1. Evaluate Patagonia’s business strategy – what type of strategy is it pursuing and how has it configured its value chain to support this strategy?
Patagonia’s is pursuing a community-focused sustainable strategy, where it focuses on its actions and policies to establish connections with the community, where it takes action to benefit the community as a whole, including other businesses, not only its customers. A Patagonia jacket signals the wearer’s individual association with the community of environmentally concerned hikers. Its initiative of repair, reuse, and recycle makes it highly environmentally-conscious. Patagonia has configured its whole value chain of employees, supply chain, and marketing & sales to move towards a lower carbon footprint, and offering all people attached to its lifecycle environmental benefits for every contribution they make towards caring for nature.
2. How important to Patagonia’s strategy is its environmental position?
Patagonia’s environmental position is very important to its strategy as it is the core of the company, to become highly quality and environmentally committed. The company has created a competitive advantage for itself, creating a niche in this segment, and being a pioneer in some of its initiatives, like leading the industry to move towards organic cotton. It has received free publicity for its actions, which has benefited the company hugely, while saving costs on excess marketing and sales initiatives. This strategy of being open about its practices, builds trust and customer loyalty. The longevity and durability of its products, waste reduction and better supply chain practices all benefit the company’s value proposition.
3. How fast can Patagonia grow? How fast should it grow?
As can be seen in Exhibit 2, as compared to its competitors, Patagonia’s sales though being low, and its gross profit margin is better than other companies and also it’s ROA and ROE is in line with other businesses. So, the company is looking pretty good and would be expected to grow faster with its new Product lifecycle initiative bound to increase its popularity. It should be growing at least more than its nearest competitors to not be pressurized to increase its profit margins and reduce its social and environment initiatives.
4. How might Patagonia’s strategy differ if the company’s stock was publicly held and traded?
If Patagonia was publicly held and traded, than the pressure would be more on profits, than being environmentally conscious. As most of the Fortune 500 companies are moving towards sustainability today, still the focus is on growth. If a company makes recyclable tissues, it encourages customers to increase tissue usage thus absolving both of them of the guilt of high energy consumption. Public companies cannot voluntarily restrict growth to save the planet.
Courtney from Study Moose
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