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 to its main mission – to build the best product without causing unnecessary harm to the environment, but also expand its vision worldwide to create and implement environmental solutions. That’s why the company positioned itself as an environmentally friendly, high-quality and innovative apparel manufacturer, which strived to high level of corporate social responsibility. In other words they implemented specific environmental differentiation strategy. The company had huge investments in R&D activities and decided to use organic raw materials for its production. It caused refusal to apply pesticides and synthetic fertilizers and created a competitive differentiation amongst its competitors (Columbia, Nike, Timberland and so on).
This approach was however more costly but anyway it reflected the core of Patagonia’s business insights. Another off the wall decision was applying the Product Life Cycle Initiative. Company made a lot of efforts to produce high performance, simple and repairable products according to 4 main initiative’s components: “Reduce, Repair, Reuse and Recycle”. Patagonia took responsibility “from birth to death and then beyond death to rebirth” by: encouraging consumers to buy less clothes but higher quality; sending old garments for repair and reuse;
introducing an online market for sale, exchange and donation. On the other hand environmental features which were applied in Patagonia were not always financially effective. This fact provoked tensions within the company because growth and profitability still mattered. If they wanted to survive and be respected, they had no option but to be gainful. Nevertheless the company solved this problem by setting higher prices in comparison to rivals in exchange of eco-friendly products. Also more customers were willing to buy their goods due to the company’s values and aims – be responsible for our environment. Another important fact about Patagonia was utilizing 1% of its revenues for the Planet issues.
They were one of the first companies dedicating considerable financial resources for environmental tasks and furthermore made sufficient efforts to spread this trend to other market players which resulted in 64% growth rate of such contributions. Patagonia inspired a lot of producers to adoption environmental practices and gave advices to such companies as Nike and Gap to use organic cotton as well. From that time on, more and more companies were following this new ecological trend. The company was continuing its way of breaking old stereotypes connected with business’ irresponsibility to the environment. They did manage to not only implement best ecological practices, but also spread it and create a new attractive trend which nowadays is being supported by more and more companies whole over the world. In the following part we will try to generalize overview of the company’s strategic opportunities and determine possible ways of improvement. The strategy for Patagonia for the next 5-10 years
For developing possible strategies, first of all, we need to determine existing strengths and weaknesses. One would think what can be better those strategies and those facts, which we found in case: a company with a new vision of business making, which willingly try to spread the idea of saving environment during producing processes, donates 1% its revenue to environmental cases. Patagonia even showed to the audience the reasons why we should not buy their products. On the web-site everyone can find info about what is good and what is bad in their product, for example water consumption for one jacket and what does it mean in general for world. From this point of view we would like to take into account all strategies, strengths and other factors to develop strategies for Patagonia. One of their strengths is of course their environmental reputation, which allows them to find new target audience.
Against unwillingness to use their environmental position for marketing add, they established such niche of companies, which really care about environment and irreparable harm for the nature. Patagonia participates in many social programs, but it can be one strategy for company to make people more conscious in understanding importance of this goal, to make people more responsible for their consumption, choices, to motivate them to act ‘smarter’. For example, to provide more information worldwide about their products, how do they produce them, why are they doing these things. The main goal of Patagonia, as it was mentioned in case and in other sources, which we found, is to achieve 10% annual growth in sales for the next 5 years. To achieve a success in this Patagonia needs to take them beyond the existing as a mere clothing brand and redefine their position into the lifestyle category. As a development for a company for the nearest future we can recommend to establish a new line of clothes, for instance with one of famous couturier, who is also interested in environmental protection for spreading their position not only in the world of sport, but also into new markets, such as fashion.
It can be also a sport line, but made by someone influential within fashion world. As we noticed, one of the weaknesses of Patagonia is limited product line, so it would be a good move to improve this situation. The weaknesses of the company are also low customers’ accessibility and limited suppliers. Very important is becoming more global company and in this situation they need to expand into new markets, especially in Europe and in those regions, where people are socially oriented and are interested in buying products with longer product lifecycle. For this purpose they have to make sure they understand each region’s business environment, appropriate distribution channels, etc. Also they need to keep the same policy about employees. That is one of the most important reasons of their success on the world stage. Company should not forget what the main ‘engine’ of their progress is.
Their strength is of course low employee turnover. So some additional programs for employees will motivate them for more effective work, to design and invent new technologies and new possible strategies of development for the company As a simultaneous step we recommend to untwist the new App Yerdle, which allows reducing the number of new items purchased by 25 percent. Yardle is a kind of swap market, where one can buy or sell clothes or similar things, which they don’t use anymore. But the main currency here is not money (dollars or euro), but rather yerdle credits. The people who sell something get yerdle points, which then can be used for buying other stuff. It’s one of the core missions of Patagonia – to make lifecycle of product longer.
For the further years we also recommend tight collaboration with government. As it is already known, the human impact on the nature is huge. Especially, when we are talking about industries, we can assume that harm of production is irreparable. So that is a good and useful reason for cooperation between state and private company to design and implement the joint project to spread the idea of safety environmental production process. Patagonia has a lot to do, but this could be just a beginning for them. They should improve their sustainability. Conclusion
A unique set of values, high level of CSR and innovative character of business strategy allowed Patagonia to become well-known, profitable and respected brand within the apparel industry. Their willing is to encourage customers to buy less products but with higher quality, repair and recycle clothes as much as possible. They transformed their eco-views into the popular trend and reminded to all industry members that they are not alone on this planet and they have to be more responsible to our only home – Earth.