Patagonia's Strategic Management Analysis - PM303 Autumn 2017

This report provides a strategic management analysis of Patagonia, focusing on its potential business expansion into the UK market. It includes an environmental analysis using PESTEL and Porter's Five Forces to assess the UK market's political, economic, social, technological, environmental, and legal factors, as well as industry rivalry, supplier power, buyer power, and threats from substitutes and new entrants. The report also analyzes Patagonia's resources and competencies, evaluates its current mission statement, and proposes recommendations for improvement. A SWOT analysis is conducted to identify the company's strengths, weaknesses, opportunities, and threats. The report concludes by emphasizing the importance of diversification and cost-effective strategies for Patagonia to establish a strong presence in the UK market, despite existing challenges.

Running Head: Strategic Management 1
Strategic Management Analysis of Patagonia

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Executive summary
This report will focus on the extensive knowledge on important business strategies. The
report will analyze the strategic business operations of Patagonia in brief in United States. Along
with this, report will also focus on various analyses which are important to consider while
entering in a new global market. In this report, Patagonia is considered for the business
expansion. The company has its presence in various brand’s outlets by its quality products.
Further, report will analyze the resources and competencies by using relevant framework.
Current strategic statements of the company will also be analyzed and recommendations for
implementing effective change in the business will be given. Despite of all the challenges and
prospects, Patagonia should adopt diversification and cost-effective strategies in the business to
have strong presence in the target country.

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Contents
Executive summary ......................................................................................................................... 2
Introduction ..................................................................................................................................... 4
Main body ....................................................................................................................................... 4
Task 1 .............................................................................................................................................. 4
Environmental analysis ............................................................................................................... 4
PESTEL Analysis .................................................................................................................... 4
Porter’s five forces analysis ..................................................................................................... 6
Task 2 .............................................................................................................................................. 7
Resources analysis....................................................................................................................... 7
Competencies .............................................................................................................................. 8
Task 3 .............................................................................................................................................. 8
Current mission statement............................................................................................................... 8
Recommended change in mission statement ............................................................................... 9
Task 4 .............................................................................................................................................. 9
SWOT analysis ............................................................................................................................ 9
Conclusion .................................................................................................................................... 11
References ..................................................................................................................................... 12

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Introduction
This report basically focuses on the outdoor clothing company Patagonia which is famous
for the quality products in the USA market. Although Patagonia is not listed in any stock market
but it has its strong presence in the market. The company has successful business operations by
its innovative marketing strategies such as ‘Worn Wear’, ‘Don’t buy this jacket’ and ‘replacing
and repairing the worn wear’. But, the company somehow was failed to leave its footprints in the
European countries. The reason is that the company does not have its own stores in various parts
of UK. Along with this, there is strong competition in Europe for Patagonia. So, company is now
seeking for the business expansion in UK market (Patagonia, 2017). The objective of this report
is to analyze the business capability of Patagonia based on various frameworks such as
environmental analysis and resource and competencies analysis. The report also focuses on the
business environment in UK. Along with this, the report also analyzes the competitive advantage
that Patagonia will have in the UK market. The strategic solutions are also provided to minimize
the negative impact of barriers in UK market so that favorable market can be created ( Terpstra,
Foley & Sarathy, 2011).
Main body
Task 1
Environmental analysis
PESTEL Analysis
Political
Patagonia is seeking for the business expansion in the European market especially in UK
market. Company has to face some political barriers in the UK market while expanding the
business. Company can face the challenges due to the Brexit issue. Further, political condition of
UK is also not stable so, company has to deal with some challenges in terms of rules and
regulations imposed by different governments. Along with this, there are various uncertain
factors which will also impact on the different trades of operations of Patagonia in UK market.
Unpredictable political condition of UK might be challenging for the capability of Patagonia to
prove its worth in the new market (Dhingra et al, 2016).

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Economic
The economic situation in UK is favorable for the business expansion of Patagonia. In
UK market, the infrastructure quality is excellent. Along with this, there is the significant growth
in the GDP rate in the country. There are some factors which must be managed by the company
like savings rates, inflation rates and interest rates as these factors can be the cause of business
issues. Further, there is the need to be cautious by Patagonia in terms of supply and demand for
the outdoor products in UK market.
Social
In UK market, the attitudes of the customers for the outdoor clothing products are
different as compared to United States. Their preferences of the customers for various brands are
also different as compared to the US market. People in UK market are much inclined to easy
factors and attitudes. So, this will be actual taste of the customers in UK and company will focus
on those customers in order to sell the products who are not the buyer of Patagonia.
Technological
Technology has important role in every industry in all over the world. So, outdoor
clothing industry of UK is also affected by the technological factors. Technology has high level
of involvement in the clothing industry in order to meet the needs and requirements of the
customers. It is observed that Patagonia is working in the collaboration with e-Bay in United
State market in order to replace and repair the worn clothes. The collaboration with e-Bay in the
business shows the use of technology by Patagonia in the business process. This process will also
be used by the company in the UK market (Schilling, 2010).
Environmental
The environmental factor focuses on one of the mission which is followed by Patagonia
in its business. The company is dedicated in order to minimize the negative impact of business
on the environment. Company is using organic cotton in the production of eco-friendly clothes
which proves that company is taking stand for the environmental sustainability. Such types of
strategy adopted by Patagonia are also required in the UK market in order to settle down their
first store in the UK clothing market (Thompson & Ke, 2012).

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Legal
There are various laws and regulations imposed by the government of UK and Patagonia
has to follow those laws regarding export of products. This will ensure less criticism which is
basically a challenge for the company. It is important for the company to have control on the
exporting practices in the global market. Enforcement tools can be used in the exporting
practices including undercover operations, computer surveillance and monitoring the
telecommunications. There are specific laws and legislations and authorities that are involved in
such tasks. Patagonia has to follow to those laws. Along with this, there are some laws and rules
in UK market related to health and safety of the employees which also need to follow by the
company.
Porter’s five forces analysis
Industry rivalry
There is strong competition in the UK outdoor clothing industry. It is expected that
Patagonia has to face high competition from existing companies like M&S, H&M, Primark, New
Look and many other companies. So, it is clear that it is highly competitive sector. Along with
this, the success of the company depends upon the use of better strategy, supply chain
management, and technology in the manufacturing process. In UK market, Patagonia needs to
establish strong relationship with the suppliers in order to meet the demands of the customers
(Brumfitt, 2001).
Bargaining power of suppliers
In the clothing industry of UK, bargaining power of the suppliers is low. It is assumed by
Patagonia that it will be beneficial to invest in the R&D process. Company tries to ensure that
whether everything is there at the place. So, it is challenging for the company to find out more
and quality suppliers for the business operations. So, the bargaining power of suppliers in the
clothing industry is low.
Bargaining power of buyers
The bargaining power of customers is medium in the UK outdoor clothing industry.
Customer loyalty is the important factor for the successful which can anytime change in the

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market scenario. Customers always seek for the quality clothing products and switch to those
brands which are affordable for them. Along with this, customers are founded quite loyal with
their trusted brand. So, this can be significant opportunity for Patagonia as the company is
focused on providing on quality products to the customers (Pavlou & Stewart, 2015).
Threats of substitute
In every industry, threat of substitute products is always available. For the UK outdoor
clothing industry, the availability of substitute is categorized as medium and threatening. There
is the threat of substitute products because of the changing attitude and preferences of the
customers towards the brands. The customers are always motivated by the various modes of
advertisements dome by various celebrities for the particular brand. Such advertisements
influence the customers to purchase those specific products (Boone & Kurtz, 2013).
Threats of new entrants
In UK clothing market, threats of new entrants is medium challenge. It is well-known that
UK is the most suitable market for the business expansion. The UK market attracts various
established brands along with potential new companies. So, this market is the center of attraction
for the foreign investors. Although conditions are changes after the Brexit issue but UK is still
first for the foreign investors. Investors are now more excited to make investment in the UK
clothing market.
Task 2
Resources analysis
Physical resources-
In the United State market, Patagonia is famous and established name among the
customers. It has effective supply chain management which means company deploys everything
of its own. The physical resources of Patagonia include manufacturing machines, transporting
process, R&D centers and distribution centers (Lovelock, 2011).
Financial resources-

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It is observed that Patagonia is not stock listed company but company has strong
presence in the market based on its revenue and profit. With the strong financial performance,
company has strong brand image in the United State market. The company has maintained a
sustainable growth in the clothing market of US. The financial resources of the company will be
helpful to operate the UK market.
Human resources-
Patagonia is the limited name in the clothing business industry. The company has 1000
employees working in the United States. The company is operating with the skilled and
dedicated professionals in the US market so that value can be added with the products. Same
strategy need to be followed by the company in the UK market. Company should prefer local
professionals with the working experience as this will be helpful in understanding the mind
status of people in UK market (Roger, 2013).
Competencies
Core competency of the company can be analyzed based on some factors such as
providing wide range of products for the consumer’s benefits and dealing with the competitors.
In this manner, Patagonia is standing strong in the market as the company believes in making
quality products. Company has advertised ‘Don’t buy this jacket’ which reveals the concern of
the company towards purchasing decision. Along with this, company is using organic products to
support the environmental cause. So, it is difficult for the other companies to copy this core
competency of Patagonia in the UK market (Fifield, 2012).
Task 3
Current mission statement
Mission statement of Patagonia is to build the best product, cause no unnecessary
harms, use business to enhance and implement the solutions for the environmental crisis.
The mission statement of the company shows its concerns towards product quality and
environmental benefits. The mission is rightly served in order to achieve the organizational goals
in the US market. Along with this, the company is focused on recycling the used clothes to
reduce the harmful impact on the environment. The decision should be made for the valued

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products by Patagonia. Research and Development capabilities are the example which shows the
concern of the company towards the manufacturing of best quality.
Recommended change in mission statement
From the above description of mission statement of Patagonia, it is analyzed that the
mission statement of the company is good and support with some effective strategies such as
various types of marketing strategies. But, there is the need to focus on the profitability part also
as the company is entering in UK market. Company has to focus on the revenue part as there is
the need of huge investments for the effective business operations such as marketing and sales,
supply chain expenses; infrastructure related costing, recruitment and selection process, and
many other processes. Based on the business perspectives, it is important for the company to
have good returns in the business at the global level. This can be possible for Patagonia if it is
focusing on the profitability as well (McCormick et al, 2014).
Task 4
SWOT analysis
Strengths-
Patagonia has environmental reputation in the operating market. Key strength of
Patagonia is high quality products which are famous among the customers. So, company is
focused on meeting the demands of the customers at the affordable prices. Along with this,
company has strong brand image which is helpful in expanding the business in UK market.
Company is also committed towards the sustainability of the environment which would also be
beneficial to gain the trust of the customers in UK market.
Weakness-
Despite of various strengths, there are some weaknesses in the business operations of
Patagonia. It is analyzed that Patagonia has limited number of suppliers. So, company has to face
challenges in terms of providing products on time. Limited range of products can also be
considered as the big weakness of Patagonia. Further, company does not have its presence in the
global market. Along with this, company does not have loyalty reward for its customers and that
might be a reason for customers to switch on other brands.

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Opportunities-
For Patagonia, there are various opportunities in the UK market. The company has
opportunity to gain competitive advantage in the UK market in terms of profit and revenue. In
order to become customer oriented company, Patagonia can provide training to the employees
and motivate them by feedbacks. International market such as UK is an opportunity for
Patagonia to expand the business. It is observed that the popularity of the retail stores is growing
continuously which is beneficial for Patagonia in UK market. Further, infrastructure is strong in
the UK market (Verbeke, 2013).
Threats-
There are some threats in UK which can impact the business expansion of Patagonia.
There is unexpected political condition in UK after the exit of Brexit. Along with this, after the
Brexit issue, the GDP behavior is unpredictable in UK. These issues can be major threats for the
business expansion of Patagonia in the country. Further, there is strong competition in the retail
industry of UK and many established companies are creating tough competition for Patagonia.
Changing behavior of the customers is also a threat for Patagonia as they are attracted from
different advertisements (Gudgin et al, 2016).
Based on the above discussed SWOT analysis, there are some recommendations related
to business strategy for Patagonia. Those recommendations are as follows:
 Company should use cost leadership strategy for the business expansion in UK. This will
encourage the lowering of product prices.
 Company should never been distracted from its business values in terms of providing
quality or valuable products to the customers.
 Patagonia should adopt a balanced approach to become cost-effective in the UK market.
This can be possible by limiting the display rows of products.
 Further, Patagonia can use diversification strategy in its products. This includes entering
a new market with new product line (Turnbull & Valla, 2013).

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Conclusion
From the above analysis, it is observed that Patagonia is doing well in the USA market.
The company will get mixed experiences while expanding the business in the UK market. By all
the analyses i.e. PESTEL, Porter’s five forces, SWOT analysis and VRIN analysis, various
evidences are developed in support of the fact. It is analyzed that Patagonia has various
opportunities in the UK market. UK market has great infrastructure and customers are loyal
there. So, company will get success and growth in the global market.

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References
Boone, L., & Kurtz, D. (2013), Contemporary marketing, USA: Cengage Learning
Brumfitt, K., (2001), The Competitive Business Environment, UK: Nelson Thornes Ltd.
Dhingra, S., Ottaviano, G., Sampson, T. and Van Reenen, J., (2016), The impact of Brexit on foreign
investment in the UK, BREXIT, p.24
Fifield, P., (2012), Marketing strategy, (2nd edition), Berlin: Reed educational & publishing Pvt Ltd
Gudgin, G., Coutts, K., Gibson, N. and Buchanan, J., (2016), The macro-economic impact of Brexit:
using the CBR macro-economic model of the UK economy (UKMOD), Centre for Business Research
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Lovelock, C., (2011), Services Marketing (7th edition), India: Pearson Education
McCormick, H., Cartwright, J., Perry, P., Barnes, L., Lynch, S. and Ball, G., (2014), Fashion retailing–
past, present and future, Textile Progress, 46(3), pp.227-321
Patagonia, (2017), Patagonia Outdoor Clothing & Gear | Free Shipping, accessed on 30th
October 2017 from http://www.patagonia.com/us/home
Pavlou, P. A., & Stewart, D. W., (2015), Interactive Advertising: A New Conceptual Framework Towards
Integrating Elements of the Marketing Mix, pp. 218-222
Roger, A.K., (2013), Marketing In Asia. (2nd). Columbus, OH: McGraw-Hill Education.
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McGraw-Hill Irwin
Terpstra, V., Foley, J., & Sarathy, R. (2011), International marketing, Naper Publishing
Thompson, B. and Ke, Q., (2012), Whether environmental factors matter: some evidence from UK
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Turnbull, P. W., & Valla, J. P., (2013), Strategies for international industrial marketing, USA: Croom
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Verbeke, A., (2013), International business strategy. Cambridge University Press.
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