Patagonia Case Analysis
Strategy at the Intersection of Business & Society
by Yerlan SeisembayevTeam C M-1
IEBrownSince its existence in 1972, Patagonia Company is known for thriving to produce and sell sustainable and environmentally friendly products that are strong and long-lasting outdoor gears and clothing. By focusing on sustainable product innovation to create value, Patagonia later moved its products to use organic grown cotton so to have less negative impact on nature. As a surfer, climber, an entrepreneur, a known philanthropist, and an environmentalist, Yvon Chouinard clearly stands out as one of the few entrepreneurs who got his success as a result of on his own way of doing business. For Yvon caring for the environment is everything that in turn became the cornerstone of Patagonia’s mission “to build the best product, cause no unnecessary harm, and use business to inspire and implement solutions to the environmental crisis.” (Reinhardt 3)
This shared value towards environmental sustainability and the unique approach to business is what gave Patagonia a competitive advantage in the market. At his tender age, Yvon knew that he had the capacity to make more environmentally safe, effective, and cheap climbing equipment available in the market, and as of 2010, he has seen Patagonia’s wholesale channel make approximately 145 million US dollars in sales and a gross margin above 45%(Reinhardt 5).
The principle of sustainability works best for self-interest that is enlightened that often invokes a social, economic, and an environmental performance (Porter & Mark 4). Coming up with a business model that will see a company succeed requires careful articulation of various elements. For Yvon profit of the company didn’t really mattered but causing less or no harm to the nature was. Thus, one of the key element of Patagonia was to maximize its ability to focus on serving the world and its interests first before their individual interests. As a result, Patagonia became an admired brand that in turn brought it financial success. Companies should operate in ways that secure long-term economic performance by avoiding short-term behavior that is socially detrimental or environmentally wasteful. The principle works best for issues that coincide with a company’s economic or regulatory interests. (Porter & Mark 4).
Personally, Chouinard never set out to become a businessperson, he therefore could not play by the normal rules of businesses (Reinhardt 2). He simply wanted to make the world a better place! To him, business deserves the blame of the globe’s social, economic, and environmental issues. However, he had faith that business was in a position to bring a positive change to all these problems and inspire a better outcome, and Patagonia represented an “experiment” to “challenge conventional wisdom and present a new style of responsible business” (Reinhardt 2). The traditional culture of doing business, which is profit-oriented, is evidently doing the world a lot of injustice, considering the increased rate of environmental degradation and population wallowing in poverty it leaves behind.
As the company leader, Chouinard recognized that social problems presented challenging constraints to their operations and huge opportunities for growth and applied the five mutually reinforcing elements: defining the social need rigorously, embedding a social purpose, business and social value measurement, co-creating with external stakeholders, and creating the optimal innovation structure (Pfitzer et al. 5). Patagonia stakeholders managed to identify that the wicked problem, environmental degradation, could not be resolved by traditional processes and that conventional approach may even exacerbate situations by resulting in undesirable outcomes. To address the problem, Patagonia does not only clearly define their corporate identity and focus on action, but also involve stakeholders, document opinions, and communication (Camillus 2-6). Chouinard evidently supported sustainability and managed to motivate volunteers. For example, workers could not go to work for the company in order to take part in environmental wellness and still get their full salary. Indeed, this shows the deep and sincere commitment of Patagonia’s core founder to environmental sustainability.
In order for Patagonia to stay competitive in the market and stay ahead of its competitors its executives need to tackle and stay on top of the environmental aims and initiatives that its founder has put in place to maintain positive reputation in the market. Therefore, to fulfill Chouinard’s environmental visions, the executives have to first embrace environmental sustainability as their first priority and make Yvon’s ideas part of their culture by incorporating leadership training for all the stakeholders together with advocating for environmental wellness.
Camillus, John C. “Strategy as a wicked problem.” Harvard business review 86.5 (2008): 98.
Pfitzer, Marc, Valerie Bockstette, and Mike Stamp. “Innovating for shared value.” Harvard Business Review 91.9 (2013): 100-107.
Porter, Michael E., and Mark R. Kramer. “The link between competitive advantage and corporate social responsibility.” Harvard business review 84.12 (2006): 78-92.
Reinhardt, Forest, Ramon Casadesus-Masanell, and Hyunjin Kim. “Patagonia.” (2010).