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Case Study: Chouinard Equipment (Patagonia)

Case attached - Lost in Patagonia. Questions to be answered at end of the case in the attached file. Each answer should be 5-6 lines.

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1. Are Chouinard's absences from the company good or bad for the company?
Chouinard's absences from the company sent mixed signals to the company's employees, he was absent for half of each year. Even though he was available on phone, his employees who trusted his judgement more than that of professional managers valued his presence. Patagonia is a company where the personality of the founder shaped its creation, existence and growth and his absence would mean disaster for the company. This absence led to flattening sales. He was obviously not testing gear eight months in exotic locations and even though loyalists like McDivitt never mentioned it, this certainly had a poor effect on the morale of the employees of the company.
2. Do Chouinard's proposals to increase profit in the future make sense?
No, Chouinard's proposal to increase profit in the future does not make sense. He asserts that even if his sales remain flat his profits will increase. His thought was that his company would limit supply and sell to those dealers, who get their preseason orders in first. His second thought was that it will use local suppliers to reduce costs and it will tighten up on accounts receivable. His third thought was to avoid direct mail in favor of advertising. Each of these ideas was faulty. If he limited the supply of his products, the dealers could get it elsewhere and in the long run there could be new suppliers who would fill up the niche. In addition there was the need to sell off the huge inventory his company was piling up. If he used local suppliers, his quality would suffer. Finally, he had built his business on the basis of direct mail, this advantage would be lost if he turned to advertising and advertising was likely to be costlier.
3. Why have ...

Solution Summary

Here is just a sample of what you will find in the solution:

"Each of these ideas was faulty. If he limited the supply of his products, the dealers could get it elsewhere and in the long run there could be new suppliers who would fill up the niche. In addition there was the need to sell off the huge inventory his company was piling up. If he used local suppliers, his quality would suffer. Finally, he had built his business on the basis of direct mail, this advantage would be lost if he turned to advertising and advertising was likely to be costlier."

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