Faculty of Business, Economics and Statistics
Winter Semester 2014
Patagonia and the outdoor apparel industry
Vienna 5th of December
Analysis of outdoor apparel industry
Outdoor apparel is a rapidly growing segment of the global sport clothes market, which develops technologically in an ongoing way. One of the leaders on this market is an american apparel brand Patagonia, which was established in 1972. This company produces high-performance, but fully non-hazardous for the environment clothes, while trying to address to all other businesses the message that there can be a profitable industry with environmental friendliness at the same time. The customer segment for this company are people between 18-35 who love sport, nature, eco-friendly products and probably their willingness-to-pay more money is high, because of the high-quality of the clothes. Besides, the company always invested in innovations that benefits customers and make their satisfaction much higher. Distribution channels of this company are: large department stores, its Web site, catalog and wholesale business. As to consider internal consistency, the company’s goal is to use resources such as organic cotton and recycling in such technological way, so that it could cause no harm for the environment. In reality, these techniques bring the company more attraction and therefore more earnings. The other goal of the company is the simplicity. In spite of the fact that the company is private and can play like other businesses, it has minimum bureaucracy and even gives huge donations every year. There is a monopolistic competition on the market with a lot of direct competitors against Patagonia, such as The North Face Inc., Marmot Mountain Ltd., Mountain Hardware, Arc’teryx and many other high-performance and high-quality apparel companies. These brands are producing non-differentiated products, i.e. approximately the same high-end outdoor clothes, which are intended for active lifestyle usage. Due to a big number of substitutes, such high-end apparel always needed innovation technologies, otherwise these products could become commodities. These facts increased the internal rivalry. Besides, switching costs are high, because it’s very easy for consumers to choose between all the brands, so the bargaining power of the buyers is high. On the contrary, suppliers have weak bargaining power, because a lot of companies are commoditized and besides that there are difficulties of switching to another supplier according to specific requirements of materials needed. There are obstacles to entry the market, however the threat of new companies to enter this segment of market is high due to the reason that there are already several huge organizations in this industry and other famous brands also try to compete on this market making their sport clothes. Patagonia’s strategy
To start with the explanation of Patagonia’s Business Strategy it is important to state that Patagonia had a specific business philosophy in conducting its activities. Chouinard always claimed that he wouldn’t like to adhere to “normal business rules”. Normal rules in this context mean focusing solely on maximizing profits. He strongly believed that doing business included much more environmental, social and economic responsibility than most of apparel companies worldwide did. Moreover, Chouinard was inveterate climber and he brought some lessons from his passionate activity into his business. He told that if he had to be a businessman, he would conduct it as risk-freely as possible. In that context we see connections to the environmental problems which companies cause on everyday basis, but only a few of them really care about it. He wanted to change the whole attitude of doing business emphasizing on environmental crisis which sooner or later mankind will have to face and resolve. Regardless common business views, Patagonia keeps...
Please join StudyMode to read the full document