Can it be possible to harmonize Patagonia`s business model with its environmental position?

               When The body shop sold to L`Oreal, many people criticized the event even though the founder of The body shop saying ‘Reason for helping L`Oreal to be an ethical company.’ It`s natural to being sold or buying the company with their own interest. But consumers believed its commitment to the ethics as being of primary importance to The body shop. And so this acquisition seemed as a Faustian transaction.

(Source : ethicalconsumer.org)

                  Patagonia fell into the dilemma; between environmental goals and financial initiatives. They already knew that environmental decisions are not always result to greater profit. And this situation can make some buzzes from the board of directors who plans to future of the company. Between environmental issues and financial issues, how can it be possible to harmonize? There are two cases can give some insights.

                  Cadillac is known for its luxury car. And the mission they have concentrates on customer’s loyalty. So even though there are lots of opportunities in developing country`s demand for the mid-range priced car, they just concentrated on luxury car. With their proud, they attained sustainable competitive advantage toward luxury car and take greater shares in GM Motors. This concentration strategy can give us some insights. Targeting limited area made them attain optimal profits.

                  Abercrombie&Fitch is infamous for the CEO`s saying ‘We don`t make XL size’ or ‘I want thin and beautiful people shopping in my store’. Even though their apparent hatreds toward fat and chick, they also expand their markets to Asia. They surrender to the financial initiatives and fell into the dilemma. And as a result, they lost many customers. First comes to the Asian people with his saying, and second to the so called WASP people who prefers the brand in confidence.

                  Cadillac succeed with harmonize its vision to the business model and Abercrombie&Fitch failed. Luxury for Cadillac compromised to its competitive advantage and this can also able to applied in Patagonia. Compared to its competitors like Columbia Sportswear and Nike, they have only 1.13%[1] in Annual Sales. And specialize in environment can give them sustainable demand. So, it is advisable to hold its position as a pioneer in environmental area. Someone can say ‘What might otherwise be additional sales opportunities and growth that Patagonia needed to increase profitability’ and this is wrong. It can be seemed as an additional sales in present, but it`ll lose sales in future. Customer who buys the Patagonia already know that Columbia Sportswear or North Face is better for price but their priority is not the price but the environmental one.

                  Environmental position is the golden goose to Patagonia. For the expansion in business, it is impossible to get along with the environmental position and when they sacrifice the environmental position, it`ll totally ruin Patagonia like The Body Shop case. But for the optimum scale, keep following the environmental position will be a great advantage.

- Related question

1. Evaluate Patagonia`s business model. How important to Patagonia`s business model is its environmental position?

4. How would Patagonia`s business model differ if the company were publicly held?

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[1] Source: Compiled from Hoover`s Online, “Columbia Sportswear Company” and “V.F. Corporation,” accessed June 2010, and Patagonia company documents