This report is about the strategy analysis of famous outdoor clothing company named Patagonia. The report focuses on the environmental analysis of the company by the PESTEL and Porter’s five forces analysis. The company has engagement process to bring transparency, improve risk management, targeting customers, providing information and increase efficiencies etc. Patagonia is the unique brand providing outdoor active lifestyle clothing products. Patagonia is the subsidiary of VF Corp which was founded on 1973 by Yvon Chouinard. The report focuses on the various resources and capabilities used by the company in the business operations. Some recommendations are also provided to Patagonia to expand the business at the global level (Patagonia, 2017).
Political-
In case of outdoor clothing industry in USA, it is observed that the political system of the country is full of the rules and regulations which impact the business in their operations. The taxation system of the company is complex. The clothing companies have to pay high taxes while shipping the product in the other country. These situations have impact on the business operations of the clothing industry who are engaged with the outdoor clothing product business. It is observed that most of the companies are doing business in the overseas market and the clothing products are shipped in other countries with heavy customs and duties. Because of this fact, companies have to hike the prices of products and they lose their customers due to high prices of the products (Terpstra, Foley & Sarathy, 2011).
Economic-
In case of the economic aspects, it is analyzed that the economy if USA is quite good and companies are enjoying the low interest rates, high sales of the products and large profits in the business. Apart from this, inflation rates and exchange rates are also impacting on the clothing companies while dealing in the global market. Sometimes, the issue of credit crisis also impact on the business of clothing industry which creates challenges for the customers and companies in the market.
Social-
In the clothing industry, companies are affected by the changed behavior and pattern of the customers in the fashion trends. They set up a behavior and attitude towards a particular product. Along with this, companies have to deal with the cultural differences and attitude of the products and provide the products according to them. The outdoor clothing industry is manipulated by various social environments and focuses on providing the quality products to the customers to satisfy them accordingly. There are some social causes in the operating market such as policies against the child labor and for the goodness of the society, companies has to follows those rules and regulations. The industry is focused on providing good shopping experience to the customers by providing them unique fashion products (Kotler et al, 2012).
Technological-
Companies like Patagonia in the outdoor fashion industry use various technologies to attract the customers in the market. They use online media tools and websites to grasp the attention of the customers. For the effective business, companies have effective supply chain process along with the various electronic technologies. Technology has strong impact on the business operations of the clothing industry. They are using a material in the outdoor products called Gore-Tex which make the products unique. It is lightweight, waterproof and perfect for the outdoor clothing products. Companies use environmental friendly products so that customers can be attracted significantly (Bainbridge, 2011).
Environmental-
The clothing industry is focused on doing business with the environmental norms and regulations. It is the responsibility of the companies to keep the environment clean so, they focused on the recycling process of the products. Further, the clothing industry takes various actions towards the sustainability of the environment while manufacturing quality clothing products. Eco-friendly material is used by the companies to protect the environment from any kind of harm. Along with this, there are some strategies adopted by the companies to deal with the climate state such as global warming.
Legal-
The outdoor clothing industry is focused on doing business with the legal practices of labor and provides wages as per the industry norms. Further, in case of Patagonia, USA government has imposed some rules and norms to minimize the child labor practices in the business operations. So, companies have to follow these rules for the successful business operations.
Competitive rivalry-
In the clothing industry, there is the strong competition in the market. There are many retailers and brands which are offering similar products to the customers. This increases strong competition in the industry. Various brands ate providing clothing products at very low rates to attract the customers. There is the saturation in the clothing industry and there are varieties of similar products. In this manner, there is strong competition in the market.
Bargaining power of buyers-
In the outdoor clothing industry, the bargaining power of the suppliers is low with the inconsequential force. The companies deal with the suppliers for getting sources for the products and they get very small fraction of the profit. Further, suppliers do not have control on the clothing companies and sometimes, they do not have s much importance for the business operations. Based on this reason, the input prices are very low (Martínez, 2012).
Bargaining power of suppliers-
In case of customers and buyers of the clothing products, their bargaining power is high for the products. The reason is that they focus on the prices of the products. In such condition they switch towards that brand which is providing quality products. So, buyers have direct bargaining power in the clothing industry. They have various alternative brands to shop the clothing products by focusing on low prices.
Threats of new entrants-
It is analyzed that there is the strong competition in the clothing industry so the threats of new entry is low for the existing companies. To stay competitive, new entries are using online and social media tools to enter in the market and promote its products. In the fashion industry, there is the high level of risk and companies who are facing risk get high level of profits. So, it is very difficult for the companies to enter in the market without proper planning.
Threats of substitute products-
There is low level of substitute products in the clothing industry as each company is trying to provide quality in its own way to satisfy the customers. In terms of outdoor fashion clothing industry, the force of substitute products is minimum or very low as there is no substitute of the clothes. The availability of substitute products is to increase the competition among the brands (Baker, 2003).
Patagonia is operating in the outdoor clothing industry. To operate successfully in the market, company must have effective resources and capabilities. Based on the given case, it is analyzed that there are two types of resources i.e. tangible and intangible resources which are used by the company for its business operations. In terms of intangible resources, company is values which are added in the products provided by the company. From the internal perspectives, it is observed that company is using various resources in the business operation to make the business successful in the market with its potentials. Patagonia is providing values to the customers in the clothing products based on the primary and secondary business operations. Further, company is using effective business operations with the values to add the customers (Chakravarthy & Coughlan, 2011). In such manner, the company is focusing on the sustainability of the environment by using a management system and environmental performance including five main areas of the production i.e. water emission, air emission, resources productivity, consumer safety and occupational health and safety. Further, in case of tangible resources, Patagonia has such resources which allow the company to achieve competitive advantage in the clothing industry. Those resources include innovative production process, effective and unique products, and suitable locations for the production purpose. Apart from this, there are three intangible resources used by Patagonia in the business i.e. brand image or name, internal culture of the company and actions towards environment. All the tangible and intangible resources are helpful for the company to gain competitive advantage in the clothing industry (Peck et al, 2013).
In case of organizational capabilities of Patagonia, there some effective capabilities by which the company is able to get best results in the business operations. it is analyzed that the company has outstanding organizational capabilities including customer services, product development, manufacturing and innovation. For the effective product development process, company uses environment friendly material along with the skilled and trained workforce. Along with this, employees of the company are always able to help the customers and provide effective customer services to them (Brumfitt, 2001).
Mission statement of every company reveals the organizational objectives that are to be achieved by the company. It is analyzed by the given case Patagonia is operating in the clothing industry and focused on providing quality outdoor gear and products. Objective of the company is to be leading retailer in the clothing industry. The company is already listed in the top listing companies in terms of innovative products. It has very clear values to operate the business. Those values include treating the employees and customers fairly and protecting the environment with its actions. Along with this, there are effective vision and mission statements set by Patagonia to achieve the organizational goals and objectives. Based on the analysis of case, mission statement of the company is to build best and quality products by using business strategies, implement innovative solutions to prevent the environment from the crisis and unnecessary harms (Turnbull & Valla, 2013).
By analyzing the mission statement of the company, it can be seen that as a business entity, company has clear strategic objective for the success of its business. In the competitive environment, the demands of the customers are continuously changing. So, company is trying to provide clothing products to the customers to meet their demands. Further, company is also focused on protecting the environment from the negative impact of the production. The mission statement of Patagonia shows the core values of company to operate in the market by being transparent and honest with the customers and employees (Boone & Kurtz, 2013).
Patagonia is the famous company of outdoor clothing industry. With providing the clothing products, company is also focused on the protection of environment and surroundings in which it is operating. The company is operating at the big scale and has strong presence in the market. To analyze the position of the company in the market, it is important to analyze the internal capability and external environment for the company. For this manner, SWOT analysis would be suitable for Patagonia.
First of all, key strength of the company is its brand image which has maintained by the company in USA market. Further, company has quality clothing products which is the one more strength of the company in the clothing market. Along with this, there is the innovative business culture in Patagonia which includes the actions towards environmental safety and security (Hooley, Piercy & Nicoulaud, 2012). Further, company has done lots of investments in the research and development department to produce high tech gear for the potential consumers. Company also focuses on providing excellent stores experience to the customers (Lovelock, 2011).
There are some weaknesses in the business operations of the Patagonia which must be minimized by the company on the priority basis. In the company, employees do not share their ideas and viewpoints with the senior management as there is lack of morality among them. Along with this, company has kept the prices high of the products as it is unable to understand the perception of the customers completely towards the products. In such case, it is observed that company is not communicating with the customers in proper manner and losing its customers. The community outreach strategy of the company is weak.
In the clothing industry, there are various opportunities for Patagonia as the trend of fashion is changing day by day. So, company has opportunity to innovate new products based on the fashion needs of the customers. Further, company can improve the morale of the customers by motivating them based on the feedbacks. Further, company has opportunity to expand the business in the global market by involving the international community. This would b e helpful for the company to improve the brand image among the customers (Bickhoff, Hollensen & Opresnik, 2014).
Strong competition in the industry can be a big threat for Patagonia in the clothing industry. Reason of the competition is that competitors are also providing same products at the affordable prices. Although the company has strong brand image but competition can reduce the number of customers. Potential threats for Patagonia in USA market are Columbia Sportswear and Ryan Gellert which are providing same products at the lower rates.
For Patagonia, it is important to enter in the international market like UK for the growth and success. Based on the discussion of SWOT analysis, it is suggested that strategic change is important for Patagonia to improve and maintain the brand value in the overseas market. For expanding in the international market, there are some recommendations for Patagonia.
Conclusion:
This report is the strategic analysis of the company Patagonia in the clothing industry. Based on the above discussion, it is observed that The Company is listed on the top companies in terms of quality products. The company has engagement process to bring transparency, improve risk management, targeting customers, providing information and increase efficiencies etc. The strategy of Patagonia was very successful compared with its rivals. Further, it is observed that the company has core values of treating the employees and customers fairly and protecting the environment with its actions. Company is also focused on protecting the environment from the negative impact of the production. Company has innovative business culture by which includes the actions towards environmental safety and security. But, there is the issue that company has kept the prices high of the products as it is unable to understand the perception of the customers completely towards the products. So, there is the need to lower the prices of the company for the high sales and profit.
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