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Case Study Patagonia

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The Case of Patagonia Company

Patagonia was founded in 1957 by Yvon Chouinard, an avid and renowned outdoorsman.
With the superiority of Yvon’s designs, by the late 1960s Chouinard Equipment had an estimated 80% of the US market for climbing hardware.In the late 1960s Yvon shifted his attention to the sale of quality outdoor clothes. His company continued to grow slowly until 1972 when the clothing line took off.(Merchant,Stead 2012)
We began to grow at a rapid pace; at one point we made Inc. Magazine's list of the fastest-growing privately held companies. That rapid growth came to a halt in the summer of 1991, when our sales crimped during a recession and our bankers, themselves in trouble and up for sale, called in our revolving loan. To pay off the debt, we had to drastically cut costs and dump inventory. We laid off 20% of our work force–many of them friends and friends of friends. And we nearly lost our independence as a company. That taught us a major lesson. We have kept growth – and borrowing – to a modest scale ever since.(Patagonia,2014)

"Rapid growth and maximization of corporate profits were not among Patagonia’s goals. Yvon
Chouinard explained publicly that the only reason he and Malinda had not sold the company was that they were “pessimistic about the fate of the world and felt a responsibility to do something about it.".(Merchant/Van der Stead/2013,pg.342)

1. The objective of Patagonia, Inc. seems not to be to maximize shareholder value. Patagonia company was started by CEO Yvon as an environmentally conscious company with employees who shared those values.
The budget matters were disregarded ,and were not consistent with maximizing shareholder value.
A former Patagonia CEO was quoted as saying:
"Yvon has no respect for banking and accounting people – people who wear coats and ties. It’s almost a loathing. But that stuff is part of business. It’s almost like hating your left arm."
Largely because of the lack of attention paid to financial affairs and business planning, Patagonia faced its first crisis, in 1991. The economy was in the midst of a recession, and the company was facing more significant competition.(Merchant/Van der Stead/2013,pg.344)

What is Patagonia’s primary objective? Is this appropriate
The Patagonia's company primary objective was to the environment.One of the primary objective of Patagonia is to make everything sustainable in the company, to create a flexible and freedom-working environment. To meet the employees satisfaction by assisting with the work -life balance ,example by giving both parents days off to attend school functions.To have a shared ideology with the staff by minimizing your environmental foot print and maximizing contribution to the planet.
Its a great thought ,but you can’t separate the business of saving the environment from the business of making profits to fund saving the environment

2.Patagonia has a strong culture.
At First you think this Company has a strong culture ,with great ideals.
But then you see that the employees and CEO are a little to relaxed for the business in order to continue making profits for shareholders who believe in the companies brand. The company is very much driven by a culture. This collaborative eco friendly and holistic culture has been created and nurtured by Yvon Chouinard, his wife Malinda and their team. "Make the best quality product and cause no excess harm" defined the essence of their motivation as relayed by Yvon at the 1996 Corporate Citizenship hosted by President Clinton. (Merchant, Kenneth A. /Van der Stede, Wim A.2012) .

Does this culture ensure that Patagonia employees will work hard and act consistently in the corporation’s best interest?

Guidance from Managers with a different set of controls which is why they felt the need to revamp by Creating the Workbook Process .To ensure that Patagonia employees work hard they were given incentives to stimulate them to work hard,but the structure was run with much leisure!

If not, what must Patagonia managers do to shore up the company’s control system?

Balancing Commitment to Business and shareholders with the Commitment to the environment. One of the issues management was facing is balancing the company’s desire for environmental ideals with its existence as a for-profit business.
The idea of running a for-profit business implies operating at the lowest cost, growing financially,and maximizing financial returns to stockholders. A commitment to the environment can raise costs and hurt margins, environmentally-friendly policies are not cheap.

Summary

The Patagonia company’s mission statement declares "build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis". Yvon,'s company has proven that consumers will pay premium price for ecofriendly products.It has proven to be a solid business model that has lead to brand loyalty. Based on what I have read about Patagonia and Chouinard’s ideals is they do not have to choose between business practical and saving the environment. They encourage creativity and innovation among their employees to achieve both a sustainable business and environmental friendly products. The employees and the managers believe in the company and what they promise on their products.They use high quality and sustainable products for their clothing such as Hemp and Organic Cotton .Demand for environmentally-friendly services and products continue to grow, with consumer awareness. Patagonia’s success is a testament to its viable business model.
The Company's philosophy continues to lead a green revolution. On their Online company site "The Footprint Chronicles" allow customers to track where the products that are purchased are made. profiles of the social and environmental practices of key suppliers as well as profiles of key independent partners.The continued awareness through social media of "The Climate change movement" shows a rapidly growing group of consumers looking to buy sustainable products. Yvon Chouinard’s ideals are a permanent part of the company’s culture and vision even after he leaves. The company should continue to provide its core beliefs and values into every product it produces,Along with Maintaining innovative designs, exceptional quality, and environmental ingenuity is the key to continue being profitable and successful.

References

Robert N. Lussier (2013)Human Relations in Organizations: Applications and Skill Building, 9th Edition ;McGraw-Hill/Irwin

Merchant, K. A. & Van der Stede, W. A. (2013). Management control systems (3rd ed.). London: Prentice Hall.

http://www.patagonia.com/us/patagonia.October.2014
























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