Patagonia Executive Summary

After reviewing Patagonia as a company and as a competitor in the market of high performance outdoor wear we have found and will highlight some of their advantages that keep them in business. First, one needs to look at the wide spread selection of clothing line and diversity of each product that Patagonia offers to their clientele. While providing massive selections, they also spent large amounts of money in Research and Development to survey professions that they sell to in order them to give their input on materials and designs to produce the best product available.
Patagonia’s target market is also favorable in their success because they focus their products for a “core” user that includes the some of the most elite athletes on the
planet. Yvon Chouinard has always felt his vision for his company was not to become Dicks Sporting Goods, but instead keep the company smaller with average growth while staying true to its core users. This has helped the company to keep its sales steady when the economy deals with a recession. Patagonia’s products are still in large demand in part the “core” users need them to compete.
After completing the five-force model our group has found that the three forces most important to the serious outdoorsman industry are; bargaining power of suppliers, substitute products, and bargaining power of buyers.
Bargaining power of suppliers is the most important force in this industry due to the fact that the product is specialized high performance equipment and clothing, which can only be purchased from specific suppliers capable of handing such unique demands as organic cotton. In order to become an industry leader one must find and build relationships with highly specialized, cost efficient, and reliable suppliers. As show in the diagram, due to the limited number of suppliers, the outdoorsman industry will be much more dependent on their suppliers, than their suppliers will be on them. By developing profitable and lasting relationships a company will be able to try and persuade its suppliers to sell materials at lower costs, thus allowing that company a strategic advantage that might not be offered to its competitors until the number of industry competitors increase. Finding innovative ways to cut down on supply cost could save more money then any other force could offer. One possible way to take advantage of relationships with suppliers would be to find the most cost efficient suppliers in the develop cost efficient relationships with those suppliers, and eventually buy those suppliers out. By buying out ones suppliers a company would be able to better control their own business, as well as the business of their competitors. In an industry with so few suppliers, companies competitors would be forced to buy supplies form them with basically no alternatives. The second most important force in the serious outdoorsman industry is the threat of substitute products. As described in the model above, much competition exists in the outdoors clothing industry and similar products of all different prices, brands, and qualities exist for consumers to choose from. Due to the fact that there are low, or no user switching costs and substitute products are everywhere, companies must make sure that their product is known, respected, and always readily available to the consumer. Because this industry sells expensive products that are top of the line, the small number of industry leaders will have an edge over many of its competitors that sell lower quality products. As long as consumers believe that the company’s product is an investment that does what it promises, then consumers wont settle for substitute products. The bargaining power of buyers was the final force our group found to be relevant in the serious outdoorsman industry. In today’s society consumers are smarter and savvier then ever, and are willing to do research to make sure they get what they’re looking for. Selling expensive clothing and equipment will make buyer demand weak, and as mentioned in the diagram, consumer-switching costs are very low. However, a company will be able to take some consumer power away if they were to follow our group’s suggestion of buying out industry suppliers. Not only would company be able to control supply access to its competitors, but also they could better manage their own warehouse inventory and turnover if they only stored what they knew they would sell. The current overall rivalry among competitors is low due to the small number of participants in the serious outdoorsman industry. However in order to successfully compete in this industry companies must focus on controlling supply costs, lowering fixed costs and most importantly positive consumer perception which shows in the case of Padagonia to be a catalyst to continued growth.
Before the Internet, the decision of where a business would begin its operations was the most imperative decision business executives made. However, today mostly all businesses are computerized or virtually accessible. Web-site development, email ordering, inventory control, maintaining customer mailing lists, sales projections, and book-keeping are all operational tasks that can be completed by developing an effective web-site and becoming computerized. Since BG Group is a new organization in the industry, it is best to rely mainly on Internet sales to back your international performance and market outlook the first couple of fiscal years. As a result, identifying countries and regions that have substantial interest in your company can be looked at as potential store locations in the near future. Essentially, if you always follow the herd to similar countries, opportunity and potential growth will be minuet. Aside from developing an easily accessible web-site, BG Group should plan on building their retail headquarters in the western region of the United States.
Outsourcing will never be acceptable. All production will take place at the headquarters to avoid redundant industry manufacturing designs, manage costs, and discover new trade-offs for leveraging purposes. The western region of the United States occupies predominately all of the adventurous landscape; such as, mountains, cliffs, lakes, and forests. The environs of the adventurous landscape would attract visitors directly from your customer base, so you could easily connect and relate with your consumers needs, likes, dislikes, lifestyle, and step into the lives of the “serious outdoorsmen”. Primarily, the goal is to have at least twenty retail locations, mainly on the west coast of North America where the nature enthusiast resides, and open more than one new store every year. Conversely, BG Group will possess more force within the industry, as a result of a more liberal growth outlook, over primary rival Patagonia (growth expectations is approximately a new store per year), due to more store
locations. Once the locations have been chosen, the next vital decision that must be made is the different markets BG Group will emphasize.
In comparison with Patagonia, BG Group’s primary customer will be lowly educated, low income consumers of average quality outdoor apparel and equipment, but with a focus on fashionable apparel and dependable equipment. Patagonia is not a low cost provider, develops products for the “core user”, charges higher than the industry average, ignores fads and the next generation customer, and views things in psychographics rather than demographics. Yet globally, the younger population tends to be the most adventurous, fashion focused, has the least amount of funds to disburse towards purchases, and remains as loyal as older individuals to their most liked brand names. By charging less, BG Group will plan to sell more in bulk and mass produce, which will dramatically lower costs of production. “Hard core” followers, those persons who are extremely environmental conscious, are few and far between in this generation. Hence, Patagonia’s median customer age is forty-four. However, the next generation is more aggregate based rather than detail based, enjoys the never-ending challenge of conquering nature over the weekly athletic adventure, does not focus on environmental friendly equipment, and the professional backgrounds of a company. The next generation wants to be fashionable, but still have dependable, long lasting material and equipment. The VP of
Product Development, Rich Hill, stated Patagonia does not “listen to the voice of millions. We listen to the voice of a few dirt bags”. While this may be true of Patagonia, this mentality does not foster high growth and profitability, which BG Group is striving for. To foster growth and accomplish high profitability, BG Group needs to create a strong organizational structure, set and achieve goals, exploit competition, be unique, and continuously gain leverage and progress within the outdoor apparel and equipment industry. Similarly to Patagonia, BG Group needs to hire valuable employees, develop loyalty amongst consumer base, have a single shipping point from headquarters to all channels of distribution, attain mainstream athletes as spokespeople, and produce high quality products. At the same time, there will be a lot of differences between your organizations such as: a younger consumer base, numbers driven sales team, fashion focused organization, franchises, publicly traded, profit determined, advertise on television and radio, employee turnover ratio, growth, risk, expectations, and pressure. The major platform for advancing BG Group’s products into the mainstream would be to concentrate on television and radio advertisements, since you’re demographic is the top television viewers and radio listeners in North America and rarely purchase magazines. Unlike Patagonia, your “special events” will not be related to grassroots, which has a modern day sound to it, but related to “hip” and “current” events, which is relative to the common viewers of your show Man Versus Wild. For example, sporting events, such as ESPN’s “The X Games”, which entertains daring athletes across the world, would be a great venue for your company to advertise or sponsor. Also, the following television channels would reach your market base easily and effectively: ESPN, The Discovery Channel, Travel Channel, Comedy Central and MTV. Mainstream mass media, retail stores, the Internet, and wholesale dealers will be the channels to all of your profits. Today’s generation is more daring, adventurous, and attempts to push everything to the limit, just like your President Mr. Grylls. Grylls attacks every challenge with minimal resources, a strong psyche, and the next generation admires those qualities. Above all, BG Group will outsmart and outperform Patagonia and other industry rivals by becoming a cost leader, and possessing a diversified product line and employee base consisting of high fashion sense that will create a sustainable competitive advantage for your firm in the long term.