This company produces high-performance, but fully non- gizzards for the environment clothes, while trying to address to all other businesses the message that there can be a profitable industry with environmental friendliness at the same time. The customer segment for this company are people between 18-35 who love sport, nature, CEO-friendly prod cuts and probably their willingness-to-pay more money is high, because of the high-quality of the clothes.
Besides, the company always invested in innovations that benefits customers and make their satisfaction much higher. Distribution channels of this com panty are: large department stores, its Web tie, catalog and wholesale business. As to consider internal consistency, the company’s goal is to use resources such as organic cotton and recycling in such technological way, so that it could cause no harm for the environment, In reality, these techniques bring the company more attraction and therefore more earnings. The other goal of the company is the simplicity.
In spite of the fact that the company is private and can play like other businesses, it has minimum bureaucracy and even gives huge donations every year. There is a monopolistic competition on the market with a lot of direct competitors against Patagonia, such as The North Face Inc Marmot Mountain Ltd. , Mountain Hardware, Racketeer and many other high-performance and high quality apparel companies. These brands are producing non-differentiated products, i. E. Approximately the same high-end outdoor clothes, which are intended for active lifestyle usage.
Due to a big number of substitutes, such high-end apparel always needed innovation technologies, otherwise these products could become commodities. These facts increased the internal rivalry. Besides, switching costs are high, because its very easy for consumers o choose between all the brands, so the bargaining power of the buyers is high. On the contrary, suppliers have weak bargaining power, because a lot of companies are commoditized and besides that there are difficulties of switching to another supplier according to specific requirements of materials needed.
There are obstacles to entry the market, however the threat of new companies to enter this segment of market is high due to the reason that there are already several huge organizations in this industry and other famous brands also try to compete on this market making their sport clothes. Patagonians strategy To start with the explanation of Patagonians Business Strategy it is important to state that Patagonia had a specific business philosophy in conducting its activities. Cinchonas always claimed that he wouldn’t like to adhere to “normal business rules”.
Normal rules in this context mean focusing solely on maximizing profits. He strongly believed that doing business included much more environmental, social and economic responsibility than most of apparel companies worldwide did. Moreover, Chou inward was inveterate climber and e brought some lessons from his passionate activity into his business. He told that if he had to be a businessman, he would conduct it as risk-freely as possible. In that context we see connections to the environmental problems which companies cause on everyday basis, but only a few of them really care about it.
He wanted to change the whole attitude of doing business emphasizing on environmental crisis which sooner or later mankind will have to face and resolve. Regardless common business views, Patagonia keeps to its main mission – to build the best product without causing unnecessary arm to the environment, but also expand its vision worldwide to create and implement environmental solutions. That’s why the company positioned itself as an environmentally friendly, high-quality and innovative apparel manufacturer, which strives to high level of corporate social responsibility.
In other words they implemented specific environmental differentiation strategy. The company had huge investments in R activities and decided to use organic raw materials for its production. It caused refusal to apply pesticides and synthetic fertilizers and created a competitive differentiation amongst its competitors (Columbia, Nikkei, Timberland and so on). This approach was however more costly but anyway it reflected the core of Patagonians business insights. Another off the wall decision was applying the Product Life Cycle Initiative.
Company made a lot of efforts to produce high performance, simple and repairable products according to 4 main initiatives components: “Reduce, Repair, Reuse and Recycle”. Patagonia took responsibility “from birth to death and then beyond death to rebirth” by: encouraging consumers to buy less clothes but higher quality; sending old garments for repair and reuse; introducing an online market for sale, exchange and donation. On the other hand environmental features which were applied in Patagonia were not always financially effective.
This fact provoked tensions within the company because growth and profitability still mattered. If they wanted to survive and be respected, they had no option but to be gainful. Nevertheless the company solved this problem by setting higher prices in comparison to rivals in exchange of CEO-friendly products. Also more customers were willing to buy their goods due to the company’s values and aims -? be responsible for our environment. Another important fact about Patagonia was utilizing 1% of its revenues for the Planet issues.
They were one of the first companies dedicating considerable financial resources for environmental tasks and furthermore made sufficient efforts to spread this trend to other market players which resulted in 64% growth rate of such contributions. Patagonia inspired a lot of producers to adoption environmental practices and gave advices to such companies as Nikkei and Gap to use organic cotton as well. From that time on, more and more companies were following this new ecological trend. The company was continuing its way of breaking old stereotypes connected with business’ irresponsibility to the environment.
They did manage to not only implement best ecological practices, but also spread it and create a new attractive trend which nowadays is being supported by more and more companies whole over the world. In the following part we will try to generalize overview of the company’s strategic opportunities and determine possible ways of improvement. The strategy for Patagonia for the next 5-10 years For developing possible strategies, first of all, we need to determine existing trenches and weaknesses.