Challenges of Entering the Italian Market
Entering new markets is commonly associated with various challenges: economic, political, cultural, etc. One of the most critical obstacles that a company should consider in the frame of extension is the competitive environment. As such, a new entrant needs to offer some substantial benefits to gain its competitive advantage (Zimmerman and Blythe 124). Lululemon specializes in athletic apparel and other sports-related products. According to the expert opinion, this industry is highly competitive due to the growing interest inactive lifestyle and sports (Kell par. 1). Therefore, it is proposed to examine both direct and indirect competition factors that Lululemon should consider while entering the Italian market.
Competition Challenges
First and foremost, it is essential to target the main competitors that can challenge Lululemon’s performance in the Italian market. To do it, it is necessary to differentiate between direct and indirect forms of competition. As such, direct competition takes place between those companies that sell similar products and target the same audience (Greene 111). From this perspective, Lululemon’s direct competitors are companies that specialize in athletic apparel such as Nike, and Adidas. Both companies are powerful market players with a recognizable reputation within this industry.
Indirect competitors, in their turn, are those who sell similar products even though it is not their major specialization (Greene 111). From this perspective, Lululemon’s main indirect competitors are Gucci, Calvin Klein, and Zegna. These are native Italian brands the main specialization of which is luxury designer clothes. Meanwhile, they likewise offer some sportswear collections that turn them into Lululemon’s competitors.
Direct Competition
Direct competition is highly severe since Nike and Adidas have already established effective operation patterns in Italy. Thus, for instance, Nike uses a multi-channel approach to supply its goods to the Italian market. Its major distribution channels are traditional supply chains and websites. The latter proves to be particularly effective showing 50% growth annually. It is likewise a skillful user of modern technologies. As such, its ID service ensures productive marketing and client targeting (De Marco et al. 263). Therefore, it might be recommended that Lululemon examines Nike’s practices to adopt the best experience of operating in the Italian market.
The competition between Nike and its main rival Adidas is very severe. Recent research has revealed that the former has a significant competitive advantage. As such, one of the most consistent revenue sources that Nike benefits from is contracts with football teams. From this perspective, Adidas shows a less productive performance (Thomasson par. 7).
In the frame of analyzing direct competition, it is essential to take into account such factors as brand awareness. As such, it is evident that Lululemon’s brand awareness is lower than that its rivals enjoy. On the face of it, it might appear to be a disadvantage. In the meantime, practice shows that less recognizable brands have substantial chances to surpass their popular competitors. Thus, for instance, Under Armour is a relatively new player in the sportswear market. Nevertheless, it has already managed to surpass the leaders showing exclusively high sales both in apparel and footwear sectors (Hendriksz par. 1). This example has two implications for Lululemon that is planning an entry into the Italian market. First, it might be interpreted as a positive trend showing that a company can take advantage of the fact that its brand is not as recognizable as those of its rivals. As such, customers are likely to show an increased interest in a new entrant. From a different perspective, this example shows that the scope of Lululemon’s competitors in the Italian market does not limit to industry leaders such as Nike and Adidas but likewise includes less visible brands as Under Armour. Therefore, it might be recommended that the company pays due regard to Under Armour’s practices since they appear to operate under equal conditions.
Indirect Competition
Indirect competition in the Italian sportswear market is less severe than direct. As such, Lululemon will have to compete with both national luxury brands such as Gucci, Calvin Klein and Zegma and with mass-market brands such as Benetton and H&M. The former group represents a few threats since it occupies a separate market niche and pursues a different pricing strategy.
The latter group should be considered more critically. Thus, the Italian market is domestic for Benetton so that the company’s experience of operating there is highly substantial. Additionally, sportswear is a new line it has launched this year. Before the release of this collection, Benetton never produced any sport-related products. As such, the customer’s interest in the new product line is naturally high. Moreover, the company exhibits a pro-active attitude towards social life in Italy. Thus, it participates in the national running race organization every year which serves as substantial support to its public image. Therefore, it might be recommended that Lululemon focuses on mass-market companies while evaluating the indirect competition environment in the Italian market and, meanwhile, examines their successful practices to adopt the experience.
Works Cited
De Marco, Marco, Dov Te’eni, Valentina Albano, and Stefano Za. Information Systems: Crossroads for Organization, Management, Accounting and Engineering, London: Springer Science & Business Media, 2012. Print.
Greene, Cynthia. Entrepreneurship: Ideas in Action, Boston, Massachusetts: Cengage Learning, 2016. Print.
Hendriksz, Vivian. Why Under Armour is surpassing Adidas and catching up to Nike 2015. Web.
It’s Benetton’s Turn to Launch A Sport Collection 2016. Web.
Kell, John. Athletic Apparel: Outperforming the Competition in 2014. 2014. Web.
Thomasson, Emma. Nike Has Most Europe Soccer Deals, Adidas The Most Lucrative: Study. 2014. Web.
Zimmerman, Alan, and Jim Blythe. Business to Business Marketing Management: A Global Perspective, London: Routledge, 2013. Print.