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The main risk is brand dilution, so it is recommended that Billabong use a different brand when entering these new segments.
Another option for long-term success is to roll out a high end line of customized gear. The surfwear market is already priced at a premium level, demonstrating that credibility inhibits price elasticity. Therefore, a super-premium line can be introduced. This would put Billabong into competition with niche players, but Billabong's economies of scale and international distribution network enhance their ability to compete in the niche markets considerably. Despite fears of an economic downturn, there is long-run value in developing a high-end option, because the cyclical nature of the industry ensures that the market will recover.
On a more corporate-wide level, Billabong can assist their long-term competitiveness by establishing a corporate presence in the United States. The company has done an excellent job penetrating the Australian market, but there is still room for further penetration into the U.S. market. Moreover, the firm is still subject to considerable foreign...
They can reduce some of this risk by shifting some of their corporate functions to the United States. This reconciles their cost structure with their revenue streams, reducing foreign exchange exposure.
Another option is to insulate themselves from global economic downturns by producing store brands, or discount brands. Low-end apparel retailers are actively developing a market for such product, and Billabong has the existing design and production capabilities. They would need to keep at arm's length from these brands in order to maintain the integrity of their core brand, but would be able to shift profit emphasis during economic slowdowns from the Billabong line to discount brands, as the volume moves towards the lower-end products.
Works Cited
Kotelnikov, Vadim. (2008). Hierarchical Levels of Strategy. eCoach. Retrieved October 29, 2008 at http://www.1000ventures.com/business_guide/strategy_hierachical_levels.html
No author. (2007). Porter's Five Forces. QuickMBA. Retrieved October 29, 2008 at http://www.quickmba.com/strategy/porter.shtml
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