Billabong - Challenges to Business Success an Operations Management Focus - Case Study Example

Challenges to Business Success an Operations Management Focus Name: Lecturer: Course: Date: Introduction Billabong is among Australia’s leading multinational corporations that operate in four continents. Established in 1973, the company became listed on the ASX in 2000, hence becoming a full-fledged public company. The company deals primarily in manufacture and sale of clothing, skateboards and accessories under different brand names. The Billabong’s operations management strategy has instrumentally enabled the company to expand globally and to be able to distribute its products in over 60 countries worldwide. It has also acquired businesses and brands that relate to its core business, including Beachworks retailers, Von Zipper sunglasses and Nixon watches. In the recent years, business have faced challenges in their operations managements due to the changing technologies, continued globalization of markets, including changing customer expectations, changing job designs, quality management and global manufacturing (Hernaus 2011). This paper examines how each of the challenges is likely to affect Billabong’s business in future. PART 1 Changing Technologies Among the predominant changes in technology include powerful mobile computing and internet technology, which have changed how business use technology to communicate. Cloud computing has also changed how business store and deliver information and applications. Social networks have altered social patterns and how business approach to public relations and most importantly, social networking, mobility and cloud computing have shaped future business innovations. More future technology advancements are expected to present varied challenges to Billabong operations (Yoffie n.d.). Integration of advanced technologies, including communication methods, using eco-friendly technology, shipping and internet technology include some of the technologies that are expected to affect Billabong’s operations management, where the company has to procure new computer systems, perform installations and offer training to employees to close the likely digital gap (Billabong 2010). Other imminent challenges include changeful computer systems and the advanced software that have to be integrated for business operations. A key challenge that Billabong will face include adapting to the changes and making significant changes in their structures to accommodate the new technologies. For instance, e-retailing through social networks and e-commerce site is massively being adopted at present and Billabong will have to engage the technologies to accommodate the current and future retail trends. Additionally, because of the current environmental activism, Billabong will be forced to start using more eco-friendly manufacturing and waste disposal technologies (Umble et al. 2003). Changing customer expectations The exponential advancements in technologies have shifted greater power to the consumers, as well as increased competition. This implies that Billabong is confronted by threats of commoditisation. Hence, an imperative to engage business technologies and innovate has emerged. Billabong will have to use digital channel to engage with its customers and key stakeholders. Without innovation, Billabong’s competitive advantage is likely to wear out (EY 2013). The expectation of the Generation Y, also known as ‘digital natives’ imply that Billabong will have to keep with their current and future expectations to restore relevance. The challenge Billabong is likely to face includes the impacts of digital change, specifically loss of control over customer relationship, intensified competition and risks of commoditisation as well as need to engage stakeholders, suppliers, employees and customers. The current customers have extensively varied and sophisticated expectations of services, products, environments and values, compared to half a decade ago. Within the new multichannel reality, companies have been forced to question the role of their sales outlets, in the modern-day environment, where connected or networked consumers pose a challenge. Indeed, the tough economic times following the 2009 global economic crisis have brought more focus on the changing consumer behaviours within the clothing and textile industry (EY 2013). A study by Deloitte (2013) observed five changes in customer expectations. First, consumers' spending is expected to continue weakening especially in buying discretionary or luxuriant items. Business costs will continue to rise, which will increase price of products and limiting purchases. Technological evolution, as well as, increased use of interactive devices has changed consumer purchasing behaviour and finally, the sustainability agenda will contribute substantially to commercial performance as more and more customers are favouring eco-friendly products (Deloitte 2013). Changing job designs Studies have established that a well-defined job satisfies and motivates the employee, resulting to increased performance and productivity. Several factors affect job design, namely environmental, organisational and behavioural factors. The modern-day businesses are adopting new tendencies based on organisational factors to design the jobs. These include client-orientation and downsizing (Hernaus 2011). In regards to downsizing, there is presently a tendency targeted at de-layering organisations, though elimination of managerial levels, as well as giving employees more responsibility to manage and coordinate their work. Hence, hierarchical levels are removed to facilitate more efficient and faster decision-making closer to the bottom line (Hernaus 2011). This is since information technology has promoted better communication and greater control spans. Consequently, having flatter structures that have limited hierarchical levels that encourages responsibility and autonomy will have to be adopted by Billabong. With the two new job designs, Billabong is likely to face opposition from its employee-base due to resistance to change. Therefore, high employee turnovers are likely to occur, specifically on the part of the executive management who do not support the changes (Hernaus 2011). Quality management A study by Business Improvement Architects indicated that the quality management trends are changing towards ‘System profound knowledge,’ where quality management principles are combined with projects (Stanleigh 2014). The organisations, guided by the System Profound Knowledge, are expected to be more efficient. System Profound Knowledge incorporate increased knowledge in the management. Hence, quality management would no longer be left strictly to production. Additionally, project management would no longer be an IT project. In the new, trend, project and quality management are integrated into each department within an organisation. This will however present new challenges to Billabong, as it has traditionally used quality management strictly in production. Billabong will, therefore, change the challenge of aligning its business structures with its internal business processes. Such a horizontal approach will allow saving of resources and time, while at the same time providing higher quality apparel and greater customer satisfaction (Hernaus 2011). Among the greatest challenges would be organisational culture change in its global operations. This would require additional cost of training and hiring new consultants and professionals, who are well-versed with the System Profound Knowledge, and who will focus on developing quality measures to the entire projects, production and organisational learning. Globalization of markets including 1st and 2nd world entrants Evidence suggests that the share of inter-industry trade in total trade is on the rise. Part of this is credited to the growth in raw material trade. This has further reflected a change in the factors that drive trade. While trade initially took place among countries that are similarly endowed, it currently takes place between the developed and less developed countries. Further, greater emphasis is on gains from specialisation according to industry and from differences in prices and factor endowment. It is believed that by transitioning to greater globalisation, more risks are likely to arise due to the new economic methodologies that outpace Billabong’s control and understanding. This would result to greater volatility, speculation, risks and uncertainty, which will pose a challenge to Billabong’s operational management, thus causing planning and budgeting constraints. The investor’s confidence may further be affected. Global manufacturing The contribution of manufacturing in tackling a range of social grand challenges, such as climate-change effects and industrial sustainability, as well as, emphasis on manufacturing for technology development has gained prominence in the current trends (UNIDO 2013). The changes are likely to affect Billabong’s supply chain management. Current trends also show an emphasis on future innovation of interdependence of manufacturing, with emphasis on links between research activities and interaction for future development. A key consequence includes changing its key suppliers to engage only those who provide eco-friendly raw-materials in manufacturing its products. Rather than changing its suppliers, Billabong can also offer appropriate information to their suppliers on the kind of raw materials that match with the their customers' expectations of sustainability (Billabong 2010). PART 2 Goods and Service design In customer orientation, customers are becoming increasingly demanding, which implies that Billabong has to design the jobs to focus on customer satisfaction. This is since work has become more multifunctional and oriented towards customers. Therefore, to keep present and future customers, the organisations are designed and run in a way that allows customers to easily approach and communicate with the company. This implies that the number of contacts between the customer and the organisation has to be cut. Hence, a number of organisations are seeking to distinguish between employee experience, capability and knowledge in delivering products that are adapted to customer needs (Hernaus 2011). A recent study by BBMG (2013), of more than 2.5 billion customers worldwide, showed that 98 percent of the consumers preferred responsible shopping while 58 percent loved brands that acted in the best interest of the society (Trendwatching.com 2014). The trends in goods and services design are therefore likely to affect Billabong’s profitability, unless the company complies with the customer needs and shopping behaviour. Already, the company experienced losses due to low sales, and this is likely to worsen unless changes are made in goods and services design. For instance, Billabong experienced collapsed earnings of $859.5 million loss in the financial year 2013, with global sales down by 13.5 percent (Greenblat 2013). Hence, Billabong will have to undertake life-cycle assessments of its products, as well as put emphasis on product stewardship. Such have been catapulted by the passage of the Product Stewardship Bill 2011. Focusing on product stewardship promotes shared responsibility in product impact, as well as encouraging better designs that mitigate environmental impacts. Billabong will also have to engage with its customers, as well as incorporate feedback mechanism from the customers through social networking sites. The company should also be wary of how it responds to customer feedbacks by improving goods and services designs to increase sustainability (ACCA 2010). This will enable the company to understand customer preferences and to align the product designs to market trends. Already, the company has plans to restore its sales by manufacturing eco-friendly boardshorts, boxers and t-shirts, manufactured from eco-friendly fabrics and fibres (Billabong 2010). The fabrics are manufactured from organically-grown thread while boardshorts are made from recycled plastic soda bottles (Hook 2009). Supply Chain Design Firms have adopted strategies targeted at revolving their value chains making manufacturing to be increasingly fragmented. Goods are manufactured in stages in different locations or countries. Additionally, raw materials are acquired in once location and produced in other locations (Hernaus 2011). Additionally, the supply chain design has shifted towards ensuring environmental sustainability. Significant environmental impacts from Billabong result from companies internal operations, through their downstream and upstream supply chain. Such impacts include the upstream environmental impacts that happen through the application and disposal of its products (UNIDO 2013). This will affect Billabong’s profitability as more customers are going for eco-friendly products. To influence the purchasing power of the customers, Billabong has to make its supply chain to be more environmentally sustainable by seeking environmentally sensitive suppliers, designing environmentally-friendly products and marketing and engaging with customers. This is likely to affect the operations of Billabong Internationally, as the company’s manufacturing is greatly fragmented, with more of its products manufactured outside Australia. Significant effects are also likely to be felt, since the company produces many lines of products. Hence, problems with coordination of supply chain are likely to surface. Billabong must restructure the management of its global model to ensure better coordination of the manufacturing in its geographical base units, in Asia-Pacific, Europe and Americas. In fact such trends have already caused profit downgrades of the country. Consequently, the company has cut its more than 25,000 product range by 15 percent. Additionally, it has cut the number of its suppliers, from 500 to 200 (Speedy 2013). Therefore, Billabong has to gain better supply chain visibility as well as provide vital information across global manufacturers and suppliers. A possible solution is integrating technology that can help manage its manufacturing and distribution processes in different locations. The company has been responsive to such changes. Already, it signed a contract in 2013 with a technology company called Lawson QuickStep Fashion to supply it with Lawson Software Platform for managing the manufacturing and distribution processes of products, across its subsidiaries in Brazil, Europe, North America, New Zealand, Japan, South African and Australia (Billabong 2012). The Lawson software is designed to help manufacturers on the global space to gain better supply chain visibility, as well as provide vital information across scattered manufacturers and suppliers (Dang 2011). Facility and Work Design Evidence has indicated that current trends in facility and work design are influenced primarily by technological and environmental forces. The two dictate the changes in the work design premise and mechanisms for worker motivation. This has resulted to unclear job boundaries, variable work designs, higher work complexity, greater work interdependence and group-based work designs. In regards to higher work complexity, the current trends in work design are greatly focused on connecting employees and works within the system. Additionally, work done by individuals has become more multi-level and cross-functional in nature. This has heralded more problems for organisations with multilevel work designs, such as Billabong (Hernaus 2011). Unclear job boundaries, which have resulted from the technologically enhanced dynamic markets and flattened organisational structures has caused jobs to be no longer static as it was traditionally. This is likely to affect Billabong’s employee retention strategies as high employee turnovers are likely to result, since jobs are no longer static and employees are more willing to work from anywhere. Towards this end, Billabong should apply work analysis on a range of jobs and roles of its business activities to come up with flexible work designs that allow employees to work from anywhere. The company should also initiate ‘term work’ to replace the traditionally-accepted ‘term job’. Additionally, work designs have become more variable because of technology. Current trends show that forms of work are not being presented as permanent. Work designs also represent operative and strategic tools that vary as a result of change in strategies or a combination of activities that it makes up (Hernaus 2011). This implies that jobs are increasingly fluid. This is likely to affect Billabong’s employee development initiative, aimed at representing permanence of work in the eyes of the employees. The company’s recruitment strategic is also likely to be affected, as employees will have to be employed on temporary basis rather than permanent basis. In such a case, Billabong should use dynamic work relationships and assignments. The workers should also be temporarily given responsibilities for undertaking group tasks. The skills and needs of the company and a combination of the tasks should as well be adjusted. A review of Billabong shows that such trends have already taken shape in the company. In February 2012, the company announced plans to undergo major restructuring, where 400 full-time jobs would be lost permanently, with focus changing to temporary employments. Conclusion Billabong International faces challenges in their operations managements due to the changing technologies, continued globalization of markets, including changing customer expectations, changing job designs, quality management, global manufacturing. Integration of advanced technologies, including communication methods, using eco-friendly technology, shipping and internet technology are some of the technologies that are expected to affect Billabong’s operations management. A key challenge that Billabong will face include adapting to the changes and making significant changes in their structures to accommodate the new technologies. The exponential advancements in technologies have also shifted greater power to the consumers, as well as increased competition. This implies that Billabong is confronted by threats of commoditisation. With the two new job designs, Billabong is likely to face opposition from its employee-base due to resistance to change. Therefore, high employee turnovers are likely to occur. Billabong should use dynamic work relationships and assignments. The workers should also be temporarily given responsibilities for undertaking group tasks. The skills and needs of the company and a combination of the tasks should as well be adjusted. Billabong will need to balance between engaging customers and presenting new ways of experiencing the breadth of their range of products. The company will also have to undertake life-cycle assessments of its products, as well as put emphasis on product stewardship. Billabong will also have gain better supply chain visibility, as well as provide vital information across global manufacturers and suppliers. A possible solution is integrating technology that can help manage its manufacturing and distribution processes in different locations. 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