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 - – central banks are concerned over increasing inflation, wage bills are increasing, challanges to central banks by blockchain based private currencies, increasing transportation and logistics costs, banking and financial system is disrupted by Bitcoin and other crypto currencies, geopolitical disruptions, increasing energy prices,
talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion, 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 -
Low bargaining power of suppliers
– Suppliers of Chouinard Patagonia in the sector have low bargaining power. Patagonia: Encouraging Customers to Buy Used Clothing (B) 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.
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 (B) 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.
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 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.
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.
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.
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.
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.
Strong track record of project management
– Chouinard Patagonia is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
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.
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 (B) - 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 (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.
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 (B), 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 (B) 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.
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.
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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Patagonia: Encouraging Customers to Buy Used Clothing (B), 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.
Lack of clear differentiation of Chouinard Patagonia products
– To increase the profitability and margins on the products, Chouinard Patagonia needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
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.
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.
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 -
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.
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.
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.
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.
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.
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.
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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Chouinard Patagonia can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Patagonia: Encouraging Customers to Buy Used Clothing (B), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
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.
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.
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.
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 -
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.
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.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Chouinard Patagonia will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.