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COMPETITIVE ADVANTAGE

Patagonia: Competitive Advantage

Pacific Coast Time

College of Integrative Sciences and Arts, Arizona State University

OGL 355: Leading Organizational Innovation and Change

Dr. B

November 11 , 2020
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COMPETITIVE ADVANTAGE

Patagonia: Competitive Advantage

Patagonia has been turning profits year after year for decades. According to Investopedia

author, Poonkulali Thangavelu, as of 2020, Patagonia is worth one billion dollars and profits

over 400 million annually (Coulter, 2013). Patagonia has operated on the idea that it can make

more money by making less. Meaning, make more money by making less of an impact on their

and our environment. This has become one of Patagonia’s primary competitive advantages.

However, this is not Patagonia’s only competitive advantage. Business success requires a

cocktail of competitive advantages paired with the proper climate to produce success;

specifically, the kind of long-term success that Patagonia has shown. So, how did Patagonia

create their competitive advantages and how can they maintain them? To answer these all-

important questions, we can observe and analyze Patagonia’s competitive advantages from

multiple angles but first, we must identify what competitive advantage is and within what

frameworks it is comprehended. 

Competitive Advantage Is…

Competitive advantage can be defined as the process by which a company stands out

from its competitors. It is primarily categorized in one of three ways: I/O, RBV, or guerilla.

Simplified, competitive advantage is what makes a business's product more attractive to the

consumer than its competitors. Competitive advantages are conceptualized in one of the three

formerly mentioned viewpoints. We will briefly define the three competitive advantage

viewpoints and then discuss which one of these three viewpoints is most advantageous to

Patagonia’s success and why. Then, we will conclude with what we believe is Patagonia’s

greatest competitive advantage moving forward. 

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First, the I/O view focuses on how the industry is structured, and “how these influence

competitive advantage” (Coulter, 2013). What is known about the I/O viewpoint primarily comes

from Michael Porter’s Five Forces. Porter believes it is necessary to “determine the average

profitability of an industry, which in turn influences the profitability of firms within the industry”

(Coulter, 2013). This is an advantage because it helps business decision-makers make proper

decisions. After all, they are analyzing what makes the industry attractive to consumers (Coulter,

2013). Next, there is the resource-based view (RBV) that suggests that a company’s resources

are the key to a competitive advantage. The idea of this view is that it is a company’s resources

that develop its competitive advantage. Lastly, there is the guerilla point of view which involves

the idea that an organization's competitive advantage operates like a revolving door. In other

words, a company’s competitive advantage is in constant motion and requires constant

adjustments within the organization to be maintained. Of the three primary frameworks, we

believe that Patagonia has primarily observed RBV as its greatest competitive advantage. We

will specifically discuss how Patagonia has used its company's resource allocation as its

competitive advantage. 

Competitive Advantage and POV

Patagonia’s greatest resource is its reputation. The brand’s reputation is based on its

ethics and values and is the driving force behind the brand. It has produced strong loyalty from

their customers. Patagonia focuses on protecting the planet and our environment, which draws

the attention and support of a large number of clients around the world. This effort has given

them an advantage within the eco-friendly community. For example, one way Patagonia

practices what it preaches is that “All of its cottons is certified organic by the Global Organic

Textile Standard (GOTS), and it is bluesign® certified for some of its fabrics. A high proportion
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of its materials are made from recycled fabrics, including polyester, nylon, and wool. Patagonia

belongs to both the Sustainable Apparel Coalition and 1% For The Planet. It rejects fast fashion

by creating high-quality, long-lasting products, and offers a repair and reuse program” (Wolfe,

2019). From being in control of the sourcing of the different textiles that their products are made

to having a role in extending the lifetime of their products, Patagonia reinforces their brand

reputation twofold by staying focused on the environment and the impact its products can have.

Another example of how Patagonia focuses on the entire manufacturing process and its

environmental responsibility can be found on their website. Patagonia reports that “We recycle

used plastic bottles, unusable manufacturing waste and worn-out garments (including our own)

into polyester fibers to produce clothing. We use recycled polyester in many of our products,

including hard shells, boardshorts, fleece, and Capilene® baselayers.” From start to finish,

Patagonia places a huge amount of focus and energy into maintaining its brand. Not only

focusing on looking good but to live up to their ethical standards and values which concretes

their reputation and position as an admirable company.

Rationale

When looking at how Patagonia holds their advantage over the marketplace, one must

first look at competitors in the same market, namely The North Face who is another outdoor

clothing brand that features similar items to Patagonia. The North Face is a well-recognized

brand in its own right. However, they use their resources quite differently compared to

Patagonia. The North Face works to provide quality outdoor clothing while constantly working

to innovate the products they provide to their consumers. The North Face also spends more of its

resources on advertisements while also receiving more publicity from pop culture due to the

collaborations with other brands they have participated in. One of these collaborations is with the
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brand Supreme which has its roots as a high-end skateboarding brand (2020). As such, we can

assume that The North Face leans towards the I/O and guerilla viewpoints of competitive

advantage. 

Although other companies such as The North Face provide similar products to Patagonia,

it is the philosophies within the company that truly sets Patagonia apart from the competition. As

formerly mentioned, Patagonia takes a strong stance on preserving and restoring the natural

environment. They proudly advertise how they donate 1% of their profit to foundations working

to protect the environment. They also make the location of labor and material resources readily

available to the public to practice accountability. Therefore, Patagonia only uses fair labor

locations and follows strict company guidelines when deciding on their suppliers. As for their

material resources, they work to only use materials that are sustainable in efforts to lower their

effect on the environment.

Patagonia’s strategy has proven successful as people are becoming more environmentally

conscious. Interestingly enough, this just happens to be where American culture is going.

Patagonia has not changed its values, but they are highlighted amid this new cultural shift. The

North Face also has similar views on the environment but they, instead, work to use their

resources toward advertisements and collaborations. 

While the outdoor wear industry has experienced exponential growth over the years and

fostered new innovative organizations that battle for market share within the industry, Patagonia

has maintained a competitive advantage that other organizations have yet to duplicate. By using

its unique resources and processes, the billion-dollar organization has managed to maintain a

unique market share that is critical to protect ensure viability. From Patagonia’s perspective,
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investing in resources that fundamentally change how we approach the production of outerwear

is essential to promoting a healthier environment. Investing in resources that negate obsolescence

is also beneficial to the environment and customers alike.

When compared to other organizations in the industry, Patagonia stands alone with its

unique resources and culture. For example, “68% of Patagonia’s line uses recycled material

when producing their products” (Enviro, 2020). “100% of their virgin down is certified to the

Advanced Global Traceable Down standard” (Enviro, 2020). If your product is damaged,

Patagonia will repair or replace your product free of charge. The environmentally conscious

culture and resources they utilize are undeniably unique. As if it were not enough, they also

promote a culture of social responsibility. Patagonia reveals that “83% of their line is Fair Trade

Certified sewn” (Enviro, 2020). The choice to submerge themselves in social accountability

speaks volumes of their true concern as an organization. They participate in Fair Trade because

“apparel workers are among the lowest-paid employees worldwide” (Enviro, 2020). Utilizing

Fair Trade practices allow workers to be paid a more decent wage which is in alignment with

Patagonia’s humanitarian efforts.

We have established that Patagonia uses its resources to leverage and maintain its

competitive advantage. We see how the RBV point of view can garner a loyal customer base and

grow the customer base. Organizations like The North Face have recently attempted to become

more socially and environmentally responsible, but do not go nearly as far as Patagonia. The

North Face also stumbled with a failed and somewhat underhanded attempt at a guerilla

marketing strategy that attempted to manipulate Wikipedia into posting its photos on their site

for free (Mervosh, 2019). Those kinds of tactics make customers question the integrity and

principles an organization embraces. The North Face’s attempt to gain a better position than its
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external forces shows an I/O point of view while attempting to use guerilla-type strategies to

gain those positions. Although The North Face and other outdoor wear companies have made

similar steps in environmental and social responsibility to compete, Patagonia’s longevity in

these areas is more convincing to the commitment it has to these responsibilities. Patagonia has

maintained an ethical and humanitarian approach while building its brand since its founding. 

The I/O View of Competitive Advantage focuses primarily on external forces that could

derail a company’s success. It “proposes that getting and keeping competitive advantage means

analyzing external forces and basic strategic decisions on that analysis” (Coulter, 2013, p. 31).

Patagonia’s business strategy would suffer if this approach were implemented because their

attention would be diverted to predicting and combating what their competition is doing rather

than focusing on what has made them unique. In fact, “Social responsibility (environmental and

labor initiatives, primarily) has become a greater competitive advantage for Patagonia than even

product quality” (AW, 2015). For this reason, rather than utilizing the I/O view, the organization

would be better off focusing inward on its ability to capitalize on the utilization of renewable

resources and sustainable manufacturing practices.

        The guerilla view of competitive advantage, which “proposes that any organization’s

competitive advantage is temporary and can be gained only by peppering the competitive

marketplace with rapid radical surprises,” would require a radical change in Patagonia’s culture

(Coulter, 2013, p. 30). They have sustained long-term success by placing their focus on

sustainable practices and marketing themselves as an environmentally conscious company. Their

“long-term investments in socially responsible environmental and labor initiatives are

Patagonia’s dearest asset and have proved its greatest performance advantage” (AW, 2015). As
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such, the chaotic conditions that the guerrilla view to competitive advantage requires would be a

hindrance to their success as it goes against everything they have built themselves up to be.

Conclusion

As we delved deeper into the culture of Patagonia, we learned that their competitive

advantage comes from the culture that they have created and their ability to stand steadfast in

their beliefs. Every aspect of the company is connected, from how they move into the future, to

how they have kept such a loyal customer base, Patagonia has followed a resource-based strategy

when it comes to creating their competitive advantage. Patagonia has based their competitive

advantages on the brand’s reputation for having strong morals and ethics when it comes to

expanding its business. While they might have a lot of competition from companies such as The

North Face and their profit-focused I/O viewpoints, Patagonia’s dedication to quality and the

longevity of their products has made them a very strong competitor in the clothing industry.

They have done an excellent job of using their customer base and reputation as a resource to set

them apart. As we look to the future, we think Patagonia could benefit from using more of a

guerilla point of view as the need to innovate is always needed to keep businesses alive. While

we fear a dramatic shift in strategy will challenge its beliefs, we do think that the company could

take advantage of the benefits that temporary disruptions in their process could offer. All in all,

Patagonia has secured its business by keeping its customer base with its resource-based

viewpoint. The company could benefit from further establishing its e-commerce presence and

expanding its product line to more than just outerwear. To stay on brand and appease their loyal

customer base, it is paramount that they move forward with the same passion and values they

have always possessed so that they can remain unapologetically Patagonia.

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References
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AW. (2015, December 9). Patagonia: Corporate social responsibility as a behavior-binding asset driving

demand. Retrieved from https://digital.hbs.edu/platform-rctom/submission/patagonia-corporate-

social-responsibility-as-a-behavior-binding-asset-driving-demand/

Coulter, M. (2013). Strategic management in action (6th ed.). Upper Saddle River, NJ: Pearson.

Environmental Responsibility. (2020). Retrieved November 11, 2020, from

https://www.patagonia.com/our-footprint/recycled-polyester.html

Mervosh, S. (2019, May 30). North Face Edited Wikipedia's Photos. Wikipedia Wasn't Happy.

Retrieved November 11, 2020, from https://www.nytimes.com/2019/05/30/business/north-face-

wikipedia-leo-burnett.html

The North Face® X Supreme® Fall 2020 Collection. (2020). Retrieved November 11, 2020, from

https://www.thenorthface.com/featured/supreme.html

Wolfe, I. (2019, September 25). How Ethical Is Patagonia? Retrieved November 11, 2020, from

https://goodonyou.eco/how-ethical-is-patagonia/