How Increase Employees Wages

Case 10; Billabong

Billabong is an Australian company, which manufactures all kind of surf wear and surf accessories. Billabong is a major exporter and most of its sales revenues are generated in the United Stated. Therefore, the exchange rate between the Australian dollar and the US dollar is a main factor determining the company’s profitability.

Sales in U.S are closely linked to the rate that the Australian dollar is exchanged for US dollar. When the Australian dollar drops against the US dollar Billabong products become cheaper in the U.S. Therefore, increasing the demand and raising sales. However, when the value of the Australian dollar appreciates, prices in the U.S. simultaneously increase causing sales to go down.   

The global financial crisis during 2008 and 2009 caused the value of the Australian dollar to fell against the US dollar. While most businesses were affected by the severe crisis, Billabong benefited from this. Sales increased not only in the U.S., but also elsewhere as they were able to reduce their production cost in Australia, allowing Billabong to decrease their prices in the foreign market and as result sales revenues from exports increased.

In 2009 the value of the Australian dollar unexpectedly raised thus decreasing the company’s profitability as sales revenues in the U.S. dropped leading to a 10 % decline in profit. Foreign exchange represents a major challenge for internationals companies as it difficult to forecast currency markets and exchange rates are uncertain. Changes in the currency market and in the economy of the countries a company exports can positively or negatively impact a company.