Patagonia Case Summary

Patagonia Case Summary

Legenda: Question 1

              Question 2

Question 3

Question 4

Introduction

The CEO (Sheahan) and senior executives were, in the Spring 2010, struggling with the decision to implement a radical environment initiative, because doing so would impact their target of 10% revenue growth for the next 5 years. This was known as the Product Lifecycle Initiative- recovering old garments and creating a market for used products, while fostering a less consumerist conscience.

Social responsibility has always been one of the core values of Patagonia. The founder, Chouinard, is “not afraid of losing this business”, despite difficulties in consolidating retailers and fast-growing competitors in the outdoor apparel industry. He is keen on implementing the Product Lifecycle Initiative.

Early Years

Patagonia was founded in 1972 as an apparel line for Chouinard Equipment, a climbing hardware supplier. It became a company in 1979, and in 1984 Lost Arrow Corporation was created as a parent company for Chouinard’s businesses. Patagonia grew in sales during the 1980’s, expanding to Europe and Japan. Sales grew erratically in the 1990’s due to the recession. In 2000, it had $200 million in net sales.

        Business Philosophy

Patagonia adopted its founder’s belief in Zen philosophy, with operations focused on getting every detail of the firm’s operation to perfection in order to meet the firm’s objectives. 

The elements of risk-aversity and environmental concern arise from Chouinard’s experience as a mountaineer, guiding the company’s mission statement: “build the best product, cause no unnecessary harm, and use business to inspire and implement solutions to the environmental crisis”,

In 1998, with a growing market for anti-odor clothing, Patagonia removed anti-odor chemicals from its products, due to this environmental concern. Despite the possible impact on sales, it was a proof that the company would remain faithful to its values.

        Governance

By the time of this new initiative (Spring 2010), Lost Arrow Corporation, the parent company of Patagonia, still had only two shareholders, the Chouinard couple. Observers claimed that the sustainable agenda was at the expense of its growth. The environmental concerns have led the firm to have multiple CEOs in the 1990’s and 2000’s, because they “didn’t understand what we’re about…the values here are so deep..”. Yvon Chouinard is still the mastermind behind the company’s ideas and products, while the new CEO, Sheahan, implements them in the day-to-day scale-up and globalization of the business.

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