Billabong Australia Limited is a public company which designs, produces and distributes surf gear in over 60 countries worldwide. The following report outlines the nature and sources of change for Billabong Australia Limited, describes the reasons for resistance to change and analysis the effective management of change by billabongs management.
Outline the nature and sources of change for billabong Australia limited
External Sources Of Change
The sale of $66 million of shares by billabongs original owners led to an investigation by ASIC and the ASX, this was a source of change because the sale led to a dramatic increase in the price of individual chares for Billabong. (See Appendix 3 for details of the matter concerning ASIC)
The September 11 events which occurred in the US in 2001 and the IRAQ war owe a source of change because they caused the public to be discouraged from overseas travel and hence there was a reduction on the purchase of items generally bought for holidays (such as swimsuits) which Billabong primarily produces. This reduction in consumer spending consequently led to a loss of sales revenue for Billabong.
The season of winter in Australia and Europe in the year 2001 caused a slowing of sales because billabong primarily produces apparel for wear in the summer months.
Changing Nature of Markets
In the past few years, new target markets have appeared in parts of Europe such as Italy, and new distributors in the Middle East have also been discovered which has forced Billabong to alter its marketing strategies to its new target markets.
Structural Response to change
Billabong outsources the production and retailing of its surf ware to a variety of agencies worldwide. Billabong had decided to outsource to a variety of organizations as a response to changes in the external business environment. In addition to outsourcing, production and retailing; Billabong also outsources its E-Commerce operations (see E-commerce sections)
Increased Media coverage at various sporting events in particular surfing events has provided change at Billabong, as it has caused it to sponsor more surfers to wear their surf gear in order for the brand to be more heavily recognized than other surf brands.
Internal Sources of Change
Billabong was faced with the incorporation of new business cultures into its own as a result of its acquisition of Von Zipper, an eye wear brand and Element, which produces skate apparel.
New Systems and Procedures
As a result of the establishment of a new operations center in Brazil and the purchase of distribution business in Belgium and Germany, Billabong has been faced not only with financial costs, but the necessity to incorporate these new operations centers into their worldwide system of operations. The establishment of new product lines such ad the production of winter apparel (in particular jeans and hooded sweaters) has caused a change in the production procedures at billabong as well as marketing procedures.
Although Billabong outsources its E-commerce operations to independent retail websites (as mentioned earlier) it plays a major part in which organizations are permitted to sell its products online. Billabong only outsources its E-commerce operations to online retailers who are familiar with billabongs range, and who they feel are trustworthy (see billabong.com)
Cultural Incompatibility In Mergers/Takeovers
When billabong acquired Element and Von Zipper there may have been a resistance to change by Billabongs staff, as they would have been reluctant to accept the new business cultures of Von Zipper and Element as their own. I may have been difficult to accept change by Billabong’s staff due to the prospect of having to make friends with new colleagues or take on new systems of doing things such as product productions.
Inertia of Managers and Owners
During the stage in which many of the changes were implemented at Billabong, the staff may have been reluctant to accept the changes (for example being forced to put more work into promotions for Billabong on its website as a result of accelerating technology). This reluctant is otherwise known as inertia. Staff may have felt inertia towards many of the changes being implemented that their job may be sacrificed (for example in the takeover of Element and Von Zipper). They may also have refused to co operate with plans and change felt inertia because they might have felt unable to cope with changing procedures, such as those implemented during the introduction of a new girls product line.
In response to the various changes that Billabong was forced to cope with staff, in particular management may have resisted change due to the fact that it can be extremely expensive. For example, during the purchase of distribution business in Belgium and Germany management may have resisted change due to the considerable financial costs involved.
Additionally as a result of the acquisition of Von Zipper and Element there were significant financial costs involved in the retraining of staff so that they would be familiar with the new product which Billabong is now associated with.
Analyze the effective management of change by Billabong management
Response to external Influences
In response to the increase in the share price for Billabong, management has decided to implement various strategies to ensure that there is a sustained growth in share price in the future. This strategy is an effective one as it takes into account the future growth of the company.
As a result of the September 11 terrorist attacks and the Iraq war, Billabong has implemented strategies such as the development of exciting new products and extensive promotion through marketing efforts. These responses are effective in managing change as they have caused consumers to become interested in retail spending again and have consequently caused retail sales to rise dramatically.
As a consequence of slow sales due to poor seasons management increased its promotional efforts heavily worldwide.
As a result of the identification of new markets in Italy and Germany, Billabong has decided to do a significant amount of market research. This is an effective response to change as though doing extensive market research; Billabong will have a greater understanding of the target markets and will be able to tailor its marketing efforts accordingly.
In response to the structural change of outstanding that Billabong has implemented, Billabong has developed a supplier policy in which the companies to which Billabong outsourcers are evaluated once a year for their compliance with local laws and environmental regulations. This is an effective response to change because it makes sure that Billabong complies with its legal and ethical responsibilities in the communities in which it operates. It also gives Billabong a good name in both the community and worldwide.
In response to the growing trend of coverage of sporting events by particular Surf brands, Billabong has increased its sponsorship efforts significantly and also covered the Pro World Surfing Championships in Tahiti. Billabong also sponsors various high-profile surfers such as woman’s number one surfer Layne Beachely, Taj Burrow and Andy Irons. This management of change by Billabong is positive because it has led to increased promotion of the brand and hence led to higher sales revenue.
Management of Change in the Internal Business Environment
As a result of the acquisition of the brands Von Zipper and Element and incorporation of its own, management worked very hard to ensure that the fusion of the two cultures was as successful as possible. This was a successful management of change by Billabong as it ensured that the staffs were accepting of the new cultures and that operations were not compromised.
In response to the establishment of a new operations center in Brazil and purchase of distribution business in Germany and Belgium, Billabong ensured that it was heading the costs involved very closely. This is effective management of charge by Billabongs staff because it led to a decreased amount of loss through implementing charge and also has allowed a strong hold on the distributions in Europe for Billabongs products.
Due to the expansion of its girls product lines, Billabongs management appointed a director of girls branding, who is in charge of the girls surf ware and accessories. This is an encouraging management of change because it has allowed the promotion efforts of the new girls product line to be focused on which will hopefully lead to increased brand recognition and sales revenue. (see appendix 3 for details of the growth in sales of girls ware).
The response to the movement towards brand specific retail outlets and point of sale promotions, Billabong has recently announced its intention to open a Billabong/Element retail store on Broadway in New York’s Times Square (see appendix 1) This is a highly effective response to change as times square is one of the most prestigious places for a retail outlet to be situated and the recognition that the store (and its brand, Billabong) will receive will be enormous.
In response to the growing use of E-commerce to sell products worldwide, Billabong has outsourced its E-commerce operations to reliable online organizations. This is a significantly effective management of change by Billabong because it allows Billabong to concentrate on other aspects of business, while allowing its products to be sold by online retailers who specialize in E-commerce.
Effects of Accelerating Technology
As a result of a rapid increase in internet usage worldwide Billabong has been forced to expand its marketing operations into ones concerning the internet. Billabong has produced and constantly updates its primary website www.billabong.com, and also its corporate website www.billabongcorate.com to provide up-to-date information for its shareholders.
This management of change by Billabong is effective because it has led to increased brand recognition by consumers and provides up-to-date information for shareholders.
In Conclusion it is evident that the management and change by Billabong International Limited has been successful, this is due to a number of factors
The need for change was accurately identified and documented by management (see annual reports)
Goals were set by management regarding what they wished to achieve e.g. (budgeting for the establishment of a new operations center in Brazil allowed managers to carefully monitor their spending which led to a smaller than anticipated loss)
A culture of change was created within the business of billabong and staff were directly involved with the implementation of change.