the lululemon brand to connect with customers with such a different cultural experience.

Which products should lululemon export to China?

a. The current product offering that is available in all lululemon retail locations

b. A customized product line aimed at Chinese customers

Answer 1

1.

Transnational strategy

In a global strategy approach the company focuses on standardization and efficiency. This means selling the same product everywhere on the globe. Example companies can be Microsoft that sells the same software all over the world. A mult-idomestic strategy focuses on the local demands and the market. It prioritizes local preferences over their global agenda. For example, Unilever has certain brands that are specific to countries. This strategy is the most sensitive approach to the culture of the country. However, given the two choices transnational strategy provides the better option. In transnational strategy some standardization may be upheld along with some localization. For example, McDonalds follows same operational procedure in many countries. However, their product offerings cater to the local taste. This is why if Lulu Lemon wants to be responsive to local culture, they should use transnational strategy.

2.

Exporting from an existing network of suppliers

Since the focus is on quality products, the best approach is to use the existing suppliers and export the product to China. Lulu Lemon could likely set up a sales office or a subsidiary to merely receive the product and distribute it in China. Creating a new subsidiary with new manufacturing facility in china may lower the quality of the product but also lower cost. If cost was the concern then this would have been a better option in the long run. However, with quality focus, it is better to reduce risk and use the existing network of suppliers.

3.

A customized product line aimed at Chinese customers

At the very beginning we decided that we will be sensitive to local culture. The way to do it is to bring about product customization. While we use our own system to manufacture (global strategy portion) we can customize the products (multi-domestic strategy portion) to provide a mix in our strategy. This will be the best transnational approach.