Patagonia Case Summary
Patagonia: A Case Briefing
Prepared by Kenny Ruth
In partial fulfillment for Integrated Business Planning I
Dr. Michele Govekar
Company History With an entrepreneurial spirit from early in his career, Patagonia’s founder Yvon Chouinard’s story is truly a tale of turning one persons passion into many peoples lifestyles. Beginning in 1957, Chouinard got into the business of by creating his own version of climbing “pitons,” the pegs climbers use to scale the sides of mountains or rock formations. By 1967 he had partnered with fellow climbing enthusiast Tom Frost and created Chouinard Equipment Ltd. By the early 1970’s, the pair became the largest supplier of climbing hardware in the United States, while also opening the first Patagonia store in Ventura, California. (2009) The name Patagonia is homage to the region of southern Argentina and Chile. As abstract as a name can get, the overall idea and …show more content…
meaning of the brand fits with the vision of the company. The region possesses a vast amount of environmental differences whether it be land formations, flora present, and the elements that can be experienced. Each difference that the region offers is represented by various product offerings available by the brand. (1997) With an increasing amount of success, the 1980’s greeted Patagonia with rapid expansion that put the company on edge. At this time, outdoor fashion was stuck in a drab color scheme – dominated by forest greens and dirty browns. Patagonia wanted to give their look a more nontraditional style with classic designs and vibrant colors. They hoped to maintain their rugged attitude but also wanted to add its own personal wink to the industry. This daring move proved to be too much growth all at once, with the line being viewed from industry leaders and consumers as more “fashionable” than functional. (1994) The company was moving towards becoming more fashion conscious than being a staple for outdoor enthusiasts, selling more non-sporting apparel than the brands more technical offerings. The company’s tremendous growth stopped in 1991 with the economic recession causing some of the brands banks to close and resulting in having to lay off about 20 percent of their employees. Learning their lesson, Patagonia has since then made changes about internal and external growth and that sometimes moderation pays off. (1994) Product Development When it comes to product development, Patagonia prides itself by using three main criteria: quality, environmental impact, and aesthetics. Innovation in a market as large and diverse as athletic and outdoor apparel and goods is key, and Patagonia is undoubtedly a front-runner for innovative products. (1994) From meticulously choosing the most environmentally sound materials to scrutinizing every design to guarantee perfection, Patagonia is involved directly with all processes. The company has developed strong relationships with fabric manufacturers to create their very own superior fabrics to use in the creation of their garments – explaining why they can put a hefty price tag on their goods and why the quality is exceptional. (1994) In the 1990’s Patagonia switched from using conventionally grown cotton to organically grown. They found that the methods for growing traditional cotton used toxic chemicals (pesticides) and dyes had adverse affects on soil and water. The company discovered that costs were comparable between both methods, except in some instances. For a break down of using conventional cotton as opposed to organically grown cotton and the costs of each, refer to Exhibit 1. Patagonia wanted to use this aspect of their brand as leverage against their competitors – making a statement that when someone buys from Patagonia, they are doing something beneficial for the environment. They wanted to be the role model for other industry leaders. Another positive attribute that Patagonia likes to make known is that their products are primarily manufactured in the United States. Over half of Patagonia’s products that they offer are manufactured in North America with some in Europe, as opposed to competitors who manufactured around 90% of their goods overseas. Also, as I said before, Patagonia is not a company that goes with trends, but rather creates looks and products that are classics and will ultimately last with the consumer. This helps the company if they have products that crossover from season to season.
Target Market Patagonia has developed products for a “core” consumer, one who takes into consideration what their sport actually means to them. These “core” customers have been given the name of “dirtbags,” which according to Patagonia.com were “the human scale to the corporate, vagabonding to tourism, the quirky and the lively to the toned downed and flattened out.” The company goes further to describe their target customer as someone who works “temp jobs” and “forged meals.” (2009) It is only natural that when a company like Patagonia opens up, they first cater to the customer market that surrounds them. Being that Ventura, California is the birthplace of the company, the company began selling apparel and goods common to the California lifestyle, consisting of flowing tops, bikini bottoms, and wet suits. Taking a deeper look at the target market, we see that these “dirtbags” lead extremely active lifestyles, often times involved in an array of extreme sports. The median age of these customers was found to be 44 years old, which does not seem to fit with definition of a “dirtbag.” The median age for a company such as Patagonia should sit at around the 25-45 age range, because not only do you get the individuals who are young enough to partake in the activities Patagonia offers products for, but you get consumers who are trying to reclaim their glory years or who have remained active throughout life. The company has done a great job at focusing on the singles market. These individuals typically have more of a disposable income and time to spend on extreme activities such as hiking and climbing. They are also those people who are not really interested in fashion as much as quality – taking functionality over looks and treating their purchases as an investment. Furthermore, these individuals tend to be more environmentally aware. You can see these people eating organically grown fruits and vegetables, drinking from their Nalgene bottles, and driving their hybrid vehicle on the weekends when their bike just does not cut it.
Strengths and Weaknesses For all the good that the company is doing, they have an equal number of things that they could improve upon. One major improvement the company should focus on would be the lack of growth into other markets. Patagonia has found its niche in California, with the laid back attitude of the culture and customers who desire their products. However, the company has yet to successfully move into other segments. As much as people want functionality, they do not want to purchase products that are similar – because then you have people walking around who all look the same. On the west coast, people tend to all fit into a specific look, and the look for a twenty-something guy in California is not going to fit well with a thirty-something man from Fargo, North Dakota. By focusing more on taste, style, and really looking at creating lines that cater to all forms of customers, they can make steps to making their brand better known among other parts of the United States. Another downfall of the company is the timing it uses to create new products. As opposed to its major competitors like The North Face and Columbia, who come out with new lines often, Patagonia takes about a year and a half with all the work that goes into developing their fabrics and executing manufacturing. This extra time needed to create new products in theory keeps shelves empty in stores and online and the company is missing a large portion of sales opportunities. Perhaps figuring out a process that cuts manufacturing time of fabrics could help design teams get a more diverse line out faster and more often, giving customers more choice and variety among products and product lines. For a full sense of the company’s strengths and weaknesses, please refer to Exhibit B.
Opportunities and Threats By far, the biggest threat to Patagonia are their major industry competitors such as Columbia and The North Face. The two companies offer similar products as Patagonia, but at a fraction of the price. According to the company’s Vice President of Production Julie Ringler, “[Patagonia is] never going to be the lowest-cost provider.” This has to do primarily with the cost of goods such as their organic cotton and costs that went to their manufacturers. Knowing that the company is not willing to change their stances on environmentally friendly apparel, they need to figure out a way to boost sales. One way that could happen is by opening up stores where hiking, climbing, and other extreme outdoor activities take place. States like Montana, Alaska, and Colorado are all known for various outdoor activities and national parks and would be prime locations for stores of this sort. Knowing the company’s past problems with rapid expansion, these steps should be done in stride – making sure there is enough of a desire for Patagonia stores and taking the appropriate steps needed to getting their proverbial feet on the ground. For a full sense of the company’s opportunities and threats, please refer to Exhibit B.
Recommendations After learning and reviewing the company, there are some recommendations that could definitely improve the brand name and image to consumers of all kind. First and foremost, I feel that the company offers a lot of different lines that are non profitable and are taking money away from other successful lines. The most successful line within the company was its Alpine line, which was responsible for 34% of total sales. Within this line, there were a few collections that consisted of lightweight down items, jackets and pants for skiing and snowboarding, waterproof and windproof shells, and breathable soft shells and basic layers that were water and wind proof. The other line that did the best was Patagonia’s Sportswear line, which included casual clothing like sweaters, flannels, and pants. These two lines appeal to the biggest group of consumers in the United States, because everyone enjoys being causal and comfy, and the same goes with sporting enthusiasts – they want to be comfortable on and off of the mountain. The most unsuccessful lines within the company are its Kids line (5% of sales), which are smaller versions of their other adult lines, its Fishing line (2% of sales), and Endurance line (5% of sales). With these numbers, one would think of either eliminating them or fixing them up. I feel that the Kids line should be removed from the store. The target market for kids in this area are 12 years or younger, and I cannot think of many children who tend to go out scaling faces of mountains or extreme hiking. The resources spent on creating a kids line could be use in developing other items for the more successful lines or used for increasing lines that could be doing better, like their Accessories line (3% of sales). Although the accessories have the next to lowest amount of total sales generated, I think that if focused more on it could be highly beneficial. Customers like the idea of going into a retailer and getting everything they need all at once – eliminating the need of going from store to store and risking quality. If Patagonia could increase their accessory sales, customers could get all their sporting needs in one shopping trip and would know that it was the best quality for their price. Another recommendation for the company would be to increase their online traffic. Patagonia’s website is a great tool for the company due to all the resources available on it. One can go to their website and learn all about the company history, what the company is doing for the environment, and browse the many product offerings. It is easy to navigate and it also provides environmental and company blogs, photos, and issues facing the environment. It is an environmentalist’s best friend … or it could be. By making it known that all of these features are available for not only customers, but for everyone interested about all things environmental, they could increase their customer base and work towards gaining more customers. Along those lines, creating a customer incentive program could help in retaining current customers. I know that for some sport retailers like Dick’s Sporting Goods, they have a “Score Card,” so that with every purchase you make online on in-store, you get points based on how much and what you spend. Knowing that with every purchase you make at Patagonia is going to come out in your favor down the road is appealing and can generate more return on investment. Finally, I think that Patagonia needs to develop a more advanced marketing campaign. The company steers clear of using television or radio advertisements and focuses more on print advertising. Patagonia uses beautiful pictures of outdoors scenic scapes and people in them. The people in these photographs were sometimes professional athletes known as “ambassadors” and were not used as a sales tool, but as a “mood tool,” instilling a feeling of beauty and grace associated with the line. These pictures could also be found in the Patagonia magazine that is also not traditionally used as a sales tool. This is all nice, but in order to make money, you cannot always rely on beauty. I think that changing the magazine to being more sales-oriented while maintaining the look and feel of it, the company would be using the money that goes in to producing it more wisely. Also, perhaps the company could acquire more well known athletes to act as ambassadors for the company, focusing more on them product than the atmosphere they tend to use them in. With the acquisition of bigger name celebrity endorsers, creating a few television ads could help make the brand a household name. The United States public relies heavily on the news and information received via television, and most families have at least two televisions in the house – sometimes more. Taking the vision of the company and streaming it into households across the country would increase curiosity and desire to learn more about Patagonia.
Future of Patagonia Patagonia is a remarkable retailer. They take every necessary step to create the most advance product they can. Although they have some areas they can approve upon, like market penetration and timeliness of creating new products, I see nothing but great things for this environmentally friendly retailer. With the addition of new marketing techniques, elimination of poor lines, more online traffic, and customer incentive programs, this underdog could very likely be at the top of the mountain.
Exhibit A
Table 1.
Environmental Costs of Cotton
| Conventional Cotton | Organic Cotton | Growing | $ .67 | $ .33 | Ginning | .02 | .02 | Processing | .02 | .02 | Distribution | .08 | .08 | Transportation | .32 | .32 | Consumer Care | 2.69 | 2.69 | TOTAL | 3.79 | 3.45 |
Source: Forest Reinhardt, Ramon Casadesus-Masanell, and Debbie Freier, “Patagonia,” Harvard Business School, December 14, 2004
In the 1990’s, Patagonia moved to using organically grown cotton as opposed to traditionally harvested cotton because it did not use harsh pesticides or chemicals. It shows that the environmental costs of each are similar, but the growing of conventional cotton costs more because of the materials (such as pesticides) needed to grow.
Table 2.
Differences in Costs for Prdoucts: Organic vs. Conventional Cotton
| Conventional Cotton Cost | Organic Cotton Cost | % Increase | Heavy Flannel Shirt | 18.83 | 23.81 | 79% | Zip Front Flannel Shirt | 12.27 | 15.42 | 80% | Mondo Shorts | 13.75 | 15.86 | 87% | Mondo Pants | 17.86 | 23.23 | 77% | Women’s Short Skirt | 12.67 | 15.59 | 81% |
Source: Forest Reinhardt, Ramon Casadesus-Masanell, and Debbie Freier, “Patagonia,” Harvard Business School, December 14, 2004
As is witnessed by Table 2, the percentage increase to Patagonia’s products that are made with organically grown cotton is large, falling between a 75% to 90% markup of its products. One might ask if the use of organicially grown materials are beneficial or hurtful to the company.
Exhibit B
SWOT Analysis
Strengths 1.
Increased importance of customer service 2. Appreciation of environmentally friendly products 3. Strong employee base/retention 4. Research and development 5. High quality products | Weaknesses 1. Inability to generate new products in a timely manner 2. Lack of growth into other markets 3. Weak brand name 4. In need of better marketing 5. Price | Opportunities 1. Opening new stores 2. Expansion of target markets 3. Global expansion 4. Increase online traffic 5. Customer incentive program | Threats 1. Competitors 2. Cheaper alternatives 3. Aging target market |
Exhibit C
Marketing Mix
Product- Multiple LinesAlpineSportswear“Capilene”Luggage/Hard goodsEnduranceKidsAccessoriesFishing- Most made from organic cotton and specially manufactured fabrics to be more durable and environmentally sound*Lots of research and development*Innovation- Offer “classic” looks as opposed to following industry trends | Price- Higher quality = higher priceHigher price due to cost of cotton
| Promotion- Use print ads, electronic media, grassroot efforts, public affairs, trade shows, product graphics No television/radio ads - Catalog Not really a sales tool Full of photography - Website Thousand of hits daily Still trying to make it an “experience” - 1% for the Planet Campaign | Place- Few stores- United States, Asia, Europe- Online - Catalog |
Bibliography
C. McEwan, L.A. Borreo and A. Prieto. [1997] Patagonia:Natural History, Prehistory and Ethnography at the Uttermost End of the Earth. Princeton University Press with British Museum Press. F. Reinhardt, R. Casadesus-Masanell and D. Freier. [1994] Patagonia. Harvard Business School. Patagonia. [2009] Company History. http://www.patagonia.com/web/us/
patagonia.go?assetid=3351&ln=79
Prepared by Kenny Ruth
In partial fulfillment for Integrated Business Planning I
Dr. Michele Govekar
Company History With an entrepreneurial spirit from early in his career, Patagonia’s founder Yvon Chouinard’s story is truly a tale of turning one persons passion into many peoples lifestyles. Beginning in 1957, Chouinard got into the business of by creating his own version of climbing “pitons,” the pegs climbers use to scale the sides of mountains or rock formations. By 1967 he had partnered with fellow climbing enthusiast Tom Frost and created Chouinard Equipment Ltd. By the early 1970’s, the pair became the largest supplier of climbing hardware in the United States, while also opening the first Patagonia store in Ventura, California. (2009) The name Patagonia is homage to the region of southern Argentina and Chile. As abstract as a name can get, the overall idea and …show more content…
meaning of the brand fits with the vision of the company. The region possesses a vast amount of environmental differences whether it be land formations, flora present, and the elements that can be experienced. Each difference that the region offers is represented by various product offerings available by the brand. (1997) With an increasing amount of success, the 1980’s greeted Patagonia with rapid expansion that put the company on edge. At this time, outdoor fashion was stuck in a drab color scheme – dominated by forest greens and dirty browns. Patagonia wanted to give their look a more nontraditional style with classic designs and vibrant colors. They hoped to maintain their rugged attitude but also wanted to add its own personal wink to the industry. This daring move proved to be too much growth all at once, with the line being viewed from industry leaders and consumers as more “fashionable” than functional. (1994) The company was moving towards becoming more fashion conscious than being a staple for outdoor enthusiasts, selling more non-sporting apparel than the brands more technical offerings. The company’s tremendous growth stopped in 1991 with the economic recession causing some of the brands banks to close and resulting in having to lay off about 20 percent of their employees. Learning their lesson, Patagonia has since then made changes about internal and external growth and that sometimes moderation pays off. (1994) Product Development When it comes to product development, Patagonia prides itself by using three main criteria: quality, environmental impact, and aesthetics. Innovation in a market as large and diverse as athletic and outdoor apparel and goods is key, and Patagonia is undoubtedly a front-runner for innovative products. (1994) From meticulously choosing the most environmentally sound materials to scrutinizing every design to guarantee perfection, Patagonia is involved directly with all processes. The company has developed strong relationships with fabric manufacturers to create their very own superior fabrics to use in the creation of their garments – explaining why they can put a hefty price tag on their goods and why the quality is exceptional. (1994) In the 1990’s Patagonia switched from using conventionally grown cotton to organically grown. They found that the methods for growing traditional cotton used toxic chemicals (pesticides) and dyes had adverse affects on soil and water. The company discovered that costs were comparable between both methods, except in some instances. For a break down of using conventional cotton as opposed to organically grown cotton and the costs of each, refer to Exhibit 1. Patagonia wanted to use this aspect of their brand as leverage against their competitors – making a statement that when someone buys from Patagonia, they are doing something beneficial for the environment. They wanted to be the role model for other industry leaders. Another positive attribute that Patagonia likes to make known is that their products are primarily manufactured in the United States. Over half of Patagonia’s products that they offer are manufactured in North America with some in Europe, as opposed to competitors who manufactured around 90% of their goods overseas. Also, as I said before, Patagonia is not a company that goes with trends, but rather creates looks and products that are classics and will ultimately last with the consumer. This helps the company if they have products that crossover from season to season.
Target Market Patagonia has developed products for a “core” consumer, one who takes into consideration what their sport actually means to them. These “core” customers have been given the name of “dirtbags,” which according to Patagonia.com were “the human scale to the corporate, vagabonding to tourism, the quirky and the lively to the toned downed and flattened out.” The company goes further to describe their target customer as someone who works “temp jobs” and “forged meals.” (2009) It is only natural that when a company like Patagonia opens up, they first cater to the customer market that surrounds them. Being that Ventura, California is the birthplace of the company, the company began selling apparel and goods common to the California lifestyle, consisting of flowing tops, bikini bottoms, and wet suits. Taking a deeper look at the target market, we see that these “dirtbags” lead extremely active lifestyles, often times involved in an array of extreme sports. The median age of these customers was found to be 44 years old, which does not seem to fit with definition of a “dirtbag.” The median age for a company such as Patagonia should sit at around the 25-45 age range, because not only do you get the individuals who are young enough to partake in the activities Patagonia offers products for, but you get consumers who are trying to reclaim their glory years or who have remained active throughout life. The company has done a great job at focusing on the singles market. These individuals typically have more of a disposable income and time to spend on extreme activities such as hiking and climbing. They are also those people who are not really interested in fashion as much as quality – taking functionality over looks and treating their purchases as an investment. Furthermore, these individuals tend to be more environmentally aware. You can see these people eating organically grown fruits and vegetables, drinking from their Nalgene bottles, and driving their hybrid vehicle on the weekends when their bike just does not cut it.
Strengths and Weaknesses For all the good that the company is doing, they have an equal number of things that they could improve upon. One major improvement the company should focus on would be the lack of growth into other markets. Patagonia has found its niche in California, with the laid back attitude of the culture and customers who desire their products. However, the company has yet to successfully move into other segments. As much as people want functionality, they do not want to purchase products that are similar – because then you have people walking around who all look the same. On the west coast, people tend to all fit into a specific look, and the look for a twenty-something guy in California is not going to fit well with a thirty-something man from Fargo, North Dakota. By focusing more on taste, style, and really looking at creating lines that cater to all forms of customers, they can make steps to making their brand better known among other parts of the United States. Another downfall of the company is the timing it uses to create new products. As opposed to its major competitors like The North Face and Columbia, who come out with new lines often, Patagonia takes about a year and a half with all the work that goes into developing their fabrics and executing manufacturing. This extra time needed to create new products in theory keeps shelves empty in stores and online and the company is missing a large portion of sales opportunities. Perhaps figuring out a process that cuts manufacturing time of fabrics could help design teams get a more diverse line out faster and more often, giving customers more choice and variety among products and product lines. For a full sense of the company’s strengths and weaknesses, please refer to Exhibit B.
Opportunities and Threats By far, the biggest threat to Patagonia are their major industry competitors such as Columbia and The North Face. The two companies offer similar products as Patagonia, but at a fraction of the price. According to the company’s Vice President of Production Julie Ringler, “[Patagonia is] never going to be the lowest-cost provider.” This has to do primarily with the cost of goods such as their organic cotton and costs that went to their manufacturers. Knowing that the company is not willing to change their stances on environmentally friendly apparel, they need to figure out a way to boost sales. One way that could happen is by opening up stores where hiking, climbing, and other extreme outdoor activities take place. States like Montana, Alaska, and Colorado are all known for various outdoor activities and national parks and would be prime locations for stores of this sort. Knowing the company’s past problems with rapid expansion, these steps should be done in stride – making sure there is enough of a desire for Patagonia stores and taking the appropriate steps needed to getting their proverbial feet on the ground. For a full sense of the company’s opportunities and threats, please refer to Exhibit B.
Recommendations After learning and reviewing the company, there are some recommendations that could definitely improve the brand name and image to consumers of all kind. First and foremost, I feel that the company offers a lot of different lines that are non profitable and are taking money away from other successful lines. The most successful line within the company was its Alpine line, which was responsible for 34% of total sales. Within this line, there were a few collections that consisted of lightweight down items, jackets and pants for skiing and snowboarding, waterproof and windproof shells, and breathable soft shells and basic layers that were water and wind proof. The other line that did the best was Patagonia’s Sportswear line, which included casual clothing like sweaters, flannels, and pants. These two lines appeal to the biggest group of consumers in the United States, because everyone enjoys being causal and comfy, and the same goes with sporting enthusiasts – they want to be comfortable on and off of the mountain. The most unsuccessful lines within the company are its Kids line (5% of sales), which are smaller versions of their other adult lines, its Fishing line (2% of sales), and Endurance line (5% of sales). With these numbers, one would think of either eliminating them or fixing them up. I feel that the Kids line should be removed from the store. The target market for kids in this area are 12 years or younger, and I cannot think of many children who tend to go out scaling faces of mountains or extreme hiking. The resources spent on creating a kids line could be use in developing other items for the more successful lines or used for increasing lines that could be doing better, like their Accessories line (3% of sales). Although the accessories have the next to lowest amount of total sales generated, I think that if focused more on it could be highly beneficial. Customers like the idea of going into a retailer and getting everything they need all at once – eliminating the need of going from store to store and risking quality. If Patagonia could increase their accessory sales, customers could get all their sporting needs in one shopping trip and would know that it was the best quality for their price. Another recommendation for the company would be to increase their online traffic. Patagonia’s website is a great tool for the company due to all the resources available on it. One can go to their website and learn all about the company history, what the company is doing for the environment, and browse the many product offerings. It is easy to navigate and it also provides environmental and company blogs, photos, and issues facing the environment. It is an environmentalist’s best friend … or it could be. By making it known that all of these features are available for not only customers, but for everyone interested about all things environmental, they could increase their customer base and work towards gaining more customers. Along those lines, creating a customer incentive program could help in retaining current customers. I know that for some sport retailers like Dick’s Sporting Goods, they have a “Score Card,” so that with every purchase you make online on in-store, you get points based on how much and what you spend. Knowing that with every purchase you make at Patagonia is going to come out in your favor down the road is appealing and can generate more return on investment. Finally, I think that Patagonia needs to develop a more advanced marketing campaign. The company steers clear of using television or radio advertisements and focuses more on print advertising. Patagonia uses beautiful pictures of outdoors scenic scapes and people in them. The people in these photographs were sometimes professional athletes known as “ambassadors” and were not used as a sales tool, but as a “mood tool,” instilling a feeling of beauty and grace associated with the line. These pictures could also be found in the Patagonia magazine that is also not traditionally used as a sales tool. This is all nice, but in order to make money, you cannot always rely on beauty. I think that changing the magazine to being more sales-oriented while maintaining the look and feel of it, the company would be using the money that goes in to producing it more wisely. Also, perhaps the company could acquire more well known athletes to act as ambassadors for the company, focusing more on them product than the atmosphere they tend to use them in. With the acquisition of bigger name celebrity endorsers, creating a few television ads could help make the brand a household name. The United States public relies heavily on the news and information received via television, and most families have at least two televisions in the house – sometimes more. Taking the vision of the company and streaming it into households across the country would increase curiosity and desire to learn more about Patagonia.
Future of Patagonia Patagonia is a remarkable retailer. They take every necessary step to create the most advance product they can. Although they have some areas they can approve upon, like market penetration and timeliness of creating new products, I see nothing but great things for this environmentally friendly retailer. With the addition of new marketing techniques, elimination of poor lines, more online traffic, and customer incentive programs, this underdog could very likely be at the top of the mountain.
Exhibit A
Table 1.
Environmental Costs of Cotton
| Conventional Cotton | Organic Cotton | Growing | $ .67 | $ .33 | Ginning | .02 | .02 | Processing | .02 | .02 | Distribution | .08 | .08 | Transportation | .32 | .32 | Consumer Care | 2.69 | 2.69 | TOTAL | 3.79 | 3.45 |
Source: Forest Reinhardt, Ramon Casadesus-Masanell, and Debbie Freier, “Patagonia,” Harvard Business School, December 14, 2004
In the 1990’s, Patagonia moved to using organically grown cotton as opposed to traditionally harvested cotton because it did not use harsh pesticides or chemicals. It shows that the environmental costs of each are similar, but the growing of conventional cotton costs more because of the materials (such as pesticides) needed to grow.
Table 2.
Differences in Costs for Prdoucts: Organic vs. Conventional Cotton
| Conventional Cotton Cost | Organic Cotton Cost | % Increase | Heavy Flannel Shirt | 18.83 | 23.81 | 79% | Zip Front Flannel Shirt | 12.27 | 15.42 | 80% | Mondo Shorts | 13.75 | 15.86 | 87% | Mondo Pants | 17.86 | 23.23 | 77% | Women’s Short Skirt | 12.67 | 15.59 | 81% |
Source: Forest Reinhardt, Ramon Casadesus-Masanell, and Debbie Freier, “Patagonia,” Harvard Business School, December 14, 2004
As is witnessed by Table 2, the percentage increase to Patagonia’s products that are made with organically grown cotton is large, falling between a 75% to 90% markup of its products. One might ask if the use of organicially grown materials are beneficial or hurtful to the company.
Exhibit B
SWOT Analysis
Strengths 1.
Increased importance of customer service 2. Appreciation of environmentally friendly products 3. Strong employee base/retention 4. Research and development 5. High quality products | Weaknesses 1. Inability to generate new products in a timely manner 2. Lack of growth into other markets 3. Weak brand name 4. In need of better marketing 5. Price | Opportunities 1. Opening new stores 2. Expansion of target markets 3. Global expansion 4. Increase online traffic 5. Customer incentive program | Threats 1. Competitors 2. Cheaper alternatives 3. Aging target market |
Exhibit C
Marketing Mix
Product- Multiple LinesAlpineSportswear“Capilene”Luggage/Hard goodsEnduranceKidsAccessoriesFishing- Most made from organic cotton and specially manufactured fabrics to be more durable and environmentally sound*Lots of research and development*Innovation- Offer “classic” looks as opposed to following industry trends | Price- Higher quality = higher priceHigher price due to cost of cotton
| Promotion- Use print ads, electronic media, grassroot efforts, public affairs, trade shows, product graphics No television/radio ads - Catalog Not really a sales tool Full of photography - Website Thousand of hits daily Still trying to make it an “experience” - 1% for the Planet Campaign | Place- Few stores- United States, Asia, Europe- Online - Catalog |
Bibliography
C. McEwan, L.A. Borreo and A. Prieto. [1997] Patagonia:Natural History, Prehistory and Ethnography at the Uttermost End of the Earth. Princeton University Press with British Museum Press. F. Reinhardt, R. Casadesus-Masanell and D. Freier. [1994] Patagonia. Harvard Business School. Patagonia. [2009] Company History. http://www.patagonia.com/web/us/
patagonia.go?assetid=3351&ln=79