1. Internal analysis - Operations Management
Supplier relations
Down from 200 to 41
Suppliers chosen based environmental values
Lower product defect rates due to eco-friendly suppliers
Dealers/ suppliers must join the One Percent for the Planet
Production
Focused on reducing footprint of production process
COGS: 1/3 manurfacturing, 2/3 raw materials
- 85% of production outsourced outside NA
Order units/order
Lower return rates than industry standards
Distribution
- Distribution center/service center in Reno, Nevada
900-1,000 dealers (competition has 4000 dealers)
Small single store retailers and national chains

2. Internal analysis - Operations Management
Risk evaluation
Operating risk: shortage of inventory caused by inability to satisfy existing demand
Cost/ Expenses
$3.8 million for eco-friendly commitment in 2009
$100k annually on field testing
$350k to repair 12k garments/yr = $29 per garment
Less than 1% revenues on marketing
1% revenues on environmental causes
$200k in kind donations to eco-causes

3. Internal analysis – Customer analysis
Target market
38 year old with household income of $160,000
“dirtbags”
Customer acquisition
Communicates its eco-friendly efforts
Great PR for its eco-causes
Ads for Patagonia promote their eco-causes, not their product.  difficult to know what they sell
Customer retention
Near 100% satisfaction guaranteed
Customer contributions to environment

4. Internal analysis – Customer growth & Innovation
Creating a partnership with their customers for commitment to extended product life ensures long-term relationship with customer base
Product Innovation
1% of revenues for R&D with raw materials testing lab
More durable fabric and 100% recyclable zippers
Patents for synchilla, capilene, and chlorine free wool lined in wet suit
Industry leader: created many fabrics adopted across industry
Product categories:
Sportwear
Technical outerwear: insulation and technical shells
Technical knits: base layers with fabric treatment
Hard goods: packs, accessories

5. Internal analysis – Social responsibility
Environmental commitment
every building owned by Patagonia has solar panels, energy efficient lighting, natural heating and cooling systems.
Mostly vegetarian and organic cafeteria for staff
self-imposed enviro tax of 1%
Eco-friendly suppliers/dealers
Recycle program for customers to reduce overconsumption
Plans for product lifecycle initiative

6. Internal analysis – HR & Corporate Culture
Human Resources
Dirtbag employees
Eco-friendly staff
1,400 employees
53% employed 6+ years, less than 5% turnover
Voted best company to work for
10k resumes received for 100 jobs
Corporate Culture
Surf conditions written on board daily
Employees take time off work if tide is up
Vegetarian/organic cafeteria
Eco-friendly office buildings
2 month paid leave to work on environmental causes of their choice
$2000 subsidy for buying a hybrid car
Bail money for those arrested in nonviolent activism for enviro causes

7. Internal analysis – Leadership & Management
Family atmosphere
Off-site meetings in the mountain or ocean
Climbing together on weekends
Travelling to Patagonia, Chile, to help create a national park
On site childcare
Mat and pat leave for parents
Management
Owned by Lost Arrow, holding company owned by Yvon and Malina
Major turnover of CEOs in 90s and 2000s
Private company = easy to maintain sustainability
Board: Yvon, Malinda, 2 kids, Kristine McDivitt Tompkins
Board drives change, CEO manages day to day

8. Internal analysis – Sales & Marketing
Annual growth of 6% in net sales
4 sales channels:
Wholesale: $145 million in 2010
Retail: $100 million with 65% margins. 33% of sales offering 80% of product. 26 retail stores in US, 52 total.
Catalog/internet 23% with only 69% ad space (competition has 90-95% ad space).
Objective: 10% growth in the next 5 years
Marketing
Less than 1% of revenues for marketing
Lots of free PR
AmEx spent $3 million on a Patagonia commercial
Offered to donate $10 per protesters picketing

9. Internal analysis – Competitive advantage
The most socially responsible company of its industry
The only company to repair products
Setting industry standards with product innovation
Patents for product creations
Lots of free PR

10. Internal analysis – Strengths & Weaknesses
R&D lab
Industry leader in product innovation
Most eco-friendly company in industry
Good HR practices/corporate culture/ leadership
High quality products
Private company
Free PR
Weaknesses
Too specialized, niche target market
Governance
Size, they’re relatively small compared to competitors
Inventory management issues: shortage, inability to supply demand
Brand awareness