Financial And Strategic Management For Nonprofit Organizations – External And Internal Environmental Analysis

External analysis

In today`s competitive environment, it has become extremely important for any business organization to look out for factors existing in the external environment so that it is easily able to combat with the factors present in the external environment. The business is required to utilize its competitive advantages and then use them for the benefit of the firm. There are various strategic tools present which can be utilized effectively in order to ensure that the given business is being able to use them to their competitive edge. The company chosen for the given assessment is the Billabong International Limited (Choose Your Experience | Billabong, (2018). The company is a surf company which was primarily established as a clothing retailer which produces goods like watches, backpacks, snow board and other related items under different brand names.

The primary aim of the given report is to present an external and internal environment analysis of the company which can further be used to analyse the strategic problems being faced by it and present alternatives for the same (Hill, Jones & Schilling, 2014).

The external environmental tool like the Michael Porter`s Five forces can be described as an effective tool to analyse the relevant factors present in the industry in which any company operates. According to Wheelen et al., (2017), the five forces have a significant impact on the profitability of the firm in which it operates in. The five factors which tend to have a huge impact are given as follows:

• Threat of New Entrants
• Bargaining Power of Suppliers
• Bargaining Power of Buyers
• Threat from Substitute Products
• Rivalry among the existing players.

In the given section, the Porter`s Five forces of Billabong International will be analysed in order to derive strategic problems and their solutions.

The threat of new entrants is a measure which is popularly used to analyse the different companies who may be willing to enter into a given industry in order to be able to plan accordingly. The new entrants in the Consumer durables and apparel industry bring about innovation, new processes and thus have put a pressure on the given company by following a low pricing strategy and offering a unique value proposition to the customers. The Billabong Company needs to look after the strategies in order to ensure successful business. The company can tackle these problems by bringing about new services and products and developing an economies of scale.

The bargaining power of suppliers in the given industry is quite strong and various companies in the apparel industry purchase their raw materials from the external suppliers who have a dominant position in the market. These suppliers using their negotiation techniques in order to extract high prices from companies like Billabong. Hence, the presence of these factors tends to lower the profitability of the firm. Billabong can combat against these issues by building an efficient supply chain system where they do not have to source from just one supplier but multiple suppliers so that the power gets distributed. It can take reference from Wal-Mart and Nike and aim to build a dedicated their party relationships with their suppliers.
Bargaining Power of Buyers

Threat of New Entrants

The buyers are the customers who tend to purchase the products and hence they would like to have the best offerings which are available at the minimum price. Hence, this demand which is made by them tends to put a pressure on the profitability of the firm in the long run. As the powerful customer base tends to put pressure on the company, Billabong can start building a large base of customers then. For this they will be able to reduce the bargaining power of the different buyers and also be able to provide an opportunity to the firm to be able to streamline its sales and the production process.

It can also bring about new products and seek discounts on the same in order to be able to attract the given customer base. If the company starts taking in new products then it will be able to reduce the competition which is presently prevalent.

The threat of substitute products or services can be defined as a threat whereby the new products or services will be able to meet similar customer needs in a different manner. In such a scenario, the profitability of the industry takes a toll. The threat of substitutes for Billabong comes from the different alternative products. The company can combat against these threats by becoming service oriented along with being product oriented (Barney, 2014).Billabong can also increase the switching cost for the customers and lastly understand the need of the customers.

The rivalry in the given industry is relatively very huge, however, if Billabong is able to build sustainable differentiation it will be able to combat against this factor.

• Strong brand name
• Efficient acquisitions with various brands
• Premium quality products being offered

Although the external environmental factors present in the business tend to play a great role in determining the success of the firm, it is also very important for the organization to ensure that it makes use of its internal components in a manner such that the firm will be able to survive in the long run and fight against the different factors which exist in its environment (Chernev, 2018).  Hence, a strategic management tool which can be used in order to assess the internal environment of the business is the SWOT Analysis. The SWOT Analysis tool is an efficient tool in analysing the internal process of a business and for this purpose, a SWOT analysis of the Billabong international company. A value chain analysis will also be done on the same.

Bargaining Power of Suppliers

Strength

The strength can be defined as an internal advantage which a company may possess and utilise in order to combat against the external factors which may be present in the external environment of the given organization. The strengths of the company are its good brand name and product offering (Bettis et al., 2017).

Weakness

The weakness of a company can be described as an internal disadvantage which the company may have which weakness its position in the external environment of the business organization. The weaknesses of Billabong are given as follows:

• High selling prices- The selling prices of the products are quite high which then reduces the profitability of the firm (Rothaermel, 2015). 
• Failing in its marketing activities- The company does not have a strong marketing strategy which will be to successfully promote its products
• Management- Recently, the management of the company was held for faulty practices and they were sent to jail (Meyer, Neck & Meeks, 2017).

Opportunity

An opportunity can be described as a factor which is present in the external environment of the business and goes a long way in supporting it to perform well.  If these opportunities are able to be utilized well, the firm can reach to new heights (Foxall, 2014).  The opportunity is the market present.

Threat

A threat can be described as an external component which may hamper the business activities of the firm. If this threat is not planned against then, the business may shut down. The threats of the Billabong have been given as follows:

• Other competitors present in the market like Quicksilver and Hurley
• High cost of raw materials (Mooradian, Matzler & Ring, 2013). 
• Slowdown in consumer spending

The value chain analysis is generally used in order to analyse the primary activities of the firm and identify those activities which will be able to satisfy consumer needs. For the analysis a three step process is generally adopted

• Identification of the primary activities (Bryce, 2017). 
• Determination of how the services add value
• Evaluation of current practices

Primary Activity	Value Analysis	Current Practices
Selling apparels	Reliable  quality Premium brands Attractive offers	The quality is highly reliable The Store offers premium brands to the customers It does not provide any attractive offers to its customers
After sale services	Return Policy Damage repair (Morschett, Schramm-Klein & Zentes, 2015)	There is a return policy in place. There is no damage repair guarantee
Attempting sales activities	Reliable performance at checkout Huge display	The performance at checkout is not highly reliable The display of the firm is good
Customer care	Efficient and fast responses Well trained staff	The customer care is not that efficient.

• The brand name- The brand name of Billabong is very strong and the company has been in business since a long period of time which further strengthens its position in the environment.
• Relationship with other brands- The Company has various acquisitions with other companies which enables it to be in a favourable position (Eden & Ackermann, 2013). 
• High quality products- The quality of the products being sold by the company are very high.

Therefore, from the external and internal environmental analysis, the following could be figured out. The main strategic issues being faced by the company are as follows:

• Management- Recently in 2016, the CEO of the company, Billabong was held for undertaking faulty activities and went behind the bar for this purpose. The company had been performing well earlier, however from the year 2008, the company has been facing problems with respect to the performance and its bidding process has been going on. Recently it adopted a corporate turnaround strategy which proved to be quite beneficial and the company has been achieving profits. However, the fraud regarding the CEO, in 2016 has brought it back in spotlight. He had been sent to jail which greatly brought down the image of the company in the eyes of the customers and also brought down the management structure. The company has been poorly managed since then and needs a structured management for that purpose (Stead & Stead, 2014).  A new chief executive officer may be appointed for that purpose.
• Marketing- the Company Billabong international, does not have a well-defined marketing plan in place, the company seeks to operate in the Australian market since a long period of time but however it has not been able to successfully form a marketing mix and be able to utilise the new tools of marketing in order to attract the target audience. The customers are not aware of the offerings of the company which leads to a weakness and issue on the side of the company and affects its profitability (Ginter, 2018).

• Hire external marketing team- The Company Billabong International is required to revive its marketing plan and ensure that it is successful in being able to provide the different target market with products that will be able to increase its profitability in the current scenario. It needs this marketing plan to revive its operations and also decide upon its pricing and promotional mix. As observed, the price tends to form a weakness and thus, it has been identified that the company needs to take external help in order to improve. A period of nine months will be allotted to the company and it is during this phase that the given company would be required to plan strategically and come back in shape.

• Improving the management team-The management of the company is comparatively very weak and therefore for this purpose, the company is required to ensure that it is successfully able to engage in the formation of a new management team which will be able to guide the company and ensure its success. If the company is not able to do so it may fall back against its competitors (Lasserre, 2017).  Hence, for this purpose a time frame of eighteen months may be chosen.

Sr. No	Activity	Resources	Time frame	KPI
1	Revive marketing strategy	External marketing company Participation of suppliers Participation of various units and alliances	Six months	Increase in sales Increase in profits Increased advertisement views
2	Management team formation	HR Company to be assigned for this purpose	1 year	Better operations Increase market share Increase sales

Activity

Months

Quarter 1

Quarter 2

Quarter 3

Quarter 4

Quarter 5

Quarter 6

Hiring external marketing company

Planning

Implementation

Controlling

Feedback

Hiring external hr company

Recruitment

Selection

Induction

Review of results

 

Conclusion

Therefore from the given analysis it can be said that although Billabong has been in business since a long period of time, it has not been able to perform well in the last few years. In 2008 the  company was on the verge of shutting down, however due to the consistent efforts being made on the side of the management and its corporate turnaround strategy, it was able to achieve considerable success. However, due to the fraudulent activities of the given management, the company was not able to achieve considerable amount of success. The report has analysed the internal as well as the external environment of the business and certain strategic issues with a strategic corrective plan has been identified.

References

Barney, J. B. (2014). Gaining and sustaining competitive advantage. Pearson higher Ed.

Bettis, R., Gambardella, A., Helfat, C., & Mitchell, W. (2014). Quantitative empirical analysis in strategic management. Strategic Management Journal, 35(7), 949-953.

Bryce, H. J. (2017). Financial and strategic management for nonprofit organizations. Walter de Gruyter GmbH & Co KG.

Chernev, A. (2018). Strategic marketing management. Cerebellum Press.

Choose Your Experience | Billabong. (2018). Retrieved from https://au.billabong.com/

Eden, C., & Ackermann, F. (2013). Making strategy: The journey of strategic management. Sage.

Foxall, G. (2014). Strategic Marketing Management (RLE Marketing) (Vol. 3). Routledge.

Ginter, P. M. (2018). The strategic management of health care organizations. John Wiley & Sons.

Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an integrated approach. Cengage Learning.

Lasserre, P. (2017). Global strategic management. Macmillan International Higher Education.

Meyer, G. D., Neck, H. M., & Meeks, M. D. (2017). The entrepreneurship?strategic management interface. Strategic entrepreneurship: Creating a new mindset, 17-44.

Mooradian, T., Matzler, K., & Ring, L. (2013). Strategic marketing: Pearson new international edition. Pearson Higher Ed.

Morschett, D., Schramm-Klein, H., & Zentes, J. (2015). Strategic international management (pp. 978-3658078836). Springer.

Rothaermel, F. T. (2015). Strategic management. McGraw-Hill Education.

Stead, J. G., & Stead, W. E. (2014). Sustainable strategic management. Routledge.

Wheelen, T. L., Hunger, J. D., Hoffman, A. N., & Bamford, C. E. (2017). Strategic management and business policy. Pearson.