Case Study Description of Patagonia's Sustainability Strategy: Don't Buy Our Products
In 2005, Patagonia launched the Common Threads Recycling Program. The goal was to reduce the number of products Patagonia customers purchased through a two-fold effort. The first part was to encourage customers to fix damaged clothing. Patagonia began publishing do-it-yourself repair guides to assist customers in repairing their clothing. To provide an alternative for customers who were unable or unwilling to repair their clothing themselves, Patagonia charged an affordable fee to have garments shipped to their repair facility. The second aspect of the Common Threads program was to create a second-hand market for Patagonia garments that did not fit or that were no longer worn. Patagonia collaborated with eBay to develop a storefront and also created an online marketplace on its main website. Patagonia also offered to cover the shipping costs for garments that were beyond repair, which Patagonia would then break down and repurpose. To promote its Common Threads initiative, Patagonia created "Worn Wear," a program that highlights thousands of videos and pictures from customers around the globe who treasure their worn, patched-up Patagonia garments with pride. While most companies would encourage customers to repeat their purchases, Patagonia prides itself and its customers on waste-free purchases. Patagonia's next step was to launch a campaign in 2011 to dissuade customers from purchasing clothing that they did not really need. On the busiest weekend for retailers in the US, a 2011 New York Times ad from Patagonia featured a picture of one of Patagonia's highest grossing fleece jackets below the words: "DON'T BUY THIS JACKET." Underneath was a detailed description that defended Patagonia's rationale based on the negative environmental impacts caused by consumerism. Despite Patagonia's efforts, sales increased by approximately 30% in the nine months following the ad. The case concludes with the business dilemma facing Chouinard: What should Patagonia do?
Swot Analysis of "Patagonia's Sustainability Strategy: Don't Buy Our Products" written by Francisco Szekely, Zahir Dossa includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Patagonia Patagonia's facing as an external strategic factors. Some of the topics covered in Patagonia's Sustainability Strategy: Don't Buy Our Products case study are - Strategic Management Strategies, Transparency and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Patagonia's Sustainability Strategy: Don't Buy Our Products casestudy better are - – technology disruption, increasing commodity prices, increasing energy prices, increasing government debt because of Covid-19 spendings, there is increasing trade war between United States & China, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels,
increasing transportation and logistics costs, talent flight as more people leaving formal jobs, etc
Introduction to SWOT Analysis of Patagonia's Sustainability Strategy: Don't Buy Our Products
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Patagonia's Sustainability Strategy: Don't Buy Our Products case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Patagonia Patagonia's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Patagonia Patagonia's 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's Sustainability Strategy: Don't Buy Our Products can be done for the following purposes –
1. Strategic planning using facts provided in Patagonia's Sustainability Strategy: Don't Buy Our Products case study
2. Improving business portfolio management of Patagonia Patagonia's
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Patagonia Patagonia's
Strengths Patagonia's Sustainability Strategy: Don't Buy Our Products | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Patagonia Patagonia's in Patagonia's Sustainability Strategy: Don't Buy Our Products Harvard Business Review case study are -
Analytics focus
– Patagonia Patagonia's 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 Francisco Szekely, Zahir Dossa 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.
Highly skilled collaborators
– Patagonia Patagonia's 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's Sustainability Strategy: Don't Buy Our Products HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Training and development
– Patagonia Patagonia's has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Patagonia's Sustainability Strategy: Don't Buy Our Products 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.
Digital Transformation in Leadership & Managing People segment
- digital transformation varies from industry to industry. For Patagonia Patagonia's digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Patagonia Patagonia's 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.
Effective Research and Development (R&D)
– Patagonia Patagonia's 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's Sustainability Strategy: Don't Buy Our Products - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Diverse revenue streams
– Patagonia Patagonia's is present in almost all the verticals within the industry. This has provided firm in Patagonia's Sustainability Strategy: Don't Buy Our Products 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.
Cross disciplinary teams
– Horizontal connected teams at the Patagonia Patagonia's 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.
Operational resilience
– The operational resilience strategy in the Patagonia's Sustainability Strategy: Don't Buy Our Products 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.
Superior customer experience
– The customer experience strategy of Patagonia Patagonia's in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Sustainable margins compare to other players in Leadership & Managing People industry
– Patagonia's Sustainability Strategy: Don't Buy Our Products firm has clearly differentiated products in the market place. This has enabled Patagonia Patagonia's to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Patagonia Patagonia's to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– Patagonia Patagonia's has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Patagonia Patagonia's 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.
Learning organization
- Patagonia Patagonia's 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 Patagonia Patagonia's is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Patagonia's Sustainability Strategy: Don't Buy Our Products Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Weaknesses Patagonia's Sustainability Strategy: Don't Buy Our Products | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Patagonia's Sustainability Strategy: Don't Buy Our Products are -
Capital Spending Reduction
– Even during the low interest decade, Patagonia Patagonia's 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 dependence on star products
– The top 2 products and services of the firm as mentioned in the Patagonia's Sustainability Strategy: Don't Buy Our Products 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 Patagonia Patagonia's has relatively successful track record of launching new products.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Patagonia's Sustainability Strategy: Don't Buy Our Products, is just above the industry average. Patagonia Patagonia's 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.
Products dominated business model
– Even though Patagonia Patagonia's 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's Sustainability Strategy: Don't Buy Our Products should strive to include more intangible value offerings along with its core products and services.
Interest costs
– Compare to the competition, Patagonia Patagonia's 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Patagonia's Sustainability Strategy: Don't Buy Our Products, in the dynamic environment Patagonia Patagonia's has struggled to respond to the nimble upstart competition. Patagonia Patagonia's has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High cash cycle compare to competitors
Patagonia Patagonia's 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's Sustainability Strategy: Don't Buy Our Products, it seems that the employees of Patagonia Patagonia's 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's Sustainability Strategy: Don't Buy Our Products HBR case study mentions - Patagonia Patagonia's takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Patagonia Patagonia's is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Patagonia's Sustainability Strategy: Don't Buy Our Products can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Increasing silos among functional specialists
– The organizational structure of Patagonia Patagonia's is dominated by functional specialists. It is not different from other players in the Leadership & Managing People segment. Patagonia Patagonia's needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Patagonia Patagonia's to focus more on services rather than just following the product oriented approach.
Opportunities Patagonia's Sustainability Strategy: Don't Buy Our Products | 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's Sustainability Strategy: Don't Buy Our Products are -
Buying journey improvements
– Patagonia Patagonia's can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Patagonia's Sustainability Strategy: Don't Buy Our Products suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Learning at scale
– Online learning technologies has now opened space for Patagonia Patagonia's 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.
Leveraging digital technologies
– Patagonia Patagonia's 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.
Better consumer reach
– The expansion of the 5G network will help Patagonia Patagonia's to increase its market reach. Patagonia Patagonia's 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.
Developing new processes and practices
– Patagonia Patagonia's can develop new processes and procedures in Leadership & Managing People 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
– Patagonia Patagonia's 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's Sustainability Strategy: Don't Buy Our Products - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Patagonia Patagonia's to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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. Patagonia Patagonia's can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Patagonia Patagonia's can use these opportunities to build new business models that can help the communities that Patagonia Patagonia's operates in. Secondly it can use opportunities from government spending in Leadership & Managing People sector.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Leadership & Managing People industry, but it has also influenced the consumer preferences. Patagonia Patagonia's can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Manufacturing automation
– Patagonia Patagonia's can use the latest technology developments to improve its manufacturing and designing process in Leadership & Managing People 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.
Building a culture of innovation
– managers at Patagonia Patagonia's 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 Leadership & Managing People segment.
Creating value in data economy
– The success of analytics program of Patagonia Patagonia's has opened avenues for new revenue streams for the organization in the industry. This can help Patagonia Patagonia's to build a more holistic ecosystem as suggested in the Patagonia's Sustainability Strategy: Don't Buy Our Products case study. Patagonia Patagonia's can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Patagonia Patagonia's in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Leadership & Managing People segment, and it will provide faster access to the consumers.
Threats Patagonia's Sustainability Strategy: Don't Buy Our Products External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Patagonia's Sustainability Strategy: Don't Buy Our Products are -
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 Patagonia Patagonia's business can come under increasing regulations regarding data privacy, data security, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Patagonia Patagonia's with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Stagnating economy with rate increase
– Patagonia Patagonia's 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.
Increasing wage structure of Patagonia Patagonia's
– 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 Patagonia Patagonia's.
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 Patagonia Patagonia's in the Leadership & Managing People sector and impact the bottomline of the organization.
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Patagonia Patagonia's 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. Patagonia Patagonia's needs to understand the core reasons impacting the Leadership & Managing People industry. This will help it in building a better workplace.
Consumer confidence and its impact on Patagonia Patagonia's 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.
Environmental challenges
– Patagonia Patagonia's 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. Patagonia Patagonia's can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
Regulatory challenges
– Patagonia Patagonia's 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 Leadership & Managing People industry regulations.
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.
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 Patagonia Patagonia's.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Patagonia Patagonia's in the Leadership & Managing People industry. The Leadership & Managing People 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.
Weighted SWOT Analysis of Patagonia's Sustainability Strategy: Don't Buy Our Products 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's Sustainability Strategy: Don't Buy Our Products 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's Sustainability Strategy: Don't Buy Our Products 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's Sustainability Strategy: Don't Buy Our Products 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's Sustainability Strategy: Don't Buy Our Products 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 Patagonia Patagonia's needs to make to build a sustainable competitive advantage.