Strategic Market Planning for Billabong International Limited - Case Study Example

Strategic Market Planning Name: Course Code: Tutor: Date: TABLE OF CONTENTS Business Description 2 PESTLE Analysis 3 Porter’s Five Forces Analysis 4 Competitor Identification and Analysis 5 SWOT Analysis 5 Evaluation of Strategic positioning and Market Attractiveness 6 Market Segmentation Analysis 6 Potential Market Opportunities 7 References 8 Business Description Billabong International Limited an Australian clothing retail company located in Burleigh, Queensland. The company was founded in 1973 by Gordon and Rena Merchant. The main products that the company deals with include clothing, home products and a range of surfing equipment. The company has faced a series of profitability and losses since its inception in 1973 such as the collapse of the company in 2008 during world economic recession. Regionally, the company is competitive in clothing retail business that range from men’s clothes, women’ clothes and children’s school uniforms (Barnwell & Best, 2008). The company has also entered into the international operation and has opened its stores in the United States, New Zealand, Singapore, Japan and South Africa. During the process of development of the company, it acquired new brands such as the acquisition of skateboarding apparel and the Purchase of Gold Coast-based Palmers Surf Company. The company also acquired Nixon Inc., in 2004. The company has also entered into a ten-year licencing deal with the Plan B skateboarding company for the purpose of supplying them with surfing apparels. The main marketing strategy used to market the products of the company is newspapers and magazines that have been used since 1980s. However, advertisement through TVs has also contributed towards improvement of the company profile. Due to these strategic actions, the company has remained competitive in clothing industry and it has been able to surge from previous periods of loss to profitability. PESTLE Analysis Political: The main political factors affecting the operations of Billabong include government regulations that require strict adherence to Health and Safety Standards and identification of hazards, assessment of risks and ensuring they are controlled. This is particularly important in the sales of surfing apparel for the purpose of ensuring safety of users during surfing (Chernev, 2006). Howver, there is a complete support from the government in terms of reduced tariff barriers in the importation of clothing materials for sales by the company. Economical: The main economic factor that affects the operations of Billabong is the spending capacity of target customers of the company. This is because most Australians have the spending power and the Australian Dollar has a strong value in the international market. There is also a high demand for Billabong clothing products both locally and internationally, thus ensuing survival of the company (Doole & Lowe, 2008. Sociological: There has been a change in the social trends in the previous years and Billabong has adapted successfully to change social changes such as increased use of the internet. This has necessitated the need to market its products online as well as ensuring the products they sell are up to date so that they can keep up with the trends of customer interests. Technological: Technology is a significant factor in the process of managing retail business activities. This is because companies are required to manage their brands in an effective and careful manner (Gillespie, 2014). For instance, Billabong has kept abreast with the latest technologies by marketing its products using the latest technology so that brand loyalty can be achieved. The company has also designed an appealing website with bright colour and a range of choices so that customers are attracted to log into it to see the available products. Legal: There is a constant change in legal requirements for Billabong operations and the company has been involved in constant training of its staff so that they can be up to date with the new laws regarding Health & Safety at work place. The company has also ensured it follows legal requirements for operation of a company in Australia. Environmental: Due to the current campaigns by various environmental organizations, companies are compelled to change the ways in which they dispose waste materials to the environment. Billabong has been forced to ensure it does not contribute to environmental pollution by observing the Green policy (Harris, Best & Dalton, 2005). The company has put in place measures aimed at reducing pollution of the environment such as recycling waste clothing materials. Porter’s Five Forces Analysis Figure 1. Porter’s Five Forces Model for Billabong Competitive Rivalry (high): High competitor rivalry is brought by small retail companies that sell similar items such as Supermarkets in Australia and individual retailers of surfing apparels as well as other forms of clothing. Despite the effort to differentiate itself from competition by positioning itself in a high value-for money, there has been low customer attraction due to the competition from its competitors. Buyer bargaining power (high): Bargaining power of buyers is high due to a high concentration of buyers. There are also a number of alternatives and costs incurred during switching are low. Due to possible cases of economic downturn in the Australia, there is a likelihood of cutting down prices so that customer needs can be addressed (Henry, 2011). Uncertainty of income has also resulted into the need to shop more, thus a higher bargaining power. Supplier power (low): Billabong is a huge company with a massive turnover and each supplier tries to provide the company with its products so that they can create good relations with Billabong. In addition, the company does not depend on local suppliers compared with other stores due to the fact that there is a subsidy on imports of products into Australia. This makes importation of the products sold by Billabong cheaper. Thus the company obtains most of its clothes internationally. Thus, most local suppliers are unable to provide their products to the company. Threat of Entrants (Medium): There is a medium threat of new entrants because Billabong has invested heavily in chains of stores in various parts of Australia (McLoughlin & Aaker, 2010). The stores of Billabong have strong brand names and enjoy customer loyalty as well as experience in dealing with various customer needs. Threat of Substitutes (high): While there is a low threat of substitutes for clothes sold by Billabong in general, the company faces threat of substitutes from local businessmen and distributors of surfing apparels. These distributors come into direct contact with consumers thus affecting the demand for its products. Consequently, threat of substitutes is high. Competitor Identification and Analysis While Billabong boasts of a large number of stores both within Australia, Japan and New Zealand, it faces stiff competition from other companies. An example of such a competitor is Australian Clothing Company that specialises in the sales of moderately priced clothing that targets men, women and children (Morden, 1999). The customers of this company are mainly executives who are looking for stylish and affordable clothes that enable them go through the fashion cycle. This company offers competition for the products of Billabong. Another competitor of Billabong is local clothing stores and individual retailers. These stores and retailers have the ability to reach customers individually and create good relations with them. This makes most customers of Billabong get the products sols by retail stores and individuals at reduced prices, thus affecting the demand for its apparel. SWOT Analysis Strengths: Billabong has high brand recognition and is known by many people in the Australia. Due to brand recognition, its products are preferred by most consumers compared with the products of competitor companies (Beall, 2010). The brand name is a contributing factor towards its growth. The company is also in a position to provide a wide range of surfing equipment thus making diversification of its services possible. Weaknesses: The main weakness is bad publicity due to non-trendy products. While the company has a wide variety of products, the consumers have a wrong assumption that the products sold by the company are mainly for those involved in surfing. This makes the business less profitable. Another weakness is that Billabong faces a high transportation cost and its positioning strategy has not been strong due to different perceptions by different customers. There is also regular change in management which makes it less effective in management strategies. Opportunities: There is a growing demand for clothing products both in Australia and outside Australia. This implies that the company has the opportunity to spread its business activities to reach more customers, hence improve its profitability (Chernev, 2006). Threats: The main thereat that Billabong faces is stiff competition from various areas of businesses such as those that involve individual sellers of apparels to consumers directly and retail stores that have access to consumers directly. These competitors cause low demand for clothing materials sold by Billabong. Evaluation of Strategic positioning and Market Attractiveness The strategic position in which Billabong is operating is a competitive one. The company has strategically organized itself so that it can provide a wide range of clothing that meet the needs of various types of consumers such as those who need them for surfing or for office wear (Doole & Lowe, 2008). The company is aware of high competition from other companies that offer similar products and it is also sensitive to technological changes that affect the provision of clothing and other forms of apparels to customers. The company focuses on the core values that include ensuring high quality products at affordable prices as well as ensuring consumers are provided with the latest clothes. There is also the increased attempt by Billabong to gain market share despite the present significant market share and low profitability (Gillespie, 2014). This shows that the weakness of the company is cutthroat in the retail sector. The company has also strategically enhanced provision of its products in the Australian mainland and the Gold Coat thus generating more than half of its revenue from stores within the country. Market Segmentation Analysis Market segmentation is the process of determining the needs of different customers and providing services based on these needs and interests. Billabong has the ability to divide the customer based on their needs by opening stores that mainly focus on those needs. This can be done in line with other competitors of the company that have specialised in market segmentation (Harris, Best & Dalton, 2005). Billabong can open small shops that are easy to maintain so that operating costs are reduced and the effect on gross profit does not become significant. For instance segmentation can be done on the basis of age. This is where products and services are designed with the target in a particular age group. Stores are then opened with the target of reaching these age groups. For instance, during its operations, Billabong can create stores that only provide clothes of young people and different stores that provide clothes for the older people. This will ensure the needs of various age groups are addressed. Another market segmentation that is effective when used by Billabong is dividing market in terms of income. This is where marketing of its clothing is focused on high income families in Queensland and Gold Coast so that the possibility of buying its clothes is enhanced. Potential Market Opportunities Billabong has the potential of improving marketability of its products in international markets such as China, European countries, Russia and Korea Republic. This is because less than 10% of its revenue comes from stores outside Australia (Henry, 2011). By improving market segmentation and consumer awareness internationally, it will be possible to increase its profits in a particular year. Another market opportunity that can be utilised by Billabong is that there is increased use of the internet and social media. The company can make use of these avenues to reach more customers especially those in their 20’s and 30’s that are most likely to use the internet more frequently (McLoughlin & Aaker, 2010). This will enable consumers know about various clothes and surfing equipment sold by the company and customer base will be improved. References Barnwell, H., & Best, N. (2008). CIMA Official Learning System Test of Professional Competence in Management Accounting. Burlington: Elsevier Science & Technology. Beall, A. E. (2010). Strategic market research: A guide to conducting research that drives businesses. New York: iUniverse. Chernev, A. (2006). Strategic marketing analysis. United States?: Brightstar Media Inc. Doole, I., & Lowe, R. (2008). International marketing strategy: Analysis, development and implementation. London: Cengage Learning. Gillespie, A. (2014). Foundations of economics. Oxford [u.a.: Oxford Univ. Press. Harris, D., Best, N., & Dalton, C. (2005). CIMA managerial level: Paper P5. Oxford: Elsevier. Henry, A. (2011). Understanding strategic management. Oxford: Oxford University Press. McLoughlin, D., & Aaker, D. A. (2010). Strategic market management: Global perspectives. Hoboken, N.J: Wiley. Morden, A. R. (1999). Business strategy and planning: A strategic management approach. London: McGraw-Hill. Read More