Patagonia on Strategic Management, Research Paper Example

Introduction

Patagonia, Inc is an apparel-making and retailing company that sells outdoor clothing. Yvon Chouinard founded the company in 1973; it is currently based in Ventura, California. The company operates at least 150 stores in 5 continents, has plants in 16 countries. The company had at least 1500 before the pandemic and maintained revenue of 200 million dollars. The company considers itself as an activist company, often with clear and recognizable innovative strategies. Its 1% total sales dedicated to environmental groups have increased commitment towards ecological restoration. It has on the front-run on climate change, an attribute that led to its constant political and land preservation interests.

• Patagonia is a certified B corporation, certified as a benefit corporation under state legislation of California. The firm also targets carbon neutrality by 2025, where it utilizes a circular economy in the lines of product design and Worn Wear for the product it resells.
• Patagonia has been involved in protests against land locations and land legislation. The company opposed Utah governor Gary Herbert’s interests in revoking Bears Ears National Monument. It would later sue the Trump administration for the violation of the property clause in the U.S constitution for alleged violations of Bears Ears National Monument.
• In July 2020, the company boycotted the use of Facebook and Instagram for its business. It alleged the platform sponsored the Hate for Profit Campaign, noting the social network did little to curb hate speech on the site.

Patagonia triple bottom line (TBL) – Situation and Dilemma

Preamble

TBL best evaluates Patagonia’s path of corporate social responsibility by examining the different accounting frameworks, including social, ecological, and financial. By measuring the organization’s Sustainability through the TBL, it will be possible to explore its efficiency within essential projectors of people, planet, and profit. For example, it is evaluating how the organization. This helps to understand the ethical dilemmas involved in managing the organization, protecting the environment, and employee welfare while maintaining profits.

People

On its website (Patagonia.com), Patagonia claims to respect people, social equity, and human capital. The bottom line, people the social equity bottom line conceives the reciprocal social structure and corporate performance. The social network considers corporate, labor, and other stakeholder interests. Mautz (2019) believes the organization experiences 4 percent employee turnover against an industry average of 13 percent. Employees do not feel the urge to leave the company for being maltreated or underpaid. The company does not have children employing child labor, while it monitors its partners to ensure they are not involved in such vices.

Patagonia (2021) notes that nearly two thousand people who work directly in the organization’s offices, stores, distribution centers, and other facilities receive maximum benefits, which include health care, subsidized child care. Employees also enjoy flexible work schedules. They are exposed to a work environment that cares about their internal quality. Stanely (2021) believes Patagonia’s supply chain is innovation-driven, establishing employee protection and safety at the center of the business model. The company has a reputation for making the best pitons, solving problems within the supply chains. It invests in human resource sustainability within the supply chain by engaging in regular training.

Patagonia invests in giving back to society, building a competitive business that strengthens the overall community performance. It works with specific guidelines to defeat the rising global challenges of the pandemic, remaining environmentally and people sustainable. For instance, according to Workforce.com. (n.d.), Patagonia lays off employees to work with a team that is passionate about the environment. During the months of lockdown, the company was still paying its employees instead of relieving them. Rock (2020) further noted that the clothing company is best known for loyalty that inspires employees. It majors in the transformation and development of employee behavior that improves performance management, making improvements with humans, and maximizing intra-organizational employee linkages. It does not fight employee unions but works together with them towards good collective bargaining.

Planet

Repeatedly, the organization has focused on natural capital development, engaging in sustainable environmental practices. The organization’s operations aim at zero harming or by possibly reducing its carbon/ ecological footprint. It has focused on the careful management of the consumption of energy while reducing manufacturing waste. It conducts a product life cycle assessment that evaluates the true environmental costs. It maximizes growth and harvests raw materials while minimizing the disposal and end-user performance. Farra (2021) believes the costs of disposing of non-degradable toxic products have a financial and environmental impact on current and future generations. The company claims that it directs clients on how to recycle the products best to minimize waste problems.

According to Tom and Jerry (2021), Patagonia incorporated Sustainability by engaging multiple initiatives for the environment. Some programs include the Worn Wear program, where individuals can buy secondhand Patagonia products, reintroducing recycled products in the supply chain. Furthermore, the 1% for the planet oversaw the company have a dedicated kitty for environmental restoration programs. Only a few companies took the 1% environment challenge. Furthermore, it has dedicated action work, connecting with environmental protection groups regionally. Their ambition to achieve carbon neutrality by 2025 has seen at least 100% of their energy and renewable energies increase, increasing the percentage of recycled materials.

• It focuses on a competitive environment sustainability report by engaging activism, products, and donations. The organization has managed to increase its involvement in environmental activities through activism, such as the revolutionary New York Times cover (Nissa 2021). The company has also been involved in campaigns such as The President Stole your land or Vote the assholes out, these two targeting poor environmental legislation. Indeed, the organization has shifted from pure advertising towards activism and promotion, building brand identity through agitation fair ecological relationships.
• Equally, it recognizes that its product causes the most significant environmental harm. Therefore, Patagonia develops its products to reduce unnecessary damage. The worn-wear programs experienced an increase in 40% growth, sponsoring accurate knowledge to customers. In addition, the company installed secondhand distribution opportunities aiming to enhance the distribution of recycled materials. Patagonia.com (2021) noted the percentage of recycled materials went down from 35-31%; however, its popularity, especially its un-rivaled approach in putting the message across, has seen a satisfying performance.
• Lastly, the company has been involved in multiple donation programs. Its 1% program saw the donation of at least 10 million dollars towards environmental sustainability efforts. The company also encourages employees to dedicate two months of payable working time to supporting ecological projects. The company aims at reducing 16% decrease in harmful trips. It also implements fair trade practices within the supply chains. It has doubled its fairtrade portfolio encompassing at least 7200 employees.

Profit

Despite the sacrifices on the other two bottom lines, the organization has managed to keep its profits almost constant. It has created a business value aimed at deducting costs of production but maximizing capital tied up. For instance, its recycling policy remains profitable despite not having to make new products. The organization’s real economic benefits focus on the internal profits that the organization will have to engage to stay competitive. Hoang (2017) noted that Patagonia’s business aims at manufacturing, repairing, and recycling products that have high durability.

Szekely (2005) noted how Patagonia launched the common threads recycling programs to maximize the products assigned to customers. It engaged customers through a fix damaged clothing, guiding and assisting customers towards repairing new clothing. It focused on creating a secondhand market for Patagonia garments. As such, it has managed to increase growth by over 30% within nine months. Patagonia collaborated with e-bay to develop a competitive storefront that would cover the rising operational costs, such as shipping and repair. It has traditionally engaged in a common threat initiative, which has proved profitable since it encouraged customers to treasure their worn clothes.

Salpini (2019) believes its environmental sustainability efforts are closely related to profit sustainability strategy. The organization works with recycled polyester, cotton, and other materials, pushing for more sustainable practices. The company has been responsive to these efforts by gaining a competitive threshold where it focuses on environmental responsibility, engaging product development that is long-lasting, appealing a higher price for each unit sold.

Value chain and resource-based view

Operations Model

Patagonia R.D. department is located in the U.S but utilizes South East Asia for cheap production and market. It has built a sustainable business model by allowing customers to buy less but high-quality products. In addition, it made its veto power on business credibility, being transparent in environmental and human resource practices. Halog and Nguyen (2019) believe its social responsibility effort maximized competitive advantage by focusing on product quality; it has been committed towards graved wool, 100% organic cotton, 100% traceable down, with audits on environmental audits on factors and waste management technology.

Furthermore, the company has achieved a strategic competitive advantage by engaging Fair Labor Association, where it provides credible, external, and third-party auditors with accurate information on the supply chain. To achieve human resources and environmental Sustainability, the FLA audits Patagonia supply chains annually and accredits the company to ensure its strategic commitment. In addition, it has managed to engage a continuous improvement program resolving failing metrics. As a result, the company distinguishes Patagonia from other brands claiming usefulness in social responsibility while motivating the company’s progress by attaching to the social commitment of profit maximization.

SWOT

Discussion

Patagonia is essentially purpose-driven, with an increased social consciousness amongst consumers. The brand aims at building substantial consumer value while still integrating 4Ps product, price, place, and promotion. Patagonia, being privately-owned, seeks solutions over other public competitors by changing strategies going through several investors on oversight boards. It protects its supply chain by pursuing an excellent philosophy entrenched through buying less and buying quality. In addition, the company engages excellent eco-friendly operations with community-centered solutions (Patagonia 2021).

Patagonia’s adaption of e-commerce strategy, but subsequent strife with social media giant Meta (Facebook and Instagram), creates a conflict within the supply chain. Furthermore, it has a low market presence, with only 37 stores in U.S. and 2 in Canada, which affects its ability to deliver products (Patagonia 2021). Also, positioning itself as an environmental activist is a mix of business ideology, while engaging in politics negatively exposes the company.

The company seeks to expand its 37 stores for the 20 states, strengthening the presence of the market. Expanding globally improves its value niche and doubles returns through increased market leverage, broad e-commerce supply chain, and extended product line. In addition, empowering its e-commerce channel enhances an opportunity for growth, doubling sales.

Patagonia aims to expand its natural products wool primarily wool, and develop relevance in climate change solutions (Patagonia 2021). The looming recessions due to the pandemic have created apathy in purchasing clothes. The company also faces still competition from the outdoor market, while competing in gaining relevant market share. The declining retail sector, especially after the pandemic, means consumers do not have enough disposable funds to purchase items.

PESTLE

Discussion

Developing a sustainable competitive advantage in the apparel market is challenging as producing firms utilize technologies such as dye or cotton whose production is not environmentally friendly. Patagonia’s venture on sporting equipment and clothing but operating in a competitive, relevant environment forced the organization to focus on emerging lifestyle trends, increasing dynamism and complexity (Husted et al. 2011, p. 121). Early, Patagonia was forced to lay off at least 20 percent of the workforce, Keeley (2013) encouraging the need to innovate human resources within the supply chain. It responds to environmental commitment, developing social values that inspire the firm’s growth and enhance its competitive leverage. The firm has also had to deal with borrowing and improving employee benefit relations. The firm has had to change its business model to accommodate a sustainable business model while still taking advantage of an integrated business and social strategy.

Patagonia features a solid mission to support sustainability efforts and develop supply chains that have lasting wear on high-quality composition. Patagonia products have a higher shelf life, where it encourages customers to fix their garments, replacing them with iFixit. The organization has retained sustainability efforts by focusing its campaign on lower carbon footprints. However, Liang et al. (2018) seem to agree Patagonia’s efforts to develop a properly-recognized brand faces challenges like retail outlets, often facing limited distribution of the network. Likewise, Patagonia’s opportunities revolve around the ability to launch new products while tapping on the social, economic, and environmental performance changes. There are rising threats that limit the company from desirable strategic performance. The company finds it challenging to meet desirable government regulation and tax expectations.

Patagonia’s mission of building the best products without causing harm sees the organization implement a sustainable strategy. Patagonia has utilized emerging trends, such as the internet, to maximize emerging lifestyles and increase dynamism and complexity. In addition, Patagonia grew its commitment to environmentalism, maximizing social values and enhancing the growth and borrowing process. Patagonia managers enhanced a hostile environment, taking an opportunity of maintaining an integrated business and social strategy. The firm has also kept afloat by engaging technology-driven product development, patent and enhancing customer loyalty through high control liability. Similarly, like SWOT, Pestle also has an alternative analysis of Patagonia’s competitive advantage.

The Strategic Proposal

Preamble

Ideally, Patagonia’s current position has not been sustainable enough, the company facing poor competitive advantage, leading to a weakening supply chain. However, Patagonia has completely positioned its business model to meet climate change expectations. Its slogans Build the best products, causing no unnecessary harm, and inspiring to implementation of the environmental crisis solution illustrate that it has critical interests in ecological Sustainability.

Profitability

Perhaps profitability reflection should have been covered in the earlier sections, but this section presents how profitable the venture is. Wall Street Journal (n.d) indicated a 678.08% total assets growth in 2019, up from 0.94% and 31.29% the previous two years. In the year 2020, the total growth in assets stood at -8.5. From the balance sheet, the company seems to be performing all relatively competitively. Total assets stood at 83.6 million in 2019, dropping to 76.526 in 2020. Total assets of 2018 and 2017 stood at 10.790 and 10.689. There was a major asset acquisition proving the profitability of the firm. However, despite the non-profit making environment initiatives, the organization has managed to keep doing business afloat, with promising equity returns. However, the drop-in asses from 2019 to 2020 indicates the massive investment of 2018 is not sustainable enough. Equally, total liability rose from 12,624, to 17,399 in 2017 to 2018, to 65,753 in 2019 and 49,256.7 in 2020.

(WSJ Data)

The organization’s finances are still very stable; the massive loan it acquired to finance its critical operations has demonstrated solid resilience in 2021. However, the question remains how competitive is the current environment sustainability strategy relative to its human resource sustainability vs. the profit sustainability. Guidance from Northumbria University Newcastle indicated a perfect supply chain flow should consider extraction, production, distribution, consumption, and disposal, a theme that Patagonia has diligently followed.

Strategic Proposal

Further guidance from the University of Northumbria indicated the need to identify potential sources of competitive advantage; this will guarantee that the outstanding loan is paid while the company is continuously resilient from Covid-19. With its realignment in the Environment industry, the company needs to begin making money by still making a significant impact on the environment.

Strategic Recommendation (Musk Model)

This study is esteemed by the great works Elon Musk is doing while still keeping profitable despite the challenges of investments. Although the University of Northumbria already respects the Elon Musk model, in our 18th Lecture, we learned what a sustainable supply chain means and understand how to adapt the supply chain for the analysis for SSC.

Elon Musk focuses on technology change to navigate the electric vehicles industry. Elon Musk is the first business model to be commercially efficient in cost-competitive solar and battery technology, reliability, private space, traffic-bypass tunnels, and shunted living robotic surgeons. Technology to provide electrical and mechanical solutions.

People Sustainability

Patagonia should adapt the sustainability model without further ado by investing in sustainable fashion models to keep the jobs flowing. Trott (2014) appreciates the competitive effort of a sustainable business model in developing a profit model. With its firm budget and currently colossal funding, the organization should reinvest in renewable energy based on the waste materials it produces in its supply chain (Trott, 2014). With a parallel transport department, such materials can be collected to the center position, and various forms of recycling, including recycling as a source of energy. Furthermore, the company should diversity its interest in sustainable cotton farming. This can easily be achieved by working with indigenous groups globally and empowering them as supply chain members. The University of Northumbria advises adopting industry structure, viable positions, desired positions, creating jobs, and defends.

Furthermore, Patagonia has been a strong producer of shoes but does not have a diversified product portfolio. This is an area that the organization can demonstrate it desires a sustainable people, planet, and profit strategy. On its website, it has factory floor worker boots made with an Aluminium bar. However, it should venture on emerging generations who want something different fancy but still serve the purpose. Furthermore, it should provide 5-year insurance on some of its key products such as boots, thus showing its commitment to a sustainable organization.

Locke and Latham’s (2006) new directions in Goal-setting theory encourages firms to consider goals to affect, mediators of goal effects, and macro-level goal settings encourage discoveries without limit. Patagonia should begin changing its business models within the same path, even having a sister organization dedicated to climate change research, policing and legislation, legal works, and product development center.

Conclusion

Patagonia’s mixed business model should achieve maturity soon. The organization has not accurately positioned itself in the market; it needs more environmental sustainability products. Although the organization has placed strategies such as the 1% challenge and the recycling strategy, they have not been sustainable. The recent 2018 investments attempting to bridge the profit indicated only saw the company acquire a new debt, which it has not positioned accurately to achieve. Besides, it laid workers before and after the pandemic, meaning that it has not met the people’s Sustainability. Drawing from the triple bottom line, the company needs to redesign a balance value chain by creating new products on the market.

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