What strategic capability does Lululemon lack, impacting its market diversification?

The strategic capability that Lululemon lacks, which affects its market diversification, is strong design diversification into various sporting activities. Lululemon is primarily known for its yoga-inspired athletic apparel and has built a strong brand identity around this niche. However, this focus can limit its scalability into broader segments of the athletic market, such as high-performance gear for sports like running, cycling, or team sports.

While the brand has made some efforts to diversify its product lines, the lack of a robust and well-rounded design strategy for a wider range of sporting activities prevents it from appealing to a broader customer base that engages in diverse forms of exercise. This limitation can hinder Lululemon's ability to compete with brands that offer more extensive collections tailored to various sports, thus impacting its growth in new markets and customer segments.

In contrast, the other options reflect capabilities where Lululemon has shown strength or is actively developing. For instance, the company has made significant strides in effective online marketing strategies and has built a notable retail network, which supports its existing product lines. Additionally, innovative sustainable production methods have been a focus area, as Lululemon emphasizes environmental responsibility in its operations.