Marketing assignment on: Sporting goods

Marketing assignment on: Sportinggoods

INTRODUCTIONBillabong is an Australian retailer and mainly in the businessof clothing. It is a public company listed on Australiansecurities exchange. Gordon and Rena Merchant found Billabongin 1973. Headquarter of the company is in Queensland,Australia. Top officials of the company are; Launa Inman: CEOand Ted Kunkel: Chairman. Main products of the company areapparel and sporting goods.

Currently Billabong has more than 6000 employees and 677 companyowned stores. Revenue of the company was AUD 1.79 billion in2011 (Billabong 2012). Company is now interested in expandingits business in Asia – Pacific region. There are manycountries in Asia – Pacific region which could be beneficialfor the business of Billabong e.g. China, India etc. Thesecountries are economically developing countries and haveemerged as the fastest growing economies of the world sincelast decade. In this report India is considered as thepotential market for the company as India is a consumptiondriven economy. High population and increasing disposableincome of Indian people will be highly beneficial for thecompany.

This report contains the analysis of current business andeconomic environment of retail industry worldwide as well asin India. Analysis of India has been done by using PESTanalysis technique. Also Evaluation of the best strategy to

enter into the Indian market is done. Competition level ofIndian retail sector has been analyzed and accordinglystrategy for Billabong is developed. Based on the analysis ofindustry and target country some recommendations are providedat the end of the report.

METHODS

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

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

CURRENT INTERNATIONAL BUSINESSAND ECONOMIC ENVIRONMENTRetail Industry is a very big industry worldwide. There aremany players in the industry at world level. Top fiveretailers are given below:

1. Wal-Mart from US2. Carrefour from France3. Tesco from UK

4. Metro AG from Germany5. Kroger from UK

When we look at the current business environment of the retailindustry we find that the world has suffered from an economicslowdown in the last decade. First debt crisis in EuropeanUnion countries and then economic slowdown in US affected manybusiness of the world. But retail industry did not see highimpact of economic slowdown in fact it saw growth year on yearbasis. There are many factors which contributed to the growthof retail industry worldwide e.g. favorable economicconditions in the emerging economies like China and India, newretailing strategies adapted by the retail companies as wellas technological development and most importantly growingpopulation of the world. Global Retail Development Index(GRDI) in 2011 clears that the per capita retail sales has gotdoubled as compared to the 2002 i.e. almost 90 % of growth hastaken place since 2002. In 2002 per capita sales were USD 2000and in 2011 it became USD 3850.

Another factor which has played a big role in the growth ofretail sales is online retail. According to an estimate of ACNielson E-commerce has seen a high level of compounded annualgrowth rate. Also the channels through which retail operationscan be conducted are evolving. World Retail Congress in Berlinshared a survey; some important facts of the survey are givenbelow:

Retailers are required to be present online and they aregiving priority to it.

Continuously growing importance of brick and mortarstores.

There is a perception that China has the highestpotential of retail growth.

India has emerged as a leading location for brick andmortar outlets (Global Retail Industry 2012).

Above facts clearly explain that retail industry has notaffected by the economic slowdown worldwide and still have ahigh potential of growth especially in countries like Chinaand India.

ANALYSIS OF INDUSTRY, PRODUCTAND ITS ENVIRONMENTAs we have discussed above that the retail industry is verybig and there are many small and big players in the industry.The Industry is growing because of the growing population aswell as their growing disposable income. Also the improvementin technology has played a big role in growth of retailindustry. We can better understand the retail industry bydoing a SWOT analysis of the industry.

STRENGTHS

The biggest strength of retail industry is the financialstrength of the players in the industry. Companies like Wal-Mart, Tesco and Carrefour are very strong in terms offinancial stability. Billabong is also revenue wise afinancially strong company as the revenue of the company in2011 was AUD 1.79 billion. Strength of retailers is theirprice leadership. They can sell their products in cheaperwholesale prices. Another strength of a retail company is thatthey can offers unique products for example high quality ofclothes but slightly defective in lower prices.

WEAKNESSES

Possible weakness for retailers may be the old plant andequipments. Also if a retailer has a very narrow product linethen it becomes a weakness for that retailer. As thetechnology has become an important thing for success if aretailer does not have a better technology then he becomes aweak retailer in front of his competitors. Also unawareness

among the target consumers about the brand of Retail Companyis a weakness of the company. This can be examined throughmarket research (What makes a good leader 2009).

OPPORTUNITIES

Opportunities are those things which are positive and externalto the company. For example a biggest opportunity forretailers is growing population of world and most importantlyof China and India which are not only highly populouscountries but also emerging economies. This is the reason forIndia being a favorable destination for Billabong. Anotheropportunity for retailers is unfulfilled needs of theconsumers. Consumers of the retail industry are having highlevel of disposable income and they are ready to spend it tofulfill their needs and wants.

THREATS

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

ANALYSIS OF TARGET COUNTRYOur target country is India as we described earlier that it isa country with high level of population and increasingdisposable income. For analyzing India we can look at themarket situation of retail industry in India as well aspolitical, economic and sociocultural conditions in thecountry. 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 isapproximately 14 % to 15 %. The worth of Indian retailindustry is estimated at US $ 450 billion and it comes amongone of the top five most attractive retail destinations of theworld. Economy of India is US $ 1.847 trillion with apopulation of 1.2 billion. Growth of the retail sector in thecountry is estimated at 15 to 20 % for the next five yearswhich is a big opportunity for Billabong. Reason for growth ofretail in India is good macro – economic condition. Economy ofthe country is growing at a rate of 6 to 7 % (Jain 2012). Letus have a look on PEST analysis of the country for retailsector.

POLITICAL

Political factor mainly includes environmental regulations andprotection laws in the country, taxation policies in India aswell as political situation in the country. Currently India isconsidering 100 % FDI in single brand retail and 51 % FDI inmulti brand retail and every day parliament in India discussesthe advantages and disadvantages of FDI in retail.

ECONOMIC

We have already discussed the economic factors in India thatthe GDP of the country is growing at a rate of 6 to 7 % andthe disposable income of the people of India is increasing.According to a report of World Bank Indian economy will growat 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 goodsign for the retailers in India (The Times of India 2012).

SOCIAL

While looking at the sociocultural situation of India we findit very favorable for Retail. The demographic situation in thecountry is excellent for retailer as the 70 % population ofthe country is youth. This part of population is highlyskilled as well as earning and hence has the capacity tospend. When we consider the cultural factor in India we findthat it is a country with many cultural back ground. Cultures

of east, west, north and south India are different and henceBillabong will have opportunity to diversify in many products.

TECHNOLOGICAL

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

ENTRY STRATEGY IN INDIATo enter into Indian retail industry Billabong will berequired a strong strategy as the competition in the industryis very high. Billabong needs to decide the target marketsegment in India first as we discussed that Indian market hasdifferent cultural preferences.

Since the population of the country is high Billabong isrequired to target the mass market rather than targeting onlypremium segment of the consumers. Billabong will be requiredto develop some strong marketing strategies so that it cancreate a brand image into the mind of Indian consumers.Billabong can use price penetration strategy to capture theIndian market. If it can offer its products at little lowerprices it would be beneficial for company to beat thecompetition.

Also there is another way of entering into Indian retailmarket which is being a partner of any other big Indian retailcompany like Reliance or other. Acquisition or joint ventureshelp a company in expanding its business rapidly in a newcountry 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. Someof 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 theirbusiness in Indian retail sector. But still consumers of Indiaare looking for new choices and this can help Billabong. Tomanage competition in India Billabong will be required todevelop new strategies (Shine.com 2012). Billabong can useMichael E. Porter’s Generic strategies to decide its entrymode in the retail market of India. Also Porter’s five forcesanalysis will be helpful in deciding the strategic orientationof Billabong.

ENRTY MODE AND COMPETITIVE STRATEGY

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

Porter’s generic strategies are based on the market scope ofthe industry. For a narrow market scope market segmentation isrequired but for a broad market scope product differentiation

and cost leadership is required. Being a cost leader in Indianretail industry will not be easy for Billabong as companieslike Pantaloon, Provogue and Zodiac are very big and they caneasily compete with the prices of Billabong. These companieshave made a good brand image as well. Product differentiationstrategy would be beneficial for Billabong to enter into theIndian retail sector with a mode of Partnership with a bigIndian retail company e.g. Aditya Birla Retail Ltd.

(Source: Mind Tools 2012)

A company becomes a product differentiator when it becomesable to convince its consumers that the products offered bythe company are different from its competitors. Billabong hasa range of products for men as well as for women. It will notbe difficult for Billabong to convince the Indian consumerswith the help of brand image of a big Indian retail company.Hence in short we can say that the best entry mode in Indiawould be a joint venture with a big established Indian retailcompany like Aditya Birla or ITC and the best competitivestrategy would be product differentiation for Billabong (Anton2011).

CONCLUSION AND RECOMMENDATIONIn conclusion we can say that retail industry is a bigindustry with high level of growth potential. Emergingeconomies like China and India are the most favorabledestinations of the big retail companies because ofcontinuously growing economy and increasing disposable incomeof people living in these countries. Billabong is a big retailcompany of Australia with a range of products for men andwomen 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 somepoints in mind:

Political situation of the country is stable and currently the

country is thinking to allow 100 % FDI in single brand retailand 51 % FDI in multi brand retail. This is a good time toenter into Indian market.

High level of cultural diversification is available inIndia and people’s taste and preferences also differ indifferent parts of the country and hence Billabong willbe required to understand taste and preferences ofdifferent parts of India and accordingly it can sell itsproducts to Indian people.

At last retail industry in India is highly competitiveand hence Billabong will be required to develop strongmarketing strategies to capture the required market sharein India.