PATAGONIA CASE ANALYSIS
Patagonia is a privately-owned company that Patagonia was established in 1984 by its founder Yvon Chouinard. It is primarily involved in research and development, design, manufacturing, merchandising, and sales of high-quality outdoor clothing and equipment. Its headquarters is located in Ventura, California, and houses approximately 900 employees. On average, it annually registers revenues of US$165. Its core values include quality, integrity, and environmentalism. For its success, its management relies on and has heavily invested in continuous innovation and the abiding commitment of its employees to the company’s strategy.
To further demonstrate the organizational over view of patagonia, Hollender, Breen, & Senge,(2010, p. 114) state that Patagonia is the epitome of a genuinely sustainable brand and a model for every company that wants to put its purpose at the center of its profit making. They go ahead and state that in term of its ability to weave environmental and social sustainability into the fabric of it business, Patagonia stands out.
The strengths that have propelled Patagonia to its immense success can be recapitulated summarily in its stated core values; pursuit of ever-greater quality, relationship built on integrity and respect, environmentalism, development of innovative ways of doing things. These are the values upon which the success of the company can be attributed to.
Patagonia’s primary strength is that it integrates environmental and social responsibility with business. This is so albeit according to market research at Patagonia only 20% of the market customers care about the environmental impact of what they purchase. However, around 20% of the customers who purchase Patagonia equipment claim they do so for the reason of its repute and long-standing dedication and commitment to environmental and social responsibility. Thus, however much a limited portion of the population (20%) are concerned about the environmental bearing of what they purchase, the 20% of their customer who purchase their goods due to their commitment to safeguarding the environment is a considerable and valuable number.
Another strength lies in the benefits it provides to its employees. The company offers an on-site childcare for working parents, it allows for “flexi-time”, and provides a culture that balances work with the lives of its employees. This motivates employees. Moreover, Patagonia encourages employees to make decisions that satisfy both business and social responsibility goals. As a result, employees are not only committed to Patagonia’s organizational goals but also are also encouraged to work more productively.
Patagonia also has a high employee commitment and loyalty. It provides high employee satisfaction rate which provides the company with high employee retention rate. This in extent brings with it benefits to the company such as, the company’s cost of interviewing and training of new employees is avoided and the cost of the acculturation of the employee to the organization’s culture and expectations is avoided.
Patagonia has also been able to differentiate its products from those of its competitors. Considering the increasing difficulty in differentiating a company’s products based on technology, Patagonia has been able to differentiate its products based on environmental performance.
Patagonia also has a strong brand presence which is primarily founded on the technical integrity and excellence, and the performance and quality of its products. Moreover, it also has a social consciousness which has always been a part of its value disposition and a considerable section of its customer base buys their good because of their values.
Key Leadership and Management Challenges
Patagonia’s leadership has made giant steps in ensuring the company’s’ brand awareness and reputations are uniquely and enormously out of proportion to its size. The leadership has invested heavily on the innovation strategy which has ensured it produces a stream of products which are good enough to the meet the continual expectations of the most avid experts in intensity sports, and in the process leaving its competitors in it’s awake.
However, besides all these success that have been attributed to its prudent and top notch leadership and management, Patagonia still faces a myriad of challenges which lags it behind.
Effron & Goldsmith, (2003, p. 204) outlined valuable directions and challenges that usually face most large and successful companies. These they identified as, reconnecting with consumers, focusing the company’s brand portfolio, pioneering new channels to reach consumers, ensuring a world class supply chain, simplifying the organization and building an enterprise culture. In many regards, these challenges are typical of those facing the leadership and management of Patagonia albeit not exclusively.
The main challenge that is facing Patagonia management is how to face competition. The market for superior and high quality equipment and outdoor clothing is immensely saturated and extremely competitive. Their key competitors are making very high quality products, therefore it is becoming increasingly difficult to differentiate based on technical performance.
The other challenge the management is that of risk taking. Like its founder Yvon Chouinard had done 20 years earlier, by opting out of the profitable and thriving, superior-quality piton climbing equipment market and change in favor for the clean climbing equipment which has comparably lower environmental impacts. The current management is faced with decisions on whether to risk and widen the scope of the products they manufacture.
In the current competitive corporate world, changes are continuously occurring which are causing business leaders to revise their managerial styles and become more creative in their thinking. (Fandt, Michlitsch, Lewis, & Goodman, 2006, p.28)this brings another chaleenge facing the leadership at the company. as much as in the ‘outside world’ management thinking continues to evolve to meet the challenges raised by the rapid and dramatic societal changes, at patagonia the management has been the same for many years and the same strategy are being recycled year after year. As much as they still register profits, their lack of ‘new blood’ to rejuvinated the board of directors hinders them fromachieving even greater giant steps in their quest to cement their company as a force to reckeon with in the industry.
The management of Patagonia should emphasize more on the differentiation of their products based on their environmental protection strategy as it is the only channel through which they will continually be able to attract customers to its products and curve a customer niche for itself. This is so, as it will be capital costly for other firms to employ the same strategy.
Patagonia can allow its research and development department to invest in any research that has the promise of coming with a new product or an improvement in its products which is relevant to the industry. That is, it should be left at the discretion of the researchers to come up with product innovations and not be limited with their research. This will create a name for the company as it will be associated with innovativeness.
In order to address the challenge of monotony and the lack of new strategies to implement, Patagonia can begin to make frequent changes in their management and introducing new leaders in order to tap into the new ideas and strategies that new managers come with, in the hope of making their presence being felt within the firm.
Effron, M., & Goldsmith, M. (2003). Human resources in the 21st century (illustrated ed.). John
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Fandt, P. M., Michlitsch, J. F., Lewis, P. S., & Goodman, S. H. (2006). Management: challenges
for tomorrow’s leaders (5, illustrated ed.). Ohio: Cengage Learning.
Hollender, J., Breen, B., & Senge, P. (2010). The Responsibility Revolution: How the Next
Generation of Businesses Will Win. John Wiley and Sons.