Republic of the Philippines

PATAGONIA
CASE STUDY NO.15

Problem Diagnosis
            Patagonia Company is the producer of the high quality garments which
are environmentally friendly for commanding significant price premiums from the
JESSA MARIE D. LANCETA
BS. INDUSTRIAL ENGINEERING
 Republic of the Philippines
customers. The company has established a strong environmental
stance in the industry and has maintained significant growth in its
gross profit margin as compared to its competitors. The company
was now looking to analyze and assess a new radical environmental initiative
called as the Product Lifecycle Initiative. Under this initiative, the company
would take the responsibility of the product from birth to death and beyond
death to rebirth of its products. Under this initiative, the company would form a
mutual agreement with its customers for repairing, reducing, reusing and
recycling the company’s products. This case emphasizes on evaluating the
strategic fit of this initiative with the current mission and strategy of Patagonia.
Case Analysis
            The case analysis has been performed by evaluating, assessing and
analyzing a range of different areas. However, first we begin with the strategic
audit of the company.
Strategy Audit of Patagonia Company (Question 1)
            A full Strategy Audit has been performed for analyzing the strategy and
business model of Patagonia along with evaluation of its long term
sustainability.
Current Goals
            The current goals of Patagonia are being profitable, achieving
sustainable growth and minimization of the ecological expenses which forms the
basis of its business model. The company emphasizes on increasing the
productivity of natural capital by making minimum amount of environmental
impact along its entire supply chain.
Value Proposition of Patagonia
            Sustainability is the value proposition of the company which lies at the
center of the business model of Patagonia. Sustainability at Patagonia acts as
the primary source of the basis of company’s differentiation strategy and source
of its competitive advantage. In order to differentiate its strategic stance, the
company has always produced superior quality products along with the
continued involvement of the company in environmental initiatives to reduce its
impact on the environment.
Business & Corporate Level Strategy Evaluation
            A focused differentiation strategy is used by the company where the
company focuses on a narrow segment of the customers who are willing to pay
a premium price. Innovation, environmental impact and quality helped the
company to charge 20% higher prices as compared to competitors. On a
corporate level, the company operates as a single business company and
serves only the high end outdoor apparel market. The business is not diversified
but diversification is still displayed in the numerous environmental initiatives and
product lines of Patagonia.
VRIO Analysis

JESSA MARIE D. LANCETA

BS. INDUSTRIAL ENGINEERING
 Republic of the Philippines
Valuable: Commitment of 1% for the planet, Product Life Cycle
Initiative, Organic Cotton
Rare: Leader for industry shift and Pioneer of organic cotton. The
company is leader in the field of sustainability and recycling which also donates
revenues to the environmental organizations worldwide.
Imitation Costs: The 20% stake of the company was risked on organics and
the costs of organic cotton triple the price of conventional cotton. Company also
invests $3 million annually on innovation and $60,000 for recycling initiative
costs.
Organized to Capture Value: The goal of company is to raise recycling ratio
from 65% to 90% for all products. The company also sold 8% more as
compared to competitors with its organic products.
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REFERENCE:

https://www.thecasesolutions.com/patagonia-case-analysis-69424

JESSA MARIE D. LANCETA

BS. INDUSTRIAL ENGINEERING