Lululemon PESTEL Analysis | Business Teacher
Political activity in the external environment influences Lululemon’s ability to operate efficiently. Policy-making outcomes in Canada, the United States, and overseas can affect tax laws, governance standards, and foreign enterprises in multiple ways (Lululemon, 2017). Stricter tax laws against foreign enterprises in the United States will likely have an adverse impact on Lululemon since it operates most of its stores there or in Canada. Alternatively, Lululemon’s business activities abroad are also subject to the rule-making of local political leaders (Bertels, Koen, & Elsum, 2015). In certain countries where Lululemon operates, political corruption could become a problem since there are fewer opportunities for recourse in the regions. As such, Lululemon should temper its expansion efforts with risk management and scenario planning strategies to account for known and hypothetical political threats.
Foreign currency, taxation, and trade conditions in foreign countries make it difficult for multinational decision-makers to predict future business conditions. Should nations where Lululemon operates enact disadvantageous tariffs, embargoes, or trade restrictions, the models Lululemon depended on for its expansion strategy could become obsolete (Lululemon, 2017). Likewise, Lululemon stores in countries with worsening economic conditions may have to close if doing business there becomes unprofitable or too risky.
Lululemon depends on third-parties for the manufacturing and supply needs of its athletic apparel. By association, should these companies engage in unethical business practices or skimp on quality guidelines, these acts will reflect poorly on the Lululemon brand (Vallester, Lindgreen, & Maon, 2012). The use of foreign labour and manufacturing resources among multinational enterprises can become complicated, where firms that violate principles of corporate social responsibility experience backlash from consumers often (Nam et al., 2017). For quite a few multinational corporations, these issues are controllable, although this is not the case for Lululemon since it is far-removed from its suppliers and has few supplier alternatives.
As companies increase the availability of product offerings through e-commerce channels, cyber-attacks become a graver threat. Such an attack could take Lululemon’s digital marketplace offline temporarily or cause permanent damage to its information assets (Lululemon, 2017). Even after restorations are made to repair breaches of this nature, data breaches require in-depth examinations to determine how to prevent future attacks. Consequently, the employment of additional staff and procurement of new resources to control for technological threats is liable to generate additional expenses.
Environmental forces could disrupt Lululemon directly or via one of its key suppliers. Natural disasters in South East Asia and South Asia especially a concern because 82% of the Lululemon products come from manufacturing in these regions (Lululemon, 2017). Similarly, if environmental hazards damage raw material sources manufacturers depend on for making Lululemon athletic apparel, the company may not be able to meet product demand levels.
If data breaches occur and experts determine Lululemon violated confidentiality or privacy laws through flaws in its information security protocols, it could face serious litigation and financial penalties. Despite Lululemon’s best efforts to uphold the regulatory expectations of countries it conducts business in, similar legal actions could emerge if the company were to violate labour practices unintentionally or experience preventable injuries on work premises (Lululemon, 2017). Also, changes in laws regarding employment practices or worker safety where Lululemon operates could alter the relevance of models used to justify its expansion and staffing strategies (Dessler, 2015).
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