Strategic Analysis of Patagonia's UK Market Entry and Expansion

This report provides a comprehensive analysis of Patagonia's potential entry and expansion into the UK market. It begins with an executive summary and table of contents, followed by an introduction outlining the company's current market position and the assignment's objectives. The main body of the report utilizes PESTLE and Porter's Five Forces analyses to assess the external environment, identifying opportunities and threats related to political stability, economic factors, social preferences, technological advancements, environmental concerns, and legal regulations. The report then delves into resource and competency analyses, employing frameworks such as VRIN to evaluate Patagonia's competitive advantages. Furthermore, the report examines Patagonia's current strategic statements and recommends changes to the mission statement to better align with the UK market. A SWOT analysis is conducted to synthesize the findings, and the report concludes with strategic recommendations for Patagonia's successful entry and growth in the UK market, emphasizing cost-effectiveness and diversification strategies.

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Strategic Management of Patagonia
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1STRATEGIC MANAGEMENT OF PATAGONIA
Executive summary-
The study covers an extensive knowledge on few important business strategies. It depicts the
business of Patagonia in brief in the United States. It also shows the different analysis, which is
necessary to consider while entering a new global market. In this study, Patagonia is considered
for an expansion in the United Kingdom. The company has its presence through its products in
the different brand’s outlet. However, the study shows a different entry with its own store outlet.
The entry is full of opportunities and threats as well. Despite all the prospects and the challenges,
Patagonia should adopt cost-effective and diversification strategies in order to produce a resonant
presence in the target country.

2STRATEGIC MANAGEMENT OF PATAGONIA
Table of Contents
Introduction-....................................................................................................................................3
Main Body-......................................................................................................................................3
Task 1-.........................................................................................................................................3
1. Use of PESTLE & Porter’s five forces-..............................................................................3
2. Based on findings identify the opportunities & the threats for entering the UK market-. . .7
Task 2-.........................................................................................................................................8
1. Resources analysis using suitable framework-....................................................................8
2. Competencies analysis using relevant framework-.............................................................9
3. Competitive advantage in the UK market using the existing resources & competencies-. .9
Task 3-.......................................................................................................................................11
1. Current Strategic Statements of the Company-.................................................................11
2. Recommended change in the mission statement-..............................................................12
Task 4-.......................................................................................................................................12
SWOT analysis & implications for Patagonia-.....................................................................12
Conclusion-....................................................................................................................................14

3STRATEGIC MANAGEMENT OF PATAGONIA
Introduction-
This study is focused on a California based outdoor sports company Patagonia, which is
not yet listed on any stock market but has generated enough of buzz around the country and the
parts of Europe. The company has been successful through its extensive marketing strategies
such as “Don’t buy this jacket”, “Worn Wear” and “replacing & repairing the worn wear”.
However, somehow it has failed in leaving its footprint in the European countries. It has existed
there but largely through other local stores. Indeed, it does not have its own store outlets in many
parts such as in UK. On the other hand, its biggest rival the North Face is much more successful
in Europe. The present CEO of the company Mr. Gellert is very concerned for the business in
Europe. The study shows the decentralization strategy of Mr. Gellert from the existing European
centers to Amsterdam (patagonia.com 2017). The main purpose of this assignment is to analyze
the business capability of Patagonia by using different suitable frameworks such as the SWOT
analysis. Moreover, the study is also aimed at analyzing the external business environment in
UK, so that, it could analyze the competitive advantage that Patagonia will have in UK.
Additionally, the study also recommends strategic solutions to counter the expected barriers and
challenges in UK, so that, a favorable market is created.
Main Body-
Task 1-
1.Use of PESTLE & Porter’s five forces-
PESTLE analysis-
Political-

4STRATEGIC MANAGEMENT OF PATAGONIA
The study is focused on the expansion and growth of Patagonia in the European market in
particular in the UK market. This might face some political barriers due to the recent Brexit
issue. The political stability is at stake in UK as well as in Europe. There are endless numbers of
experts who are uncertain on the fates, which will happen to the different trades operating in UK.
An unpredictable political condition in UK might test the capability of Patagonia for showing the
required resilience to prove its worth (Dhingraet al. 2016).
Economic-
The economic circumstances in UK are quite favorable for Patagonia. The infrastructure
quality is good and so the exchange rate behavior. Additionally, there is a rise in GDP. However,
Patagonia needs to be concerned for saving rates, inflation rates and interest rates as these factors
in European context can cause some issues. Additionally, Patagonia needs to be cautious with the
supply and demand for the outdoor products in UK (Gudginet al. 2016).
Social-
The demographic factors are different in UK. The preference for brand is also different
than it is in the United States. The UK people are much inclined to leisure factors and attitudes.
This will be a real test for Patagonia as it believes in selling the used products to those who are
not a buyer of Patagonia (Begg and Mushövel 2016).
Technological-
Technology has influenced the different industries across the globe. The story is not any
different with the outdoor sporting business in UK. Technology indeed is highly involved in
providing the much needed attraction to a brand. As Patagonia did in the United States when it

5STRATEGIC MANAGEMENT OF PATAGONIA
worked in collaboration with e-Bay to form a network of people to replace and repair the Worn
Wear. The use of technology in the form of collaboration with e-Bay just shows the importance
of technology in such business. The story is not any different in UK either (Coyle 2016).
Environmental-
Environmental concerns are one of the missions, which the Patagonia follows. They are
largely dedicated to support the environmental cause. The use of organic products such as
organic cotton in manufacturing the clothes is one of such examples that validate their stand in
environmental terms. Additionally, they also use organic food to support the surrounding
environment. Such strategies will also be required in UK once they settle down with their first
outlet in UK. Environmental factors are indeed a global concern (Thompson and Ke 2012).
Legal-
Patagonia needs to follow the laws regarding the export. This will ensure less criticism,
which is usually a challenge for the firms. Voluntary compliance for enforcing controls in
exports is less practical with all the exporters. It is important to have a mechanism that controls
the exporting practices. Enforcement tools for example include undercover operations,
monitoring the telecommunications and computer surveillance. It has rather been felt to have a
specific legislation and to define the authorities of agencies that are involved in such tasks. This
will prevent from several crimes such as corruption, forgery and smuggling
(Publications.parliament.uk 2017). Additionally, the environmental laws related to the health and
the safety of employees need also to be followed in UK. (McMorrow 2015).
Porter’s five forces analysis-

6STRATEGIC MANAGEMENT OF PATAGONIA
Industry rivalry-
There is high competition in the outdoor clothing industry in the United Kingdom. The
company is expected to face challenges from M&S, Primark, New Look, H&M and many others.
It is a highly competitive sector. Moreover, all will depend on the use of better strategy and
technology in the manufacturing, the accounting and the supply chain management. Patagonia
needs to have a good relationship with the suppliers to meet the unexpected demands of
customers (Aguirregabiria and Suzuki 2015).
Threat of new entrants-
Threat of new entrant is of medium challenge. However, UK is one of the most potential
markets in the world. It attracts many towards it such as the numerous established brands as well
as potential new companies. European countries have always remained a centre of attraction for
the foreign investors. UK is not any different name; however, things have changed a bit after the
Brexit. Investors might now be relatively more cautious for making the investments (McCormick
et al. 2014).
Threat of substitutes-
Threat of a substitution is always there; however, it will still be categorized as medium in
UK. This is threatening as well. This is due to the changing behavior of customers. They get
motivated from advertisements through various modes of Ads or through the celebrities
advertising a particular brand. Such advertisements excite them to avail the advertised products.
This is where flexibility is required with the offerings (McCormick et al. 2014).
Bargaining power of customers-

7STRATEGIC MANAGEMENT OF PATAGONIA
This is medium despite the fact that customer loyalty is a factor, which can anytime
change the market scenario. This is due to the fact that the customers for such clothes are little
unique in their shopping habit. They are found quite loyal with their trusted brands. This will be
a good chance for Patagonia as they manufacture quality products (McCormick et al. 2014).
Bargaining power of suppliers-
It is low in the United Kingdom. Patagonia does believe in spending a significant sum of
its turnover in the R&D process. They try to ensure whether everything is there at the place.
Therefore, this will be challenging in relation to spending extra on finding quality suppliers;
however, their operation in the United States just proves that they are capable in doing so
(McCormick et al. 2014).
2. Based on findings identify the opportunities & the threats for entering the UK market-
Opportunities-
 Good infrastructure (McCormick et al. 2014)
 Loyal customers who adore quality products (McCormick et al. 2014)
 Controllable relationship with the suppliers (McCormick et al. 2014)
 Customers are concerned about environmental condition (McCormick et al. 2014)
Threats-
 Instable political condition due to Brexit (Dhingraet al. 2016)
 Expected effect of Brexit on GDP (Dhingraet al. 2016)
 Fierce competition from industry giants like Primark (Dach and Allmendinger 2014)
 The business and the environmental laws (Wilson, Williams and Kemp 2012)

8STRATEGIC MANAGEMENT OF PATAGONIA
Task 2-
1. Resources analysis using suitable framework-
a. Physical resources-
Patagonia is an established name in the United States market. It has its own supply chain,
which means it deploys everything of its own. The physical resources include many such as the
different transporting means, the manufacturing machines, the distribution centers and the R&D
centre (patagonia.com 2017).
b. Financial resources-
Patagonia has not listed in any stock market yet but, still it is a capable company. It has
proved this right with the help of its financial performance in the United States market. The
revenue returns touched 8.1% in the last year. It has maintained a healthy growth in the United
States (Wiese and Leon 2017). This will help Patagonia in operating in the United Kingdom.
c. Human resources-
They are yet a limited name in the world of clothing business. They have 1000 employees
working for them in the United States. Patagonia believes in working with committed and skilled
professionals, so that, they get valued contribution of their employees. They need to follow the
same strategy once they start operating in UK. Local professionals with working experience with
some giant competitors should be preferred as this will help to understand the brand awareness in
the UK people (patagonia.com 2017).

9STRATEGIC MANAGEMENT OF PATAGONIA
2. Competencies analysis using relevant framework-
a. Core competencies-
Core competencies can be attained only with the help of three factors such as providing
access to large number of products must think for consumer benefits and must be difficult to
imitate by its competitors (Königová, Urbancova and Fejfar 2012). Patagonia stands strong in
these regards. It trusts in making quality products. The advertisement “Don’t buy this jacket” just
shows their concerns for purchasing decision. According to them, customers should buy valuable
products. Additionally, the company uses organic products such as organic cotton to support the
environmental cause. This is difficult to be imitated by its expected competitors in UK
(patagonia.com 2017).
b. Threshold competencies-
It can be defined as a capability that helps to survive in competition. Patagonia has some
threshold competencies such as using the organic cotton to manufacture organic products. This is
environment friendly. Moreover, this will create a competitive advantage to the company in UK
(Königová, Urbancova and Fejfar 2012).
3. Competitive advantage in the UK market using the existing resources & competencies-
VRIN framework-
Competency Valuability Rarity Imitability Non-
substitutability
Competitive
advantage
Physical
resources
Yes No No yes Competitive
Parity
Financial Yes Yes No Yes Temporary

10STRATEGIC MANAGEMENT OF PATAGONIA
resources competitive
advantage
Human
resources
Yes No No No No
competitive
advantage
Core
competencies
Yes Yes Yes No Competitive
advantage
Threshold
competencies
Yes Yes No Yes Temporary
competitive
advantage
Figure 1: VRIN framework analysis of Patagonia
(Source:Kamasak 2013)
The above VRIN analysis of Patagonia shows the competitive advantage of it in UK. The core
competencies of Patagonia provide utmost competitive advantage to it in the UK market.
Patagonia uses organic cotton to manufacture the products. This is one step ahead in producing a
sound environmental impact in the outdoor clothing industry. They give high emphasis on
recycling the used products through forming networks with help from online giants such as it did
with e-Bay in the United States. Additionally, it spends 10% of its turnover on improving the
product quality through spending this on the R&D process. These are some rarest strategies that
very few companies in the United Kingdom use (Wang and Shen 2017).

11STRATEGIC MANAGEMENT OF PATAGONIA
Task 3-
1. Current Strategic Statements of the Company-
a. Vision statement-
b. Mission statement-
Figure 2: Mission Statement of Patagonia
(Source:patagonia.com, 2017)
The mission statement clearly indicates their concerns for product quality and environmental
benefits. They have rightly served their goals throughout their business in the United States. The
use of organic cotton to manufacture clothes is one of such examples. Additionally, recycling of
the used clothes shows their concern for unnecessary harm done to a product. An encouraging
thought with the advertisement “Don’t use the jacket” just shows how concerned they are with
the decision making capability of the customers. Patagonia wants the decision should be made
for valued products. A 10% spending of the entire turnover on improving its R&D capabilities is
one example that shows their concern for manufacturing best in quality product (Mayer and
Cortright 2012).