A Resource Analysis of Columbia Sportswear

Nicolas Martinez

ASU OGL 260

Table of Contents

1. Introduction 3

2. About Columbia Sportswear 4

1. Value Creation Process 5

2. Capitals and Resources 6

3. Stakeholders and Accountability 8

4. Risk and Externalities 10

5. Recommendations 11

2
 Introduction

Throughout the resource allocation in organizations course, students examined

the different types of resources and capitals and how each can be leveraged to
create value. As the course expanded and resources and capital were
examined, students were asked to chose a company or organization to examine
and use as a practical example for the lessons put forth.

This company will continue to be used as an example for the final exploration
into how organizations create value and leverage their resources and capitals
to create value.
This project will also look at the
company’s different
stakeholders and accountability
factors and partners, as well as
examining the different risks
that could hinder or slow
growth and sustainability.

This will all be completed

through an analysis of
corporate documents, primarily
their most recently published
annual report.

Tim Boyle, President and Chief Executive Officer,

Columbia Sportswear

*taken from the 2018 Columbia Sportswear Corporate Responsibility Report

3
 About Columbia Sportswear

Columbia Sportswear is a global apparel brand that has numerous sub-

brands under the overall Columbia umbrella. This paper will focus on their
posted annual report (FORM 10-K) from the fiscal year ended in December
2018.

Columbia Sportswear was founded in 1938 and is one of the largest outdoor
and active lifestyle apparel and footwear brands in the world and is a publicly
traded company. The annual report is reported in accordance with Generally
Accepted Accounting Principles (GAAP), but the company also included other
supplemental information to assess differing aspects of the company’s
operations when needed. The company’s auditor is Deloitte and Touche LLP
and Columbia has a Chairman and a Board of Directors that serves as its
formal decision-making authority.

According to their annual report (2019), Columbia Sportswear was “founded in

1938 in Portland, Oregon as a small, family-owned, regional hat distributor and
incorporated in 1961” (p.2). The company has grown beyond its family-owned
start to become a global leader in outdoor and active apparel, footwear, and
equipment. The company has earned ‘an international reputation for
innovation, quality and performance” (Columbia, 2018). Columbia sportswear
distributes and markets under four main brands: Columbia (their largest
brand), SOREL (a more fashion forward brand), Mountain Hard Wear (a high-
performance mountaineering brand) prAna (a stylish brand focused on
sustainability). In addition, the company has the OutDry brand that holds
various patents for manufacturing of waterproof items and the Pacific Trail
brand which is licensed to third parties.

The company does not directly address or mention specific values in its annual
report there are key threads of innovation and improving performance and
sustainability. In addition to the annual report, Columbia’s corporate
responsibility report describes its three-step strategy to invest in initiatives
that have a positive impact on their customers, partners, and employees.
These three steps are empowering people, sustaining places, and responsible
practices. These will be covered more in depth in the stakeholders and
accountability section below.

4
 Value Creation Process

A business model canvas was constructed to analyze Columbia’s

value creation process. To complete this, the annual report and
corporate responsibility report analyzed to identify the company’s
value propositions, key activities and partners, customer
relationships, segments and channels, and cost structure and
revenue streams.

• Attracts outdoors focused, active consumers who enjoy camping, skiing,

snowboarding, hiking, mountain climbing and numerous other outdoors activities.
• Focused on hip and more fashion forward customers who appeal to the beachy
Customer outdoors aesthetic
Segments

• Customers are concerned about functionality, durability, and innovation and they
share a respect for the outdoors and nature.
• Customers who enjoy more leisurely active lifestyle activities and are focused on
Value fashionable wear and sustainable processes and materials.
Propositions

• main customer channels into a mix of direct-to-consumer (DTC), wholesale to

distribution, independent distributors and licensees. While there are some brands
that do licensing, DTC and wholesale are the company’s main customer channels.
Channels

• Seeks to engage in long-lasting relationships with their customers and their focus
on durability, innovation, and functionality all highlight their desire to create and
Customer maintain brand loyalty
Relationships

5
 Value Creation Process

• The image and reputation of the brand(s)

• Intellectual properties that help drive innovation
Key
Resources

• Self-built inventory management solutions and systems that are the key to proper
forecasting and order fulfillment
• They do not own their own manufacturing so maintaining their systems to manage
Key contract manufacturers supply and demand tables is a key activity.
Activities

• Columbia manages and works with a network of manufactures located outside the
US, with approximately 6% located in Vietnam and China. The company’s
relationship with contract manufactures is key to their overall success and the
Key partners company spends energy to maintain and diversify these relationships.

• Contract manufacturers make up the bulk of its costs. Cost of sales, which includes
all direct product sales, shipping and duties and importation, accounted for 50.5%
of all net sales.
Cost • Other significant costs: cost of maintaining their workforce, renewing or seeking
Structures patents and technology upgrades, and marketing, only 5.4% of their net sales.

• Columbia’s main revenue streams come from sales to customers or to wholesalers.

• More than 60% of their revenue comes from the U.S.
• 18.9% from Latin American and Asia Pacific (LAAP)
Revenue • 12.5% coming from Europe, Middle East and Africa (EMEA)
Streams • 8.6% comes from Canada

6
 Capitals and Resources

An analysis of Columbia Sportswear’s different capital types was

completed based on reviews of the 2018 Annual Report, Corporate
Responsibility Report and Investor Presentation.

Financial Capital
Columbia Sportswear goes into significant detail on its financial capital throughout its
annual report. There are numerous tables and charts to break down the company’s
financial positions. The report starts with tables to summarize net sales and incomes
for the past three years. Additional tables cover net sales by the four major brand
types and other covers sales and income in the four major regions Columbia services.
The annual report also contains a balance sheet and cash flow sheet for the past year
of operations, including the previous year’s numbers for comparison. Lastly, the report
is full of text comparisons of data from previous years compared to current.

*taken from the 2018 Columbia Sportswear Annual Report

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Capitals and Resources

Manufactured Capital
Columbia doesn’t any of its own manufacturing so the majority of their manufactured
capital comes from headquarters, administrative buildings, and distribution facilities.
The company covers these items in their own sub group labeled property and accounts
for these seven locations and their contents of their report under the “property, plant
and equipment, net” section. (2018a, p.56)

*taken from the 2018 Columbia Sportswear Annual Report

Natural Capital
In their corporate responsibility report Columbia does well in noting their dedication
to sustainable operations and to helping the environment through charitable
organizations and bettering practices. Examples of the natural capital highlights will be
discussed in the Stakeholders section.

*taken from the 2018 Columbia Sportswear Corporate Responsibility Report

8
Capitals and Resources

Human Capital
In both the annual report and the corporate responsibility report, the company
discusses the importance of their human capital. The annual report discusses their
reliance on key personnel and the innovation that they bring (2018a, p.19). The
responsibility report spends several sections noting employee engagement and
improvement projects, additional training programs on sustainment and improving
working conditions, and ventures like HER:project, focused on empowering women in
the workplace (2018b).

*taken from the 2018 Columbia Sportswear Corporate Responsibility Report

Relationship Capital
The main source of relationship capital discussed throughout the annual report is the
reliance on contract manufacturers to produce Columbia’s apparel and footwear. The
company is fully aware of the importance good relationships with suppliers and
manufacturers are. In addition, the shipping company relationships after production is
complete are mentioned. The entirety of the supply chain is the biggest noted
relationship throughout the annual report as well as the corporate responsibility
report.

9
Capitals and Resources

Symbolic Capital
The annual report mainly covers two symbolic capital areas: intellectual
property and intangible assets. The company places a large emphasis on
their use and protection of intellectual property. The annual report
dedicates nearly a full page of the report talking about the risks that
come with not protecting intellectual property well enough. The report
also discusses intangibles assets and accounts for them in their balance
sheet (2018a, p.56). The company puts patents, purchased technology,
and customer relationships in their intangibles category and accounts for
them with a dollar figure.

Structural Capital
Columbia only briefly covers their structural capital in their annual report.
Brief sections that talk about the make-up of the board, the ownership of
a majority of the controlling stock, and sections about the board’s
authority are covered.

10
 Stakeholders

An analysis of Columbia’s stakeholders was conducted in the fourth module of

the course. This analysis focused on looking through the 2018 annual report
and posted corporate responsibility report. Five different stakeholders were
identified during this assignment: shareholders, supply chain and
manufacturers, environmental and regulatory entities, employees, and the
community and non-profit organizations.

Employees
•Her Project: Empowering women in global supply
chain
•Stock options and bonuses
•Employee Cause engagement: $1.1M cash and
$821K product donations to employee picked
charities
•Focus on inclusion, diversity and equity (3 female
board members, 48% women workforce, 18%
manager are POC), 25% managers are
millennials, 16% boomers, 58% GenX)
•Focused on maintaining enhancement of
technology systems and supply chain to attract,
retain and manage qualified personnel

Community and Non-profits

•Partnerships with more than 200 shared value
teams
•$101K in retail store charity checkout programs
•Corporate matching of volunteer hours
•Conservation programs: Planet water (water for
5K people) and Conservation alliance (112 miles
of river supported)

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Stakeholders

Shareholders
•Decrease operations costs while improving growth
rate
• Regular dividends payments
• Advancing measurement, reporting and accountability
systems across the company
• Created supply chain transparency maps, know
where products come from and are going
• Improved foundational retail systems to streamline
delivery and order fulfillment

Supply Chain and Manufacturers

•Fair trade certified (first brand to pilot FT apparel)
• Growth of employee engagement programs
throughout supply chain
• Sustainable raw materials: organic cottons,
responsible sourced down and leather, increase of
recycle materials
• Training and capability building for sustainable
factory management: Human Resources • Effective
Worker-Management Dialogue • Production Efficiency
•Supplier ownership program rewards socially
responsible factory performance

Environmental and regulatory

•Carbon Neutral Shipment program in partnership
with UPS
•Improving water sustainability, decreasing water use
in manufacturing
•Adopting Green chemistry; Over half 80% of fabrics
and trims were bluesign© certified
•Improving energy efficiency during manufacturing
and daily operations

12
 Risk and Externalities

Columbia’s annual report covers a large number of identified risks factors to

their sustainability and success and covering each topic is entirety isn’t
feasible. However, this section will work to group some risk factors into
groups and to give highlights of factors the organization has taken into
account during their annual reporting.

Some of the initial risk highlighted in the annual report covered things internal
to the company. These items included the possibility that they would be unable
to execute their designed business strategies, initiatives to upgrade their
business processes and information technology systems could cause
unexpected delays, and their reliance on highly customized technology
systems that could fail.

Additional risks identified were focused on their supply chain. The company’s
dependence on contract manufacturers was a large part of their risk section.
The volatility of global production and transportation costs and capacity as
well as the volatile economic climate were also forefront in their supply chain
analysis and the analysis of their customer’s ability to buy goods.

Another risk factor includes consumer habits and the changing fashion and
global trends. As the company relies on advanced orders and foresight of
design and production missteps in customer preferences or fashion trends
could set Columbia behind. The company has done a good job of diversifying
across four major sub-brands but the possibility of falling out of favor with
fashion still exists.

13
 Recommendations

Columbia did a good job of covering a majority of the capitals highlighted in the
course. The one area where the company might need to focus more effort on
dissecting and accounting for comes in the human capital arena. While there
was talk about employee and shareholder cost in terms of financial factors
like pay and dividends, there was little talk about how experience or expertise
played a factor into the overall value of the company.

The company also did not do a great job of noting their environmental
concerns and focus within their annual report. There is plenty of
documentation in others presentations or reports, but little discussion was
had in the annual report on the impact of environmental considerations on the
financial aspects of the company.

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 Resources

Columbia Sportswear (2018a). Annual report pursuant to Section 13 and 15(d)

(10-K). Retrieved 05 February 2020, from https://investor.columbia.com/sec-
filings/annual-reports/content/0001050797-19-000007/0001050797-19-
000007.pdf

Columbia Sportswear (2018b). Corporate responsibility report. Retrieved 05

February 2020, from
https://cscworkday.blob.core.windows.net/hrforms/Recruiting/Career_Site/CR
_Reports/2018_Columbia_Corp_Resp_Report.pdf

Columbia Sportswear (2018c). Investor relations presentation. Retrieved 05

February 2020, from
https://d1io3yog0oux5.cloudfront.net/_2d8ab5d8d4d04b01e6c2b9b165f03539/col
umbia/db/641/5666/pdf/Current+Investor+Presentation+-+November+2019.pdf

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