Our Patagonia PESTLE analysis examines what external factors impact the operations of one of the most famous outdoor clothing brands.
Do you love participating in adventurous activities like camping, surfing, and trekking? If yes, you must know that special clothing and gear are required to carry out these activities.
The most common problem people face when they opt to do these adventurous activities is that the clothes required are hard to find.
Patagonia is a clothing brand that fills this market gap by providing clothes for outdoor activities. Patagonia is one of the most famous stores manufacturing clothes for outdoor activities.
Earlier, we conducted the SWOT analysis of Patagonia. However, in this article, we will conduct the Patagonia PESTLE analysis to examine what external factors impact the operations of this brand.
Before we proceed further and conduct the PESTLE analysis, let's look at Patagonia's history. The foundation of Patagonia was laid by a rock climber named Yvon Chouinard in 1973.
Patagonia was founded to manufacture the gear required for mountain climbing. Ynon pursued this business since he was a mountain climber, so he wanted to start a business that could benefit the fraternity of mountain climbers and outdoor enthusiasts.
Later in the 70s, Patagonia struggled financially. That's when Patagonia shifted its focus toward clothing production. From the start, Patagonia was an environmentally-friendly brand.
Patagonia used to manufacture clothes from organic cotton and recycled materials. This made the brand look more attractive, increasing the demand for Patagonia's clothes.
Patagonia will manufacture quality clothing items for outdoor adventures in the coming years. These attractive outdoor jackets and clothes grabbed the attention of outdoor enthusiasts. As a result, Patagonia got established as an outdoor clothing brand.
Besides manufacturing quality products and marketing the brand perfectly, Patagonia also paid attention to fulfilling its corporate responsibility to improve its image. The brand pledged to donate 1 percent of its sales to environmental causes.
Such campaigns improved the brand's image and managed to pull environment-friendly audiences. Due to the increased demand for Patagonia's products, the brand expanded its operations.
Patagonia opened several stores in the US as well as internationally. By doing so, the sales of Patagonia increased significantly, and the brand got more recognition all over the globe.
Currently, Patagonia has more than 70 stores across the globe, through which it generates around $1.1 billion annually. It also provides employment to around 2000 employees.
There are bigger companies than Patagonia in the clothing industry. However, Patagonia is among the top few clothing brands in the outdoor clothing niche. Now that we have looked at Patagonia's history and discussed how it evolved over the years, let's proceed and discuss PESTLE analysis.
PESTLE analysis is a business tool used to analyze the external factors that impact the operations of any business. This PESTLE analysis will examine how various political, economic, environmental, social, technological, and legal factors affect Patagonia.
Political Factors That Affect Patagonia
The actions of governments and the political scenario of a country impact different industries and businesses. In this section, let's examine how different political factors affect Patagonia.
The government's tax policies are one of the factors that affect the sales of Patagonia. If a government increases the tax rates in a country, less disposable income would be left in people's pockets.
This will cause the demand for the products of Patagonia to fall. As a result, Patagonia will suffer financially. Moreover, policies on international trade and tariffs impact Patagonia.
Suppose a government imposes high tariffs on imported machines or any other input Patagonia uses in manufacturing. In that case, the production cost of Patagonia will increase, and the profits will be minimized.
Moreover, suppose restrictions on international trade are imposed. In that case, Patagonia won't be able to export its products to other parts of the world. As a result, the brand won't be able to earn huge profits.
Furthermore, political stability also impacts Patagonia significantly. In a country where this is political stability, people tend to spend because there is less uncertainty.
On the contrary, people in a politically insatiable country tend to spend less and save more. Hence, Patagonia will experience high sales in countries with political stability.
Economic Factors That Affect Patagonia
Economic factors are related to various macroeconomic factors of a country. A country's economy plays a significant role in impacting the operations of any business. In this section, we will discuss how various economic factors impact Patagonia.
Inflation is the change in price levels compared with the base year. It has a negative impact on Patagonia. As inflation rises, the disposable income of people falls. As a result, the consumption of people falls.
In a country with high inflation, the demand for products of Patagonia will fall, and the brand will suffer financial losses. Moreover, interest rates have a substantial impact on Patagonia as well.
Suppose a country's interest rate is high; people would limit their consumption and try to deposit their money in banks to earn a return. Hence, the demand for Patagonia's products would fall, and the brand will observe losses.
Other than that, recessions and periods of economic growth significantly affect Patagonia. If a country is experiencing economic growth, the income of people living in that country rises. As a result, people start to consume more. This benefits Patagonia since its sales increase during periods of economic growth.
On the contrary, when a country is going through a recession, unemployment increases, and the income of individuals falls. As a result, the sales of Patagonia will fall, and the brand will have to bear losses.
Social Factors That Affect Patagonia
Social factors are the factors that highlight various socio-cultural factors that impact any business. In this section of the PESTLE analysis, we will analyze how different social and cultural factors impact Patagonia.
Consumers' taste has a strong impact on businesses. Similarly, Patagonia is also affected by the change in consumers' tastes. Patagonia is making huge profits by selling millions of its clothing products.
Suppose the consumer taste changes and people start to dislike the designs of Patagonia. The demand for the products of Patagonia will fall immediately. Hence, Patagonia has to keep an eye on the taste of its consumer and adapt accordingly.
Moreover, the demographics of a country have a great impact on Patagonia.
Suppose a country has a large population of people below 30 years old. In such countries, the sales of Patagonia would be high because Patagonia targets outdoor enthusiasts, and most of them are young.
Other than that, social trends have a significant impact on the operations of Patagonia.
In a country where great importance is given to the environment and people are socially aware of global warming, people will acknowledge Patagonia's measures to protect the environment.
Otherwise, Patagonia's efforts to protect the environment wouldn't help improve the brand's image.
Technological Factors That Affect Patagonia
Technology affects businesses in many ways. In this section, we will discuss how different technological factors affect Patagonia.
Patagonia has been functional since the 1970s. Back then, there were fewer technological advancements in the manufacturing sector. Over the years, things started to get automated. Machines brought efficiency to Patagonia's manufacturing process.
Other than that, the Internet and social media have impacted Patagonia positively. As the number of internet users has increased across the globe, the potential customers of Patagonia have also increased.
Internet access has allowed people to order Patagonia's products while sitting at home. Moreover, the arrival of social media has made it possible for Patagonia to market its products on social media.
By doing so, the cost of advertising decreased, and the reach increased. As a result, both the Internet and social media proved to be beneficial for Patagonia.
Data analytics also helped Patagonia in analyzing consumer preferences and making informed decisions. Moreover, it also helped the brand to examine its targeted audience.
Knowing its targeted audience helped the brand to make effective policies and initiate successful marketing campaigns.
Legal Factors That Affect Patagonia
Legal factors are the factors that are related to the legal framework of a country. Different legal factors affect Patagonia. Let's discuss how different laws affect the operations of Patagonia.
Labor laws in any country have a significant impact on businesses. Similarly, strict labor laws that ensure labor rights would force Patagonia to pay high wages to its workers. Moreover, the labor laws would ensure that no discriminatory practices occur on the brand's behalf.
Patagonia has to abide by the labor laws, or it might be charged with heavy penalties. Other than that, laws regarding intellectual property impact Patagonia significantly.
In a country with effective laws against the theft of intellectual property, Patagonia will be safe since its competitors won't be able to copy Patagonia's designs. On the other hand, Patagonia will also have to play safe and ensure its designs don't resemble any other brand's, or it will have to face heavy penalties.
Furthermore, Patagonia has to ensure that its customer's data is protected, or else the brand might have to face serious punishments due to violating data protection laws.
Data protection laws ensure that the data of consumers is protected. Patagonia will have to pay fines in case of data theft or data leaks, and the brand's image will also be damaged.
Laws related to quality assurance also affect Patagonia. In a country with strict quality assurance laws, Patagonia will have to make sure that it is not making sub-standard products, or else the brand might face a ban which will cause damage to Patagonia immensely.
Environmental Factors That Affect Patagonia
Environmental factors are factors related to the environment. Many environmental factors affect businesses across the globe. Let's look at how different environmental factors affect the operations of Patagonia.
Climate change and natural disasters impact the operations of Patagonia significantly. Patagonia is a clothing brand that requires various inputs. Natural disasters and climate change cause disruption and delays in the manufacturing process of Patagonia.
Moreover, as natural disasters have increased and extreme weather has become more common, people might start avoiding risky outdoor adventures such as glacier climbing.
As a result, the demand for Patagonia's clothing products would decrease, and this would cause Patagonia to suffer financially.
Natural disasters also cause traffic congestion and road blockages. Natural disasters may disrupt the supply chain of Patagonia, causing product shortages in the stores of Patagonia. This would cause losses to the brand and impact the image of Patagonia negatively.
Other than that, as more attention is being paid to the environment globally, Patagonia has adopted waste management techniques. Patagonia processes its waste before disposing of it. This will definitely affect the environment positively. However, it would also increase the operational cost of Patagonia.
Patagonia PESTLE Analysis: Final Word
Patagonia is one of the most famous US brands that manufactures outdoor clothing products for outdoor enthusiasts. The brand was founded by a mountain climber in 1973. The initial plan was to sell gear for outdoor activities such as surfing, mountain climbing, etc.
However, soon the brand shifted its focus to outdoor clothing products. Over the years, Patagonia innovated and designed useful clothing for outdoor enthusiasts. As a result, the brand got famous, and currently, it has more than 70 stores worldwide.
Besides making huge profits, Patagonia is one of the few brands that has always shown interest in protecting the environment by shifting to environmentally friendly practices.
In this article, we discussed the practices of Patagonia and examined how it evolved over the years. After gaining some insight into the brand, we conducted the PESTLE analysis of Patagonia to see what external factors impact the brand. The PESTLE analysis framework highlighted the impact of various external factors on Patagonia. If you found this article interesting and want to see how a PESTLE analysis is conducted, then look at more examples of the PESTLE analysis.
