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Module Code-ABS301

Module name- The Global Economy

Format-Report

Title: A Report on the Internationalisation Strategy of Patagonia

Inc

Student Name-

Student ID-

Word count- 1750

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Executive summary

The fundamental aim of this module is to display the international business strategy of

Patagonia Inc. This company has a high vale and corporate sense. Moreover, the

internationalisation through joint venturing and FDI will make opportunity for this

organisation to mitigate the challenges and reinforce the opportunities through the effective

business strategy development.

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Table of Contents

Introduction 3

IBM self-assessment 3

Internationalism mission and & goals 3

Internal and external assessment 4

SWOT analysis 4

Porter’s five forces analysis 4

Market entry analysis competitive business approach 5

Competitive business approach 6

Key foreign investments and entry proposals 7

Impact of company functions and operations 7

Strategies 8

Conclusion 8

References 9
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Introduction

Patagonia Inc was founded in the year 1973 in Ventura, California, USA. It is a outdoor

clothing company that is well-known for the authentic quality of products and environmental

activism. Patagonia INC was founded by Yvon Chouinard and as per the report of 2018 there

are approximately 1000 employees. However this company has expanded its business in

more than 10 countries and crosses 5 continents showing its higher ability to operate its

business in the international business market. The annual revenue of is organisation is

US$800 million in 2029 financial year (Paganin, 2020). Patagonia Inc is an internationally

admired brand for its distinguished quality of the clothing items, improving lives activity and

the activities for saving the planet.

IBM self-assessment

According to the International Business reports, this company has already explored the global

marketplace. This company is actively operating its business features in the United States,

Japan, Netherland, Argentina, South Korea, Australia and Chile and is aims to explore more

foreign markets with its effective and strategic market entry methods.

There are different requirements for exploring the international business market places. With

the internationalisation this company will enhance its consumer base and increase the growth

of the business. Moreover internationalisation will help this organisation to develop

competitive advantages in the home country with technological or other features that is not

existed in the local market (Fatehi & Choi, 2019). It also helps exploring the investment

opportunities in the foreign markets.

Internationalism mission and & goals

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The mission of this company is the company is doing business to save the planet and the

vision is to build best quality products to implement and inspire the solutions that are

required for resolving the environmental crisis. However, this organisation has a high sense

of corporate governance and commitment towards the planet. The broader mission and goals

of this company are-

● To expand more foreign market so that is can serve more people and environmental

region with its environmental activism (Rogers, 2018).

● To enhance its customer base both in the local and international marketplaces for

being the top brand globally.

Internal and external assessment

SWOT analysis

Strengths Weaknesses

● Ethical business objectives ● Poor technological aspects

● Effective marketing strategy ● Ineffective supply chain

● High brand reputation ● High pricing strategy

● Global presence ●

● ● Engagement of politics

Opportunities Threats

● Strong market presence (Dang, ● Looming recession

Jasovska & Rammal, 2020) ● Declining retail sector

● Global expansion ● Global pandemic

● Exploitation of eCommerce channels ● High competition

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● Extended product portfolio.

The outdoor retailers are mainly dependence ob Canada and US and there us a higher

requirements of the outdoor clothing across the world and thus Patagonia has a opportunity to

develop the business strategy globally. Moreover, the necessity of the customers in the online

shopping facility is encouraging this organisation to develop the eCommerce site.

Porter’s five forces analysis

Forces Intensity Analysis

Threat of new entrants Low This company will face lower threat of new entrants as

the company offers high quality products with a

affordable rate and also it has established a loyal

customer base through its Corporate Governance and

CSR strategy (Tenniglo & Limbach, 2017).

Threat of substitute High Patagonia faces a high threat of substitute as the

clothing items offered by the company is often offered

by other organisations with cheaper rate that can create

psychological cost switching.

Rivalry among the High Patagonia faces a high competitive environments in the

competitors business market as there are different other giant

organisations that can offer cheaper products and

services of similar category.

Bargaining power of High The potential suppliers are concentrated in several

supplier regions and the bargaining powers of suppliers are

higher as the cost-switching from the existing suppliers

will be higher for the company. Thus the fewer number

of suppliers of Patagonia are enforcing a higher

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bargaining power.

Bargaining power of Moderate The bargaining power of buyers are also very high for

purchaser this company as this company has a concentrated

customer base and often the buyers switch to other

brand for price sensitivity. On the other hand, the high

quality and differentiated product line have the ability

to hold the existing customer base.

Market entry analysis competitive business approach

Market of China

Advantages Disadvantages

Faster growing economy Relationship of US and china after significant

tariffs placed by Trump government.

Growing middle class buyers Language barrier

Technologically advanced market that can The government involvement has

provide an opportunity to develop cutting- complicated the situations for the joint

edge features. ventures (Hardaker, 2018).

The international trading regulations are Politically and culturally sensitive region that

simpler. can lead intense criticism of the product

lines.

Market of Thailand

Advantages Disadvantages

It is a best marketplace for start-ups Soaring rate of tax

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A tourism industry has created attractive Complicated legal process

environment for doing business

(Kanittinsuttitong, 2018).

Educated and skilled labour market High pay for the overtime to the workers

High range of middle class purchaser Issues with construction permission

Market of United Kingdom

Advantages Disadvantages

Growing and developing opportunity with Supply chain issue

high customer range

Advanced technological field Local laws and taxes

Enhancement of customers and increasing

rate of sales and profit rate (Hoang, Barnes &

Munroe, 2019).

Flexible laws and policies for international

trading.

It can be recommended after the evaluation of the three selected market places. Patagonia can

explore the business market of UK due to the huge customer base and a high economic

backbone of this country. Moreover, this country is technologically advanced and the

increasing start-ups are seeking for FDI in creating opportunity to explore the market place.

Next, the company will explore the marketplace of Thailand for comparatively the less

competitive atmosphere.

Competitive business approach

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In the UK, there are a huge range of competitors like Farfetch that has 5441 employees and

this company has annual revenue of $1 billion. Other competitor is Columbia Sportswear that

has annual revenue of $2.2 million. These potential competitors can provide a huge

competition to Patagonia. In order to effectively create value in the global market, this

company needs to develop value proposition that will enable this company to highlight the

goods and services range before the competitors. Moreover, the meaningful vision of this

organisation towards the environment can emotionally connect the customers. Moreover,

content marketing and strengthening customer relationship can add value in Patagonia in the

market place of the UK.

Key foreign investments and entry proposals

Joint venturing: Patagonia Inc can use Joint venture strategy in order to explore the foreign

marketplace of UK. Joint venturing with the local companies can be also utilised by

Patagonia Inc by creating agreements with the local well-known clothing organisations. It

will allow both the companies jointly operating the business (Selig, Gasser & Baltes, 2019).

It is the most effective strategy as this has a lower risk and has high potentiality to earn huge

revenue.

The main advantage of joint venture strategy is that both the companies carry the cost and

risks of business operations and the Patagonia Inc will have a better knowledge regarding the

foreign culture and the insight of audiences. Moreover Patagonia can disventure anytime and

consolidate itself if it experiences adverse effect or less profit.

The disadvantages of joint venture includes the involvement of both the companies may vary

in the production and promotional activities. Moreover, clash of culture among the employees

is a common issue in the joint venturing that can be mitigated through cross-cultural training.
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Moreover, before adapting joint venture strategy Patagonia needs to evaluate and analyse the

target company in UK and a lot of planning and researches has to be performed.

Foreign Direct investment: FDI is another option that can be developed by Patagonia that

can enable this company to establish a lasting interest in the target company of the UK.

Through FDI strategy Patagonia can owe the ownership of a local business organisation of

UK. Through this strategy Patagonia will have a high control over the target company.

However, this strategy involves a high degree of commitment and resources. The main

advantages of this entry strategy are it is market diversification (Ghebrihiwet, 2017). Lower

labour cost, tax incentives, subsidies and preferential tariffs while the disadvantages include

economic stimulation, human capital development and employment enhancement.

Impact of company functions and operations

In order to explore the new foreign market, Patagonia needs to develop a new HR policy that

can actively align the company culture with the values and culture of the target company of

the UK. It will de essay to prevent any kind of discrimination or racism in the organisational

setting. Moreover, it will be the key role of the HR managers to provide cross-cultural

trainings to the employees to foster global collaboration (Mäkelä & Kinnunen, 2018). The

policy will include diversified view, disciplinary action, recruitment and employment policy,

training and development policy, health and safety benefits and compensation policy and

anti-discrimination policy and will be aligned with the guidelines proposed by the

government of UK.

Moreover, Patagonia will hire new people in the new business market to have a clearer view

of the values and cultural objectives of the foreign marketplace. Moreover, it will help the

business to have a government support for creating job opportunities in the foreign market.
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Strategies

The higher competitive marketplace in the UK can be tackled by Patagonia Inc through

offering the higher quality and differentiated outer clothing in a affordable and comparatively

cheaper price. Moreover, accessibility to the foreign suppliers through the FDI and Joint

Venturing will be easier that will mitigate the issue of high dependency in the US market

supplier. The weak eCommerce facility with also be developed in the technology –based UK

market place. In order to grow the business with long-term, Patagonia will involve its main

vision of corporate responsibility towards the community and the environment of the foreign

market (Zhao, Zhang, & Kwon, 2018). Moreover, this strategy will help this business to

create competitive advantages in the post pandemic situation. T

Conclusion

From the above evaluation it can be stated the Patagonia will adapt joint venture or FDI

strategy to enter the foreign market place of UK. Moreover, this company has a good sense of

corporate responsibility that will foster its international business strategy and management

process and will create a long-term value in the new marketplace.

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References

Paganin, N. (2020). Doing well by doing good, Corporate Social Marketing e il caso

WornWear di Patagonia Inc (Bachelor's thesis, Università Ca'Foscari Venezia). Retrieved

from: http://dspace.unive.it/handle/10579/16461

Fatehi, K., & Choi, J. (2019). International business management. Springer Nature

Switzerland AG. Retrieved from: https://link.springer.com/content/pdf/10.1007/978-3-319-

96622-9.pdf

Rogers, C. (2018). Patagonia on why brands ‘can’t reverse into purpose’through

marketing. Marketing week. Retrieved from: http://fleurwillemijn.com/wp-

content/uploads/2018/07/Patagonia_-You-cant-reverse-into-purpose-through-marketing.pdf

Dang, Q. T., Jasovska, P., & Rammal, H. G. (2020). International business-government

relations: The risk management strategies of MNEs in emerging economies. Journal of

World Business, 55(1), 101042. Retrieved from:

https://www.sciencedirect.com/science/article/pii/S1090951618308320

Tenniglo, L., & Limbach, A. K. (2017). Transparency-only a trend or a driver for change?:

The opportunities of creating a competitive advantage through transparent communication

about sustainable business practices. Retrieved from: https://www.diva-

portal.org/smash/record.jsf?pid=diva2:1142881

Hardaker, S. (2018). ‘Retail revolution in China’–transformation processes in the world’s

largest grocery retailing market. Die Erde, 149(1), 14-24. Retrieved from:

https://core.ac.uk/download/pdf/235028876.pdf

Kanittinsuttitong, N. (2018). Market Demand and Capacity of Wellness Tourism in Thailand.

In 26th International Society for Business Innovation and Technology Management

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Conference, Thailand. Retrieved from: https://www.researchgate.net/profile/Nutworadee-

Kanittinsuttitong-

2/publication/328556536_Market_Demand_and_Capacity_of_Wellness_Tourism_in_Thailan

d/links/5bd4402b92851c6b2792258e/Market-Demand-and-Capacity-of-Wellness-Tourism-

in-Thailand.pdf

Hoang, D., Barnes, C., & Munroe, O. (2019). Management of traditional retail markets in the

UK: comparative case studies. International Journal of Retail & Distribution Management.

Retrieved from: https://www.emerald.com/insight/content/doi/10.1108/IJRDM-04-2018-

0079/full/html

Selig, C. J., Gasser, T., & Baltes, G. H. (2019). Effects of internal corporate venturing on the

transformation of established companies. In Digital Entrepreneurship (pp. 159-183).

Springer, Cham. Retrieved from: https://link.springer.com/chapter/10.1007/978-3-030-

20138-8_7

Ghebrihiwet, N. (2017). Acquisition or direct entry, technology transfer, and FDI policy

liberalization. International Review of Economics & Finance, 51, 455-469. Retrieved from:

https://www.sciencedirect.com/science/article/pii/S1059056016303239

Mäkelä, L., & Kinnunen, U. (2018). International business travelers’ psychological well-

being: the role of supportive HR practices. The International Journal of Human Resource

Management, 29(7), 1285-1306. Retrieved from:

https://www.tandfonline.com/doi/abs/10.1080/09585192.2016.1194872

Zhao, H., Zhang, F., & Kwon, J. (2018). Corporate social responsibility research in

international business journals: An author co-citation analysis. International Business

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Review, 27(2), 389-400. Retrieved from:

https://www.sciencedirect.com/science/article/pii/S0969593117306650