Product Lifecycle InitiativeLaura Acosta & John E. Mroczek

Patagonia represents a way to “challenge conventional wisdom and present a new style of responsible business” - Yvon Chouinard

AGENDA

• Business Model of Patagonia

• Situation Analysis

• Dilemma at Patagonia

• Action Plan

• Project Scope

• Implementation & Marketing

• Challenges and Risks

• Recommendation

WHO? Worldwide Leader of environmentally responsible business.

WHAT? Offer products that are simple, functional and multifunctional.

HOW? Leader in Technological Innovation to develop and test raw materials to cause the least amount of harm to the environment as possible.

BUSINESS MODEL

SITUATION ANALYSIS

Company: Focusing on the production of simple, functional and multifunctional product to encourage customers to consume less by consuming better.

Customer: someone who was an avid climber and took temporary jobs in order to pay for climbing expenses

Competition: All of the competitors targeted the middle to high end

outdoor apparel customer demographic of 38 years old. Using Mass Market retailers to distribute their product.

Collaborator: chosen in regards to their alignment to the value of the Patagonia corporate culture.

Climate: Corporate Social Responsibility has become a must for any successful company. ** The experience Patagonia has created something that is rare,

valuable, non-substitutable, and inimitable

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• Pledge to make products:• High quality goods

• Multifunctional

• Repairable

•Sending old garments for repair and reuse

• Place them on the online market:

• For sale

• Exchange

• Donation

Product Life Cycle Initiative

** Take responsibility “from birth to death and then beyond death to rebirth”

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• Target of increasing a 10% annual sales growth.

• Requires evaluation of the sacrifices it is willing to make:

• Company Values & Purpose

• Scope of the project

• Costs & Resources

• Time

Dilemma at Patagonia“Environmental decisions were not at odds with the optimal financial performance”

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Dilemma at Patagonia

Alternative 1. Establish the 10% Sales Growth Strategy

“to lead corporate America by example, it had to be profitable”

Pros- Increase 1% for the Planet contribution by 64%.

Cons- Diverge from its core values, quality products and

reduction of environmental sustainability. Focus towards a revenue growth focus company. Effectively translated into the company image.

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Dilemma at Patagonia

Alternative 1. Establish the 10% Sales Growth Strategy

“Forget about the goal and

instead focus on the individual

movements involved in

shooting an arrow- if [the

elements are perfected, one]

can’t help but to hit the center

of the target”

- Yvon Chouinard

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Dilemma at Patagonia

Alternative 2. Product Life Cycle Strategy

Pros- Aligned with the core values. Encouraging their customers to limit their consumption.

Cons- 1% of sales to the planet can be compromised. Increases reparation, transportation, material and

administrative costs Against “using the company’s environmental position as a

marketing tool to encourage customers to increase consumption” Acquisition costs of new Patagonia customers

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Dilemma at Patagonia

Alternative 3. Product Life Cycle for Future Dirt Bags Promote less consumption. Encourage to repair and reuse garments them as long as possible.

When disposed of they can be refurbished and sold at a slightly lower price.

Outsource repair in Manufacturing and Distribution.

Pros- Larger Customer Base. New Market Demographic. Leverage Existent Resources and Customer Loyalty. Remain profitable.

Cons- Gimmick to increase. Affect the image of the product.

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Dilemma at Patagonia

Alternative 3. Product Life Cycle for Future Dirt Bags

  2011 2012 2013 2014 2015

Net Sales 384,456 444,046 512,873 592,369 684,186

Cost of Goods Sold 199,318 217,499 237,499 259,499 283,699

Gross Sales 185,138 226,547 275,374 332,869 400,487

SG&A 208,451 240,761 278,078 321,181 370,964

Operating Margin -23,313 -14,214 -2,704 11,689 29,523

% of Sales -6% -3% -1% 2% 4%

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ACTION PLAN

Take the responsibility to reduce landfill waste by repairing and recycling Patagonia Garments to sale for the future generations of dirt bags in 3 years.

Objectives

Transmit the same quality, durability and environmentally conscious productions to future generations of Dirt Bags.

Uniting all in a virtual community that represents a common space where individuals can communicate a common ambition.

Make the physical deposit of recyclable and reusable products as accessible as possible.

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PRODUCT LIFE CYCLE INITIATIVE SCOPE

Leverage knowledge to create functional, simple garments.

Integrate refurbishing its already existent manufacturing and distribution centers.

Easy to use website to connect consumers to Patagonia.

Creating an IT Center to support advocating environmental commitment.

OUTSIDE PRODUCT LIFE CYCLE INITIATIVE

Redesign or re-manufacture the garments sent in.

Only refurbish Patagonia Products.

ACTION PLAN

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ACTION PLAN Implementation-

3 years

Outcome- Strive to retain the same core customer and to reinvent the repaired garments to attract new customers.

Leverage the education Patagonia Core Customers.

Go further by educating on purchasing refurbished clothing. Sold at Patagonia Stores and in the Baselayer

Dealers 14

ACTION PLAN

Activity Flows

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ACTION PLAN Work Break Down Structure

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MARKETING MIX

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RISKS• Initiative can simply fail causing significant losses and damages to the brand name.

• Providing Competitors information about failing practices.

• Risk of downgrading the quality of the products.

• Overall revenues will be affected in the 1st and 2nd years.

• High level of dependency on IT department and Customer

• Diverging from core competencies.

• Loss of market share because of aggressive plan

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BENEFITS • Decision is rooted with core competencies of Patagonia

• Reach broader customer base

• Online network will foster sense of community

• Patagonia will maintain position of innovative and industry leading company.

• Tax Incentives and over all reduced costs.

• Educate and enhance customer knowledge further.

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RECOMMENDATIONS

• Product Life Cycle Initiative offered only for Patagonia Products.

• Outsourcing Repairs to facilities abroad.

• Selling of refurbished items to younger Dirt Bags

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Thank You !!!

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