Patagonia Case Study

Ana Martinez Valls 22/10/2012 PATAGONIA 1) Evaluate Patagonias channel model. How primary(prenominal) to Patagonias communication channel model is its environmental position? Business models principally turn over as a primary objective to make believe m whizz(a)nessy, however, Patagonias is primarily oriented towards doing things right. That is why Patagonias founder Yves Chouinard considers the caller-out an opportunity to challenge the conventional wisdom and present a red-hot style of answerable business.Its business model differs intimately from the traditional business one. PATAGONIAS BUSINESS MODEL * Target guest Patagonia builds products for its core users, those who lead the dirtbag lifestyle ( close to(a)one who wanders for temp jobs and dogged summers, someone who is passioned rough climbing, surfing.. etc) * Product High property & useful products, for different occasions that are aimed to brook forever Four main product categories Sportswear (47%), ski lful outwear (30%) Technical Knits(12%), Hard Goods (6%). Mission- Core serviceBuild the ruff product, cause no unnecessary harm and use business to repair and implement solutions to the environmental crisis. Value delivered Manufacture of high quality outdoor(a) and adventure sport clothing -Quality Best clothes, own quality science laboratory (pa gots and technique used by opposite big corpportaions) -Environmentally impact (organic materials, recyclable products, environmental campaigns) -Innovative products that mint last forever (more intelligent consumption) -Service to he client (repair, replace) Acquire and keep customers during a recession as it is the case nowadays, in a competitive commercialize if cardinal unfluctuating s have the same product at a similar price and one of them has a more responsible business, customers are going to choose the responsible business product * Differentiation Organic materials that decrease harm to the environment. Products that l ast forever. Indeed you dont have to buy new products you can repair them Products tested (proved by professionals) and developed in Patagonias lab. utter(a) generation Margin earned from selling through its four convey unitsale(44%), retail (33%), catalog and internet (23%). As a percentage of sales, the gross margin ranges form 50 to 55%. In their new products they focalize on innovation, environmental impact and quality what enabled them to charge prices roughly 20% higher than those of other(a) outdoor apparel and 505 higher than mass market brands for comparable products. * Cost structure one third of the cost comes from manufacturing and two thirds form raw materials.Higher costs due to labor costs in North America which are estimated to be anywhere from four to ten times those elsewhere but also by the use of eco golden materials such as organic cotton which was between 50% and tier centigrade% more expensive than normal cotton. * Profit margin $26 963 000 ($332 862 in net sales) in 2010 2) How fast can Patagonia bring on? How fast should it grow? Patagonia could grow faster, from a financial perspective but if it did it so it would not be The Coolest Company on the Planet (Fortune coverstory, Casey 2007).Indeed Patagonia endeavors a sustainable fruit and it prioritizes a unwilling growth that enable the corporation to be committed to its mission and determine. Patagonias growth path is closely connect to the values that have being shaping the phoner since 1957 when Chouinard founded it. Indeed, Chouinard is a antipathetic entrepreneur and his primary objective in business is not to earn money but he states that the reason why he is in business is to protect what he likes. An unsustainable growth goes against his values. Patagonia has found unambiguous ways to play off their products function and the brands environmental values.Their business model raises major sums for environmental causes and their technical innovation write outs t he environmental impact of their products- and that is what it is important for Patagonia. A perfect suit of the sustainable growth Patagonia wants to pursue is their willingness to use organic cotton. The help provided to other corporation in order to help to establish a whole neworganic? cotton industry is also a margin of how they are committed to a sustainable development of the manufacturing industry.Indeed, Patagonia is a adduce for other business in its path to reduce contamination and some big corporations such as Nike have imitated -in a certain degree -this new organic cotton initiative. Patagonia has a responsibility towards society and the rising reduction of pollution and feels that its mission is to share broad sustainable practices. other initiative that in theory slows Patagonia financial growth is its let outicipation in the 1% For The Planet program- an alliance of over 1200 business that donate a self imposed environmental tax of 1% of r stock-stillues to en vironmental organizations worldwide.Also, some of Patagonias practices such their Employee Internship Program- through which employees can leave their jobs at Patagonia for up to two months to work full-time for the environmental group of their choice- could also slow their financial growth but increase their positive impact in society In a nut shell, Patagonia is not only rivet in economic and financial growth but more on its path of breaking new ground on reducing environmental harm. Patagonia wants to be part of the solution to this economic crisis, and not part of the problem.Even if it could grow faster in financial terms, there is no dubiety that Patagonia is growing exponentially in other parameters such as in its position as a beneficial actor in society. 3) Would Patagonias business model differ if it were a publicly held company? If Patagonia was a Publicly held company it should in theory pursue other objectives and values that the ones it has currently since it should g ive priority to shareholders value. At a first glance we may think that a faster growth pace will be the solution.In fact, in the case it is suggested the fact that Patagonia was cloistered was a major reason that it could pursue environmental sustainability. On the one hand, shareholders care about dividends and the value of their stocks and Patagonias sustainable agenda is say to be at the expense of its growth. On the other hand, Patagonias environmental committeemen gives the company its competitive advantage and helps the company to pursue a sustainable growth.Maybe it is true that in the short term to have as the main goal Maximizing shareholder wealth by boosting growth could be a entire solution. Nevertheless, in the long term it may be unsustainable. In a long term perspective achieving the multi-ends of the firm in accordance with the common good of the society seems to be the good solution-and more now in times in of a world(prenominal) economic crisis where competi tion is huge and customers have a high bargain power.Customers will appreciate that the company is a penis of the society, a member that balances short term and long term value and seeks for the common good. Patagonia does so by being environmentally committed and by providing services for other companies by sharing with them their innovative sustainable practices and product innovations. It is interesting to render out that Patagonia has being increasing its profits each year even if they were environmental friendly.They have always bear in mind that if they press to lead corporate America by example, they have to be gainful. This kind of rationale will be difficult to implement in a publicly held business where the stockholders may be unsatisfied with the companys objectives. However in the medium or in the long term stockholders will be happy to earn stock from one of the 100 Best Companies that is probably carrying on growing.Patagonia has achieved an exceptional degree of integration between Corporate Social Responsibility values and commercial activity. Its business strategy is extraordinary and instructive. Patagonia WTP * High products * Durable Credible environmental insurance policy * Moral Wellbeing * Innovation * Multi use Organic cotton reduce models because they did not found as many providers as they needed Patagonias business model Invest in research and development quality , innovation, high price, profit Invest in environment Reduce harm, En4139ry