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 - – wage bills are increasing, talent flight as more people leaving formal jobs, increasing inequality as vast percentage of new income is going to the top 1%, technology disruption, geopolitical disruptions, cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings,
competitive advantages are harder to sustain because of technology dispersion, digital marketing is dominated by two big players Facebook and Google, 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 -
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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 -
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Patagonia: Encouraging Customers to Buy Used Clothing (B), in the dynamic environment Chouinard Patagonia has struggled to respond to the nimble upstart competition. Chouinard Patagonia has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to strategic competitive environment developments
– As Patagonia: Encouraging Customers to Buy Used Clothing (B) 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.
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.
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.
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 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.
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.
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.
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.
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.
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 -
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 (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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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 -
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.
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.
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 (B), 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 .
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.
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.
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.
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.
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 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.
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.
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.
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.
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.
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.
