When examining Patagonia's five disciplines for creating what customers want, one must first ask how exactly Patagonia identifies customer needs? The answer to this question comes from targeted market research and development. Patagonia spends time analyzing the market for their products and listening to customer reviews. They strive to design products aligned with their targeted customer's (outdoor enthusiasts) needs and values.
In order to fill the needs of their customers, Patagonia uses more of an incremental innovation approach to improve upon their existing products and processes. These incremental innovations are used as a source of competitive advantage for the company and would include new technical systems for their apparel and gear. Patagonia also uses innovative teams to create value and satisfy wants for their customers. The structure of these innovative teams is functional, meaning that each department focuses on an assigned area or task and then ultimately, all departments work together to address major concerns.
Within the organization, it is apparent that CEO Casey Sheahan is an innovative champion who takes responsibility for Patagonia as a company and the products it makes. The founder of Patagonia, Yvon Chouinard, would be considered the father figure of innovative champions. It was through his efforts that Patagonia was able to operate and survive. The idea of collaborating with innovative partners is a useful tool that Patagonia uses to add value in the marketplace. Patagonia has partnered with many environmental groups, suppliers, and even other clothing companies to satisfy customer wants and help preserve the environment.
As an organization known for being environmentally conscious and emphasizing corporate responsibility, it is not surprising to learn that Patagonia would have an extensive code of ethics. Part of Patagonia's code of ethics deals with promoting fair labor practices and safe working conditions throughout their supply chain. Besides this concern, Patagonia also has a specific workplace code of conduct that states what is ethical and acceptable in regards to a variety of topics inside and outside the workplace.
The mission of Patagonia, which is to "build the best product, do the least harm, use business to inspire and implement solutions to the environmental crisis" is very important in guiding how the company operates on a daily basis. Ethically, the people of Patagonia push themselves and their suppliers to continuously lead an examined life and improve social and environmental conditions. The standards of Patagonia's workplace code of conduct reflect the company's desire to promote ethical standards in the highest regards.
Patagonia is also involved in a number of environmental initiatives, programs focusing on corporate responsibility, and other ethically sound practices. For example, Patagonia's Common Threads Initiative is a program where you can pledge to partner with Patagonia in reducing, repairing, reusing, recycling, and re-imagining. The Footprint Chronicles is another development that allows users to go online and view a map of Patagonia's suppliers. The idea is to create transparency in Patagonia's supply chain so that consumers can see exactly where products are coming from.
Patagonia has been continuously named to Forbes and the Ethisphere Institute's list of the world's most ethical companies as a result of their ethical conduct.
Patagonia's organizational structure resembles that of a functional structure, where the major functions of the firm are grouped internally. Because Patagonia is a small organization employing some 1,200 employees and is privately held, there is no need for a more complex organizational structure. Since the company was founded, it has grown and evolved from utilizing a simple organizational structure to employing its current functional organizational structure.
The top authority in Patagonia's organizational structure is CEO Casey Sheahan. As the organization's leader, he is responsible for addressing problems within the organization's functional areas and coordinating the integration of all the functional areas. Next in the hierarchical line are the company's Vice Presidents, which include the Chief Financial Officer, the Vice President of Production, the Vice President of Marketing, and the Vice President of Product Design and Merchandising, just to name a few. These senior level management classes are responsible for reporting to the CEO.
Patagonia's Directors make up the next level of management, including the Director of Quality, the Director of Fabric, and the Director of Environmental Analysis. The CEO, Vice Presidents, and Directors all work closely with one another, which helps to flatten out the organizational structure of the company. The functional structure of Patagonia provides for a high level of centralization that helps to ensure integration and control over the firms activities and functional areas.
Patagonia uses the concept of strategic control as a tool for monitoring and correcting their strategy and performance in the business world. From an informational perspective, Patagonia is "doing the right thing" by offering products aligned with protecting and conserving the environment. Behaviorally, Patagonia is "doing things right" by positively influencing the actions of their employees. The firm's strong organizational culture, which emphasizes environmental conservation and a solid work ethic, is one example of how Patagonia utilizes behavioral controls. You never hear any negative press or news about Patagonia because they do such a nice job of placing effective controls, which minimizes unethical conduct.
The role that corporate governance plays at Patagonia is a big one in forming relationships between the various company stakeholders. Patagonia's key stakeholders in this case would include its shareholders, suppliers, board of directors, and management. Recently, Patagonia was deemed a "Benefit Corporation," which gives the company's board of directors legal protection to consider social and environmental benefits over shareholder financial returns. This means that Patagonia shareholders no longer have the legal right to sue the company for not trying to maximize profits. The overall goal of this effort is to align the interests of all of Patagonia's stakeholders in conserving and protecting the environment.
Patagonia serves its customers internationally by offering online international orders. In order to place on order online, all you have to do is visit Patagonia's country of origin page and select your country and language from the options provided. There is also a store locator page online that allows customers to see where various Patagonia stores and dealers are located. Besides the United States, Patagonia serves international customers from countries including Canada, Japan, Europe, Italy, Chile, and Argentina.
When making the decision to expand internationally, it is apparent that Patagonia would stick to their strategic focus of differentiation. Out of the four different types of international strategies, Patagonia utilizes the multidomestic strategy when dealing with business on a global scale. Patagonia would employ this strategy more so than the others because there is a low pressure to lower costs and a high pressure for local adaptation with their international products.
Because Patagonia adopts a multidomestic strategy, they must alter and adapt their products to local needs and tastes. This might include insulating their jackets with a different material to adjust to the climates of different regions, or even adapting apparel colors to the various local tastes. Since Patagonia would still target the same clientele market, there wouldn't need to be a high emphasis on lowering the cost of their products.
Patagonia tends to operate more on the side of a single business organization than a diversified business when it comes to their corporate-level strategy. Rather than managing operations in multiple businesses, Patagonia prefers to stick to the outdoor apparel/adventure gear industry. The diversification Patagonia displays is limited to their product line and numerous environmental initiatives the company is involved in.
An example of Patagonia's diversification can be seen with their Textile Exchange program, which brings together product brands, retailers, farmers, and key stakeholders to learn about the social and environmental benefits of environmentally conscious textiles. Patagonia was a founding member of this nonprofit group in 2002, which aims at driving global sales of organic cotton apparel and home textile products. Patagonia has also partnered up with other outdoor clothing companies such as REI, The North Face, and Kelty to create The Conservation Alliance, a group concerned with involvement in environmental affairs.
Although Patagonia leans more on the side of a single business organization, one can still see aspects of a diversified business on their website. Not only can you shop for clothes and gear online, but you can also listen to specific Patagonia music and watch live videos of world travels through an online video gallery. There is also an online blog where employees, friends, and customers can share their discoveries and insights with one another.
When it comes to implementing
a business-level strategy, it is apparent that Patagonia operates with a
differentiation strategy in mind. Patagonia is able to create and sustain a
competitive advantage by offering customers unique, quality products. Patagonia
uses their favorable brand image and innovative product designs to attract
customers to their market and keep them coming back for more. The cost of an
apparel or outdoor item is not as important to Patagonia as good quality is. One
can see this by simply looking at the prices of Patagonia products and the
materials used to make these products.
Patagonia also uses
cutting-edge technology in developing their products to help sustain a
differentiation strategy in the marketplace. Many of their jackets and pants
feature wind and water resistant technologies to give consumers the best
outdoor experience possible. Patagonia's technical systems are always dialed
into the conditions of the environment, giving Patagonia a uniqueness that
makes it hard for competitors to imitate.
Some could argue that
Patagonia operates with a focus strategy, since they target the particular
market segment of outdoor enthusiasts only. This is partially true, but I would
consider Patagonia's business-level strategy to be more of a differentiation
strategy than a focus strategy because a wide variety of people do buy Patagonia's
products. I myself would not be considered an outdoor enthusiast, yet I still
own Patagonia apparel. There are aspects of both strategies that come into play
when giving Patagonia a competitive advantage.
