Patagonia: Encouraging Customers to Buy Used Clothing (A) SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Patagonia: Encouraging Customers to Buy Used Clothing (A)
How do you make money when you tell your customers 'don't buy our stuff unless you really need it?'" This was the question that Yvon Chouinard, founder of the clothing company Patagonia, asked himself as he considered developing a new partnership with eBay in which customers would buy and sell used Patagonia gear on eBay rather than buy it new. As he considered this new partnership, Chouinard would have to balance the environmental priorities upon which Patagonia was founded with its financial well-being. This is a two-part case. Part A presents the decision which Chouinard is considering, while Part B presents the decision that Chouinard chose. The A and B cases were written by graduate students Allyson Johnson, Courtney Lee, Steven Rippberger, and Morgane Treanton, under the supervision of Professor Andrew Hoffman.
Swot Analysis of "Patagonia: Encouraging Customers to Buy Used Clothing (A)" written by Andrew Hoffman includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Chouinard Patagonia facing as an external strategic factors. Some of the topics covered in Patagonia: Encouraging Customers to Buy Used Clothing (A) case study are - Strategic Management Strategies, Marketing, Social responsibility and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Patagonia: Encouraging Customers to Buy Used Clothing (A) casestudy better are - – increasing transportation and logistics costs, digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions, increasing household debt because of falling income levels, technology disruption, increasing commodity prices, supply chains are disrupted by pandemic ,
increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, etc
Introduction to SWOT Analysis of Patagonia: Encouraging Customers to Buy Used Clothing (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Patagonia: Encouraging Customers to Buy Used Clothing (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Chouinard Patagonia, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Chouinard Patagonia operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Patagonia: Encouraging Customers to Buy Used Clothing (A) can be done for the following purposes –
1. Strategic planning using facts provided in Patagonia: Encouraging Customers to Buy Used Clothing (A) case study
2. Improving business portfolio management of Chouinard Patagonia
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Chouinard Patagonia
Strengths Patagonia: Encouraging Customers to Buy Used Clothing (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Chouinard Patagonia in Patagonia: Encouraging Customers to Buy Used Clothing (A) Harvard Business Review case study are -
Training and development
– Chouinard Patagonia has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Patagonia: Encouraging Customers to Buy Used Clothing (A) Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Low bargaining power of suppliers
– Suppliers of Chouinard Patagonia in the sector have low bargaining power. Patagonia: Encouraging Customers to Buy Used Clothing (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Chouinard Patagonia to manage not only supply disruptions but also source products at highly competitive prices.
Analytics focus
– Chouinard Patagonia is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Andrew Hoffman can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
High switching costs
– The high switching costs that Chouinard Patagonia has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Successful track record of launching new products
– Chouinard Patagonia has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Chouinard Patagonia has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
High brand equity
– Chouinard Patagonia has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Chouinard Patagonia to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of Chouinard Patagonia
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Chouinard Patagonia does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Superior customer experience
– The customer experience strategy of Chouinard Patagonia in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to lead change in Strategy & Execution field
– Chouinard Patagonia is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Chouinard Patagonia in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Chouinard Patagonia digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Chouinard Patagonia has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Diverse revenue streams
– Chouinard Patagonia is present in almost all the verticals within the industry. This has provided firm in Patagonia: Encouraging Customers to Buy Used Clothing (A) case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Ability to recruit top talent
– Chouinard Patagonia is one of the leading recruiters in the industry. Managers in the Patagonia: Encouraging Customers to Buy Used Clothing (A) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses Patagonia: Encouraging Customers to Buy Used Clothing (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Patagonia: Encouraging Customers to Buy Used Clothing (A) are -
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Patagonia: Encouraging Customers to Buy Used Clothing (A), is just above the industry average. Chouinard Patagonia needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Skills based hiring
– The stress on hiring functional specialists at Chouinard Patagonia has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
High bargaining power of channel partners
– Because of the regulatory requirements, Andrew Hoffman suggests that, Chouinard Patagonia is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
High operating costs
– Compare to the competitors, firm in the HBR case study Patagonia: Encouraging Customers to Buy Used Clothing (A) has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Chouinard Patagonia 's lucrative customers.
Aligning sales with marketing
– It come across in the case study Patagonia: Encouraging Customers to Buy Used Clothing (A) that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Patagonia: Encouraging Customers to Buy Used Clothing (A) can leverage the sales team experience to cultivate customer relationships as Chouinard Patagonia is planning to shift buying processes online.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Patagonia: Encouraging Customers to Buy Used Clothing (A), it seems that the employees of Chouinard Patagonia don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Need for greater diversity
– Chouinard Patagonia has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Slow to strategic competitive environment developments
– As Patagonia: Encouraging Customers to Buy Used Clothing (A) HBR case study mentions - Chouinard Patagonia takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Slow decision making process
– As mentioned earlier in the report, Chouinard Patagonia has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Chouinard Patagonia even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Chouinard Patagonia supply chain. Even after few cautionary changes mentioned in the HBR case study - Patagonia: Encouraging Customers to Buy Used Clothing (A), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Chouinard Patagonia vulnerable to further global disruptions in South East Asia.
Low market penetration in new markets
– Outside its home market of Chouinard Patagonia, firm in the HBR case study Patagonia: Encouraging Customers to Buy Used Clothing (A) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Opportunities Patagonia: Encouraging Customers to Buy Used Clothing (A) | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Patagonia: Encouraging Customers to Buy Used Clothing (A) are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Chouinard Patagonia can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Developing new processes and practices
– Chouinard Patagonia can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Chouinard Patagonia to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Chouinard Patagonia to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Chouinard Patagonia to hire the very best people irrespective of their geographical location.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Chouinard Patagonia can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Chouinard Patagonia can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Building a culture of innovation
– managers at Chouinard Patagonia can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
Manufacturing automation
– Chouinard Patagonia can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Leveraging digital technologies
– Chouinard Patagonia can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Buying journey improvements
– Chouinard Patagonia can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Patagonia: Encouraging Customers to Buy Used Clothing (A) suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Learning at scale
– Online learning technologies has now opened space for Chouinard Patagonia to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Chouinard Patagonia can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Better consumer reach
– The expansion of the 5G network will help Chouinard Patagonia to increase its market reach. Chouinard Patagonia will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Creating value in data economy
– The success of analytics program of Chouinard Patagonia has opened avenues for new revenue streams for the organization in the industry. This can help Chouinard Patagonia to build a more holistic ecosystem as suggested in the Patagonia: Encouraging Customers to Buy Used Clothing (A) case study. Chouinard Patagonia can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Threats Patagonia: Encouraging Customers to Buy Used Clothing (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Patagonia: Encouraging Customers to Buy Used Clothing (A) are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Chouinard Patagonia in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Chouinard Patagonia can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Shortening product life cycle
– it is one of the major threat that Chouinard Patagonia is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Chouinard Patagonia can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Patagonia: Encouraging Customers to Buy Used Clothing (A) .
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Chouinard Patagonia in the Strategy & Execution sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– Chouinard Patagonia has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Chouinard Patagonia needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Chouinard Patagonia business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– Chouinard Patagonia needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Chouinard Patagonia can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Consumer confidence and its impact on Chouinard Patagonia demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Chouinard Patagonia with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Chouinard Patagonia.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Increasing wage structure of Chouinard Patagonia
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Chouinard Patagonia.
Weighted SWOT Analysis of Patagonia: Encouraging Customers to Buy Used Clothing (A) Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Patagonia: Encouraging Customers to Buy Used Clothing (A) needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Patagonia: Encouraging Customers to Buy Used Clothing (A) is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Patagonia: Encouraging Customers to Buy Used Clothing (A) is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Patagonia: Encouraging Customers to Buy Used Clothing (A) is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Chouinard Patagonia needs to make to build a sustainable competitive advantage.