A) Achieving Growth, being Profitable, and minimizing Ecological Expenses – somewhat contradictory goals – yet achieved by Patagonia. Its business model(1) is based on the philosophy that calls for making minimum environmental impact along overall value chain engagement to increase the productivity of natural capital. At the core of this business model is the company’s value proposition – Sustainability, which acts as both the primary source of its competitive advantage and the basis of its differentiation strategy. To differentiate itself, Patagonia has effectively positioned itself as a supplier of superior quality products and at the same time it has continued its commitment towards minimizing its impact on environment – even if it calls for
Tradeoffs (e.g. by not using anti-odor chemicals or not using conventional cotton). Supply side of the business comprises of activities and relationships along the value chain that provide the finished goods and create value. Patagonia has been able to create value by creating Integrity in its product and product’s performance, effective Signaling (e.g. through warranty and replacements), using quality inputs (e.g. organic cotton), influencing customer experience (e.g. catalogues), and linking its value chain to that of its suppliers (e.g. strict standards for quality and social & environmental responsibility). On the Demand side Patagonia has created a social & psychological factor through advertising that includes educational messages, environmental grants, donations, campaigns, & green benefits for its employees etc. This helped Patagonia capture value because the differentiation resulted in consumers’ willingness to be associated with purchasing a superior quality product from a company that they trust cares for the environment,
& such consumers are also willing to pay (2) more for Patagonia’s