Marketing assignment on: Sporting goods

INTRODUCTION

Billabong is an Australian retailer and mainly in the business of clothing. It is a public company listed on Australian securities exchange. Gordon and Rena Merchant found Billabong in 1973. Headquarter of the company is in Queensland, Australia. Top officials of the company are; Launa Inman: CEO and Ted Kunkel: Chairman. Main products of the company are apparel and sporting goods.Currently Billabong has more than 6000 employees and 677 company owned stores. Revenue of the company was AUD 1.79 billion in 2011 (Billabong 2012). Company is now interested in expanding its business in Asia – Pacific region. There are many countries in Asia – Pacific region which could be beneficial for the business of Billabong e.g. China, India etc. These countries are economically developing countries and have emerged as the fastest growing economies of the world since last decade. In this report India is considered as the potential market for the company as India is a consumption driven economy. High population and increasing disposable income of Indian people will be highly beneficial for the company.

This report contains the analysis of current business and economic environment of retail industry worldwide as well as in India. Analysis of India has been done by using PEST analysis technique. Also Evaluation of the best strategy to enter into the Indian market is done. Competition level of Indian retail sector has been analyzed and accordingly strategy for Billabong is developed. Based on the analysis of industry and target country some recommendations are provided at the end of the report.

METHODS

There are some methods used to collect and analyze the data and information. Data collection is done through internet sources, government websites, research papers, magazines and news papers. Economic journals have been very useful in collection of data.

For analysis SWOT (Strength, Weaknesses, Opportunities and Threats) analysis PEST (Political, Economic, Social and Technological) analysis techniques have been used. These techniques have been used to analyze the Industry and target country as these are the best methods to analyze the current business and economic environment of a country as well as industry. To evaluate the strategic alternatives business level strategies and generic strategies have been discussed. Also Michael E. Porter’s five forces model is used to analyze the competition level in retail industry in India.

CURRENT INTERNATIONAL BUSINESS AND ECONOMIC ENVIRONMENT

Retail Industry is a very big industry worldwide. There are many players in the industry at world level. Top five retailers are given below:

1. Wal-Mart from US
2. Carrefour from France
3. Tesco from UK
4. Metro AG from Germany
5. Kroger from UK

When we look at the current business environment of the retail industry we find that the world has suffered from an economic slowdown in the last decade. First debt crisis in European Union countries and then economic slowdown in US affected many business of the world. But retail industry did not see high impact of economic slowdown in fact it saw growth year on year basis. There are many factors which contributed to the growth of retail industry worldwide e.g. favorable economic conditions in the emerging economies like China and India, new retailing strategies adapted by the retail companies as well as technological development and most importantly growing population of the world. Global Retail Development Index (GRDI) in 2011 clears that the per capita retail sales has got doubled as compared to the 2002 i.e. almost 90 % of growth has taken place since 2002. In 2002 per capita sales were USD 2000 and in 2011 it became USD 3850.Another factor which has played a big role in the growth of retail sales is online retail. According to an estimate of AC Nielson E-commerce has seen a high level of compounded annual growth rate. Also the channels through which retail operations can be conducted are evolving. World Retail Congress in Berlin shared a survey; some important facts of the survey are given below:

• Retailers are required to be present online and they are giving priority to it.
• Continuously growing importance of brick and mortar stores.
• There is a perception that China has the highest potential of retail growth.
• India has emerged as a leading location for brick and mortar outlets (Global Retail Industry 2012).

Above facts clearly explain that retail industry has not affected by the economic slowdown worldwide and still have a high potential of growth especially in countries like China and India.

ANALYSIS OF INDUSTRY, PRODUCT AND ITS ENVIRONMENT

As we have discussed above that the retail industry is very big and there are many small and big players in the industry. The Industry is growing because of the growing population as well as their growing disposable income. Also the improvement in technology has played a big role in growth of retail industry. We can better understand the retail industry by doing a SWOT analysis of the industry.STRENGTHS

The biggest strength of retail industry is the financial strength of the players in the industry. Companies like Wal-Mart, Tesco and Carrefour are very strong in terms of financial stability. Billabong is also revenue wise a financially strong company as the revenue of the company in 2011 was AUD 1.79 billion. Strength of retailers is their price leadership. They can sell their products in cheaper wholesale prices. Another strength of a retail company is that they can offers unique products for example high quality of clothes but slightly defective in lower prices.

WEAKNESSES

Possible weakness for retailers may be the old plant and equipments. Also if a retailer has a very narrow product line then it becomes a weakness for that retailer. As the technology has become an important thing for success if a retailer does not have a better technology then he becomes a weak retailer in front of his competitors. Also unawareness among the target consumers about the brand of Retail Company is a weakness of the company. This can be examined through market research (What makes a good leader 2009).

OPPORTUNITIES

Opportunities are those things which are positive and external to the company. For example a biggest opportunity for retailers is growing population of world and most importantly of China and India which are not only highly populous countries but also emerging economies. This is the reason for India being a favorable destination for Billabong. Another opportunity for retailers is unfulfilled needs of the consumers. Consumers of the retail industry are having high level of disposable income and they are ready to spend it to fulfill their needs and wants.

THREATS

Threats for retailers are those things which are external to the company and negative e.g. unstable economic condition of the world or a particular country. Controlling the economy of the world is not in the hands of a retail company. High level of recession can also become a threat to the retailers as in this scenario consumers put restrictions on their demands and are bound to spend as less as possible. Another threat for a retail company is increasing competition. Also the changing cultural environment and habits of consumers can become a threat for retailers (Suttle 2012).

ANALYSIS OF TARGET COUNTRY

Our target country is India as we described earlier that it is a country with high level of population and increasing disposable income. For analyzing India we can look at the market situation of retail industry in India as well as political, economic and sociocultural conditions in the country. An analysis of the country is provided below:

RETAIL MARKET IN INDIA

Retail industry in India is a pillar for its economy. Contribution of retail industry to the Indian economy is approximately 14 % to 15 %. The worth of Indian retail industry is estimated at US $ 450 billion and it comes among one of the top five most attractive retail destinations of the world. Economy of India is US $ 1.847 trillion with a population of 1.2 billion. Growth of the retail sector in the country is estimated at 15 to 20 % for the next five years which is a big opportunity for Billabong. Reason for growth of retail in India is good macro – economic condition. Economy of the country is growing at a rate of 6 to 7 % (Jain 2012). Let us have a look on PEST analysis of the country for retail sector.

POLITICAL

Political factor mainly includes environmental regulations and protection laws in the country, taxation policies in India as well as political situation in the country. Currently India is considering 100 % FDI in single brand retail and 51 % FDI in multi brand retail and every day parliament in India discusses the advantages and disadvantages of FDI in retail.

ECONOMIC

We have already discussed the economic factors in India that the GDP of the country is growing at a rate of 6 to 7 % and the disposable income of the people of India is increasing. According to a report of World Bank Indian economy will grow at a rate of 6.9 %, 7.2 % and 7.4 % in the fiscal year of 2012 – 13, 2013 – 14 and 2014 – 15 respectively which is a good sign for the retailers in India (The Times of India 2012).

SOCIAL

While looking at the sociocultural situation of India we find it very favorable for Retail. The demographic situation in the country is excellent for retailer as the 70 % population of the country is youth. This part of population is highly skilled as well as earning and hence has the capacity to spend. When we consider the cultural factor in India we find that it is a country with many cultural back ground. Cultures of east, west, north and south India are different and hence Billabong will have opportunity to diversify in many products.

TECHNOLOGICAL

India is a technologically developed country. Telecommunication industry is growing at a high rate as well as internet applications have increased in the country. This will help the country in developing its e – commerce business (Wadhwa 2010).

ENTRY STRATEGY IN INDIA

To enter into Indian retail industry Billabong will be required a strong strategy as the competition in the industry is very high. Billabong needs to decide the target market segment in India first as we discussed that Indian market has different cultural preferences.Since the population of the country is high Billabong is required to target the mass market rather than targeting only premium segment of the consumers. Billabong will be required to develop some strong marketing strategies so that it can create a brand image into the mind of Indian consumers. Billabong can use price penetration strategy to capture the Indian market. If it can offer its products at little lower prices it would be beneficial for company to beat the competition.

Also there is another way of entering into Indian retail market which is being a partner of any other big Indian retail company like Reliance or other. Acquisition or joint ventures help a company in expanding its business rapidly in a new country and it also helps in making the brand image of company (Anton 2011).

MANAGING INDUSTRY COMPETITION

Level of competition in Indian retail Industry is very high. There are many small and big retail companies in India. Some of them are listed below:

• Aditya Birla Retail Ltd.
• Balaji Distilleries ltd.
• Bata India Ltd.
• Crossword Bookstores Ltd.
• Ebony Retail Holding Ltd.
• ITC
• McDonald
• Nirula’s
• Pantaloon Retail (India) Ltd.
• Provogue (India) Ltd.
• Reliance Retail
• Spencer’s Retail
• Unilever
• Vishal
• Zodiac

Above are the few names which have already developed their business in Indian retail sector. But still consumers of India are looking for new choices and this can help Billabong. To manage competition in India Billabong will be required to develop new strategies (Shine.com 2012). Billabong can use Michael E. Porter’s Generic strategies to decide its entry mode in the retail market of India. Also Porter’s five forces analysis will be helpful in deciding the strategic orientation of Billabong.ENRTY MODE AND COMPETITIVE STRATEGY

Let us have a look at Porter’s Generic strategies so that we can decide which would be the best strategy to enter into Indian retail industry:

Porter’s generic strategies are based on the market scope of the industry. For a narrow market scope market segmentation is required but for a broad market scope product differentiation and cost leadership is required. Being a cost leader in Indian retail industry will not be easy for Billabong as companies like Pantaloon, Provogue and Zodiac are very big and they can easily compete with the prices of Billabong. These companies have made a good brand image as well. Product differentiation strategy would be beneficial for Billabong to enter into the Indian retail sector with a mode of Partnership with a big Indian retail company e.g. Aditya Birla Retail Ltd.

(Source: Mind Tools 2012)

A company becomes a product differentiator when it becomes able to convince its consumers that the products offered by the company are different from its competitors. Billabong has a range of products for men as well as for women. It will not be difficult for Billabong to convince the Indian consumers with the help of brand image of a big Indian retail company. Hence in short we can say that the best entry mode in India would be a joint venture with a big established Indian retail company like Aditya Birla or ITC and the best competitive strategy would be product differentiation for Billabong (Anton 2011).

CONCLUSION AND RECOMMENDATION

In conclusion we can say that retail industry is a big industry with high level of growth potential. Emerging economies like China and India are the most favorable destinations of the big retail companies because of continuously growing economy and increasing disposable income of people living in these countries. Billabong is a big retail company of Australia with a range of products for men and women and if it wants to expand its business into Asia – Pacific region then India is the best destination for it. While entering into Indian market company should keep some points in mind:Political situation of the country is stable and currently the country is thinking to allow 100 % FDI in single brand retail and 51 % FDI in multi brand retail. This is a good time to enter into Indian market.

• High level of cultural diversification is available in India and people’s taste and preferences also differ in different parts of the country and hence Billabong will be required to understand taste and preferences of different parts of India and accordingly it can sell its products to Indian people.
• At last retail industry in India is highly competitive and hence Billabong will be required to develop strong marketing strategies to capture the required market share in India.

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