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Table of Contents

Table of Contents...................................................................................................1

Introduction........................................................................................................... 2

The markets in both women’s and men’s suits declined during 2007 and 2008,
with men’s suits experiencing the largest decline by volume of all clothing
types in 2008. This reflects both the increasingly casual dress codes of
Australian workplaces and social gatherings and the high prices of suits..........2

Australia’s Clothing Industry Overview...............................................................3

External Forces...................................................................................................3

Economic factors.............................................................................................3

Social/Culture factors......................................................................................3

Political factors................................................................................................4

Ethical factors..................................................................................................4

Technological factors.......................................................................................4

SWOT Analysis: see appendices A....................................................................4

Porters Five Forces.............................................................................................4

The Competition..............................................................................................4

New Entrants...................................................................................................5

Suppliers Power...............................................................................................5

http://www.jaconline.com.au/commerce/home/downloads/ncc-pp192-193.pdf..5

Consumers Power............................................................................................5

Product Substitutes.........................................................................................5

Target Market Segment......................................................................................6

MARKETING OBJECTIVES.....................................................................................6

Objectives:..........................................................................................................6

MARKETING STRATEGY.......................................................................................7

MARKETING MIX .................................................................................................7

Product............................................................................................................ 8

Distribution......................................................................................................8
Price................................................................................................................ 8

Promotion........................................................................................................ 8

Above-the-line Support....................................................................................9

Below-the-line Support....................................................................................9

Sales Forecast Assumptions ...........................................................................9

Reference......................................................................................................... 12

Appendices.......................................................................................................... 13

Introduction

The marketing department in Billabong through various researches have identified


the following:

The markets in both women’s and men’s suits declined during 2007 and 2008, with
men’s suits experiencing the largest decline by volume of all clothing types in
2008. This reflects both the increasingly casual dress codes of Australian
workplaces and social gatherings and the high prices of suits.
(Euromonitor, 2009)

• A large segment of our loyal customers who are now between the ages of 25-
39 have different needs, identified as “Smart Casual” apparel. Although there
are different suppliers for these apparel, our customer have shown that they
like the Brand name and would prefer to purchase these apparel from
Billabong.

Billabong’s Board of Directors have approved a study to identify where we are as a


company, where we want to go and the strategies that should be implemented, if
Billabong is to launch a new product line called “CaChic”. To better understand our
current situation, both a SWOT analysis and The Nine Forces will be undertaken and
from the findings a strategic marketing plan will be formulated.

Australia’s Clothing Industry Overview

The Euronmonitor report shows that the total clothing sales in 2008 were A$10.1
billion, down by 0.8% from A$10.2 billion recorded in 2007.

The most important factor impacting on the clothing sector in 2008 was the global
financial crisis. However, sales are forecasted to recover slowly during 2011–2013.
(Euromonitor, 2009)

External Forces

Economic factors
 Improvement in the consumer income and standard of living has
contributed to the growing popularity of surfing.
 Billabong is continually influenced by fluctuations in the Australian
Dollar. In 2003-04 it reduced value of earnings and wiped millions of
dollars off the economy’s profits.
 Global scale, incomes in East Asia and South America have helped
to create new markets and encouraged company’s global
expansion.

Social/Culture factors
 Increasing popularity of surfing and surf wear among the broader
community meaning growth in brand awareness.
 Eco-friendly products: Consumers are paying more attention to
where materials are sourced, what materials are used and whether
the production processes have a negative impact on the
environment. The demand for organic products is still growing,
along with the demand for healthier, more environmentally friendly
products across all industries.
Political factors
 Reduction in the worldwide trade barriers has made it easier for
Billabong to export to other regions in the world.
 Billabong has continued to benefit from the Australian governments
continued protection of the domestic clothing and manufacturing
industry through the maintenance of tariff barriers. Import duty of
17.5% in 2005, 10% in 2010. (Weller, S, 2007)

Ethical factors

 Billabong is introducing new environmentally friendly materials for


its products.
 Billabong had sourced many of its production to mostly third world
areas, there are many sceptics as to the poor working conditions
and wages in the textile and clothing industries known as sweat
shops.

Technological factors
 Media such as cable television has exposed millions of new
customers to surfing and helped Billabong market its products
towards a broader customer base.
 E-commerce is simplifying the logistical and organizational
difficulties associated with operating a global business.

SWOT Analysis: see appendices A

Porters Five Forces

The Competition
In 2008, Pacific Brands Holdings held the largest market shares in the clothing
market as a whole and in men’s outerwear and underwear/nightwear. Specialty
Fashion Group held the largest market share in women’s outerwear, and the third-
largest in the clothing market as a whole.
The brands with the largest shares in the clothing market as a whole in 2008
wereYakka, Country Road, Millers and Bonds.

Country Road operates across the market, but Yakka, Millers and Bonds concentrate
respectively on men’s and women’s outerwear and on underwear/nightwear. All
these brands have a wide product offerings and good reputations, which account for
their large market shares.
(Euromonitor, 2009)

New Entrants
There is easy of entry for a new entrant, the example of Billabong its self is a good
example of a local small manufacture that grew and become a world leader.

Once a company has reached maturity, then easiest exit strategy is to be acquired
by a competitor or another company that is seeking to diversify.

Suppliers Power
Since Billabong became an international company it has outsourced its
manufacturing to small or mid-size companies. Today, there are six different
suppliers mostly in third world countries. These suppliers have no actual bargaining
powers and it not likely that any would try and integrate vertically.

http://www.jaconline.com.au/commerce/home/downloads/ncc-pp192-193.pdf

Consumers Power
In the industrial economies like Australia, consumers have no bargaining power.

Consumers are not likely to find a speciality tailor that would be cheaper than
existing retailers.

Product Substitutes
Retailers like Kmart and Target carry the same apparels but it mostly for consumers
who want the products but are unwilling to pay a premium price.

Others substitutes are also available from competitors like Country Road, Yakka and
Colorado, although not to the exact quality and style that Billabong are launching.
Target Market Segment
Based on the previous analysis, there appears to be increasingly casual dress codes
of Australian workplaces and social gatherings, leading to a growing demand for
affordable but contemporary casual wear at workplaces. Billabong new casual line
seeks to meet such demand and target a group of office workers. Billabong’s sports
image has long been entrenched in consumers’ mind especially among teens and
youths, while with those people grow older and reach their 30’s and start their
careers, they will be pleased to see a brand who has grown with them together now
provides expanded product offerings to suit their new needs.

The new casual line represents a contemporary, middle to up-scale but affordable
casual wear at workplaces, hence it will better resonate with people from 25 to 39
who have established careers and stronger buying power. They are not too serious,
tired of wearing suits everyday partly because it’s high prices, and are Australian
brand-driven, fashion-oriented.

Market Positioning

Billabong’s competitive advantages will be aimed to captivate the aforementioned


target group. Its high awareness in sports market which can render halo effect to the
new line, its continuous innovation to satisfying Australians’ diversifying tastes and
desires, its stylish but casual design with affordable prices will be able to set
Billabong apart from competitors. Hence Billabong CaChic will adopt a focused
differentiation strategy to approach a niche target segment of Australian consumers.

MARKETING OBJECTIVES
Mission: To become the best choice of Australia’s workplace casual wear.

Objectives:

 Achieve Billabong CaChic’s awareness in Australia at 15% by year 1, 30% by


year 2 and 60% by year 3.
 Achieve market share at 0.2% by year 1, 0.5% by year 2, 1% by year 3, 1.5% by
year 4 and 1.8% in year 5 in men and women’s outwear segment.
 Become the most preferred workplace casual wear brand among target
consumers in Australia by year 3.

Below table displays the objectives of the growth targets for the next five years

Year 1 Year 2 Year 3 Year 4 Year 5


Market Share 0.20% 0.50% 1% 1.50% 1.80%
438,20 1,117,50 2,279,50 3,487,50 4,269,60
Units 0 0 0 0 0
8,760,0 22,350,0 45,590,0 69,750,0 85,400,0
Sales Revenue 00 00 00 00 00
5,190,0 13,230,0 26,980,0 41,290,0 50,550,0
Gross Margin 00 00 00 00 00
-
Pre-tax 1,640,0 2,620,00 12,290,0 20,830,0 26,320,0
income/loss 00 0 00 00 00
Gross in sales
revenue - 60.80% 50.97% 34.63% 18.32%

MARKETING STRATEGY
 Casual but chic simplicity will be the core principle in CaChic’s design.
 Integrated marketing communication campaigns to build awareness of CaChic
and connect with target consumers
 Focused distribution at high-end retail channels to bolster CaChic’s middle to up-
scale positioning.
 Affordable price in the target segment yet between middle to high will be adopted
to ensure strategy consistency across Billabong’s wide product offerings.

MARKETING MIX
This section will provide recommendations of specific marketing tactics on how to
help CaChic achieve its desired objectives.
Product
The new casual chic line will be mainly focused on men and women’s outwear. The
design will follow wide fashion trends while maintaining the overall style of casual
with chic simplicity. It will be made of eco-friendly materials and produced in Jorden
and Vietnam, but governed by Billabong’s stringent quality standard system.

Distribution
Distribution strategy will have four prongs. Firstly, the new line will leverage existing
Billabong’s specialty stores a with a new range corner set up in the store. Secondly,
due to the high influential power of Myer and David Jones among target consumers,
these two department stores still will be the main channels for Billabong to establish
concept corner to drive brand awareness. Thirdly, it is suggested to build a flagship
store in CBD to create buzz and establish its contemporary lifestyle image, it also
can be served as a place for running marketing activities. Lastly, it will ride on
existing e-commerce platform to gain sales from international markets.

Price
As the new line will target office workers who are relatively strong in their financial
position, the average price will be benchmarked to Billabong CaChic’s key
competitor which is Country Road and positioned between middle to high of the
market, more skewed towards middle given the current stagnant of Australian
economy.

Prices Country Road Prices Billabong Casual

Average Retail Selling Price = A$70 / Average Retail Selling Price = A$70 /
unit unit

Average ex-factory Price: unknown Average Ex-factory Price = A$20 / unit

Promotion
Office men and women are highly marketing literate and extremely cynical of
advertising. To connect with them, all levels of the marketing mix are required.
Above-the-line Support
 A new TV commercial will be produced to communicate CaChic’s new launch.
 Editorials, features in leading lifestyle magazines and newspapers.
 Outdoor ads. will be adapted to further help drive awareness, one giant outdoor
billboard with consistent message adapted from TVC will be launched at prime
location in CBD where offices crowd. Three bus lines running across key
locations where target consumers frequent will also be recruited as supplement
outdoor ads to accelerate awareness building.

Below-the-line Support
 A concept store will be built at prime shopping precinct in CBD.
 A launch party and fashion parade in the concept store will be held, fashion
media, top fashionistas, key influencers in town and lucky consumers will be
invited to attend the press event and experience CaChic.
 Leverage Billabong’s existing public relations to engage media to rave about
Billabong’s new offerings. A media kit including a $50 special David Jones
voucher for Billabong CaChic, product catalogue and press release will be given
away to induce media’s love towards the brand.
 In-store fixtures and store window displays applied to all Billabong existing
specialty stores.
 Point of sale materials and swing tags in every store.
 Joint promotion with Myer and David Jones to stimulate trial, for example, buy
$100 of Billabong get $10 Myer or David Jones coupon for next purchase on
anything.

Sales Forecast Assumptions


 The average sales between the year 2003 and 2008 is 313 million units
according to the Euromonitor (2009) for men and women’s outwear.
 Our target group which is 25 to 39 years old are supposed to be the major
buying group, hence we can assume 70% of the target group for men and
women’s outwear.
 Though a 0.8% decrease in total clothing sales in 2008 due to global economic
downturn, it is expected to recover slowly during 2010 – 2013 according to
Euromonitor 2009. Therefore, a 2% annual increase will be used to project total
industry sales.
 As the market shares of individual men and women’s outwear are not available
but only total brand’s share, we will use brand’s share to project our market
share objectives for CaChic. In that case, Yakka the market leader enjoys 2.9%
share and Country Road the follower holds 2.6% share in 2008 (Euromonitor,
2009), hence it is projected CaChic market share to be 0.2% in first year, 0.5% in
second year,1% in third year,1.5% in the fourth year and 1.8% in the fifth year in
the men’s and women’s outwear segment.
 Market share objective of 0.2% in the first year will be translated to 0.44 million
units

Marketing Budget

Based on the marketing mix and sales targets presented previously, a sufficient
marketing budget is required, in particular for the first year, in order to establish the
CaChic awareness.

The services of two television channels have been engaged, channel 7 and channel
10, respectively. Channel 7 has quoted a rate of $35k per 30 seconds to air a
commercial during peak viewership time slots and $15000 during the off-peak, while
channel 10 has quoted $50k for peak viewership time slots and $10k during off-peak.
The peak hour airing of commercials escalates the cost charts dramatically.

The Sydney Morning Herald and The Age have also been engaged. Two full pages,
eight mods in area, have been selected at the rate of $18,480 each. Vogue, a big
name in the world of glamour and fashion will publish one page costing $12,100.
Several rounds of negotiations with modelling agencies have been carried out, While
some agencies quote a flat rate of $250 per model per hour. However, specific fees
apply for the use of the image. If the image is published on a website, a charge of
$2500 applies while $2000 applies to images that may be put on display in billabong
stores. Two weekly magazines, The Sydney magazine & The Melbourne times will
also carry four pages of billabong apparels at $113. Three Bus routes have been
chosen at $2000 per month where large posters of models will be put in the 1 st
quarter.

Promotional teams have also been hired. Six hour training will be provided to all staff
and hourly remuneration of $22 will be given.

Financial Analysis

Manufacturing cost

• Based on the gross margin (Country Road, 2008) the cost of goods comes
down to 40.81% of sales.

• It is assumed that the manufacturing cost will not change for the next five
years as the world is recovering from the economic crisis and the product
sales will increase in the coming future.

Expenses

• The employment expenses are taken 54.56% of the gross profit for the first
year (Country Road, 2008).

• Assume an increase in wages of 6% per annum.

• No additional employees have been budgeted for the next five years.

• The marketing budget is to be increased by 10% per annum.

• Income tax rate is taken 30$ (Country Road, 2008)

Action Time Table: see appendices

Appendix
Reference

Weller, S, 2007, Retailing, Clothing and Textiles Production in Australia, CSES


working paper No.29, viewed 15 May 2010,<http://www.cfses.com/documents/
wp29.pdf>

Billabong

http://www.billabongbiz.com/phoenix.zhtml?c=154279&p=irol-irhome

Colorado

http://www.coloradogroup.com.au/

http://www.colorado.com.au/

http://www.jaconline.com.au/commerce/home/downloads/ncc-pp192-193.pdfError:
Reference source not found
http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=BLLAF

http://www.johnwiley.com.au/highered/stratmgm/student-res/case-studies/002-smc-
200407.pdf
http://business.transworld.net/10716/features/market-watch-billabongs-anual-report/

http://euromonitorinternational.com

Appendices

SWOT Analysis

Strength Weakness

• Strong Brand Name. • Cost of transportation.

• Expansion in new market. • Perceptions as only marketed


near sea or Ocean.
• Diversification of products.
• Management changes and
• Outsourcing its production.
control.

• Cost of expansion.

Opportunities Threats

• Expansion of E commerce. •

• Media expanded to other youth- • GFC influence on economy.


oriented markets.
• Expand it’s niche markets. • Hostile takeovers.

Strategies Strategies

• Billabong to continue to use its • Use curve experience to lower

strategy of limited distribution. manufacturing costs.

• Use its experience in entering new


markets.

• Utilise E commerce to expand its • Use its existing distribution


markets. channels and sales force.