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Patagonia draws its success in the competitive outdoor sector from a responsible approach

Arthur Nègre
Máster en Marketing
EBP 2012
Universidad Rey Juan Carlos
Trabajo Fin de Máster
Tesis de Máster
Patagonia draws its success in the competitive outdoor sector from a responsible approach
Arthur Nègre
Máster en Marketing
EBP 2012
Arthur Nègre
Máster en Marketing
EBP 2012
Acknowledgement
I would like to give a special thanks to the whole teachers in Bordeaux and in la Universidad Rey Juan Carlos who gave me the rights tools to succeed in my life.
I am also grateful to the academic community in general who have motivated me to be truly involved into my business studies for the past five years.
At last but not least, I am very thankful to my family and friends that have always been a great support for me during my studies and without whom I could have probably not reached this point in my studies today.
Arthur Nègre
Máster en Marketing
EBP 2012
Contents
INTRODUCTION ……………………………………………………………………………………………………………………… 6
I. COMPANY’S OVERVIEW ………………………………………………………………………………………………….. 7
a. Concept and values of the company ……………………………………………………………………………… 7
b. Company History ………………………………………………………………………………………………………… 8
c. Financial situation of the company ……………………………………………………………………………….. 9
d. Areas of business operations ……………………………………………………………………………………… 10
e. Legal and organizational structure ………………………………………………………………………………. 10
f. Employees of the company ………………………………………………………………………………………… 11
g. Customer portfolio ……………………………………………………………………………………………………. 11
h. Location ……………………………………………………………………………………………………………………. 11
i. Main suppliers ………………………………………………………………………………………………………….. 12
1. Business Unit Sector 1 …………………………………………………………………………………………….. 14
2. Business Unit Sector 2 …………………………………………………………………………………………….. 14
II. ANALYSIS OF THE ENVIRONMENT OF PATAGONIA THE MODEL PESTEL ……………………………… 15
a. Political context ………………………………………………………………………………………………………… 15
b. Economical context ……………………………………………………………………………………………………. 15
c. Socio-cultural context ………………………………………………………………………………………………… 16
d. Technological context ………………………………………………………………………………………………… 16
e. Ecological context ……………………………………………………………………………………………………… 17
f. Legal context …………………………………………………………………………………………………………….. 17
III. MARKET ANALYSIS OF PATAGONIA …………………………………………………………………………….. 21
a. Analysis of the Strategic Business Unit 1: …………………………………………………………………….. 22
1. The intensity of competition: 8.5 / 10 ……………………………………………………………………….. 22
2. New entrants: 7 / 10……………………………………………………………………………………………….. 23
3. Substitution products: 5 / 10 ……………………………………………………………………………………. 25
4. Power of customers: 6 / 10 ……………………………………………………………………………………… 26
5. The Power of suppliers: 5 / 10………………………………………………………………………………….. 27
6. The role of the American State: 3 /10 ……………………………………………………………………….. 27
b. Analysis of the Strategic Business Unit 2: …………………………………………………………………….. 28
1. The intensity of competition: 9 / 10 ………………………………………………………………………….. 29
2. Power of customers: 6 / 10 ……………………………………………………………………………………… 29
Arthur Nègre
Máster en Marketing
EBP 2012
3. Substitution products: 1.5 / 10 …………………………………………………………………………………. 29
4. New entrants: 7 / 10……………………………………………………………………………………………….. 30
IV. PATAGONIA STRATEGIES FOR ITS STRATEGIC AREAS …………………………………………………….. 30
a. The business strategy ………………………………………………………………………………………………… 30
b. Field of activity ………………………………………………………………………………………………………….. 31
c. A differentiation strategy …………………………………………………………………………………………… 31
1. An effective strategy … …………………………………………………………………………………………… 31
2. …but not without risk ……………………………………………………………………………………………… 31
d. A strategy of concentration ………………………………………………………………………………………… 32
V. STRATEGIC MATRICES ……………………………………………………………………………………………………. 34
VI. ANALYSIS OF INTERNAL PATAGONIA: THE STUDY OF THE VALUE CHAIN ………………………… 37
a. Activities of bases: …………………………………………………………………………………………………….. 39
1. The commercial activities: ……………………………………………………………………………………….. 39
2. Process activities: …………………………………………………………………………………………………… 41
3. Support activities: …………………………………………………………………………………………………… 41
4. Competitive advantage: ………………………………………………………………………………………….. 43
VII. ASSESSMENT AND STRATEGIC CHALLENGES ………………………………………………………………… 44
a. Internal analysis ………………………………………………………………………………………………………… 45
1. Forces …………………………………………………………………………………………………………………… 45
2. Weaknesses …………………………………………………………………………………………………………… 46
b. external analysis ……………………………………………………………………………………………………….. 46
1. Opportunities ………………………………………………………………………………………………………… 46
2. Threats ………………………………………………………………………………………………………………….. 47
3. Issues ……………………………………………………………………………………………………………………. 47
4. Perspectives …………………………………………………………………………………………………………… 48
VIII. RECOMMENDATIONS ………………………………………………………………………………………………… 48
Conclusion …………………………………………………………………………………………………………………………… 52
Bibliography …………………………………………………………………………………………………………………………. 54
Arthur Nègre
Máster en Marketing
EBP 2012
INTRODUCTION
For many years now, the outdoor market has been in perpetual change. Indeed, throughout the world, users of outdoor activities are more numerous. The reasons given include a net increasing granted to leisure on one hand and on the other hand, the protection of the environment. In fact, the practice of leisure in a natural environment is similar to real outlets because they can break the constraints and the drives of life. Thus we develop a certain longing for global warming and nature more generally. Then people feel always more aware of the environment and generally want to invest more in outdoor activities for new purposes and new conveying equipment brought into play, new spaces, new temporalities and new modes of sociability.
Leisure is subject to multiple challenges as citizens’ expectations are numerous. The outdoor seems to have become over the years a social phenomenon with significant economic benefits. Thus, a real commercial market activities that is then developed in recent years and it is in this sector that the company Patagonia has emerged. Thus, many players have come to invest in this sector priori attractive. Fierce competition has therefore put in place gradually, making the most of the improvement activities in nature everywhere.
Patagonia on this industrial society is best known in his home country, namely the United States, even if the brand is trying hard to get a place on the world market for the outdoor market. Nevertheless, the faithful “outdoor players” know these products because their quality and technicality are recognized. But why such a good recognition? In other words,
Arthur Nègre
Máster en Marketing
EBP 2012
what distinguishes Patagonia its competitors in the outdoor market? To answer these questions, consider the company as a whole is apparently needed it.
For a comprehensive overview of the company Patagonia, we will implement a procedural approach precise logic. Indeed, studying a company for whatever, make sure to analyse each of its characteristics to derive a general profile. As a first step, we will proceed upstream, a brief overview of the company” Patagonia” the scene of our study. Following this, we will try to study more precisely the one hand, the market environment (macro environment) and on the other hand, the environment of the company Patagonia. This study will allow us to highlight the strategies adopted by the company since its inception. In a second step, in view of the work already done, we try to make development opportunities that will arise obviously on various recommendations.
I. COMPANY’S OVERVIEW
a. Concept and values of the company
The American company Patagonia is a wholly owned quite as innovative.
Indeed, it is in an industry booming and seeks to defend specific values. Over the years, the company, the number one U.S. outdoor, thus become a model corporate citizen. In fact, Patagonia is in the market outerwear which is one of the most desired brands in the USA. In general operation of the company, the personality of its famous founder seems paramount. Indeed, it has managed to impose innovative share ideas and managed to keep the group on the fringes of the corporation. By its originality, Patagonia and manages to keep a growing audience.
This uniqueness can be brought to light through the list of 5 key points defended by Yvon Chouinard, founder of Patagonia
? Profitability: CHOUINARD requires its troops a return of 10% before taxes. This is the only way for him to remain as independent while promoting implement its major principles include those allocated to the protection of environment.
Arthur Nègre
Máster en Marketing
EBP 2012
? Social Policy: flexible schedules and forms management of working timev must help employees balance their work and personal lives.
? Activism: employees may be absent up to 3 months (paid) to participate in programs for the protection of nature.
? Clean Production: The company seeks to reduce the impact of the activity on ecosystem by making recycled plastic jackets, cotton shirts Organic dyes are less toxic …
? “Management By Absence”, the founder of the company goes up to 40% of its time away from the business, looking for new ideas.
b. Company History
1940: Birth of Yvon Chouinard in the state of Maine (USA).
1965: Creation of Chouinard Equipment with Tom Frost, climber and aeronautical engineer who seeks to redefine and improve almost all climbing equipment marketed to make it stronger, lighter, simpler and more functional.
1970 Chouinard Equipment is the leading supplier of climbing equipment in the USA. The company becomes aware of its responsibility to the environment because the material damage created rocks.
1973: Company founded by Yvon Chouinard Patagonia. The company is on the market while high-end clothing for outdoor sports.
1977: Last sale of a fleece jacket revolutionary wicking polyester thread moisture while keeping heat.
1986: The Company undertakes to pay each year 10% of its profits to SMEs that preserve natural habitats and 1% of its turnover to finance environmental projects.
1988: the first national environmental campaign project support of de-urbanization of the city of YOSEMITE USA.
Arthur Nègre
Máster en Marketing
EBP 2012
1991: Strong sales decline and inability to credit because the U.S. is in a recession. The company must then be separated from 120 people to remain profitable and independent, where a certain level of awareness on the part of the management team. Indeed, to sustain the company’s business, Yvon Chouinard decided to focus on growth “human scale” in order to adapt the organization of the company to cyclical developments.
1993: Yvon Chouinard discovered a polyester made from bottles recycled plastic has the same properties as a normal polyester.
1994: Patagonia decided to manufacture its 100% organic cotton clothes, organic.
1996: Construction of the distribution center based in the city of Reno, Nevada (USA). David Olsen has been appointed CEO of the company while Yvon Chouinard became chairman of the board.
2001: Creation of the association “1% for the Planet”, which aims to generalize the commitment Patagonia in 1986
c. Financial situation of the company
The financial situation of the company has experienced many vicissitudes. Since its creation in 1973, the economic burden of the company continues to grow to 103 million in 1991. Then, from 1991 to 1993, the financial situation of the company has experienced a strong whirlpool 1991 (see History of the company). However, this period is over, its turnover has increased continuously reveals that the sustainability of the business of the company. Thus, the figures dated 2007 indicate that the turnover of Patagonia stands at $ 270 million per year. But why turnover also low for a company known throughout the world? A primary response is imposed on us. In the treatment of the issue date of 1994 appears to be a turning point. Indeed, at this date, Patagonia decided to buy only organic cotton to manufacture their products. The company then takes a huge risk. In fact, it turns out that this type of cotton costs 50-100% more expensive than treated cotton. Thus, the purchase of this revolutionary textile still weighs now 20% in the sales of the U.S. firm. Despite the inconvenience and misunderstanding of the commercial sector and suppliers, Yvon Chouinard founder persists and customers agreed to purchase a product certainly expensive (+ 20% compared to conventional polyester fibre products), but respectful of the
Arthur Nègre
Máster en Marketing
EBP 2012
environment. Moreover, to date, the relatively low level of turnover of the company’s founder seems just as it is the result of a desire reflects commercial and accepted.
d. Areas of business operations
As we can see in the history of the company, its business areas have greatly evolved over the years. Thus, while at first it sold mostly climbing equipment, the company has gradually oriented manufacturing outdoor clothing green.
At present, the areas of business activities are as follows:
? Outerwear
? technical equipment for outdoor activities
? technical clothing for outdoor activities
e. Legal and organizational structure
Patagonia is a type of American multinational because there are subsidiaries in Europe (Patagonia Europe) and Japan (Japan Patagonia). This approach is purely strategic, as the company seeks to establish a close relationship with its customers outside the USA.
Its organizational structure is relatively simple and innovative. Indeed, Patagonia maintains a relationship quite original with its workers and its customers. Indeed, within the company, there is no power purely formal, strictly defined hierarchical structure. The operation of the company background and the autonomy and accountability of employees. Indeed, the reasoning displayed by the founder of the company on the premise next “may a small number of our employees abuse their freedom, but what I am sure is that the best of never accept them to work in a company where we do not trust them. “Mostly in mop for the promotion of its products, it supports remote Patagonia, by delegation. A singular vision of the company management, he humorously nicknamed MBA “Management By Absence.” (cf. concept and values of the company) On the relationship between the company and its customers, it is facilitated by the fact that the two parties share a passion (the nature), the same values and this is a common language. Thus, Patagonia does no marketing strategy in place but favors the recognition of the quality of its products while respecting its values (see concept and values of the company).
Arthur Nègre
Máster en Marketing
EBP 2012
f. Employees of the company
Patagonia is a company comprised of 1,200 employees in the United States, Europe (66 employees, including 40 in France) and Japan (160 employees). The employees of this company have many advantages due to its particular organizational structure as we have seen in the above point. Indeed, Patagonia has a true philosophy of alter-breaking with company codes capitalist usual. Moreover, the operation of the company is based on the autonomy and accountability of its employees. Everyone manages his time as he sees fit, provided that his work is well done and it does not disturb other organization. Similarly, in the spirit of Yvon Chouinard, when a child of one of his workers is sick, his place is not in the office but at his bedside. In addition, each worker may, if they wish, within two months from an environmental organization of their choice as a volunteer, while still benefiting from his salary (to date, 350 employees in 1200 did) . In addition, it should be noted that Patagonia employees receive a bonus of 2000 euros if they acquire a hybrid or electric car.
g. Customer portfolio
Patagonia is a company that the quality of his clothes and his environmental commitment is known across borders. Thus, it provides a portfolio of clients and quite loyal. Thus, three types of clients can be identified:
? combining the individual clients as well as lambda loyal customers and advocates for causes that the company supports and defends well.
? businesses and associations.
? professionals outdoor sports and teams.
h. Location
Since its creation in 1973, the headquarters of American society is based in Ventura, California (USA). The establishment of the brand in Europe mainly dates from 2004, with the opening of its European subsidiary in Annecy (Haute-Savoie). Now on the outlets of the brand, they are numerous and their implementation varies enormously. Indeed, the American company owns 1,500 stores in the United States, 700 in Europe and 200 in Japan. In addition, Patagonia has stores where its products are sold exclusively. In this regard, dated
Arthur Nègre
Máster en Marketing
EBP 2012
2004 figures highlight the fact that it had 36 stores mono brand in the world, including 12 in Japan and 5 in Europe.
i. Main suppliers
Patagonia manufactures its products throughout the world. In fact, the company counted in total, 160 suppliers in countries such as China, Thailand, Japan, Turkey, Portugal, Mexico, Colombia, Israel, Morocco, Tunisia, Bulgaria and the United States.
In Patagonia, the choice of suppliers is not trivial. In fact, it selects its suppliers based on quality, technology, know-how, location, price, customer service, ability to deliver on time, the social and environmental performance and convergence of ideas with Patagonia . If a plant does not comply with these minimum standards required, then the company refuses to work with it. More precisely, the two main suppliers of the company are Teijin and Malden Mills. The first named is a Japanese company that has developed a process for recycling polyester products. Therefore, the supplier is the philosophy of Patagonia and “allows to consume 76% less energy than producing fiber from oil” by Yvon Chouinard. The second is an American company which manufactures ecological fibers Patagonia products.
In addition, two information can be revealed. On the one hand, it should be noted that 60% of products sold in Europe by Patagonia is also manufactured in Europe and the Mediterranean. On the other hand, you should know that Patagonia is the first company in the world to have developed a program for recycling old fabrics, always will first
Arthur Nègre
Máster en Marketing
EBP 2012
This ad had been show for the Black Friday which is a well-known sales event in USA. The aim is to show how to act responsible.
Strategic Business Units of PATAGONIA Strategic Business Unit (SBU) 1 (main unit)
Strategic Business Unit (SBU) 2 (second unit) Production of clothing dedicated to the
Production of clothing axe on technicals
Arthur Nègre
Máster en Marketing
EBP 2012
outdoor sector activities
? Fly fishing ? Escalation ? Hiking ? Ski / snowboard ? Mountaineering
1. Business Unit Sector 1
This is the design of high ecological clothing range for a particular audience passionate about everything related to outdoor (outdoor sports) and environmental causes. Here again, technology and know-how of the company that actively focuses on the importance of innovation with the development of the use of organic cotton (recyclable product). The company invests 10% of its turnover in R & D (Research and Development)
The main product lines associated with:
? Climbing Clothing
? Clothing for Fly Fishing
? Clothing for mountaineering
? Clothing Ski & Snow
2. Business Unit Sector 2
Here we find mainly clothing and outdoor materials on the world market. This is the origin of Patagonia Business Unit Sector, but activity is clearly related decline in recent years
Arthur Nègre
Máster en Marketing
EBP 2012
II. ANALYSIS OF THE ENVIRONMENT OF PATAGONIA THE MODEL PESTEL
In order to analyse the opportunities and threats that arise in business Patagonia, it is necessary to use the PESTEL model. This tool will allow us to understand the macro-environment and anticipate future impacts of these six factors which are of: Political, Economic, Socio-cultural, Technological, Environmental and Legal. It should nevertheless be set before the principal activity of the company Patagonia. Its Strategic Business Area (Business Unit Sector) principal, as defined above, is designing and selling clothes “Outdoor”, even if his business grows around street clothes and technical equipment sports.
a. Political context
Yvon Chouinard plays in the political field. Is this an advantage or a disadvantage?
At first, this is a considerable advantage since environmental issues are often times political bodies, aware of the current environmental issue. This new craze in connection with wills sociocultural encourages Yvon Chouinard to continue its investment policy. For example, it has recently sided with the Obama campaign, including environmental policy it seems more in line with that of Patagonia.
To support these ideas, a Patagonia catalogue, which despite being a means of communication on the brand, communicate the actions and supported by the company: it is a catalogue activist? In a second step, this activism is a weapon to be handled with care. Indeed an “extremism” green can be misunderstood by a majority of the population.
b. Economical context
Overall, the economic market items “Outdoor” and wider sporting environment is very favourable. In fact, this market is growing at 2 digits for several years, and in 2007 even reached about 20% growth.
The figures1 show that the average budget of French is 353 € per year for sporting goods which is very consistent and steadily increasing. However, this opportunity is relative to the
Arthur Nègre
Máster en Marketing
EBP 2012
average price of a Patagonia jacket that exceeds € 100. Patagonia, a company primarily operates in the U.S., the market opportunity is interesting. Indeed, this country is the largest consumer of sports clothing with 44,000 billion volume in 1998.
But of course these figures are dated before the current economic crisis. We can therefore assume that these numbers will legitimately be led to decrease. Another factor to be taken into account is the presence of many strong competitors that share the market. The threat is disappearing due to lack of competition. Patagonia, its presence majority in the United States does not allow them to take full advantage of international growth. However, it is a development opportunity that will be forgotten in the near future.
c. Socio-cultural context
Although Patagonia has existed for over 30 years with the same values, sustainable development is in thinking an important principle. In fact, with pollution and global warming, most westerners are aware of environmental issues. Patagonia’s efforts to reduce its impact on the environment during the production and distribution of its products, corroborate the previous observation. On the sportswear segment, as was seen above, this is an extremely wearer. Indeed, in addition to sports “funs” and “extreme” that grow almost 2 out of 3 French already practicing physical activity. Creating clothing requires a labor intensive and occurs in most cases in China. And this is the case for Patagonia. It is therefore necessary to pay attention to the bad image released by this practice. In addition, the Patagonia brand is considered a luxury brand (nicknamed “Pata-Gucci” or “Prada Gonia”) 2 thus excluding average incomes.
d. Technological context
As the years, R & D centres of different companies, including Patagonia have to find techniques and technologies to develop more environmentally friendly products, with human impact on the environment greatly reduced.
The strong influence of Patagonia and loyalty have enabled the brand to have significant bargaining power. Since the beginning, the company has retained its subcontractors which indicate a relationship of trust. The brand has managed to impose its suppliers to spend 10% of their turnover in R & D centre this therefore allows them to be at the forefront of
Arthur Nègre
Máster en Marketing
EBP 2012
innovations in green technology. However this can also be a threat, because suppliers have a technological advantage and can grow outside the company Patagonia (sell their patents …). But new technologies to defend their values are relatively more expensive which feels the price offered for their products. They cannot sell their clothes to many and is restricted to a niche affluent population is concerned about its environment.
e. Ecological context
There are always more certifications that are recognized by many buyers. For example, Patagonia decided since the 90s to use only organic cotton, much less polluting than conventional cotton. This choice represents an opportunity for recognition among the general public of its shares in favor of the environment. However, there is also a threat against this decision since the cost of organic cotton is up to 2 times more expensive to purchase, which obviously affects the price. The high cost of Patagonia clothing is a barrier to purchase.
However Yvon Chouinard asked to be certified for other labels. There is for example the ISO 14001 certification of factories subcontractors for leather shoes. The latex used comes from the sap of a plant (rubber), which is a very good alternative to petrochemical usually used. Recycling plastic bottles (92 million bottles since the beginning of the action) to create its range of polar “Synchilla” saves them many barrels of oil. (1 barrel (168 liters) for 3700 or 150 bottles recycled sweaters). Technology has advanced; it has developed with its subcontractor Maden Mills full range of clothing Polartec ® 3. Similarly, there was the establishment of recycling policy underwear worn. To be more environmentally friendly, Patagonia wants relocate its production, which requires logistics, labor, factories and larger inventories. It should also train staff. This is a significant threat.
f. Legal context
There is little information on the legal nature, from the fact that many taxes to limit the export / import, and protection of the U.S. cotton market strongly constrain activities using Patagonia organic cotton in large quantities and is mainly located in the United States. However, these limitations tend to diminish.
In summary, an array of opportunities and threats in the macro environment:
Arthur Nègre
Máster en Marketing
EBP 2012
Opportunities Threats Political context
? The issue of the environment is often made by politicians. More business leaders speak at political campaigns, not to promote their brand (whatever?) But the question of the environment.
? A growing recognition (branding) of companies working to protect the planet and the manufacturer environmentally friendly way quality approach.
? There are policies restricting exports through taxes. Patagonia, taxes increase even more the cost of their clothes.
? A market dominated by large companies (Columbia, The North Face, …) and introduced by sporting giants (Nike, Adidas, …) which have a strong bargaining power: lobbying.
? Activism is rather frowned upon by the general public because this mode is often equated with extremism. Patagonia for their album catalog is a militant, very focused. Economical context
? Budget for sporting goods in France is on average € 353 per year, relatively high … however the price can change Patagonia jackets this opportunity into a threat since the price of these products generally exceed € 100.
? The sports market called “funs” or “extreme” is undergoing a rapid increase of the order of 20% per year.
? The overall market is global, and Patagonia has really developed in United States, so there is an
? The current economic crisis and with the decline in purchasing power of French and more broadly Western decreases even more budget for Outdoor sportswear.
? Many competitors have entered the market and therefore shares the market share. Large competitors such as Patagonia and The North Face Columbia limit the development of the brand.
Arthur Nègre
Máster en Marketing
EBP 2012
opportunity to develop internationally.
? Patagonia is located in the United States, world’s largest consumer in 1998 (with about 44,000 billion volume). Sociocultural context
? There is a change of attitude, which include more sustainable development as necessary. Recreation and outdoor extreme sports are trendy and increasingly sought.
? Many people (more or less old) engage in the practice of his sports and sports fun. Patagonia creating high quality technical clothing is concerned this market is therefore an opportunity.
? The sportswear market growth, particularly in France.
? 60% of French in sports at least once a week.
? More people invest in clothes more or less technical sports for leisure use and Streetwear. Source volume is much more important, which
? The production of sportswear come true for most companies in China. So to be a competitor in this market, it is best to settle in these countries. However, the image of working in Asian countries is a barrier to purchase. Indeed it is considered child labor and poor conditions of work. Ex NIKE
? Extreme sports and outdoor activities are most often associated uncertainties and accidents that are related. There is therefore an obstacle to the purchase of products too technical associated with these sports.
? There is great demand versatility as the main consumers of outdoor clothing are young; they want innovation, and distinction (“tribe”). Therefore innovate.
Arthur Nègre
Máster en Marketing
EBP 2012
suggests an increase in sales.
? Opportunity related to the development of sportswear especially among young people.
? Online marketing is growing more and Patagonia in this case have a website achieve well, allowing it to sell without creating new point of sales.
? The development of the online sale of clothing will reduce the number of stores or distributors. For highly technical clothing, buyers prefer to try before putting a high price.
? The high cost of clothing products are rapidly becoming assimilated to a luxury brand, which limits the market to the affluent. (“Pata-Gucci” or “Prada Gonia”) Technological context
? The development of new technologies in this environment, and in general can make more environmentally, a force in the middle of the Outdoor synonymous with the great outdoors and nature.
? The creation of these tools, and the need to remain competitive requires constant innovation and therefore have a R & D budget is very important. This shows that there must be such investments. It is a very dynamic market that requires constant vigilance.
? And subcontractors are more skilled with their R & D, it is necessary to remember: risks of industrial espionage, need to pay more suppliers and be faithful.
? The cost of innovation is felt on prices. Environmental context
? “With global warming, the waves are
? More places of nature begins to be
Arthur Nègre
Máster en Marketing
EBP 2012
bigger and bigger. There is an opportunity. ‘
? Development in the ecological certifications (eg ISO 14001, 1% for the Planet …) can develop products more environmentally Outdoor manufactured. It also develops branding.
? Innovative techniques can save oil and therefore have an impact on the preservation of the planet.
contaminated (even Everest!) This implies that many people prefer sports in a truly natural context.
? The production of environmentally friendly clothing has an additional cost. Indeed organic cotton costs up to 2 times more expensive.
? The decrease in the oil leads to an additional cost and requires investment in R & D to be less dependent. Legal Context
? Development of globalization and trade areas preferred development assistance to the international success factor in this market.
? Laws restricting the export (taxes)
III. MARKET ANALYSIS OF PATAGONIA
THE MODEL OF PORTER
This study was conducted to collect effectively in the market which fits Patagonia, ie the outdoor apparel market. So, are successively highlighted the competitive intensity of the industry, potential new entrants, potential substitutes to the products of the market (ie Patagonia), the influence of customers and suppliers on the activity of the firm, and the role of the U.S. state of operation of the company Patagonia. This analysis is set up on 2 times, first analysis PORTER 1: Strategic Business Unit of Patagonia (the production of outdoor clothing) and the second time in a succinct analysis of Patagonia Strategic Business Unit 2, the original Strategic Business Unit (production outdoor clothing and technical materials).
Arthur Nègre
Máster en Marketing
EBP 2012
a. Analysis of the Strategic Business Unit 1:
1. The intensity of competition: 8.5 / 10
The company Patagonia is present on many Strategic Business Unit, including the sale of outdoor clothing. This sector of the sale of outdoor clothing has a multitude of actors. Regarding the U.S. market we identify three serious competitors to Patagonia, which has a very large market share in this country:
? Columbia (world leader in this market): This competitor is the actor most important areas of design, procurement, marketing and sales of outdoor clothing. It is represented on all continents and in countries where Patagonia is not represented (Russia, Korea, Australia, …). Its activities are highly diversified in the field of outdoor making it one of the competitors numbers 1 Patagonia.
? North Face: Present for 42 years on the market, the firm is a competitor for Patagonia.
? Timberland: the world’s leading outdoor footwear and serious competitor in the market for outdoor clothing.
At the global level, many large players more or less emerge:
? Lowe Alpine
? Source
? Craft
? Musto
? Eider
? Gelert
As regards the French market, global competitors appear:
? Eagle: The Company announced in 1999 a turnover of 917 million, is present in this sector and provides urban variation of its products.
? Lafuma: This firm has branded outdoor activities by: Millet (mountain) Lafuma (occasional hiking), Camel (fishing and hunting).
Arthur Nègre
Máster en Marketing
EBP 2012
? Quechua: This is the seventh global benchmark in the industry. The brand created and owned by Decathlon, alone accounts for 50% of the outdoor market in France.
? Solomon: The company is quite specialized in the sale of equipment for skiing, but it is part of the Top 5 global industry sales of outdoor clothing alongside four U.S. firms (Timberland, Columbia, North Face and Patagonia).
Patagonia is therefore a highly competitive sector, along with a dozen firms size or larger, and several other smaller companies. But the company Yvon Chouinard has a feature that distinguishes it from its competitors, giving it a strong competitive advantage in this market. The company is committed to protecting the environment. Its products are different from those of its competitors because Patagonia does not use, for example, organic cotton for their clothes. Thanks to this, and many other actions ecological Patagonia is now the first brand of global ecological textile. So, potential customers perceive the brand in a different way from Patagonia to its competitors (competitive advantage). To remain a leader in creating environmentally friendly clothing, Patagonia has posed barriers to entry in the form of patents over methods of fashion design and the use of certain materials such as Capilene and Regulator.
This feature has its drawbacks because many ecological processes of the firm (logistics, transportation, raw materials …) have a higher cost, forcing Patagonia to sell its products 20 to 30% more expensive than its competitors. But this distinction in ethics and research (fabrics, design …) remains a strong competitive advantage for the company
2. New entrants: 7 / 10
The example of Patagonia begins gradually to be emulated. Nike and the firm now use 3% organic cotton in the design of each of its T-shirts. But fortunately for any textile company Patagonia, the outdoor specialist, is ready to put up the necessary funds to develop
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environmentally friendly clothing and perform actions on the environment as does the firm for nearly 20 years. So the competitive advantage of Patagonia is not endangered by over potential new entrants.
Regarding the outdoor market, and more specifically the sale of clothing, the market remains open. And in recent years the distributors of sports brands launching outdoor clothing and we have seen the example of Quechua, launched by Decathlon in 1996 and today ranks 7th in global industry sales of clothing outdoor. Quechua has reached such famous stores as Quechua detached from the mother teaches Decathlon emerge in France. This example begins gradually to be taken, for example the French distributor GoSport through its subsidiary launched via its subsidiary Courir through the brand Moviesport a clothing brand outdoor. Other cases, the German distributor Sport-Scheck has launched a catalog specifically dedicated to the world outdoors. Distributors are new entrants seriously but do not affect the competitive advantage of Patagonia.
For nearly 50 years, the outdoor clothing sector was defined exclusively in the field of sport, and only signs providing clothing to character acting and sport utility on the market. But today the situation has changed, and the explosion of the market for outdoor activities due to the increase in free time, bringing new companies to offer products outside the sport. Thus, the group has launched a brand Damart clothing outdoor called “Nature & Freedom”, with the main objective to rejuvenate its image. These products cut across universe including fishing or walking in the mountains. Worlds where is Patagonia.
Store entirely dedicated to outdoor emerge worldwide. For example teaches Andaska launched by the firm Sport and Nature, offers stores entirely dedicated to the outdoor with a range of clothing divided into four themes: mountain, sea and city. But there are also travel agencies and bookstores devoted to tourism, travel, and environmental causes (this affects the competitive advantage of Patagonia). Prices in its stores are at those exercised by competitors Patagonia, 20 to 30% cheaper than the company Yvon Chouinard. Having outdoor clothing buyers continue to trust brands “sports” for their purchases, and the fact that companies other than sports sell this type of equipment is not returned in manners.
Yvon Chouinard has announced that the entry of China into the outdoor apparel market did not frighten her. Perhaps because the Top 5 market (Timberland, Columbia, Salomon, North
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Face and Patagonia) manufactures its products in China. But the country remains a very dangerous potential competitor, and a producer of organic cotton important. This however does not seem to endanger the competitive advantage of the firm.
3. Substitution products: 5 / 10
As previously announced, the group produces Patagonia outdoor clothing dedicated to 5 world of sports: skiing / snowboarding, Nordic skiing, fly fishing, mountain climbing, hiking / trekking and climbing. Clothing offered by Patagonia are perfectly suited to the practice of his sport. But trends change within the sport community, and dress codes change.
Regarding Ski / snowboard and Nordic skiing, Patagonia has a range of outfits, designed exclusively for its practices, rich and varied: jacket, pants, bodysuits, and underwear. But, we miss the good old snowsuit missing. In this snowsuits available in sport shops specialized or are a first substitute the clothing line “Ski / Snowboard» Patagonia. For other sports represented in the range of Patagonia products, we do not mark missing. By cons, as announced earlier, trends change and to stay in the world of the mountain, there was a slight behavioural change clothing practitioners hiking or snowboarding.
Snowboard generation is a generation in search of sensation but also in search of identity “tribal” recognition among themselves and with other practitioner’s winter sports. Patagonia is also proposed for this segment, as well protecting equipment from the cold, extremely simple and uniform. But today practitioners of snowboarding, among other things, turns to such street wear clothing manufacturers, where protection against cold is far from being as effective as proposed by Patagonia, but where the aesthetics and design outweighs any. So today, if you walk near the ski snowboarding in the winter resorts, we can see more and more practitioners wearing tunics Ecko, Enyce, G-Unit, LRG or PellePelle. The manufacturers of these products such as “street wear” gradually beginning to understand this social trend and adapt their products to the practice of winter sports, which become dangerous substitutions for products in this sector Patagonia snowboarding.
Another generation, very different from the previous one, is much more fond of long walks in the fresh air of the mountains. Practitioners hiking or trekking in Patagonia can find all the
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products they need to practice their hobby safely. But often these are very poorly equipped for most of the hike is a hobby that does not merit the investment required in the purchase of materials suitable for this sport. It is not uncommon to encounter hikers in shorts, T-shirts, Basketball, or even in Thongs (summer). This kind of dress, very easy to find (big brands, small brands …) is a substitute, certainly not suitable, niche product in hiking / trekking Patagonia.
We can realize that Patagonia should also fight against the different brands in the sports sector but also in the clothing sector “streetwear” in his own outdoor clothing market. These alternatives are often cheaper than Patagonia products for weaker performance, and it is true that it is easier for people, especially backpackers, to obtain substitute products from Patagonia. In this substitution products are a real threat to Patagonia, but as competitive products and new entrants, they do not affect the competitive advantage of the firm Yvon Chouinard.
4. Power of customers: 6 / 10
The company Patagonia is a company unique in the vast field of textiles. This is why the company’s customer base is also very specific and meets specific criteria. These are first of all lovers of outdoor sports, outdoor attracts. But they are also avid environmentalists, activists often the cause. They are also more financially affluent and a higher level of education in most cases.
The range of clients is very small and concentrated, these are great loyal to the brand for the most part, forcing Patagonia to properly analyse their request not to disappoint them and weaken loyalty and gained crucial for the brand. They do not buy in large quantities, and given the quality Patagonia product on time, it is necessary for the brand to innovate to maintain the attractiveness of its customers for its products.
Patagonia has a small panel of highly targeted customers and occasional customers of course, where bargaining power of customers large enough without being excessive because they are consumers for personal use, so buy in small quantities.
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EBP 2012
5. The Power of suppliers: 5 / 10
Patagonia is so far in connection with more than 160 suppliers to produce its range of outdoor clothing. Relationships between the firm and its partners are not common because Yvon Chouinard insists that trust and mutual govern these reports.
For example, since 1996, the company Patagonia makes real cuts in profits by having established supportive relationships with organic cotton farmers struggling to sell their crops. Even then the company paid the bale of cotton grown without chemical additives 7F60 3F90 instead of a cotton ball to normal. These special relationships are based only on the financial aspect but also increased fidelity between suppliers and the firm. Patagonia has agreed to allocate 10% of its turnover in research and development in exchange for the loyalty of some of its suppliers such as Malden Mills, who has been with the creation of the company providing the fleece .
Of the 160 providers Patagonia, over 50% are American. Yvon Chouinard is a point of honor to maintain healthy relationships with its suppliers through each sign a charter. This charter, which inspired brands such as Nike and Reebok, some points determines the obligations of each supplier:
? Stringent quality standards.
? Respect for human rights issue.
? Quality of working conditions perfect.
These obligations are monitored by inspectors appointed by the company Patagonia itself. Yvon Chouinard, is therefore able to reduce the relative power of suppliers. Patagonia uses material difficult to find (organic cotton) and differentiated products to create and produce its outdoor clothing. But by imposing a relational climate and much framed based on trust and mutual respect between company and supplier (signing of a charter), the CEO of loyalty somehow these vendors and decrease their bargaining power.
6. The role of the American State: 3 /10
Located on the coast of California, in Ventura, building Patagonia latest in ecology Yvon Chouinard, has one of the most advanced societies of its time. The company is 100% owned
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by private investors since it is Yvon Chouinard and his wife have all the market share of the company. And the American state has no influence on the functioning of Patagonia. Of course the state imposes laws on exports and imports as for all other U.S. companies, and this is where the problems begin.
The textile market in the world is wrong, and because of the U.S. state champion of liberalism yet, but responsible for these evils. The first world power is also the largest producer of cotton in the world and intends to stay overprotecting its cotton crop using grants ($ 4 billion is the GDP of several cotton producing countries are among the poorest of the world), and increasingly advanced technical means. A another tool is also to implement a policy of quotas and barriers at the entry for importers of raw materials (especially cotton).
Fortunately for Patagonia, this policy did little affected because it uses organic cotton produced on American soil. But this material is slightly more expensive on American soil on the ground that Argentina, Brazil or China. The United States therefore wear some influence regarding the purchase of raw material and especially Patagonia cotton.
b. Analysis of the Strategic Business Unit 2:
The second Patagonia Business Unit Sector, selling technical clothing, specializing in 6 sports flagship brand are fly fishing, climbing, hiking / trekking, Nordic skiing, mountaineering, skiing / snowboarding, is much less therefore the first Patagonia Business Unit Sector. The study of the Business Unit Sector PORTER clearly approximates the previous study on the Business Unit Sector first of the firm. But differences appear especially at the competitive intensity that varies in this really Business Unit Sector compared to the previous shot of influencing the bargaining power of customers. Conversely, the power of suppliers and the role of the state do not change. This strategic activity is extremely limited within the firm (7% of total production) as it relates to the production of clothing and accessories in small quantities. These clothes and accessories, known techniques are specialized materials for each sport of the firm: Fly Fishing Climbing Hiking Trekking Nordic Ski Mountaineering Ski Snowboard
Wader
Specialized
Specialized
gloves
Underwear
Underwear
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Specialized shoes
shoes
shoes backpacks
technical
technical
1. The intensity of competition: 9 / 10
As in the first field of strategic activities of the firm, the production of outdoor clothing, the number of players is very consistent. But a different point appears. If Patagonia is an expert in the design of outdoor clothing, this is not the case with regard to the production of garments known techniques. And in this market, Patagonia rubs companies totally specialists in their field, which clearly dominate the market.
The example of Waders, boots so great for fishing, is the most obvious. Patagonia is far behind market leaders such as Cordura, JMC or Astucit and Zebco. But the firm insists produce this type of equipment in order to remain consistent with his choices, especially in terms of sports displayed. The company still retains its main competitive advantage: eco-design of its technical clothing. This item can be revealing the main asset of the company in this market technical clothing.
2. Power of customers: 6 / 10
Clients of the firm who buys these technical clothing, differs little from buying clothes outdoor. The difference lies in the fact that these consumers are very few and search for specific materials and useful for a very specific task. Eg Patagonia Waders sold can only serve one thing: fly fishing. It should be noted that compared to its competitors in this area, Patagonia does not have a reputation as a specialist in the design of technical clothing, yet its prices are significantly higher. So the brand customers have strong bargaining power, the views of their small numbers, commodity prices, and low recognition of Patagonia in this market.
3. Substitution products: 1.5 / 10
The advantage in clothing production techniques is that it is extremely difficult to find substitutes for these products through their first use. Again the example of products Waders by Patagonia is the most significant, as this equipment is essential to the practice of fly
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fishing. Its substitution for this practice is not possible since it is one of the reference and role in this practice. This is also more or less the case for the various technical clothing produced by Patagonia.
4. New entrants: 7 / 10
Outdoor practices have become over the years a social phenomenon attracting many companies wanting to invest in this market. But the more specific practices, yet from this area, much less attract investors and entrepreneurs.
This can be explained in several ways:
? Customers highly concentrated, specialist in their practice (fly fishing, climbing …).
? Production skills and asking very specific ways.
? Few places available distribution.
? A market dominated by brands specialists in each field.
Therefore potential new entrants into the market called technical clothing, remain cautious minded difficulties entering, make themselves known and remain in these areas
IV. PATAGONIA STRATEGIES FOR ITS STRATEGIC AREAS
a. The business strategy
Strategic directions
The company has a strategy of internal development, that is to say, it does not seek to maximize profits but rather to use his business to inspire and implement solutions to the environmental crisis.
Two main approaches distinguish it from its competitors:
? On-going research and very advanced new materials technology ever, and adapted to the sport. These include Capilene (for underwear) and Regulator (for warm clothes).
? The invention of the concept of “1% for the Planet”, which is for a company to donate at least 1% of its sales to environmental organizations.
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Patagonia has distributed $ 25 million to 1,000 organizations in 20 years.
b. Field of activity
The business
The company is the manufacturing and distribution of mountain clothing and sporting nature. It is placed on the outdoor sector in general, more particularly 5 sports including: mountaineering, climbing, Nordic skiing, fly-fishing, snowboarding and hiking. Early development of other sports such as surfing and water sports …
Grassroots sport Patagonia was climbing, his creator is passionate about the sport, its first activity was therefore the production of climbing equipment, and he subsequently decided to diversify into the Patagonia brand dedicated to textile environment.
c. A differentiation strategy
1. An effective strategy …
The company Patagonia has chosen to offer an advantage perceived as unique in the world. Indeed, it has raised the question of how to combine an obligation of result with a logic “corporate citizen”?
The purpose of the group is the passion for sport and defence of the environment and its values, ethics, performance, solidarity, innovation, ecology responsibility…
This strategy gives the company a competitive advantage by adding to its product difference perceived by consumers as unique and may also constitute barriers to entry for potential entrants.
Differentiation also allows him to make a profit above the industry average, have an advantage over the competition for customer loyalty to its products that works pretty well because the brand has become a style life, a community and a desire to protect the environment.
2. …but not without risk
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There are still risks associated with this strategy of differentiation including the costs of differentiation that may impact on the selling price of the product and thus hinder consumers even those acquired in the environmental cause, which leads to ask the question of the price the consumer is willing to make to gain the advantage of differentiation. The fact that potential buyers could be indifferent to this distinction, or that competitors minimise the strategy.
The assets of the company Patagonia focuses on the development of its growth internally trying to do more in terms of quality and strengthening the loyalty of traditional buyers of the brand in seeking membership.
The group is well established in the industrial ecology model with the option of using recyclable materials.
The company develops the network of e-commerce, which also allows him to increase sales, to play on its brand image, to be known and managed effectively play the ambiguity of being a commercial enterprise but also a militant organization. Since 1996, all Patagonia clothes are recyclable, and since then, the company has focused on this segment, which gives it a lead over its competitors. But there are also risks associated with such a choice.
We can cite a few:
? profitability of the target segment size and profitability
? potential entrants who can make very competitive segment
? that consumer expectations are becoming commonplace …
d. A strategy of concentration
The current evolution of the outdoor market and in particular in terms of profitability explosion (nearly 20% augmentions per year) resulted in Patagonia a restructuring of its strategic business areas. Thus the firm tends gradually to an abandonment of its original DAS, apparel and technical materials related to the outdoors. This exit strategy is in place to intensify the main activities of Patagonia, producing ecological clothing.The company is thus directed today towards a strategy of concentration prioritizing its progress in terms of
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ecological production. This is in order to offer its target a single argument, being the only designer outdoor clothing, 100% ecological.
Yvon Chouinard to understand that in the ecological cause he defends passionately is found to be a strong competitive advantage in today’s society. This reveals to be an advantage for the differentiation which is a key point in the area of outdoor clothing.
But this strategy is still risky. Patagonia’s target is small but sufficiently profitable for the company. By cons, it remains a very challenging target quality of products offered by Patagonia, on the one hand, and also very stingy with respect to environmental actions supported by the brand, on the other hand.
It therefore appears that the profitability of the target Patagonia is not the major concern of the leaders of the firm. The environmental cause is the primary motivation of the market leader clothing 100% ecological.
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Máster en Marketing
EBP 2012
V. STRATEGIC MATRICES
These matrices are there to highlight the differences that distinguish Patagonia actors of the market, whether for his benefit, or conversely to his disadvantage.
Investment in communication
Quality of products
Matrix 1: Communication through quality
The value of this matrix is the correlation existing between these two axes. This diagram relates the communication investment companies active in the outdoor market, with the quality of the products they offer. So this first matrix can account for the fact that the quality of a company’s products is not necessarily pair with communication there hitching.
Four strategic groups are distinguished through this tool:
? The sports brands (recently invested in the outdoor market): These policies have large scale communication for their various products, including outdoor products, quality considered “standard” in the market.
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EBP 2012
? Own brands: These brands, very courted France, apply strong communication policies. But their outdoor products are inferior compared to various industry experts.
? Outdoor specialists: The products they offer are of higher quality than products offered by retailers and sporting brands in the world. But unlike the latter, their communication investment is much lower.
? Patagonia: Patagonia logical place in this matrix is similar to that of the outdoor specialists. In fact, the company communicates very little about these products, and channels used inefficiently and affect ephemeral targets of the brand. In contrast, the quality of products is far superior to all other stakeholders.
Patagonia’s example shows us that the lack of investment in communication of the firm can be explained by the high quality of its products. Thus the budget by Patagonia for its communication is much less than the budget allocated to the sector of research and development. This allows the company to offer the market products unbeatable in terms of quality.
Note: It is possible to see in this matrix is a real opportunity for Patagonia. An opportunity for what is communication, because the policy of the firm in this area may change in the future and allow the company to raise awareness of its products. It might even create a strong competitive advantage, as direct competitors of Patagonia (outdoor specialists) practicing communication policies quite low.
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EBP 2012
Medium price (outdoor products)
Environmental Investment
Matrix 2: The cost of the ecological cause
With this matrix the second objective is to analyze whether the act of caring for the environment through its manufacturing methods, or other distribution, influence the pricing policy implemented by a company.
Four new strategic groups are distinguished through the matrix:
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? Private labels: In the case of sports distributors that the exercised price is the lowest in the market consequences on the distribution of budgets. They don’t show any interest in the environmental cause, so they don’t invest that much event through media activities.
? Major brands, global market leader’s sportswear: Prices exercised by these brands are still higher than those distributors’ athletes. But their investment in terms of ecological actions doesn’t have a great impact. For example, today the firm incorporates Nike in the design of T-shirts, 3% organic cotton.
? Outdoor specialists: These direct competitors Patagonia charge high prices in relation to the quality of their product. In addition, the fact that they are specialists in the field of outdoor clothing implies for them a duty image facing the environmental cause. So these brands invest in this cause, especially thanks to actions, partnerships and donations.
? Patagonia: Patagonia outdoor clothing are the most expensive on the market, it is no secret to anyone. So it takes 20 to 30% more to acquire a garment stamped Patagonia, compared to its direct competitors (strategic groups of specialists outdoor). But the firm remains the world leader in this market in terms
This matrix shows us that Patagonia is an example; almost unique, strong business acquired the environmental cause. But these investments have a price, in research and development for example, in order to develop the best ways totally organic clothing. These manufacturing methods combined with the many environmental actions of the firm (Association 1% for the Planet …) are Patagonia ultimate benchmarks for green design outdoor clothing.
This big investment has enormous implications regarding the development strategies of Patagonia. It is unlikely, or impossible to observe a day implementation of a strategy for cost leadership in Patagonia. So it would be extremely difficult for the firm to create a day, a range of products more accessible financially, respecting the values of the company.
VI. ANALYSIS OF INTERNAL PATAGONIA: THE STUDY OF THE VALUE CHAIN
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A model of Patagonia’s shop
The analysis of the value chain can highlight the various features for the company’s business. A value chain is the set of procedures to determine the ability of an organization to gain a competitive advantage. This competitive advantage is defined by Porter as the ability of an organization to achieve sustainable higher performance than their competitors.
Through the analysis of the value chain of the company Patagonia, we successively determine the basic activities, namely:
? Supply logistics
? Manufacturing
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? Logistics marketing
? Marketing and sale
? services
And support activities, namely:
? The enterprise infrastructure
? The human resource management
? Research and development
? purchases
We conclude the analysis of the value chain of the company Patagonia trying to determine the competitive advantage the company has over its competition.
a. Activities of bases:
Activities bases dissociate into two main functions namely, a commercial activity and a process activity.
1. The commercial activities: Commercial activities Caracteristics
Sales
? Ambassadors very present in the world.
? Network of distribution (Old Camper, Samaritan …).
? 5 stores key: Milan, Dublin, Chamonix, Munich and Zurich.
? Project: divide society into smaller units (for marketing and sales). Units that operate as independent companies.
Products
? Types of products sold by the Group:
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? Sportswear extreme skiing, mountaineering, rock climbing …
? Fishing equipment.
? Products known for their quality.
? Biological technology.
Custumers
? Sales to individuals through distribution centers.
? Sales companies and associations (eg State Certificate).
? Sales teams.
? Clients sports enthusiasts and nature enthusiasts and environmentalists.
? Financially affluent customers rather
Price
? 1% of profits given to associations around the environment.
? 267 million turnover.
? Patagonia sells its products 20 to 30% more expensive than its competitors.
? Price for customers rather easy.
Competition
? Patagonia in a strong position as recognized for the quality of its products and its services.
? Columbia: global market leader.
? The North Face: Present for 42 years on the market.
? Timberland: The world leader in outdoor footwear market.
Services
? Patagonia offers two levels deservices and book in 15 European
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countries.
? Options available:
? Standard Delivery: 2-5 business days from the date of shipment.
? Express Delivery: 1 business day from date of dispatch
2. Process activities: Process activities Caracteristics
Procurement
? Use of rail transport.
? Commodity producers paid their fair values.
? Patagonia relationships with 160 suppliers.
Production
? Manufactures in the world.
? Made with raw materials that are environmentally friendly.
? Innovative technology and waste treatment:
? Recycling plastic bottles, organic cotton and use of wind energy, abandonment dyes containers of heavy metals and use of natural light.
? Innovation:
? Ex: clothes range Capilene are not packed, wrapped and they are only held by a elastic band.
3. Support activities:
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These activities support or support functions provide a degree of complementarity with other types of activities listed above. Support activities Caracteristics
Infrastrctures
? Parent in California.
? Stores present in the world.
? Workshops nonpolluting:
– Ex: making surfing based non-toxic.
? Center for children: no worries of childcare for staff.
? Building environmentally friendly: wood building designed to save energy. Construction recycled materials.
Human ressources
? An original human resources policy:
– Commercial, stylists, designers, buyers, technicians … all are recruited according to the same criteria established by Terri Wolfe, HR.
? Research expertise and management.
? Reflect a taste for outdoor sports, the importance of surfing for recruitment.
? Demonstrate a real interest in environmental causes or social issues.
? Recruitment = training and
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adaptation.
– Ex: The new employee is sponsored by former upon arrival, which promotes integration and training
Research and development
? Innovative technology and waste treatment.
? Importance of technics
? Change of raw materials to protect the environment:
– Ex: Passage to the use of organic cotton without pesticides or chemicals.
4. Competitive advantage:
After completing the inventory of activities of bases and supports company Patagonia, we now seek to highlight the sources of competitive advantage that the company has on its “enemies.”
Dealing with clients who engage in outdoor activities, making outerwear without polluting the environment is clearly a competitive advantage, but can not find Patagonia advantage only in that distinction.
Sources of competitive advantage Patagonia resident therefore these points, the main one being the fight for environmental causes:
? Production of environmentally friendly clothing: The act of using organic cotton to produce its clothing brand creates a very advantageous to the firm. This image is reinforced by the many actions undertaken by Patagonia, especially in the control of its production but also its suppliers (quality standards, respect for human rights and working conditions).
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? Approaches to environmental protection (branding): The various actions of the firm acting for the environmental cause for the brand Patagonia (green campaign for the vote, Association 1% for the planet. ..).
? Special relationship with suppliers: Patagonia relationships of trust with its partners who can protect themselves from possible problems of raw material supply. This through various methods: signature by each supplier a charter obliging them to provide raw materials according to specific criteria, and promises in terms of research and development to these suppliers.
? A loyal and trustly constumers: Patagonia is not like other brand and its customers is not less special. Patagonia product costs are 20-30% higher, the clients of the firm must find compensation because they invest more for a product they may have 20 to 30% cheaper. Consumers buy Patagonia therefore, in addition to clothing, the brand Patagonia. These consumers are very involved in environmental causes, conscious actions initiated by Patagonia and feel to participate in its activities by purchasing a jacket or pants stamped Patagonia. They are also financially wealthy and highly demanding on the shares of the company Yvon Chouinard.
? Detention of the whole capital of the company: Yvon Chouinard and his wife being the holder of 100% of the market share of Patagonia, the company can act almost total freedom.
VII. ASSESSMENT AND STRATEGIC CHALLENGES
All tools used previously have achieved a strategic review of the company. Indeed, the internal analysis shows the various strengths and weaknesses of the company Patagonia and analysis used to define the external opportunities and threats that arise in the environment. Results of this analysis in strategic Patagonia Inc.., It seems worthwhile to summarize the data in the form of a SWOT analysis.
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a. Internal analysis
1. Forces
Patagonia has, as it was mentioned before, a number of competitive advantages which shows their strength. These should be kept in improving the maximum in order to remain competitive.
Firstly they have high quality products (technical and environmental). This implies that their brand buyers creates a climate of trust. So they keep customers satisfied and therefore true. More for over 30 years, they have kept the same values, stability and sign of trust. Then the “Management By Absence” by Yvon Chouinard invented leaves a climate of freedom within companies Patagonia. Eg headquartered in Ventura, California, when the wind gets up and the waves form, employees are allowed to leave their work to go surfing. There is little turnover which leads to a stability in the business. Employees are satisfied.
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Another strength allows them to make choices without being accountable to shareholders. Indeed, the capital of the company is 100% owned by Yvon Chouinard (50% for his wife). They can prioritize R & D environment and quality rather than communication.
Finally loyalty to their suppliers gives them significant bargaining power. They impose their particular providers to invest 10% of their turnover in R & D in addition to ecological techniques. They sign a charter and their subcontractors.
2. Weaknesses
However, the company still has some weaknesses in its organization. Indeed matrices showed that Patagonia invested less money in communication and sponsoring athletes and muses that their main competitors. Even if this is part of their overall policy, it has a real weakness for Patagonia may no longer be visible from other producers. So they do not benefit from the primary function of communication be known!
Another weakness characterizes the price of their products. Product quality and production with 100% organic cotton does not allow them to be competitive with the prices of their competitors. They are on average 20-30% more expensive than their direct competitors. For this item, so they limit their source volume.
b. external analysis
In short, the important information PESTEL model (see above) are:
1. Opportunities
There is first an increase in the attractiveness of green products and sustainable development, there is a market to conquer this firm has always been oriented towards these values. Furthermore certifications and associations that warrant an environmental policy are developing, which will communicate via those bodies or certifications (eg ISO 14001 for their suppliers or “1% for the planet”).
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Then, the outdoor market and extreme sports funs and is in full extension which augurs an increase in sales compared with growth (about 20% per year). In addition, although Patagonia does not have many outlets outside the USA, the development of online sales allows them to be already competitive sector. However they must remain vigilant and continue to develop this type of sale.
2. Threats
There are lots of big competitors like the Outdoor Columbia and more recently Nike that starts in these products. This important competitive intensity is an obvious threat to the survival of Patagonia.
In addition, the search for quality products and green products cost in Patagonia almost 10% of their turnover. This money is not spent, for example to communicate. And this investment in green products is felt at the level of prices: care should be taken to remain competitive. Finally, for what is uncontrollable threats by Patagonia, there is for example the current economic crisis which no longer allows everyone to afford Patagonia clothing.
3. Issues
After recalling the various strengths, weaknesses, opportunities and threats to Patagonia, we can now consider the strategic issues of the company for the next 5 years.
Firstly, almost unique presence on the American continent does not allow them to consider now developing internationally. However changing this international policy, we consider a conquest of the European market, and a second time in the Asian market, mainly Japanese. Indeed, in developing these outlets, it is possible to compete on the French market, for example, brands such as Columbia or Lafuma. The first issue is the strategic conquest of European and Asian markets while maintaining its reputation and its position in the United States.
Thanks to this Patagonia may acquire a brand better known around the world, which it currently lacks. So there is a communication issue in the next 5 years to allow recognition … or just an acquaintance.
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The latest issues of strategic competitive order. Indeed, the first is to keep the market leader in environmentally friendly clothing which many new entrants credible and “dangerous” come play spoilsport as NIKE with currently 3% organic cotton in their clothes. It will therefore remain number one market environmentally friendly clothing and why not, with a little more communication and distribution become number 1 Outdoor, a hypothesis feasible.
4. Perspectives
So after we move these strategic three prospects. Firstly consistency in investment in R & D, since it is an undeniable force in this market where the priority is to defend its values. Therefore follows the second perspective to preserve the values of the company. On the economic point of view, given the current interest in sustainable development and the 2-digit growth market, we expect an increase in the turnover of the company by 20% within 5 years .
However, achieving these perspectives and consideration of strategic issues will only be effective from the moment the recommendations outlined below will be given special attention.
VIII. RECOMMENDATIONS
Arthur Nègre
Máster en Marketing
EBP 2012
The future of Patagonia explained, we can now make some recommendations about their future arrangements. Indeed, these recommendations must meet prospects so that they can be made. Thus, they should be consistent and relevant to meet.
For consistency, we will separate the one hand that the company Patagonia shall keep in his organization (reinforce its strengths) and secondly, it must change (improve weaknesses) to achieve the objectives made in the future.
Patagonia society must continue to meet some of its achievements. Thus, the method of management of the company displayed by its founder, Yvon Chouinard, is undoubtedly one of the keys to their success. By adopting the method of “Management by Absence,” the staff is on self-management (semi-autonomous work groups) because Mr. Chouinard is often test out new products, find new materials for use in its products, etc.. Thus, it is not said but manager manager.
In addition, it is necessary that the company continues its strong commitment to the environment. Indeed, the environmental cause is increasingly at the heart of the concerns of the public, a growing number of people are likely to be interested in this type of production environment. This is what makes the strength of the company and must at all costs keep the image to continue to develop to term.
Therefore, continuing to produce” clean”, Patagonia must continue to focus on quality over quantity. Indeed, one of the slogans displayed by Yvon Chouinard and his company is looking to profit for the company slightly, customer satisfaction is the priority. Emphasizing the skills of workers, the company seeks to approach the maximum of the wishes of its customers by way of own production and human face.
Finally, Patagonia must continue in the area of outdoor activity. Indeed, we have seen earlier, this sector is highly attractive because of constant changes mainly because of the growing interest of individuals to protection of the environment, especially, practices and recreational nature lesser extent. However, Patagonia must ensure evolve to meet the objectives set in advance. Therefore, some points are better for it and it is these that we must address now
.
Arthur Nègre
Máster en Marketing
EBP 2012
Thus, Patagonia has, in general, to expand internationally to improve its visibility and the same, increase its customer base. For this, the development of mono brand stores (products distributing only Patagonia) is to consider the world as well as giving away items Patagonia in multi-brand stores (InterSport, Decathlon, Go Sport etc..) Of to improve the accessibility of its products. Also, even though these countries are not conducive to their use mainly because of the climate or socio-economic context, locate Oceania and Africa may be considered because it is a public therefore potentially interested young .
Nevertheless, to compete with large international companies such as Nike, Adidas and Reebok, is expanding its range of products can be very beneficial. The reason is simple: if Patagonia is involved in this market while keeping its ecological mode of production, the company will then arise as a competitor of choice against the big companies in the sector and will surely attract the favors of a large audience. However, a research about the use of organic cotton must be less preferred because the price of items Patagonia therefore often hinders the ardor of many potential customers.
Generally, the company must improve its visibility throughout the world. This approach involves many considered. Above all, it seems necessary to consider a new logo because it seems it is somewhat outdated, share exceeded the colors he used (black, red, blue). Logo most innovative certainly give a new image to the company.
In addition, to communicate about the brand, the fact of using muses sports can be a solution. Indeed, as Thierry Henry is the Reebok brand, an outdoor sports (skiing, riding, etc..) Could represent the brand on the international scene and make it known to a wider
Arthur Nègre
Máster en Marketing
EBP 2012
audience. Also, the Patagonia company might have to organize and finance outdoor events including the launch of new products on the market. Indeed, the impact it will have, the product will be exposed and the brand will talk about it.
Finally, at the ecological level, the company must develop its actions in favor of the environment, particularly through its communication. Thus, it must establish national or international conferences to inform and educate the industry and individuals protect the environment on a daily basis (such as “Cotton Tour” organized by the brand in California). Also, in this same desire, ecological fund university courses around the world can be considered. Indeed, this kind of partnership can only be beneficial for the company will be valued its brand.
Arthur Nègre
Máster en Marketing
EBP 2012
Conclusion
The company Patagonia is a company of American actor ndustriel the outdoor sector. These general features now defined, we can highlight the strengths and weaknesses of the company studied. For clarity, both parties will be developed so dissociated. Thus, we are going to define the strengths of the company, in other words, explain why we can say that Patagonia is a unusual, unconventional.
Its specificity lies in the particular personality of its founder, Yvon Chouinard, who wanted to make to transform its business in its own way. He manages, do not run, he proposes never orders. He knew how his company is an example of management that many envy even try to reclaim but nobody has yet been able to imitate.
Therefore, a outdoor market where competition is quite pregnant, Patagonia holds a special place that is a major player in this sector. Indeed, the attention paid to the protection of the environment is essential in Patagonia also making his motto, his line of conduct. This commitment is part of the whole production process of the product. Indeed, the company decided in 1994 to make all of these items organic cotton and it is this desire that makes Patagonia an innovative company and as we know, in a competitive market such as that of the outdoor The innovation can gain an advantage over its competitors. In addition, focusing on a topic that continues to be debated (ie the environment), Patagonia attracts the favor of a large and rather easy.
Now, we will discuss the critical part of our work. This part is necessary in any case analysis. Indeed, the analysis should not be considered an end in itself but should lead to further work of this type. This critical analysis is to link with the recommendations previously established. Indeed, it appears that such products are more elitist Patagonia because their prices that only wealthy people can rather get them. Eventually, Patagonia should ensure lower prices for these products because the socio-economic world seems to impose. Indeed, given the present financial chaos this summer including on American soil and European citizens have less money to afford such purchases.
In addition, we must, of course, that the company improves its communication policy in particular to establish itself outside its homeland. Indeed, Patagonia currently use a
Arthur Nègre
Máster en Marketing
EBP 2012
communication policy almost non-existent, while its contribution could bring the company into another dimension.
In the end, it seems that the company Patagonia is an example to follow, a model corporate citizen. Indeed, even if the mode of management as seen by its founder may seem rigid (especially in its communication), Patagonia is a typical example of the company both financially profitable and respectful of its environment.
Arthur Nègre
Máster en Marketing
EBP 2012
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Arthur Nègre
Máster en Marketing
EBP 2012
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