Patagonia: Encouraging Customers to Buy Used Clothing (B) 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 (B)
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. This case presents the decision about a potential partnership with eBay that Yvon Chouinard, founder of the clothing company Patagonia, chose to pursue. 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 (B)" 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 (B) 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 (B) casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs, cloud computing is disrupting traditional business models, increasing energy prices, technology disruption, central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%,
digital marketing is dominated by two big players Facebook and Google, there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of Patagonia: Encouraging Customers to Buy Used Clothing (B)
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 (B) 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 (B) can be done for the following purposes –
1. Strategic planning using facts provided in Patagonia: Encouraging Customers to Buy Used Clothing (B) 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 (B) | 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 (B) Harvard Business Review case study are -
Learning organization
- Chouinard Patagonia is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Chouinard Patagonia is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Patagonia: Encouraging Customers to Buy Used Clothing (B) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy in the Patagonia: Encouraging Customers to Buy Used Clothing (B) Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
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 (B) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Highly skilled collaborators
– Chouinard Patagonia has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Patagonia: Encouraging Customers to Buy Used Clothing (B) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the Chouinard Patagonia are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
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.
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.
Sustainable margins compare to other players in Strategy & Execution industry
– Patagonia: Encouraging Customers to Buy Used Clothing (B) firm has clearly differentiated products in the market place. This has enabled Chouinard Patagonia to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Chouinard Patagonia to invest into research and development (R&D) and innovation.
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 (B) 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.
Weaknesses Patagonia: Encouraging Customers to Buy Used Clothing (B) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Patagonia: Encouraging Customers to Buy Used Clothing (B) are -
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Patagonia: Encouraging Customers to Buy Used Clothing (B), 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Chouinard Patagonia is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Patagonia: Encouraging Customers to Buy Used Clothing (B) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
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.
Interest costs
– Compare to the competition, Chouinard Patagonia has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
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.
Products dominated business model
– Even though Chouinard Patagonia has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Patagonia: Encouraging Customers to Buy Used Clothing (B) should strive to include more intangible value offerings along with its core products and services.
Capital Spending Reduction
– Even during the low interest decade, Chouinard Patagonia has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
High operating costs
– Compare to the competitors, firm in the HBR case study Patagonia: Encouraging Customers to Buy Used Clothing (B) 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.
No frontier risks strategy
– After analyzing the HBR case study Patagonia: Encouraging Customers to Buy Used Clothing (B), it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Increasing silos among functional specialists
– The organizational structure of Chouinard Patagonia is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Chouinard Patagonia needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Chouinard Patagonia to focus more on services rather than just following the product oriented approach.
High cash cycle compare to competitors
Chouinard Patagonia has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Opportunities Patagonia: Encouraging Customers to Buy Used Clothing (B) | 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 (B) 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Chouinard Patagonia can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Chouinard Patagonia in the consumer business. Now Chouinard Patagonia can target international markets with far fewer capital restrictions requirements than the existing system.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Chouinard Patagonia in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Chouinard Patagonia can use these opportunities to build new business models that can help the communities that Chouinard Patagonia operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
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 (B) case study. Chouinard Patagonia can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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.
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.
Using analytics as competitive advantage
– Chouinard Patagonia has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Patagonia: Encouraging Customers to Buy Used Clothing (B) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Chouinard Patagonia to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Chouinard Patagonia is facing challenges because of the dominance of functional experts in the organization. Patagonia: Encouraging Customers to Buy Used Clothing (B) case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Chouinard Patagonia can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats Patagonia: Encouraging Customers to Buy Used Clothing (B) 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 (B) are -
High dependence on third party suppliers
– Chouinard Patagonia high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
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.
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.
Regulatory challenges
– Chouinard Patagonia needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
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.
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.
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.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
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.
Stagnating economy with rate increase
– Chouinard Patagonia can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
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.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Chouinard Patagonia needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
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 (B) 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 (B) 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 (B) 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 (B) 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 (B) 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.
