Cloud Nine Ltd Audit Assessment - Case Study Example

Cloud Nine Ltd Audit report Name University Date Cloud Nine Ltd Audit report Introduction The contents of the report are relevant data collected from Cloud 9 pty Ltd. The purpose of the report is to examine the main areas that impact the company’s performance in business. The report seeks to inform audit procedures during planning. The report will ultimately elaborate the inherent effects of internal and external business environments. The assessment explores the material areas that bear financial impacts on the operations of the company. This is intended to inform the company on inherent risk factors and advise the company on possible ways of mitigating the risks and challenges it currently faces. In obtain to get adequate information on the company, the assessment follows a historical overview of the company followed by analysis of the environment, competitive advantage, the strengths and weaknesses of the major competitors, the main suppliers and the leading market segments. In addition to these, the main products the offers and the market leverage as well as Cloud nine’s current financial capabilities. This assessment is done by W&S auditors having been enlisted for the Cloud 9 pty Ltd: Background Cloud nine limited was established in the late 1970s under the name Cloud nine incorporated. The company is currently a leading footwear supplier and a strong force in global footwear market. The company currently has stores and production plants in not only Australia but also other parts of the world. With the recent surge in competition and global economic recession, the company has felt the ripples. The company changed its name in 1993 from Cloud nine incorporated to Cloud nine pty limited and has since been in the forefront in acquisitions and opening new outlets and production plants. Current Economic Condition The footwear market has over the years registered substantial changes. New product models and brands have been launched. However, the market size and increasing desire for unique products has off set the influence new entrants and flooding have on established brands sales. The rise of new economic powerhouses has direct impacts on the performance of the company. This ultimately bears effects on the financials of the business. As noted in Cloud nine’s scenario, foreign influence is a fundamental factor. Dealing with a number of stores located all over the globe, the changes in currency values have directly influenced production and sales both domestically and internationally. For instance, the company is considering importing its products from their production units in China. This indicates a trend that is likely to influence operations and has its inherent risks. Global economic meltdown has notable impacts on business performance. Companies react to such changes in world economic hard times by cutting down on expenses and lowering costs of production. The footwear market is diversified and has considerable definite segments. The effects of the rise of new economies have provided not only new business opportunities but also offer the company a solution in cases of n high production costs. After evaluation, it is apparent that production of the company’s footwear brands in China is ideal. Given the fact that production is labour intensive, considering alternative labour sources is inevitable. The proximity between the two countries is a vital factor to consider. Cloud faces a dip in production given Australia’s economic future worries. The present footwear industry faces various problems brought about by the changing consumer tastes. Over the years, different companies and outlets have reported growth in sales. On the other hand, it is important to note most of the sales were based on specific brands. The dynamics of each footwear category influence the overall financial returns a company registers. For instance, research notes that the first category, which accounts for 30% of the total footwear sales is athletics shoes. The established companies control the largest market share. This category is controlled by the two giants Adidas and Nike. The second category is the casual footwear which includes women and men’s footwear. Unlike the athletics category, this category relies on superior design and style as the marketing niches. This category accounts for f40% of the total market sales in every fiscal year. Analysts point that this category requires an innovative approach and an adequate understanding of the dynamics of the market. The factors that influence the purchase of this category are not static. In this sense, the main option companies in this category have is ensure a unique product portfolio in order to challenge the myriad companies in the industry. It should be noted that market forces do not have direct influences on consumer behaviour in this product category. Additionally, the prevailing economic conditions have no significant effects on purchases. The last category includes the other footwear products whose consumption is independent of class, application and consumers’ sex. Cloud nine footwear products are mostly category two products. In spite of the tough competition and marketing advantage that major athletics footwear companies have, Cloud nine has a strong market presence and realizes profits every financial year. Cloud nine footwear limited contributes significantly to the success of the footwear industry. Whereas the world acclaimed brands outsell the small companies in athletics wear, the difference in profits care greatly reduced when compared to Cloud nine. This is possible because of the company’s diversified products and a strong product portfolio. Cloud understands the need for superior designs and vast markets in ensuring brand and company success. The operational structures have varied impacts on the overall performance. Whereas a centralised system enables easy evaluation and audit of the internal environment, it has negative results on the productivity of each employee or department. One of the main strategies the company has is to increase the quality of their products. As noted in the previous paragraph, the second category requires total innovation and provision of unique products, which fuse elegance and business. A centralised system is not appropriate in operations if the company is to realize this ambition. Cloud nine has different production plants that operate independently. In this approach, the company seeks to enable innovation and incorporation of consumers’ needs and lifestyles into every product their release. The second product category in which Cloud nine’s products fall has cyclical tendencies. However, this tendency is often checked by offering an array of products. Notably, the Cloud nine sells athletics, men’s and women’s casual shoes and other footwear products. Considering overseas production units, the company should be concerned with fraud and theft risks. Risks posed by shipping the finished products to their respective market destinations are apparent. However, it is assumed that the company lays adequate emphasis on its goods on transit rules and regulations. Competitive Environment The footwear market is blotted with a number of companies. Compounded with liberal market regulations, the market presents to consumers an array of alternative choices. It is important to note that Cloud nine does not rely on a single product and brand in its product portfolio. The company has since inception relied on different brands designed to meet the varied consumer tastes. In order to compete established athletics footwear brands effectively, the company has been guided by innovation and has effected changes in its products in line with market trends. Given the cyclical nature of the demand for its products, the company has been steadfast in ensuring g that the disparities in sales are adequately reconciled by sales in other brands namely women’s and men’s casual wear. It is apparent that the company’s development strategy is hinged on the fact that established competitors have heightened competition and that it is futile to rely on one product at the expense of others. In this regard, the company invests heavily in creating a superior product portfolio. The main competitors include the world renowned brands Nike and Adidas athletics wear companies. The two giant companies control a sizeable section of the market. Apart from theses two giants, Cloud nine faces stiff completion from smaller companies that also rely on product quality and superiority as their selling points. Analysing the market share the two giant companies command per product category, it is evident that Nike and Adidas have unchallenged and an upper hand in athletics wears sales. The two companies control close to seventy percent of the first category global footwear sales. In the second category, a number of factors determine market dominance. The most notable is product design and consumer satisfaction. Cloud nine has an advantage in this category following its long history of product quality. In order to survive in a competitive business environment, a company has top constantly change its products and ensure that each product meets the present consumer needs (Farouq, 2007). This involves incorporating different design features and retaining the traditional aspects that the consumers use to identify the product. Timberland Boot Company is an example footwear producer that offers stiff competition to Cloud nine’s products. The company produces a collection of footwear that encompasses different sports apart from the mainstream sports and athletics. Cloud nine has differentiated its products to cover street wear, casual wear and also to serve extreme and sports activities not popular in many countries. An example of this is the extreme sports collection and the street collection. In order to tap into the increasing urban market, the company is integrating its product design with popular culture as seen in its street footwear. The entry of new companies has little effect on the company’s present market share. Having mastered the dynamics of footwear business, the company has learnt to develop new products to ward off threats new entrants pose. It is possible to state that the ability to survive in a market that is dominated by established brands emanates from sound policies and marketing strategies that ensure the consumer identifies with the brand and remain loyal over time. Besides, new entrants are apt to encounter significant barriers in a bid to enter the market. For instance, there is increasing cost of production, stiff competition and a dynamic market. Given these factors, new entrants require a certain period to provide substantial threats to Cloud nine, which is already an established brand name. Product Information Products often have a certain period upon which they face a downward trend in sales. The footwear industry is influenced by fashion trends. However, this does apply to all the products that Cloud nine offers. Apart from the ladies product brands, men’s casual footwear design are not subject to fashion changes over time. On the other hand, fashion icons and popular culture influence street brands. It is therefore apparent that some of the brands Cloud nine has in its portfolio, products that are influenced by trends. Customer Information The diversity of products that the company offers has resulted in the dependence on different customer groups. As noted in the analysis of major competitors, it is vital to observe that the company does rely on one product or shoe brand. On the contrary, the company designs an array of products that meet the needs and tastes of different sections of the society. It is notable that the company does not rely on a specific market segment but relies on economies of scale. There are no specific customers that the company holds superior or dear. The company’s mission is to ensure that each of its customers is treated perfectly and that the product lives up to the cost price. In order to identify fluctuations in customers, it is important to examine the sales returns from the different product categories. In Cloud nine’s case, the last financial year saw earnings increase in all categories. This is an indication of a substantial customer base in all the three footwear categories. Technological Advancements and Effect of the Internet The effects on technology can be viewed in two perspectives. The first perspective is the company’s application of technology to direct innovation and thereby ease production and secondly the role of technology especially the internet in advertising and company communication. Cloud nine’s strength lies in the ability to create flexible products and integrate current trends and tradition to create superior brands. Cloud nine employs the internet in the development of new products. Additionally, the company uses the social media to track their customers’ opinions and feelings toward their products. The company relies on technology to direct change in design, marketing and as well as research strategy. The footwear industry is influenced by the internet and technological advancements. Internet is fast changing consumers and creating a global culture where the society shares significant aspects of their social life. In turn, companies have had to shift their focus on designing products that have this emerging culture at heart. Legal and regulatory requirements Regulatory measures in business operations are different in different countries. Most of these regulatory measures are meant to protect the environment, the market and equally the local economy. The company’s intention to seek importation of its finished products from China is affected by legislations against imports into the country. Apart from environmental conservation laws, the most notable legislation that has significant effects on the company is the consumer protection law. The company is considering setting its production plants in countries where production costs are comparatively cheap. The consumer protection law profiles products from different countries and is likely to lock out the company from its traditional market on basis of substandard goods. References Farouq, H. (2007). Essays in Trade and Product Differentiation. Proquest Publishers. Read More