Patagonia case study

Topics: Strategic management, Environmentalism, Sustainability Pages: 5 (1795 words) Published: September 10, 2014
Patagonia – A company true to its value
KEY PROBLEM
Patagonia known as the “dirtbag” business initially when it was established in 1972 by Yvon Chouinard is now a multimillion dollar enterprise. A retailer of high-end outdoor clothing is known for its green business model. Environmentalism is at the core of Patagonia and that can be seen in their mission statement where it is committed to achieve three main objectives: Build best products for its customers, cause no unnecessary harm to the environment and use business to give solutions and inspire others to minimize environmental crisis. Patagonia had a philosophy of originating its goal mainly on doing things right for the environment and away from profit. The company does not focus on making huge profits but their main focus is to sustain the core value of the company. Patagonia’s technological innovation and environment conservation initiatives are the two things that differentiate it from its competitors. Patagonia persistently tried to improve the environmental impact of its processes. It has always been an eccentric company, its strive for sustainability has encouraged it to take up a new initiative where it will encourage consumers to buy less of new Patagonia’s apparel and ask them to reduce, repair, reuse & recycle. Therefore the challenge before Patagonia is that how will the company’s intention to encourage consumers to buy less in order to lower the environmental crisis from over consumption, lead to targeted growth rate? Achieving Targeted growth, making profit and sustaining company’s values seem difficult to achieve. RELEVANT THEORY

The case of Patagonia involves the intention of the company to take up a new environmental initiative and target an increase in sales by 10% for the next five years. It has a unique business model which is purely based on the philosophy of making least environmental impact over the entire value chain. The most important part of this business model is the company’s value proposition – Its commitment to environmental initiatives and constant innovations are the two main bases of its differentiation strategy and competitive advantage. With this being the basic business model for Patagonia, it has excellently positioned itself as supplier of high quality products and has also fulfilled its pledge to reduce environmental damage. Keeping this sustainable business model in mind, Patagonia has to initiate the new idea of “buy less campaign” among customers and get the intended increase in sales. In order to do so the management team at Patagonia will have to understand the company’s internal strengths and weaknesses and would also have to analyze the external environment in order to know the threats it faces from its competitors and suppliers. The SWOT analysis of these factors will help Patagonia understand what changes it needs to make internally in order to take this new initiative forward. And also how will the external environment react to those changes. After all above mentioned analysis, Patagonia will have to look at various alternatives to that fit best with environmental crisis serving as a business model and maintaining profitability and growth of the company. ASSESSMENT OF ALTERNATIVES

Patagonia is facing challenges from various retailers and competitors. In order to come out of this situation Patagonia has a few alternatives that can be adopted. Firstly the company has an option of increasing the price of its products in order to offset the imbalance that will be caused due to increase in repair & recycle cost and decrease in sales and profit margin due to the “buy less” initiative. Patagonia pioneers in manufacturing high quality apparel that lasts long. Such products have a right to demand a premium price for their high quality products due to differentiation and value addition of environmental welfare. As the new initiative would increase the costs of the company in order to repair and recycle the used products,...
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