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Strategic Business Units

The three strategic business units that make up Patagonia are clothing, accessories, and gear.
We chose CLOTHING as an SBU by utilizing the market segmentation process. Clothing is
defined as jackets, t-shirts, and vests. These products all have similar pricing and are
marketed towards a common audience. The audience being targeted is runners and people
who love the outdoors. All clothing offers versatility and durability. This SBU is Patagonias
most prominent division of products.
We chose ACCESSORIES as an SBU because it is composed of very similar products. These
products include hats, scarves, and gloves. All components of this SBU have similar price
points and are marketed towards active and environmentally conscious people. These
accessories are offered for a variety of circumstances and all seasons.
We chose GEAR as an SBU due to its product homogeneity. Backpacks, sleeping bags, and
totes are included within this SBU. This collection of gear has a small range of prices and
targets the specific buyers who love camping and participating in outdoor activities. This
SBU is important because it stands for why Patagonia was created: durability during
adventure. Gear demonstrates that Patagonia does not only want to be the clothing you
sport, but it wants to be how you sport.

SWOT ANALYSES
Clothing
Strengths
Fair trade (Fair Trade Certified, http://www.patagonia.com/fair-trade-certified.html)
Durable and environmentally friendly materials such as organic cotton and recycled
polyester
Ease of purchase - offered in-store, online, and through other distributors such as Urban
Outfitters, Scheels, and REI

Weaknesses
Expensive - prices vary from $30 (t-shirts) to $600 (jackets)
Only few jacket styles
Majority of clothing is marketed towards colder climates

Opportunities
Vintage patterns such as paisley and plaid are coming back into style
Different environmental disasters and issues occurring
Political changes regarding protection of federal lands/national parks (Patagonia
Threatens Trump with Lawsuit Over National Parks Review,
http://www.konbini.com/us/lifestyle/patagonia-threatens-trump-lawsuit-national-
parks-review/)
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Black Friday promotion trends (Record-breaking Black Friday Sales to Benefit the
Planet, https://www.patagonia.com/blog/2016/11/record-breaking-black-friday-
sales-to-benefit-the-planet/)
Threats
Primary competitors have wider target audiences for clothing due to more affordable pricing
Increased trend in ethical consumerism

Accessories
Strengths
Visibility of logo
Competitive pricing

Weaknesses
Product designs do not differentiate from competitors
Majority of accessories are seasonal
Adjustable fit does not accommodate all customers (Patagonia Women's Femme Fitz Roy
Interstate Hat Reviews, http://www.patagonia.com/product/womens-femme-fitz-roy-
interstate-hat/38145.html?dwvar_38145_color=CVSB&cgid=womens-hats-accessories#tile-
3=&start=1&sz=24)
Opportunities
Wildfires happening around the nation
Threats
Other brands carry similar products for a less expensive price
Seasonal changes in weather cause fluctuation in market sales

Gear
Strengths
Foundation the brand was built on
Serves many active needs
Respectable relationship with niche market (Patagonia Gear Reviews,
https://thebigoutside.com/tag/patagonia-gear-reviews/)

Weaknesses
Over engineered
Water resistant promises are not always held true
Lack of product information on website

Opportunities
Social media marketing trend (Teens and Social Media: Where Marketers Should Focus,
http://www.talentzoo.com/digital-pivot/blog_news.php?articleID=1319)
Students studying abroad in spring

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Threats
Competitor donations (The North Face,
https://www.thenorthface.com/featured/walls.html)
Primary competitor offers more encompassing gear selection (The North Face,
https://www.thenorthface.com/shop/equipment)

BCG Growth-Share Matrix
SBU: Clothing
Market growth: The value of the overall apparel market in America is expected to grow
from $288 trillion to $391 trillion by 2020
(Global Apparel Market 2016-2020,
https://shenglufashion.wordpress.com/2016/10/16/statistics-global-apparel-market-
2016-2018/)
Market Share: Being a privately owned company, the financial breakdown of sales is not
available, but Patagonias anti-growth strategy hinges on the basis that we control a
small share of the market (Patagonias Anti-Growth Strategy,
https://www.outdoorgearlab.com/topics/camping-and-hiking/best-daypack)

Label: Question Mark

SBU: Accessories
Market growth: The total market is very large, but is not growing (TRADITIONAL
PERSONAL ACCESSORIES RETAILERS STRUGGLE TO KEEP SALES STRONG,
http://www.euromonitor.com/personal-accessories-in-the-us/report)

Market Share: Patagonia has a very small share of the market (Patagonia Accessories,
http://www.patagonia.com/shop/mens-accessories)

Label: Dog

SBU: Gear
Market growth: The market is not experiencing growth. This is because sales of gear are
directly driven by outdoor recreation participation, which has been relatively stable -
fluctuating within a 1.4% participation range.
(Outdoor Industry, https://outdoorindustry.org/wp-content/uploads/2017/04/2017-
Topline-Report_FINAL.Pdf)
Market Share: Patagonia owns a large share of the market for gear. Patagonias gear is
regularly considered the favorite of many active people and is featured on sites such as
Outdoor GearLab, which reviews outdoor gear and compares products (The Best
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Daypacks for Hiking and Travel, https://www.outdoorgearlab.com/topics/camping-and-

hiking/best-daypack)

Label: Cash Cow

Business Strategy for Clothing

When considering our SWOT analysis and BCG Growth Share Matrix for this particular
SBU, it is clear that Patagonias clothing makes up a large share of the companys product
selection. Although Patagonia is a well-known brand, some of the weaknesses included in the
SWOT analysis are hindering the growth of the company. The high prices and lack of variety in
style choices, cause the company to be overshadowed by negativity.
For any business strategy, the product is always the first point to consider. Patagonia
utilizes the approach of environmental sustainability. The initial attraction for many consumers
is Patagonias durable clothing made from environmentally friendly materials. All clothing is
also fair trade certified.
Although there are current weaknesses associated with the SBU clothing, there is plenty
of opportunity for Patagonia to improve. It is crucial to focus on pricing when targeting specific
customers. A large portion of Patagonias customer base includes teens and young adults who
are frequently active and in need of outdoor clothing. This segment of buyers is being targeted
by Patagonia, but they are often not willing to pay the high-end prices. To appeal more to these
young buyers, Patagonia should utilize cause-related marketing by implementing a sales
promotion aimed at college students who purchase our environmentally friendly clothing items.
Proceeds will be donated towards relief efforts for current natural disasters. Consumers will be
more willing to purchase high-priced items when a percentage of proceeds goes towards an
honorable cause.
Similarly, Patagonia will implement a Black Friday Initiative by donating 100% of
proceeds to help grassroot environmental organizations. This will positively reflect the
character of the company. A changing political atmosphere has also introduced new
opportunities for Patagonia. With the changes that have been made under President Trump,
770 million acres of public land is under review for potential exploitation due to oil drilling and
construction. Patagonia has challenged politicians on this issue and has called upon customers
to do the same. We will continue to strengthen our brand by speaking up on social media
outlets about the wrong-doings in this situation. This act of solidarity will create a strong sense
of brand loyalty and will help keep Patagonia in the spotlight as a company that is trying to
protect the earth. When Patagonia follows these strategies, not only will we obtain a charitable
reputation and brand loyalty, but our clothing sales will highly increase.

Business Strategy for Accessories

Patagonias different accessories are easily recognized by our well-known mountain
logo. According to our SWOT Analysis and BCG matrix, the companys highly visible branding
and competitive pricing are key strengths in the sales of different accessories. Although this
SBU possesses many strengths, it is still very important to take advantage of different
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opportunities that can eliminate threats and weaknesses affecting the growth of this business
unit. A majority of Patagonias accessories are seasonal, so a seasonal change in weather can
cause major fluctuation in sales. This may cause the company to suffer at different points
throughout the year. In addition, some of the one size fits all products have been receiving
backlash from customers, so it is important to strategically change these threats and
weaknesses to opportunity growth.
Product satisfaction must be attainable for all consumers in the target market. By
providing additional sizing to our current selections online, Patagonia can ensure that all
customers are gaining a positive experience when shopping with our company. The opportunity
of creating petite sizing options can target the female population and offer sizing that is more
suitable for their dimensions. In the end, this will eliminate customer complaints, positively
reflecting the reliability of Patagonia accessories.
Another opportunity Patagonia has to increase sales growth in accessories is to sponsor
a specific relief fund. We should donate to the National Park Foundation for the relief efforts of
wildfires around the nation. It would be strategic for Patagonia to stitch the National Park
Foundation logo on the sides of hats and then donate a percentage those proceeds. This
strategy would be driven by cause-related marketing.

Business Strategy for Gear

Patagonias brand originally started with backpacks and gear. In 1953, our founder sold
steel tools and backpacks out of the trunk of his car, eventually turning it into a small store
(Company history, http://www.patagonia.com/company-history.html). Gear is a large part of
Patagonias product line since it was created for climbers, hikers, and campers. It is crucial that
outdoor-lovers gear is durable, trustworthy, and long lasting.
Gear is what Patagonia's foundation was built on and it continues to be a strength
within the company. It remains the key to our brands success due brand loyalty from with the
outdoor-loving target market. Since the start of the companys success, Patagonia has
expanded its products to all the different silent sports such as hiking, climbing, and camping.
Because we have so much gear for these activities, Patagonia faces a weakness of over
engineering products when it is unnecessary. Our customers range from beginners to experts in
their particular activities and in most cases, simplicity is best.
Within recent years, Patagonia has successfully targeted customers outside its
immediate audience, which is active and outdoorsy people. A younger audience of college and
high school students with little to no outdoor activity experience, can be seen sporting
Patagonia gear. With this growth of customers, Patagonia has a major opportunity to advertise
our gear on social media to college students. A specific trend Patagonia should notice is the
popularity of college students and recent graduates traveling abroad. Versatile packs for
studying abroad is an important purchase for these students. Patagonia should advertise
specifically to this target market by showing them how they can sport Patagonia across the
world, whether that be hiking in South America or traveling around Europe on the weekends.
Patagonia should also offer a special discount to students studying abroad as way to broaden
our gears target market.
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Patagonia has been known for being philanthropic and environmentally friendly from its
start in 1953 (Environmental Grands & Support - http://www.patagonia.com/environmental-
grants-and-support.html). Our company constantly works to serve customers and help the
environment at the same time. By supporting many different organizations and movements,
Patagonia potentially faces a threat against competitors who focus their efforts around only a
couple issues. Specifically, The North Face worked to make climbing more accessible and
donated $1 million to build public climbing walls in undeserving areas (Walls Are Meant For
Climbing - https://www.thenorthface.com/featured/walls.html). With The North Face
supporting this issue, Patagonia faces the threat of our climbing customers to switch over to
purchasing The North Face because they support the philanthropy that targets their specific
interest and hobby. Strategically, Patagonia should begin to support more specific issues such
as preserving hiking trails and cleaning up camp sites. This implementation would draw in
customers who favor businesses that support their interests.