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 energy prices, central banks are concerned over increasing inflation, geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google, increasing government debt because of Covid-19 spendings, supply chains are disrupted by pandemic , challanges to central banks by blockchain based private currencies,
there is backlash against globalization, there is increasing trade war between United States & China, 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 -
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.
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.
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.
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 (A) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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 (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
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.
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.
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.
Sustainable margins compare to other players in Strategy & Execution industry
– Patagonia: Encouraging Customers to Buy Used Clothing (A) 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 (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.
Effective Research and Development (R&D)
– Chouinard Patagonia has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Patagonia: Encouraging Customers to Buy Used Clothing (A) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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 -
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 (A) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Workers concerns about automation
– As automation is fast increasing in the segment, Chouinard Patagonia needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
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.
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.
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.
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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Patagonia: Encouraging Customers to Buy Used Clothing (A) HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Chouinard Patagonia has relatively successful track record of launching new products.
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.
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.
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.
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.
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 -
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.
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.
Loyalty marketing
– Chouinard Patagonia has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, 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 (A) - 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.
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.
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.
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.
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.
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.
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.
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.
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.
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 -
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Patagonia: Encouraging Customers to Buy Used Clothing (A), Chouinard Patagonia may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
