-Established in 1972, Patagonia is an outdoor-clothing company known for its green business model. It was founded by Yvon Chouinard who has “ turned his passion for outdoors into an amazing business” -Patagonia represented an “experiment” to challenge conventional wisdom and present a new style of responsible business. Patagonia strived to build the best product, cause no unnecessary harm, and use business to inspire and implement solutions to the environmental crisis. -Patagonia’s product line was composed of 4 main product categories: Sportswear, Technical Outerwear, Technical Knits and Hard Goods. It focused on three criteria’s while developing goods: Quality, Environmental Impact and Innovation. -During the 1980’s, Patagonia grew its sales from $20 million to $100 million and expanded internationally to Europe and Japan. By 2000, it was grossing about $200 million in net sales.
Business Environment: -Patagonia’s competitors in the high end outdoor apparel industry included The North Face, Inc., Marmot Mountain Ltd., Mountain Hardware and ARCTERYX. -Patagonia business philosophy and focus on quality, environmental impact and innovation allowed it to charge prices roughly 20% higher than those of other outdoor apparel and 50% higher than mass market brands for comparable products in both performance wear and sports wear. -As against competitors, it had come up with highly innovative environmental initiatives: Ironclad Guarantee, The Footprint Chronicles initiative and manufacturing cotton products from organically produced cotton. -The environment position of the company used to attract much attention from the media and the public. Not all attention that it received was positive, however.
Challenges at Hand: In 2010, Patagonia was planning to launch a unique environmental initiative called the Product Lifecycle initiative, which constituted Patagonia’s efforts to take responsibility for the products it made. Some executives were not in favor and believed that this initiative would jeopardize the profitability and growth of the business. It would increase Patagonia’s cost by atleast $60,000 in the first year of implementation. It would also require significant investment on capacity and repair centers. However, Patagonia was committed to implementing the initiative. The challenge at hand was that how could Patagonia balance between its mission to help solve the environmental crisis by serving as a model for business and its need to maintain profitability and competitive advantage,
Recommendation Criteria: -Actions are in sync with Patagonia’s mission and philosophy of environmental commitment -Action supplement company’s target goal of 10% annual growth in sales for the next five years
Alternatives at Hand: -Launch the Product Lifecycle initiative -Do not launch the Product Lifecycle Initiative.
Recommendation: I would recommend Patagonia to launch the Product Lifecycle initiative. If they do not launch Product Lifestyle initiative, they might never be completely socially responsible and divert from their mission of environmental commitment. They might save some costs and investment but in the long term they would not be able to reap the benefits which this initiative will bring. Though this initiative could threaten Patagonia’s delicate balancing act between committing to sustainability while achieving 10% revenue growth, this is short term. In the long term, this initiative would go a long way in getting several upsides for the business. Patagonia’s competitive advantage is its innovation and commitment to sustainability.
In the past, company has grown tremendously because of taking decisions, which may be cost incremental and expensive in short term but are in favour of environment. Also, there is always some trade-off between being socially responsible and highly profitable. But what’s more important is that company promotes and does actions in conformity with its mission and values. Also, there is no certainity that this initiative would jeopardize sales and profitability, it is also possible that it does not have any tangible affect on customer’s buying behavior and attract media and public attention to boost image.