Question:

a) What are the overall pros and cons of the Amazon proposal?

b) If Gorshland agrees to the Amazon proposal, what is the strategic impact on the G-Force Brand? How would this impact the current product lines? How does your job as the Brand Manager change?

c) In the Amazon proposal, it indicates "style cues" for each of the proposed products. Using these style cues as a basis for the COGS for each line, how would you estimate the profitability of the Amazon proposal vs Launch Option #2? What are the tradeoffs in profitability vs risk?

Case:

Strategic Marketing Back Story on the Simulation:

Gorshland is a fictional company based loosely on the evolution of the Patagonia company. The idea was to imagine what a company like Patagonia might have turned out like if they had not broadened their market focus from their original mission of serving serious rock climbers and mountaineers with highly technical gear. The founder of Patagonia, Yvon Chouinard, started making his own rock-climbing hardware in the 1960s in partnership with aeronautical engineer and fellow climber Tom Frost. They took basic designs of existing climbing tools and improved them to make them lighter, stronger, and more functional. In 1965, they formed Chouinard Equipment. By 1970, they were the largest supplier of climbing equipment hardware in the U.S. In 1973, the Chouinard Equipment Company was re-named Patagonia. For more background, see - https://www. patagonia.com/company-history.html. The fictional Gorshland company parallels the early evolution of Patagonia to some extent. Gorshland was similarly focused on technical innovations with climbing gear and apparel. Both benefitted from the growth of the "free climbing" movement in the 1960's and 70's. However, this is where the companies diverge. Patagonia began branching out into other quiet sports (non-motorized outdoor sports) like surfing. When asked about the growing success of Patagonia in the 1980's, Chouinard was quoted as saying, "I had no idea we would grow into the size we are now, we were just building the best equipment we could make for our friends." Chouinard himself had deep roots in environmental activism and he began see Patagonia as a platform to drive environmental and social causes. In 2002 Chouinard and fellow business colleague Craig Mathews formed 1% for the Planet to recruit other businesses to the mission of protecting the planet through contributions to various environmental organizations - https://www.onepercentfortheplanet.org/about. Today, Patagonia continues to break new ground. From an interview with Men's Health Magazine dated Oct 25, 2018:

Chouinard, now 79, isn't done. He's putting his money where his mouth is. Patagonia is getting into food with its new provisions line. The goal: Fix the food chain. "It's our only hope. We offer a selection of foods sourced in ways that address environmental issues," says Chouinard. "In some cases, we're adopting the best practices already in existence; in others, we're finding new ways of doing things, which, as we might have guessed, frequently end up being the old ways." That means harvesting wild protein like salmon, buffalo, and mussels, as well as organic grains, hops, and honey. It may seem a long way from Chouinard's original mission, but it's actually the path he's always pursued. "I'm in business to save the planet," he says. "It sounds corny, but that's the reason."

Patagonia vs Gorshland

Where Patagonia branched out into other sports, Gorshland stayed focused on climbing, mountaineering, and hiking. Where Patagonia began substituting environmentally sustainable materials, Gorshland stayed dedicated to technologically innovative synthetic materials. Where the Patagonia Brand became more associated with lifestyle, environmental, and social causes, the G-Force Brand is known for high performance and technical innovation. Patagonia grew to become a >$750M annual revenue company. Gorshland is stuck at around ~$100M in revenue. In recognition of the need to diversify, Gorshland recently purchased the LOTUS Activewear company which has a position in the growing Athleisure apparel market. Practically speaking, the story implies that Gorshland is a strong footwear player with G-Force in a niche segment (Outdoors Enthusiasts). This segment has lower growth potential comparatively to the other identified segments (Leisure Lovers, and Metro Athletes). Students should be able to deduce this from the Marketing Research by combining the segmentation and positioning chart with the information given about each of the segments. There is not enough information to rigorously analyze Gorshland's competitive advantages or disadvantages; however, there are some indications of the company's missions and information about how the markets have changed over time. Below are several topics that can make for a good overall class discussion.

The Amazon Proposal

The basic premise of the proposal is to move Gorshland back up the supply chain into the position of being a designer/manufacturer for Amazon in the Athleisure footwear markets. The economics of the proposal are vague but imply that the tradeoff is in lower unit margins for higher guaranteed sales volumes under the Amazon brands. This is not a simple financial decision, however. The longer-term strategic consequence of accepting the proposal is that the G-Force Brand would remain stuck in the existing position and Amazon would build their Trailside and Peak Velocity Brands instead. This is a common dilemma for small to medium sized companies and presents fundamental questions about the mission and value proposition for the Brand. Who are we? What is our mission? What differentiates us? How do we create an long-term sustainable business given our resources? There is no correct decision, therefore this makes for a good class discussion. Remember that the student is put in the position of Brand Manager for G-Force, so there is an element of self-interest involved. Some students will interpret the Amazon offer as a threat to their current position. Some may think of this as a way to work into a better job ultimately with Amazon. Although these are interesting points, they are not directly related to marketing strategy.

A good discussion will objectively explore the pros and cons of the proposal from a marketing strategy perspective. A good way to start the discussion is to simply pose the question to the class: Who thinks that RG should accept the Amazon Proposal? Who thinks RG should not accept it? Once the class is polarized around the question, you can have the different sides explain their rationale. Look for the positions below to come out in discussion:

Those accept the proposal

G-Force should stay focused on their current segment (outdoor enthusiasts) and let Amazon play in the Athleisure footwear market (Metro Athletes, Leisure Lovers).

G-Force can do both. They can simply make different products for Amazon and pursue the Athleisure markets with their own new products.

Those who reject the proposal

G-Force should stay focused on their current segment (outdoor enthusiasts) and not attempt to play in the Athleisure footwear market (Metro Athletes, Leisure Lovers) in any form.

G-Force should go after Athleisure on their own and make Amazon find some other company to be their manufacturer.