Patagonia Case Study
Patagonia Case Study
Key Strategic Issues (Why Important / Summary of Internal / External Analyses)
1) Balancing Commitment to Business with Commitment to Environment
A key issue facing management was balancing the company’s desire for environmentalism with its existence as a for-profit business. The idea of running a for-profit business implies operating at the lowest cost, growing as rapidly as financially feasible, and maximizing returns to financial stockholders ( I think it should be stockholder since it is financial return). A commitment to the environment can raise costs and hurt margins because environmentally-friendly policies are not the most financially savvy. This issue is important because Patagonia’s entire brand and business is associated with preserving the environment. Externally, this gave Patagonia a competitive advantage because of the brand loyalty it developed. The company had an unusually strong commitment to the environment – so much so that management was willing to internally implement a slow growth policy in order to promote a more environmentally-sustainable business model. Beyond simply slowing growth, the company undertook several energy-efficiency and recycling initiatives for its customer service center and retail stores.
2) Attracting Younger Demographic without Alienating Existing Aging Customer Base
Patagonia’s existing customer base rose in median age to approximately 44 years old in 2002. Externally, this proved to be a significant strategic issue because competition brands like Columbia and North Face were able to attract younger demographics, which represented a significant source of future income. Internally, the company has been strategically opposed to using its resources for chasing fads and fashion trends – for fear of losing credibility and diluting brand. So far, it focused on “classic” designs, with minimal pursuit of fashion trends. In addition, chasing fads creates a tension in the company’s operations
Key Strategic Issues (Why Important / Summary of Internal / External Analyses)
1) Balancing Commitment to Business with Commitment to Environment
A key issue facing management was balancing the company’s desire for environmentalism with its existence as a for-profit business. The idea of running a for-profit business implies operating at the lowest cost, growing as rapidly as financially feasible, and maximizing returns to financial stockholders ( I think it should be stockholder since it is financial return). A commitment to the environment can raise costs and hurt margins because environmentally-friendly policies are not the most financially savvy. This issue is important because Patagonia’s entire brand and business is associated with preserving the environment. Externally, this gave Patagonia a competitive advantage because of the brand loyalty it developed. The company had an unusually strong commitment to the environment – so much so that management was willing to internally implement a slow growth policy in order to promote a more environmentally-sustainable business model. Beyond simply slowing growth, the company undertook several energy-efficiency and recycling initiatives for its customer service center and retail stores.
2) Attracting Younger Demographic without Alienating Existing Aging Customer Base
Patagonia’s existing customer base rose in median age to approximately 44 years old in 2002. Externally, this proved to be a significant strategic issue because competition brands like Columbia and North Face were able to attract younger demographics, which represented a significant source of future income. Internally, the company has been strategically opposed to using its resources for chasing fads and fashion trends – for fear of losing credibility and diluting brand. So far, it focused on “classic” designs, with minimal pursuit of fashion trends. In addition, chasing fads creates a tension in the company’s operations