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BRIEFING PAPER
TO: Board of directors
FROM: External consultant
SUBJECT: ENVIRONMENT AND RISKS
DATE: 7 DEC 2021
This briefing paper the environment in which SmartWear operates and consider how this might impact
its business model, mission and strategic goals.
GENERAL ENVIRONMENT
POLITICAL
Noria is experiencing political uncertainty because of its coalition government,who many influential
commentators believe will not last for its full term of office. Hence There is an austerity programme
imposed by government because of reduced taxation revenue.
Political environmental is UNFAVOURABLE for us as The government more intervere with business
and introduced new regulations againsts the budget retailer such smartwear. it gives lowers business
confidence and reduce the amount of government spending.This may be difficulty to achieving our
strategic goals and objective of continued investment in order to achieve business growth.
ECONOMY
Noria face in the middle of a deep economic recession since last three years. Price inflation has been
running at nearly 7% for over a year and Finance Ministry has forecast negative economic growth for
next year as well as.
Intially, smartwear has been able to profit from the growing number of price-sensitive consumers, who
have switched from the more high-end of the clothing retail market to budget retailer like SmartWear.
However now the economy situation in noria had made trading conditions tough for business, as
Customers disposal income are reducing.
Economy environmental is may be FAVOURABLE for us as currently, our customers income are very
low and they are more price sensitive so they are switched from luxuries clothes to purchase clothes
from budget retailer like Smartwear.This will be increase our revenue and market share, also maintain
a successful and viable company that delivers healthy financial returns to our investors and
shareholders.
SOCIAL
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Adverse political and economy factors have contributed to record high levels of unemployement and a
steady decline in the standard of living of the general population. More than 8% of the adult
population currently unemployement.
Social environment is UnFAvoRABLE for us as increase in unemployement will lead to reduce
consumer power or spending.This will adversly affect our revenue and profitability.
TECHNOLOGY
There have been several new entrants into the market in the past few years who only sell online.many
customers are moving towards to online stores. This shows that technological environment is
UNFAVORABLE for us.
However, smartwear has never exploited e- commerce opportunities.We need to invest technology to
create a own websites.
Conclusion
Overall environment are UNFAvROBLE to smartwear, which means smartwear difficult to achieve the
strategic goals and our mission. It will may cause our prolonged business.
(b)
Major Risk Mtigation actions
Smartwear consider diversifying its business to
other countries. unlikely, Don't put on the ball in
Political Risk
one busket. It is already present in two other
Noria is experiencing political uncertainty because countries in european continent.
of its coalition government, which may not last for
Create a strong relationships with governments.
its full term (unfavorable)
Further E-business will help smartwear become
Political risk creates problem in long- term growth
globalization our products.
of the business.
Currently, customers more prefers to buy the
products and cloths through online suchs as
amazon , flipkart etc..,
Strategic risk
As per major institutional investors, strategic Smartwear should revisit it business strategies to
direction of the company is wrong and that improve profitability and market share
smartwear has become out of touch with its core Also, the smartwear should be analysis the
customers. customers demand and needs to provide better
strategic direction of the company.
Strategic risk is takes time to affect the overall
business.It leads going concern and become
It should also consider having CDMS And
closure down the business.
commerce/online presence
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Financial risk
Current financial statement do not present the
company in a particularly strong position. The Smartwear should review business strategies and
sales and profit levels have fallen significantly over come up with strategies which can boost sales
the last years. and profit, such as online sales etc..,
Financial risk will lead to financial issues for the Also consider smartwear needs to reduce its is
company, which will ultimately lead to going significant infrastructure costs and overheads cost
concern. which will lead high level of gearing ratio. in order to make profit.
It will also affect our strategic goals as that
delivers healthy financial returns to our investors.
Liquidity risk
The current state of company finances is such as
that recomending a dividend will deplete your cash
It should also focus on expenditing debt
reservers futher.
collections and delaying payments.
This shows that company is facing liquidity issues
having running finance credit facilities on standby
whereby it does not have sufficient liquid assets to
will also help our to run long period.
pay-off current liablities.
Liquidity risk will lead to financial issues and going
concern.
Exchange risk Smartwear can consider forward currency
contracts.
Smartwear sources its products directly from low-
cost economies in south east asia. It also It can also consider hedging option to minimize
operations in two more countries. the exchange risk .
Hence smartwear is exposed to exchange risk, Smartwear should be trade on own curreny and
Which means that any adverse movement in Trading at fixed contracts rates.
currency rates can affect smartwear's liquidity and
profitability.
Market share risk
smartwear focusing improving the profitability of
Investors have seen a siginficant fall in share price the business so that dividends can be rommended
value of smartwear. this due to fall in revenue and to restore investor confidence .
profitability of the company, due to which
smartwear is unable to announce any dividend
and difficult to raise share price.
Market share/competetive risk smartwear should explore e-commerce
opportunities and invest in CDMS in order to
There have been several new entrants into the protect this market share
market in the past few years who only sell online
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The convinienced and quality of service that these
e-retailers provide has proven to be very
appealing to smatrwear tradition customers, who
have shifted their shopping patterns and loyalty.
Supplier/ operational risk
Most suppliers have been working with Smart Buying department should be make a record on
Wear for more than five years, and there have every purchase from suppliers on system/ notes.
been no reported instances when purchase orders
have not been completed on time or in full. And also pay the amount on time or consider the
credit periods will be pay to suplliers within
Operational risk suddently affect part of period.
operation.It will leads to operation issues and may
be increase operation cost.
BEST REGARDS
EXTERNAL CONSULTANT
(C)
REPORT
TO: BOARD OF DIRECTORS
FROM: EXTERNAL CONSULTANT
SUBJECT: STRATEGIC POSITION IN SOUNTHLAND
DATE: MARCH 20X4
INTRODUCTION
This report Analyse the company’s strategic position in the Southland market to determine why
SmartWear appears to be performing so well in this particular country compared to Noria.
STRATEGIC POSITION IN SOUTHLAND
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Political stability:
Southland has a political stable compared than Noria which means experiencing political uncertainity.
It will be more suitable for Noria as stable business and conditions.
Also Southland is democratically elected government it is better than Noria election.which means It is
fully political leaders and others leaders are elected by people.
Economic conditions:
The rate of inflation is 1.4%( stable) in southland which it better than noria inflation rate of 2.2%. which
means the price of materials and products are stable compare than Noria. The average annual
earnings of people in southland is $51,700 it is higher than other two countries.
This shows that higher disposal of income as high business revenues.Which means the southland
people may be prefer high quality, branded shirts to wear. However, the smartwear may be face
challenging to operates low prices clothes in this country.
Globalization:
Southland have dominant business sectors of shipping and transportation compare than NORia, which
means the smartwear able to exporting our low price clothes to others countries also. this will be helps
to increase revenue and market share of smartwear.
Lower Unemployment rate:
Unemployment rate of southland is 6.2% in current years It is lower rate among other two
countries.This shows that the people have sufficient money to live inthis country.
Consumer debt:
The consumer debt of 67.5 %[and falling slowly].This shows that most of the consumers are pay the
amount of goods and services at the time of purchase without credit period. this will helps to reduces
our liquidation ratio and financial risk of smartwear.
BEST REGARDS
EXTERNAL CONSULTANT
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