The Billabongs Development - Case Study Example

The Billabong International Company Background Billabong International is an Australian corporation that creates and sells different products such as clothing apparel, wetsuits, eyewear, and surfing equipments such as skating boards and accessories. In its early days, Billabong only specialised in producing surf boards. The company was launched by Gordon Merchant who was an Australian surfer, along with his wife, Rena Merchant (History of Billabong International Ltd. 2013). At first, the two would design their surf boards at their home and then sell them to local surf shops. The name they gave the company- Billabong, means 'a place of stagnant creek water'. Billabong’s logo has 2 parallel and motionless waves. According to the Merchants, this was meant to depict the uniqueness of the Aboriginal culture and its interpretation of an oasis. The main factor that distinguished Billabong’s boards from those produced by other local companies was the triple-stitching method which made Billabong’s surfing boards short and thus more durable. International Recognition When Billabong first began to market its products to the Australian market in 1975, its products were well received. This allowed for the company to be able to create more products and thus increase sales. By 1981, the Merchants had been able to move to a larger headquarters and reached $1 million in total annual sales. To gain more publicity for their company, they funded competitions such as the World Final Surfing. Billabong would soon branch into other nations such as South Africa, New Zealand, Japan, and the United States. As the brand grew in popularity, the Merchants made the decision to begin creating other sports apparel. They began to experiment with manufacturing and marketing artefacts such as snowboards. In all the expansion efforts, Gordon Merchant was at the forefront of designing and marketing new brands. The surfing industry would witness great development all through the 1990s as professional surfing profited from a newfound respectability. By the end of the 1990s, the Billabong Corporation had been restructured to take advantage of the growing international opportunities in the sector of board-related sports. This restructuring process would set the groundwork for an initial public offering in the mid 2000s. The process also resulted in Billabong’s shares being publicly listed in the Australian Stock Exchange. This allowed Billabong to be able to develop even more and expand into additional foreign posts. Billabong would acquire numerous clothing line companies. Among the firms acquired were Von Zipper, Element – which specialised in forming skateboarding gear, Kustom Palmers Surf, Xcel which specialised in the production of wetsuits, DaKine which specialised in the manufacture of luggage and extreme sports backpacks, and Nixon, which specialised in the production of durable watches. In December 2007, Billabong International acquired the swimwear brand, Tigerlily, which is based in Australia. This acquisition would further develop Billabong’s brand portfolio in the girls’ apparel sector. The acquisition of these brands would assist Billabong to be able to compete with larger manufacturers of sporting goods. In 2005, Billabong decided to launch different ‘Beachworks’ branches around the world. These facilities would be responsible for selling a number of the corporation’s best products to different consumer groups. The Billabong Corporation today employs approximately 1750 personnel in their different facilities around the world. The greatest concentration of workers is in Australia's Gold Coast, California's Orange County, and Hossegor in France. Billabong International’s company values have remained consistent with its original objectives such as a dedication to ensuring brand protection and the production of design-relevant goods (Johnson, Scholes, and Whittington 2007). The Billabong Corporation is also dedicated to marketing board-sports apparel, and continuing the development of workers along with customer relationships. Billabong International’s goods are accredited and distributed in branches based in more than 100 nations in some 8000 stores. Billabong’s merchandise is distributed through specialised retailers as well as the firm’s own branded retail stores. The majority of Billabong’s earnings are from operations based in North America, Australia, Europe, New Zealand, Japan, and Brazil. The Company also uses junior athletes, as well as high profile professional athletes to promote its products and the events that it sponsors. Company Corporate Structure Billabong International's main objectives include enhancing the company’s brand, the production of design-relevant merchandise, and reaching current and potential customers in new geographical markets with advertisements while also sponsoring sports events. Billabong also hopes to further develop its product change, particularly where youth fashion markets are concerned. Financial Position According to Billabong’s financial report in 2009, Billabong’s profit was $160.2 million (Interim Financial Report 2012). This profit, which was slightly lower than the previous years’, reflected the economic recession that was experienced internationally that year. Even though the net profit decreased, however, there was growth in the sales revenue department. This was mainly as a result of Billabong’s new acquisitions as well as the adverse shifting of the Australian dollar against currencies like the Euro and the US dollar. Billabong’s operations in North America were the most severely affected by the financial slowdown. However, this was countered by strong sales witnessed in the South American sector. In 2009, Europe saw a 24% increase in the sales revenue of Billabong franchises. The Australasia region would also experience sales revenue gains of nearly 8%. This was mainly the result of the Australian retail market’s resilience and the Australian government’s fiscal stimulus packages. Due to the waning of retailer confidence in different global economies and the volatility witnessed in exchange rates, though, Billabong continued to perform reasonably well. Human Resources and Stakeholder Management Billabong International’s multinational stakeholders affect how the company chooses to operate and are also impacted by the company’s functions. Its stakeholder group is made up of shareholders, workers, athletes, business associates, opinion leaders, suppliers, and the consumers (Heathfield 2012). Billabong’s workers are the major stakeholders in any corporation and maintaining relationships with workers is critical in the process of maintaining good dealings with the wider community as well as business partners. At Billabong, the workers are encouraged to develop their abilities and have access to further chances of training and chances of benefiting from additional experience. Billabong also has different programs for its managers which help them to develop critical skills that emphasize on planning, innovation, leadership and teamwork. Billabong International also has regulations and policies for payment to make sure that there are fair approaches for rewarding their workers. Billabong International has a consultative committee that is made up of senior managers and staff representatives who are responsible for considering improvements and discussing different issues. Billabong International is committed to carrying out its different business operations in a socially responsible way. This is accomplished through employee work agreements that are part of a code of ethics that addresses the issue of what can be referred to as standard workplace practices. Billabong's governance policy asserts that the sustenance of all social, environmental, and health and safety matters is perceived to be the responsibility of the company’s Board of Directors. As a public company, Billabong International is also expected to hold annual meetings for shareholders to address issues concerning the company's business. In such meetings, Billabong’s directors also speak on the present trading conditions and prospective programs that will be implemented to improve managing functions and increase revenue. Billabong interacts with consumer stakeholders through the sponsorship of sporting events such as professional surfing contests, as well as snow competitions in different venues around the world. On a supplier level, Billabong takes part in standard factory visits to carry out audits while also allowing for the interviewing of shop floor workers so as to address the understanding of workplace standards. Within all of Billabong’s factories, there are large posters showing Billabong's supplier Code of Conduct in high profile locations so that all of the employees are conscious of their rights. Billabong also holds multi-stakeholder meetings for various workers from the Company's geographically diverse branches twice a year. In this environment, there is open discussion the direction that the company intends to take and the workers acquire a better understanding of the company’s objectives (Byoungho 2004). International Nature of the Business From being a well-performing corporation based in Australia almost 3 decades ago, Billabong has developed into an international corporation with a presence in four major continents. The moniker Billabong International Limited now reflects this development and the protection of its brand is a major objective of the business. The original market for wetsuits as well as board shorts was limited, so Billabong began to expand its product range to include other accessories. Other drivers for Billabong’s international expansion included technology improvements that called for restructuring in order to remain successful, and the emergence of global consumers as a result of the increasingly popular lifestyle expressed in surf culture. Billabong International has a global strategy to employ global branding in that the marketing of its products. Factors such as the influence of foreign governments and the deregulation of markets have not severely impacted Billabong’s revenues. Billabong has also been able to achieve growth due to the positioning of foreign outlets in countries in both hemispheres. Each of Billabong’s markets have opposite seasons that allow for the development of merchandise that is suitable for summer weather in Australia being retailed in the Northern Hemisphere markets four months later. Billabong International’s globalisation was achieved through different factors. First, the company sought for cheaper manufacturing locations in places like China and Hong Kong where products could be manufactured for sale in Australian and other nations. Billabong was also able to market to consumers in established surf cultures such as that which exists in places like California. Billabong also invested in branches in nations such as Japan, France, Brazil, and New Zealand from which distributing, importing and wholesaling operations could be conducted. The acquisition of companies in foreign locations also helped Billabong’s brand to become more recognised among international consumers. Billabong also participates in licensing- which allows for distributors to be able to utilize the Billabong name in their personal operations- thus providing the company with more visibility. As a result of the global economic crisis that was experienced some years before, there were definite changes made to the consumer and business environment (Barney and Hesterly 2006). Billabong became proactive in instituting changes that would allow it to compete and capitalised on all existing growth opportunities. Billabong also invested in fast-tracking the development of the direct-to-consumer business model through online, and bricks and mortar retail channels. For instance, Billabong acquired West 49, swell.com., Rush Surf, Bay Action, Becker Surf and Sport, and entered into a joint venture with Surfection to realise this objective. Billabong also expressed interest in acquiring the online business, surfstitch.com (Roth 2013). The acquisition of the RVCA brand helped Billabong to be more visible in the sports apparel market- which meant that there were more growth opportunities enjoyed by the company. Billabong also implemented a global life cycle management process for enhancing its management systems in sampling, product design, and the manufacturing process. To enhance its competitiveness, Billabong also entered into strategic alliances with media houses such as Fuel TV for the purposes of profiting from better advertisement of its merchandise. Such initiatives provided more visibility for the company’s compelling brand portfolio. SWOT Analysis of Billabong International Strengths Billabong’s Brand Name – Billabong enjoys a strong brand name. Many of the current top surfing celebrities endorse Billabong’s brand name, resulting in the popularity of Billabong’s merchandise, and a further increase in brand awareness. Billabong’s products have grown to be a mainstay of popular teenage culture (Parish, Cassill, and Oxenham 2006). Billabong has also experienced robust revenue growth in the last few years, resulting in a stronger financial basis that allows for the consideration of more inventive strategies. Billabong has strong profitability (World Market Intelligence 2011). Weaknesses Low Returns- In the past years, Billabong’s sales growth has decreased due to undermined consumer confidence. High Debt-Equity Ratio - Billabong has been aggressive in sponsoring its growth even with debt. This could result in volatile revenue as a result of the extra interest expense. High Dependence on the Billabong Brand - Depending on a single supplier could be risky for an outsized company like Billabong (World Market Intelligence 2011). Opportunities Strategic Acquisitions - Billabong could seek to acquire more even more companies in foreign nations as a way of reaching new markets (Roney 2004). Positive Outlook for Sporting Goods - Australia’s physical recreation and online sporting goods industry is expected to expand in large part as a result of an ageing population that is keener on participating in health and fitness activities after retirement. This will bode well for the sales of sports equipment. Rapid Growth of the Footwear Industry – Brand awareness has resulted in the further development of the domestic footwear market. Taking this aspect into consideration, Billabong can use a wide-range of options to further strengthen its brand (World Market Intelligence 2011). Threats Competition in Global Surf, Skate, and other apparel – The current surf culture drives a multi- billion dollar industry that numerous players are vying to take advantage of. Billabong has to deal with new competitors that are coming up with innovative products such as wetsuits, and surf equipment made from innovative new raw materials. Rising costs of raw materials - With the rising price of raw materials as well as oil, it is likely that the cost of surfing merchandise will increase. The slowdown in spending that resulted from the global recession is still in moderate effect. This means that Billabong has to come up with more innovative ways of encouraging spending among its consumers (World Market Intelligence 2011). Recommendations for Billabong International Billabong has the option of establishing additional branches in foreign nations or acquiring other branches in order to benefit from visibility in other markets (Pimpa 2010). With its many branches in different nations, Billabong can also get capital from foreign subsidiaries. Billabong can also outsource more operations in order to save on additional cost while insisting on the use of strict procedures so as to ensure high quality in all its products. Also, by using a global web approach, Billabong can shift its merchandise more easily, while also managing to avoid several government regulations that might cost it unnecessarily (Kerber and Buono 2004). Billabong could also use this process to be closer to its customers and markets while evading foreign exchange risks. To improve its international standing, Billabong should also conduct research into the backgrounds of any companies it acquires or enters into partnerships with; particularly if they are headquartered in developing nations. In the recent past, several international companies have experienced problems due to negative reports about the use of child labor by their affiliate partners in developing nations. The more a corporation grows internationally, the more it gets scrutinised for such practices. With Billabong’s projected growth, it is advisable for the company to invest in ensuring that such accusations do not occur. References Barney, J.B. & Hesterly, W.S. (2006) Strategic management and competitive advantages, Prentice Hall, New Jersey. Byoungho, J. (2004) ‘Achieving an optimal global versus domestic sourcing balance under demand uncertainty’, International Journal of Operations and Production Management, vol. 24, no. 12. Heathfield, S.M. (2012) Empowerment, Retrieved from . History of Billabong International Ltd. (2013) Billabong International Ltd. - Company profile, information, business description, history, background information on Billabong International Ltd, Retrieved from . Interim Financial Report. (2012) Billabong International Limited, Retrieved from . Johnson, G., Scholes, K. & Whittington, R. (2007) Exploring corporate strategy, text and cases, Financial Times/ Prentice Hall, New York. Kerber, K.W. & Buono, A.F. (2004) ‘Leadership challenges in global virtual teams: Lessons from the field’, SAM Advanced Management Journal, vol.69, no.4, pp.4-10 Parish, E.D., Cassill, N.L. & Oxenham, W. (2006) ‘Niche market strategy in the textile and apparel industry’, Journal of Fashion Marketing and Management, vol.10, no. 4. Pimpa, N. (2010) Global marketing for Australian education: lessons and strategies, LAP LAMBERT Academic Publishing, New York. Roney, C.W. (2004) Strategic management methodology: generally-accepted principles for practitioners, Praeger, Westport, CT. Roth, M. (2013) Top stocks 2013: A sharebuyer's guide to leading Australian companies, Wrightbooks, John Wiley & Sons, Australia. World Market Intelligence. (2011) Billabong International Limited: company profile and SWOT analysis, World Market Intelligence, New York. Read More