Case Study Cloud 9 (Chapter 3)

Your task is to research the retail and wholesale footwear industries and report back to the audit team. Your report will form part of the overall understanding of Cloud 9’s structure and its environment.
You should concentrate your research on providing findings from those areas that have a financial reporting impact and are considered probable given Cloud 9’s operations. In conducting your research, you should consider the following key market forces, as they relate to Cloud 9’s operations. * General and industry-specific economic trends and conditions * Competitive environment * Product information * Customer information * Supplier information * Technological advances and the effect of the internet * Laws and regulatory requirements

Solution
Students may have identified some of the following key market forces based on their research.

Economic characteristics/Supplier information/Regulatory
The Australian footwear market is expected to grow at an average of approx 2% each year to 2012: * Household consumption expenditure has decreased over the last few years with petrol and housing prices increasing. Expenditure is mostly going towards travel and leisure rather than clothing or footwear. * Tariff reductions have led to a decrease in prices for consumers * Lower pricing levels and improved quality of Chinese imports have resulted in large volume increases. Cloud 9 Pty has responded well to this shift by obtaining the majority of its good from their China distribution plant. * The strength of the Australian dollar against the US dollar has improved the foreign currency exchange issues * Having a retail outlet/store increases the risk of theft (and has been proven) and need for skilled or at least consistent labour. * Consider effect of recent events e.g. Global