Billabong Essay

Billabong International Ltd. is a typical surf-wear manufacturer out of Queensland, Australia that generates roughly 80 percent of revenue outside of its home country. Despite serving several nations, the U.S. account for nearly 50 percent of its $800 million annual income (Hill, 2011). Founded in 1973 surfboard shaper Gordon Merchant and his then partner, Rena, Billabong saw early success, and expanded abroad in the late 1980’s. In the 1990’s, the lover for surfing grew into a sport, as did Billabong’s brand expanding its product line from wetsuits and surfboards to eyewear and sweat suits. During the early 2000’s, the firm made a strategic decision to move from a wholesale distributor by acquiring several retail outlets that were converted

5). However, the firm continued to expand through location acquisitions in the UK and U.S., which provided somewhat of a competitive edge over its competition of Pacific Sunwear of California and Quiksilver manufacturers. A purchase of Von Zipper, Element, Kustom, and Nixon retail stores boosted Billabong’s value to $3.45 billion in 2007 (Terry-Armstrong, 2014). Although the firm grew in physical number of locations, its revenue failed to grow as projected. The global recession of 2008-2009 caused significant damage to the U.S. dollar, which negatively affected Billabong’s profits. According to (Hill, 2011), When Australia’s dollar falls against the U.S. dollar, product pricing decreases which increases sales revenue. On the contrary, when the U.S. dollar rises in value, Billabong earns fewer profits. In June 2008 one Australian dollar was worth $0.97, and by October 2008 it was worth

Throughout the recession, Billabong continued with higher prices for lesser attractive products, which allowed Quiksilver to increase its market share by reacting much quicker to the fast fashion trends. In conjunction, ASOS, the largest UK online fashion retailer, thrived in the online market which seemed to be ignored by Billabong. “The company’s profit from ordinary activities after income tax decreased from a profit of A$152.8 million (approximately $140.3 million) in FY2009 to a loss of A$233.7 million (approximately $214.5 million) in FY2010” (Billabong International Ltd. SWOT Analysis, 2015, p. 5). Although the U.S. recession caused significant damage to Billabong sales, the firm experienced positive exporting volumes supported by emerging markets of China and India. As a result of these demands, the Australian dollar strengthened and value was $1.66 compared to every U.S. dollar in February 2009 (Hill,