Overall, Patagonia has been a very successful company over years. Patagonia has created strong brand through producing high quality products to meet tough expectation of customer and win their loyalty. The company maintained high margin with relative small sales revenue comparing to competitors in the outdoor industry. Inside the company, Patagonia's employees showed high satisfaction and loyalty, which led to much lower turnover comparing to other rivals in the industry. Outside company, over years, Patagonia has built up great reputation on the social responsibility.
The company has become role model of other organization on resolving the business and environmental conflict because of long term commitment to the environment and society. Patagonia has created and sustained competitive advantage through focusing on the product quality while at the same time reducing the environmental damage. The firm differentiated itself from other major competitors in the industry by focusing on customers who were knowledgeable about their sports and outdoor activities and willing to pay additional amount for superior quality.
Patagonia strategy based on quality and environmental commitment - reducing environmental whenever possible. The firm has successfully implemented its core strategy through its choice of activities on product development, marking, organization structure and human resources. All these activities fit well into its strategy and strengthen the competitive advantage. On the product development side, Patagonia continuously improved raw materials, and camp up with better product design and paid great attention to the details in the manufacturing process in order to produce high quality products.
Patagonia gathered feedbacks on its product from world-class professional athletes to support innovation. It also invested great amount money on in-the-field testing, about double the spending of its competitors to guarantee product quality. Patagonia aimed to create 'classic' products whose style would last as long as the product itself. Patagonia maintained long term relationship with its contractors, who normally had 15 yeas tenure comparing to 2 to 3 years with competitors. Such healthy and long term relationship helped the company to develop high quality product consistently over long period of time.
Patagonia started to consider customer service as high priority with product quality still ultimate important. Relationship with dealers improved considerably due to Patagonia's investment in sales representatives, Patagonia employees who were trained to be heavily focused on service. These activities were important as adding value to customers. Patagonia considered its sales channels its major "platform for telling its stores. " Many customers expected to be educated with the superior specifications of the product before they decide to purchase the product.
Patagonia's governance and organizational structure also fit well into the company's overall strategy. Patagonia is a private held company so it does not have as much as pressure for growth as publicly owned competitors. These public owned competitors have been forced to move to alternative distribution channels such as large department stores under the pressure of growth. When a company emphasizes on growth, such efforts often reduce uniqueness, create compromise, reduce fit and ultimately undermine the competitive advantages.
Patagonia's governance and organizational structure eliminated the pitfall of growth. For instance, in the global market, Patagonia was careful about entering new market, believing that new grow into a new market in such way that would possibly compromise its integrity or lower its product quality. Instead, Patagonia's most international business focused on one small market: Japan which represented almost 20% of Patagonia's total sales, comparing to 11% of total revenue in competitive European market.
Another Patagonia's distinct corporate strategy was its ability to win the hearts and minds of employees by providing them quality of work life balance with fair salary. The company was included several consecutive times on Fortune's list of the 100 best companies to work for America. Most of its employees were passionately committed to ensuring Patagonia's business success and achieving its purpose. Employee retention was high compared to industry averages in both retail (turnover is only 20%-30% a year versus a typical 100%) .
The average tenure of a Patagonia employee was twelve years. Patagonia's breakthrough human resource practices have resulted in high employee commitment and high productivity that turns into bottom line results. In conclusion, I believe Patagonia's strategy position has helped the company to perform well over 25 years. The company incorporated a series of activities which fit and strengthen the strategy, and help maintain a balance among areas including product quality, environment and financials in order to achieve sustainability in the long run.
How important was Patagonia's (natural) environmental position to its strategy? How does it (the environment) contribute to or detract from Patagonia's competitive advantage and growth prospects? Patagonia's environmental position has played critical role in its overall strategy. The position has been the soul of the company strategy since the company was started by founder Yvon Chouinard. The commitment to the environment has been widely embraced by senior management, employees, suppliers and retail distributers and its customers.
Patagonia proactively integrated environmental consideration into product development and production process I believe such position explained the slow growth prospects , and contribute to the competitive advantage in several ways. First, it is true that customer choose Patagonia products because of their high quality, but Patagonia's environmental position and commitment to the community help to establish a very personal relationship with the customers who loves sport or outdoor activity.
Patagonia commitment to the environment helped its business by contributing to customer loyalty. In this highly competitive industry, a few addition market share can be very valuable. Second, environmental position of Patagonia also contributed to its competitive advantage by differencing it from other competitors in a market where technology improvement has become increasingly challenge. Commitment to the environment while without compromising the quality of the product inspires technical and quality innovation.
While Patagonia has strong brand for its quality, its environment position certainly has contribute to the health of the Patagonia's brand, to some extend justifying its premium price over other rivals. Patagonia's environmental position was certainly not perfect without tradeoff. For instance, in the case of Patagonia switch to organic cotton, Patagonia chose to totally eliminating cottons grown with synthetic chemicals, which had negative economic hit due to higher cost for growing and handling organic raw materials.
To keep its long term commitment to the environment, Patagonia needs to keep financially healthy so it can spend more on environmental activities. All in all, I believe Patagonia's environmental position contributed to company's competitive advantages in positive ways, such as strengthen the company's uniqueness against competitors, inspire innovation when attempting to reduce damage on environment, and cultivate customers intimacy by winning their trust.