Patagonia Individual Case Study PDF

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Patagonia Individual Case Study Rosemary Abella | ES2 |Ethics and Sustainability This case involves critical analysis of Patagonia’s stance vis-à-vis environmental and social issues and how it can better reconcile economic pressures, sustainability, and its environmental agenda and commitment. Patagonia already has very strong agenda on the environmental side, with its project proposals like the Product Life Cycle Initiative. This project focused on waste reduction and extension of the life for each product it produced. They planned to do this as an extension to their Common Threads Recycling program. These developments are fantastic; however, Patagonia also aims to increase their annual sales growth from 6% to 10% over five years. They realized that being an environmental leader without profitability and growth is not sustainable or respectable, as Chouinard explained, “No company will respect us, no matter how much money we give away or how much publicity we received for being one of the ‘100 Best Companies’, if we are not profitable”. Therefore, the company must also maintain its economic growth and profitability path. The big question remains with their economic targets. Consequentially, Patagonia’s focus must turn towards profitable growth. How can they achieve this without damaging their values on social responsibility for the environment? Business Environment and Sector Level Analysis

In a world where environmental impact is a growing concern, Patagonia established early on that environmental responsibility was a major priority for the company when conducting their business. In addition, in recent years there has been steady growth in the fitness industry, particularly in outdoor sport participation, therefore the demand for outdoor sports equipment and apparel has subsequently risen. Patagonia was able to capitalize on these growth factors through the development and sale of quality and versatile outdoor sportswear, giving an edge over its competitors. Drilling down further, Patagonia’s business environment has highly competitive rivalry with many strong alternative brands that provide similar products such as Columbia, Nike, Timberland, The North Face, etc. Patagonia differentiates itself, however, with its innovative focus and patented technologies such as Synchilla, Capilene, and their wetsuits lined with chlorine-free wool. In addition to this, they have strong brand loyalty due to the company’s mission and values, especially as consumers trend towards wanting environmentally responsible products. Patagonia’s unique and ethical value proposition with their CSR campaigns and values differentiates them from the market and helps retain this loyalty. They, however, must continue to invest in R&D and lab development projects because competitors are also applying their own sustainability practices as seen with Nike and Gap and their implementation of organic cotton. Patagonia has a smaller market share relative to its competitors; however, it caters to a very niche market. If these consumers are looking for high quality, reliable, long lasting, recyclable outdoor sportwear and equipment that are environmentally conscious, there are limited choices. The Patagonia Business Model and Creating Shared Value

Patagonia’s mission is to “build the best product, cause no unnecessary harm and use business to inspire and implement solutions to the environmental crisis”. This vision and these values were entrenched in every employee and their decisions because of the ethical foundation and drive of its founder Chouinard to reduce negative impact on the environment. Chouinard believed in the Zen philosophy, which he explained as focusing and perfecting all the individual movements instead of focusing on the target. If you focus on all the elements involved, you cannot help but hit the centre of the target. From a social standpoint this takes a very utilitarian approach in resolving environmental and social issues, where it promotes actions that maximize happiness and well-being for the affected individuals and in this case the environment and world as whole. The company even donates 1% of its revenues to environmental causes and refuses to undertake cost-cutting initiatives if it means harming the environment.

The company operates under the concept of creating shared value. Initially developed by Michael Porter and Mark Kramer, the shared value theory redefines maximization of shareholder value by including all benefits and costs that are external to the company. In Patagonia’s case, the externality is the environment. Patagonia creates shared value through Porter and Kramer’s avenues by engaging customers in environment friendly initiatives, which maximizes value for all the stakeholders. These projects ensure the company is perceived as a leader in terms of sustainability thus cementing its place in the market. Their refurbished products, provide a service that meets social needs, and this new value chain creates demand for products and technology that save energy, conserve resources, and support consumers who would not otherwise be able to afford the company’s high prices. Moreover, it is society that would benefit in the long-term as the environment suffers less damage. Recommendations

1. Invest more in advertising their environmental commitment highlighting the benefits of the Project Life Cycle Initiative to both retain current customer loyalty and to attract new customers. This could be done by building a stronger online presence to attract new customers through social media. 2. Patagonia could offer an external repair service rather than internal. If Patagonia would start a collaboration network with local repair shops, lead times could be reduced, and the replacement quota would ultimately drop. If incentive for repair and environmental values and concerns are strongly developed, customers will eventually be willing to pay for their own repair services because they will feel that they are doing their part in environmental sustainability. 3. Promote a do it yourself repair process, so customers do not have to bring the products in for servicing/repair. The repair process could have an online step-by-step video process on how to best maintain and repair their products. This could potentially reduce the number of items being brought in for repair. 4. Lead by example by promoting other companies to follow in their lead. They can capitalize on this by creating paid educational programs for companies to learn from their sustainability practices. 5. Expand online distribution network and partner with large or like-minded companies to cross-sell products and create additional revenue channels 6. Donate a percentage of the Product Life Cycle Initiative to charities to sustain image and commitment to the environmental importance. 7. Acquire volunteers or recruit university students looking for a foot in the door with Patagonia or other environmental companies to help launch the project to reduce initial labour costs. 8. Patagonia could create a high-priced “luxury” brand, which would use the highest quality, most environmentally friendly methods of production, and raw materials. This brand could help ensure healthy margins and potentially compensate for some of the revenue losses with their lower cost items. This brand would target high-income customers willing to pay a considerable premium for quality and the eco-friendly brand image. Moreover, creating shared value requires concrete and tailored metrics for each business unit. Successful collaboration must be data driven, clearly linked to defined outcomes, well connected to the goals of all stakeholders, and tracked with clear metrics. Patagonia has identified key social and environmental issues to target, which are opportunities to reduce costs and improve profits. They have made a case around how to tackle issues, and now they must track their progress, measure results, and use the data to unlock new value for the organization. In all, as an environmentally conscious industry leader, Patagonia has a consistent strategy for conveying its actions to reduce its carbon footprint. For Patagonia to continue profitability and growth, economic decision-making must be regarded as a social responsibility, for both its employees and as a representative for society....