Monthly Archives: January 2013

Patagonia and Entrepreneurial Growth

In my entrepreneurship course, I have been teaching the Patagonia case for several years now.  I find this case very interesting because it clearly shows the trade-offs involved in choosing  a consistent strategy and building a coherent activity system (or a business model) around those choices for the entrepreneur, “business architect”, or Yvon Chouinard in this particular case.

The history of the company is interesting for any entrepreneur in its own right.  From company history website: 

“Chouinard, after meeting John Salathé, a Swiss climber and Swedenborgian mystic who had once made hard-iron pitons out of Model A axles, decided to make his own reusable hardware. In 1957, he went to a junkyard and bought a used coal-fired forge, a 138-pound anvil, some tongs and hammers, and started teaching himself how to blacksmith. Chouinard made his first pitons from an old harvester blade and tried them out with T.M. Herbert on early ascents of the Lost Arrow Chimney and the North Face of Sentinel Rock in Yosemite. The word spread and soon friends had to have Chouinard’s chrome-molybdenum steel pitons. Before he knew it he was in business. He could forge two of his in an hour, and sold them for $1.50 each.”

To start the discussion rolling for the class, I use this video that gives more of a real feel for Yvon and the company he has created over the years:

Although overall the video could be perceived as simply marketing material for Patagonia, it also raises several interesting issues for the attentive viewers – for instance, Chouinard acknowledges that only 10% of their customers “care about the environment.”  How important is this for the overall firm strategy and positioning?  The discussion then follows its own course, eliciting student opinions about the company’s past, current, and future strategy.  I find particularly interesting to examine Patagonia’s recent Common Threads Initiative, that asks its customers to take a pledge…to consume less.

In addition, I also ask the students to read Friedman’s original article in New York Times discussing his views about the social responsibilities of businesses (“The Social Responsibility of Business is to Increase its Profits” by Friedman, M. The New York Times Magazine, 1970).  Although a convoluted read, it gives some food for thought and background understanding of the higher-level intellectual issues at stake in the Patagonia case that appears more anodyne at first view. To finish the class on more of an optimistic note, I use this quote from Yvon:

“I’ve been a businessman for almost fifty years.  It’s as difficult for me to say those words as it is for someone to admit being an alcoholic or a lawyer.  I’ve never respected the profession.  It’s business that has to take the majority of the blame for being the enemy of nature, for destroying native cultures, for taking from the poor and giving to the rich, and for poisoning the Earth with the effluent from its factories.  Yet, business can also produce food, cure diseases, control population, employ people, and generally enrich our lives.  And it can do those things and make a profit without losing its soul.”

For further information on the company, students can be encouraged to read the Wall Street Journal article on Patagonia and its founder (“Patagonia’s Founder is America’s Most Unlikely Business Guru” by Stevenson, S., The Wall Street Journal, 2012).

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