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Billabong Management Critical Analysis

Essay by   •  August 11, 2011  •  Case Study  •  1,389 Words (6 Pages)  •  1,984 Views

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Introduction

Created in 1973 by the surfer and surfboard shaper Gordon Merchant and his partner, Billabong is nowadays one of the biggest surf wear companies which have honored since 1999 its infatuation towards the global boardsport sector (Billabong company history 2010). It is nowadays the top front-runner in the manufacture of beach wear and accessories, such as boadshorts, skate, snow and wake boards (Billabong company history 2010).

Expansion of the company

Being established in Australia, Billabong is now planning to expand further more to new locations namely Malaysia. Malaysia's standard of living is relatively high due to the low cost of living and possesses a very good infrastructure in terms of settling a business(PEST analysis of Malaysia 2011). Therefore, this would be benefic for the Australian company to expand in Malaysia since Malays would have suitable financial support to purchase the products made by the brand( PEST analysis of Malaysia 2011).

First of all a PEST analysis need to be carried to investigate Political, Legal, Economic, Social and Technological influences on a business.

Political and legal analysis

Malaysia's government is very respected by the Malays. Being a federal state monarchy headed by the prime minister. "Malaysians political system has a unique foundation on which the country's machinery functions." ( PEST analysis of Malaysia 2011). Concerning taxes, the government is almost friendly with foreign investors and companies which imposes a rather low income tax rate on non-local corporations which was 28 percent in 1999(PEST analysis of Malaysia 2011). The government in Malaysia is very stable where the parliamentary power of the system is divided between the federal and state governments. Both of them are making great efforts and initiatives for industrial activities and also in the communication sector (PEST analysis of Malaysia 2011). From all those information about the Malaysian government it can be deduced that it would be beneficial for the Billabong Company to expand in that country since of the stability of the government and the rather low tax imposed by it.

Economic analysis

Even with the rise in oil selling prices, the economic situation in Malaysia is at its best, " with the GDP(gross domestic product) growth reaching an average of over 6% per year, low unemployment figures of under 4% and low inflation rate 3.9%"(PEST analysis of Malaysia 2011). Initially the inflation rate was about 2% but due to the oil crisis in 2005 it raised to 3% and to 3.9% in 2006, it was kept controlled at that percentage by the government since today (PEST analysis of Malaysia 2011). Billabong will also have to watch over the cost of living in Malaysia, to see whether people can afford to buy their products. Fortunately the cost of living in the country is relatively low in comparison to other occidental countries (PEST analysis of Malaysia 2011). Concerning the exchange rate, one Australian dollar is almost three times the Malaysian Ringgit and is remaining stable according to the AUD/MYR chart (Australian dollar 2010) this can be favorable to Billabong due to the low cost of living in Malaysia and it can be an advantage in the purchase of raw material in the country for the manufacture of products. As being newly opened up to foreign investors it is currently the best period for a company to enter the market (PEST analysis of Malaysia 2011). With a strong and healthy increasing growth of the economy it would be profitable for Billabong to develop in Malaysia.

Socio-cultural analysis

The Malaysian population can be separated into four ethnic groups: the Malays (Muslims), Chinese, Indians and Indigenous people (PEST analysis of Malaysia 2011). This information can be utilized by Billabong for them to know what kind of product can be suitable for each ethnic group and the company can thus make a greater variety of products for specified customers. Officially it is an Islamic country and Malay is the current language spoken there (PEST analysis of Malaysia 2011). Using this, Billabong can adapt its products and its advertisements to the Islamic culture of Malaysia. Demographically people from 0-14 years are about 32.2%, 15-64 years: 62.9%, 65 years and over: 4.8%( PEST analysis of Malaysia 2011), this data is important for the company to know which product will go along each age categories.

Technological analysis

Being a complete developed country Malaysia is one of the references on terms of technology. The country is doing a great effort so as to always improve the communication infrastructure and introduce new technologies, for example, the fiber optics, broadband, wireless and cellular, ATM and ISDN(PEST analysis of Malaysia 2011) and nowadays with the rise of the internet access and social networking such as Facebook and Twitter this can facilitate

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