QUESTION 1

_____ refer to the forces of change whose direction and sometimes timing can be predicted.

		Uncertainties
		Trends
		Occurrences
		Scenarios
		Forecasts

2 points

QUESTION 2

Management institutes, certification agencies, and headhunting firms are examples of specialized intermediaries for:

		financial markets.
		markets for managerial talent.
		markets for products.
		auction markets.
		labor market.

2 points

QUESTION 3

_____ involves analyzing markets for their potential size, accessibility, cost of operations, and buyer needs and practices to aid the company in deciding whether to invest in entering that market.

		Search retargeting
		Unique selling proposition
		Rebranding
		First-mover advantage
		Market due diligence

2 points

QUESTION 4

Consumer safari refers to the initiatives taken by Unilever executives to spend a day with consumers in their homes to:

		understand how they use products.
		convince them to use more Unilever products.
		train them to make multiple use of their products.
		estimate how many products they use.
		help them set up cottage industries for their products.

2 points

QUESTION 5

_____ refer to the forces of change whose direction and pace is largely unknown.

		Uncertainties
		Trends
		Occurrences
		Scenarios
		Forecasts

2 points

QUESTION 6

_____ are straight-line, one-factor projections from present to future.

		Estimates
		Opportunities
		Scenarios
		Forecasts
		Plans

2 points

QUESTION 7

The United States is separated from Nigeria by 5,840 miles and the Atlantic Ocean. According to the CAGE framework this is a case of:

		emotional distance.
		economic distance.
		cultural distance.
		geographic distance.
		administrative distance.

2 points

QUESTION 8

The GDP of France is 2.113 trillion USD whereas Sierra Leone's GDP is approximately 4.812 billion USD. According to the CAGE framework, this is a case of:

		emotional distance.
		economic distance.
		cultural distance.
		geographic distance.
		administrative distance.

2 points

QUESTION 9

_____ occurs when a function is taken out of one's country of residence to be performed in another country, generally at a lower cost.

		Open sourcing
		Offshoring
		Exporting
		Importing
		Licensing

2 points

QUESTION 10

Which of the following is true of acquisitions?

		The acquiring company will be eligible for any financial help from the company whose shares it is trying to acquire.
		It affords the firm maximum control and has the most potential to provide above-average returns.
		The acquiring company enters into an agreement with the target business to pursue a set of agreed-upon goals while remaining independent organizations.
		The acquiring firm avoids the expense of establishing operations in the new country.
		The acquiring company gains control of another firm by purchasing its stock.

2 points

QUESTION 11

Which of the following statements holds true for the ISO 9001:2008 certification?

		Organizations which supply raw materials are barred from applying for the ISO 9001:2008 certification.
		Companies which meet the criteria of a minimum financial turnover can apply for the ISO 9001:2008 certification.
		The ISO 9001:2008 certification is a mark that a company's products and services have met quality standards.
		Companies that had achieved ISO 9001:2000 certification were exempt from being recertified to meet ISO 9001:2008 standards.
		ISO 9001:2008 certification specifically focuses on the environment.

2 points

QUESTION 12

_____ refers to buying goods and services from foreign sources and bringing them back into the home country.

		Open sourcing
		Offshoring
		Exporting
		Importing
		Farmshoring

2 points

QUESTION 13

The _____ is the contract between the exporter and the carrier, authorizing the carrier to transport the goods to the buyer's destination.

		letter of credit
		bill of lading
		customs invoice
		export declaration
		license

2 points

QUESTION 14

_____ is the document by which the exporter tells the importer to pay a specified amount at a specified time.

		Letter of credit
		Bill of lading
		Customs invoice
		Insurance certificate
		Bill of exchange

2 points

QUESTION 15

Which of the following can also function as collateral against loans?

		Certificate of origin
		Export declaration
		License
		Customs invoice
		Bill of lading

2 points

QUESTION 16

_____ refers to the financing granted against collateral, which can be the imported/exported goods.

		Angel funding
		Purchase Order Financing
		Secured financing
		Overdraft
		Cash advance

2 points

QUESTION 17

Which of the following is a contractual mode of entry into a foreign market?

		Greenfield ventures
		Licensing
		Joint ventures
		Acquisition
		Merger

2 points

QUESTION 18

_____ refers to an organization that assists foreign companies in exporting their products to Japan by providing free-market entry information and business-partner matching as well as some subsidies.

		Japan Bank for International Cooperation
		Japan External Trade Organization
		Development Bank of Japan
		Master Trust Bank of Japan
		Japan Post Bank Company

2 points

QUESTION 19

Which of the following statements holds true for a nonentity joint venture?

		In a nonentity joint venture, the partner with the smaller capital investment loses control over the joint venture after a period of two months.
		In a nonentity joint venture, each of the partners contributes capital and resources in exchange for an equity stake and share in any resulting profits.
		In a nonentity joint venture, the control of the joint venture is in the hands of the party which makes the larger capital investment.
		In a nonentity joint venture, there is no contribution of capital to form a new entity.
		In a nonentity joint venture the benefit gained is in the form of collective profits rather than individual profits.

2 points

QUESTION 20

The _____ is a legal document issued by a bank at the importer's (or buyer's) request wherein the importer promises to pay a specified amount of money when the bank receives documents about the shipment.

		export declaration
		license
		letter of credit
		bill of lading
		customs invoice

2 points

QUESTION 21

_____ refers to the constellation of business, corporate, and international strategy elements, which managers must consider when making decisions.

		Five Forces Analysis
		Cluster model
		Strategy diamond
		Porter's four corners model
		Strategic grouping

2 points

QUESTION 22

Strategy implementation is the process of:

		deciding which strategies to follow in order to diversify.
		performing all the activities necessary to do what has been planned.
		deciding the businesses in which an organization would compete.
		addressing the issue of the kind of strategies an organization would follow.
		devising plans to add value to the existing line of business.

2 points

QUESTION 23

The _____ function requires monitoring performance so that it meets the performance standards established by the organization.

		controlling
		leading
		planning
		organizing
		job design

2 points

QUESTION 24

_____ refers to the sequence of activities that include the various steps of the supply chain as well as additional activities, such as marketing, sales, and service.

		Value chain
		Differentiation
		Cost leadership
		Scope
		Homesourcing

2 points

QUESTION 25

Outsourcing involves:

		diversifying into a new business.
		the sale of products or services in one country that are sourced in another country.
		the company delegating an entire process to the outsource vendor.
		guiding the choice of markets that a firm competes in.
		performing a service by staff from within an organization and also by an external service provider.

2 points

QUESTION 26

The U.S. fast-food chain Sonic will only open new outlets in states that are adjacent to states where it already has stores. This is an example of:

		differentiation.
		increasing vertical scope.
		diversification.
		offshoring.
		increasing geographic scope.

2 points

QUESTION 27

_____, which are a part of the SWOT analysis, assess the external attractive factors that represent the reason for a business to exist and prosper.

		Strengths
		Weaknesses
		Threats
		Opportunities
		Strategies

2 points

QUESTION 28

_____ refers to the number of different topographical markets in which an organization participates.

		Geographic scope
		Value chain
		Differentiation
		Cost leadership
		Offshoring

2 points

QUESTION 29

The first step in the planning process is:

		establishing organizational objectives.
		formulating and ensuring the effective implementation of plans.
		the SWOT analysis.
		identifying multiple ways of achieving organizational objectives.
		monitoring the progress and evaluating the success of the plans.

2 points

QUESTION 30

In Holland, KFC makes a potato-and-onion croquette, while in France it sells pastries alongside chicken. KFC:

		has centralized its business processes to enable it to provide the services mentioned.
		assumes that consumer needs and desires vary by country.
		assumes that the world is flat.
		sells the same products in the same way in every country.
		is following the cost-leadership strategy.

2 points

QUESTION 31

An automobile giant headquartered in the United States sells high-end bikes across the world. It wants to enter an emerging market. Customers in the market cannot afford the types of accessories used in the bikes. Thus the regional branch of the organization makes an autonomous decision to remove the accessories and to offer a toned-down version of the bikes to compete in the emerging market. This decision is accepted by the headquarters on the principle that the man on the ground is the best judge of local conditions. The above serves as an example of a(n):

		decentralized organizational structure.
		reverse engineering.
		centralized organizational structure.
		reverse innovation.
		open sourcing.

2 points

QUESTION 32

Nike products are manufactured in factories in countries such as China, Vietnam, Indonesia, and Mexico. Wholesalers, retailers, agents, and brokers are intermediaries who help in bringing the products to the consumer. These intermediaries bring the products from the factories to the consumers. They serve as an example of:

		product branding.
		market positioning.
		market segmentation.
		channel of distribution.
		social marketing.

2 points

QUESTION 33

Which of the following statements holds true for a global brand?

		It refers to the brand name of a product that has worldwide recognition.
		It refers to the marketing strategy in which a firm marketing a product with a well-developed image uses the same brand name in a different product category.
		It refers to products that make the world less flat because of lack of recognition across countries.
		It refers to the product that is distributed nationally under a brand name owned by the producer or distributor.
		It refers to the changing the identity of a product, relative to the identity of competing products, in the collective minds of the target market.

2 points

QUESTION 34

An organization that manufactures readymade cotton shirts sources the raw material from all over the world. It does this as a precaution against the failure of one or more companies to deliver the raw materials. The above serves as an example of:

		open-sourcing.
		multisourcing.
		sole-sourcing.
		home sourcing.
		outsourcing.

2 points

QUESTION 35

Which of the following holds true for product adaptation?

		It refers to the company strategy of modifying an existing product in a way that makes it better fit local needs.
		It refers to the total composite of products offered by a particular organization.
		It refers to the strategy of taking the company's current products and selling them in other countries without making changes to the product.
		It refers to the creation of a new name, term, symbol, design, or a combination of them for an established brand with the intention of developing a differentiated position in the mind of stakeholders and competitors.
		It refers to the strategy of creating an entirely new product for a given local market.

2 points

QUESTION 36

In marketing, market segmentation refers to the:

		process of dividing a larger market into smaller markets that share a common characteristic, such as age, gender, income level, or lifestyle.
		combination of the four Ps of marketing that can be customized for different countries.
		commerce areas where because of price differences across countries, consumers are able to cross international borders to legally purchase products at lower prices than in their home country.
		commerce areas where vendors purposely deceive buyers by altering products and then selling them as branded products at a bargain cost.
		set of expectations, memories, stories and relationships that-taken together-account for a consumer's decision to choose one product or service over another.

2 points

QUESTION 37

In marketing, which of the following holds true for counterfeit markets?

		It refers to the process of dividing a larger market into smaller markets that share a common characteristic, such as age, gender, income level, or lifestyle.
		It refers to the trade of goods and services that are illegal in themselves and/or distributed through illegal channels.
		It refers to the commerce areas where, because of price differences across countries, consumers are able to cross international borders to legally purchase products at lower prices than in their home country.
		It refers to the commerce areas where vendors purposely deceive buyers by altering products and then sell them as branded products at a bargain cost.
		It refers to the secretive, unregulated (though often technically legal) trading in commodity futures.

2 points

QUESTION 38

_____ refers to buying raw materials, components, or services from one supplier exclusively, rather than buying from two or more suppliers.

		Open-sourcing
		Multisourcing
		Sole-sourcing
		Home-sourcing
		Outsourcing

2 points

QUESTION 39

_____ refers to a situation which means that there is no more stock of the company's product.

		Stock of record
		Stock-check
		Safety stock
		Stock call
		Stock-out

2 points

QUESTION 40

Which of the following statements holds true for the indirect channel of distribution?

		It refers to the shortest channel of distribution, consisting of just the producer and the end consumer.
		It refers to the combination of the four Ps of marketing that can be customized for different countries.
		It refers to a channel of distribution which contains one or more intermediaries between the consumer and the producer.
		It refers to a channel of distribution where the customer is the first and not the last link in the distribution chain.
		It refers to the channel of distribution where the company sells its products to the consumers in other countries via the internet without using local retailers.

BACKGROUND INFORMATION

Wallace & Davey Partners, Chartered Accountants is a mediumsize accounting firm located in Auckland with 4 audit partners, 7business advisor partners and 4 tax partners. The firm has beenappointed to audit Cool and Cute Children Fashion Ltd for the yearended 31 December 2016. The former auditors have been rotated offthe client. The engagement partner is Patrick Wallace, and you arethe audit manager assigned to this client. Your firm does not haveexperience in children fashion industry, but Wallace thinks it is agood opportunity to learn about the industry. The fee for thefinancial audit of Cool and Cute is $150,000, which is about 16% oftotal audit fees your firm generate. The company would also requireadvice on taxation and treasury. Since this is a first time audit,you accompanied Wallace to meet the senior management of theclient. The following is a summary of your notes from theinterviews with senior management of Cool and Cute ChildrenFashion.

NOTES FROM CLIENT INTERVIEW: T

he company profile

Cool and Cute Children Fashion is an Auckland companyincorporated in 1990. It was founded by Sally Hall, a formerchildrenswear buyer, and a mum. Hall spotted a gap in the marketfor quality and fashionable childrenswear and started the brandwith a mail order catalogue. Hallâs mail order catalogue was verypopular and soon after she opened the first Cool and Cute retailstore. By 1994, Cool and Cute headed into Australia as a mail ordercatalogue, opening its first Australian store three years later.Cool and Cute adapted to ecommerce in 2001, launching atransactional website to service its Australasian markets. Cool andCuteâs rise seemed unstoppable in the early 2000s. It secured itsfirst US wholesale partner Nordstrom in 2002, and in 2003 addedAustralian department store David Jones as a distribution channel.In 2004 it listed on the NZ stock exchange and opened franchisepartner stores across the Middle East. Retail stores in the US,franchises in Singapore, Malaysia, Indonesia, South Africa andPakistan followed, along with the companyâs first ecommerce websitein 2006. Around that time, the founder Hall stepped down from theBoard, leaving the directors to find a new managing director. Sincethen, the company has changed three Managing Directors. The fastexpansion of Cool and Cute was heavily financed through debts,which contributed to a highly geared financial position. It createdpressure for the company in serving the high level of debts. Thecompanyâs expansion ceased in 2007 and its shares price peaked inJanuary 2007 at $4.95 per share. By November 2016, the share pricedropped by 60% to $1.98. As of 2015, the company closed its storesin nearly all international markets, with just 92 stores remainingacross Australia, New Zealand and Ireland. Market commentatorsbelieve that the deterioration of Cool and Cuteâ financialperformance were largely because its inability to sustain the rapidglobal expansion. 4 Despite the highly competitive retail market,the core retail businesses in New Zealand and Australia haveperformed well in the current financial period and progress hasbeen made to improve stock efficiency. Despite the difficulties inperformance, the new Managing Director Neil Jenkins, who wasappointed in June 2015, is confident that the company can be turnedaround because the brand is still strong and well recognised. Thecompany also has reduced net banking debt by $20 million, and itsbanking facilities are secured until the end of 2017. Before he wasappointed as the managing director, Jenkins was an experienceddirector and was the CFO of a large retailing chain in NZ. At themeeting, you discovered that Jenkinsâ daughter works for your firmas an audit graduate. The new Managing Director Neil Jenkins ischanging its business strategy, which aimed at repositioning itselfin the market. The new MD has a turnaround plan. He says that âCooland Cuteâs must redirect its focus to customers, the style ofclothes parents desire to buy for their kids and enhance customersâexperience in the stores. To achieve this, investment will berequired in new design of products, marketing channels and onvarious customer communication mediums.â

Competition in the market

In recent years, clothing retailers in Australia and New Zealandhave struggled. Although Cool and Cute is the biggest player in themarket, it claims to have only 4.2% of the kids fashion market. Itcompetes with brands carried by department stores as well as smallboutiques such as Seed, H&M and Cotton On Kids etc.

Financial situation

Cool and Cute delivered a $9,079,000 after-tax loss for the yearended 31 December 2016, an improvement compared to the prior yearloss of $11,495,000. Jenkins said "the financial position of thecompany has improved significantly over the last year in particularand we have formed a very strong working relationship with thebank. Over the last 12 months, we have made significant progress inreducing inventory level. Our debts (interest bearing liabilities)also have dropped from over $60 million last year to around $40million this year. In our view, this is material and has createdthe platform for us to move forward."

The structure of the Board of Directors

The board of directors consists of five members: the ManagingDirector and four independent directors at end of 2016 financialyear. Three of the four independent directors are also members ofthe Audit Committee. The Company has a formal Code of Conduct andEthics Policy. This policy provides guidance to all Directors,managers, employees and contractors of Cool and Cute Limitedexpected conduct when undertaking business on behalf of thecompany.

Communication with the prior auditor

With the clientâs approval, the predecessor auditor shared theiraudit file for the last financial year. You noted in the auditfile, a concern regarding the valuation of inventory. Thepredecessor auditor believed that the one of the inventory rangecalled âComfort maternity 5 wearâ had a long turnover time andshould be written off. The value of this particular label was 10%the total inventory. However management believed that it can stillbe sold at cost. Eventually no write-off was made for thisinventory range in the last financial statements. The previousauditor also noted that they questioned about the companyâs risk ofbreaching its bank covenant because the turnover was disappointing.The management argued that the company is in a transition periodand the poor performance was partially contributed by the failureof two suppliers because of a major flooding in a key supply regionin China.

Required:

A.Based on your audit planning, discuss which two Key AuditMatters should potentially be included in the Audit Report.

BACKGROUND INFORMATION

Wallace & Davey Partners, Chartered Accountants is a mediumsize accounting firm located in Auckland with 4 audit partners, 7business advisor partners and 4 tax partners. The firm has beenappointed to audit Cool and Cute Children Fashion Ltd for the yearended 31 December 2016. The former auditors have been rotated offthe client. The engagement partner is Patrick Wallace, and you arethe audit manager assigned to this client. Your firm does not haveexperience in children fashion industry, but Wallace thinks it is agood opportunity to learn about the industry. The fee for thefinancial audit of Cool and Cute is $150,000, which is about 16% oftotal audit fees your firm generate. The company would also requireadvice on taxation and treasury. Since this is a first time audit,you accompanied Wallace to meet the senior management of theclient. The following is a summary of your notes from theinterviews with senior management of Cool and Cute ChildrenFashion.

NOTES FROM CLIENT INTERVIEW: T

he company profile

Cool and Cute Children Fashion is an Auckland companyincorporated in 1990. It was founded by Sally Hall, a formerchildrenswear buyer, and a mum. Hall spotted a gap in the marketfor quality and fashionable childrenswear and started the brandwith a mail order catalogue. Hallâs mail order catalogue was verypopular and soon after she opened the first Cool and Cute retailstore. By 1994, Cool and Cute headed into Australia as a mail ordercatalogue, opening its first Australian store three years later.Cool and Cute adapted to ecommerce in 2001, launching atransactional website to service its Australasian markets. Cool andCuteâs rise seemed unstoppable in the early 2000s. It secured itsfirst US wholesale partner Nordstrom in 2002, and in 2003 addedAustralian department store David Jones as a distribution channel.In 2004 it listed on the NZ stock exchange and opened franchisepartner stores across the Middle East. Retail stores in the US,franchises in Singapore, Malaysia, Indonesia, South Africa andPakistan followed, along with the companyâs first ecommerce websitein 2006. Around that time, the founder Hall stepped down from theBoard, leaving the directors to find a new managing director. Sincethen, the company has changed three Managing Directors. The fastexpansion of Cool and Cute was heavily financed through debts,which contributed to a highly geared financial position. It createdpressure for the company in serving the high level of debts. Thecompanyâs expansion ceased in 2007 and its shares price peaked inJanuary 2007 at $4.95 per share. By November 2016, the share pricedropped by 60% to $1.98. As of 2015, the company closed its storesin nearly all international markets, with just 92 stores remainingacross Australia, New Zealand and Ireland. Market commentatorsbelieve that the deterioration of Cool and Cuteâ financialperformance were largely because its inability to sustain the rapidglobal expansion. 4 Despite the highly competitive retail market,the core retail businesses in New Zealand and Australia haveperformed well in the current financial period and progress hasbeen made to improve stock efficiency. Despite the difficulties inperformance, the new Managing Director Neil Jenkins, who wasappointed in June 2015, is confident that the company can be turnedaround because the brand is still strong and well recognised. Thecompany also has reduced net banking debt by $20 million, and itsbanking facilities are secured until the end of 2017. Before he wasappointed as the managing director, Jenkins was an experienceddirector and was the CFO of a large retailing chain in NZ. At themeeting, you discovered that Jenkinsâ daughter works for your firmas an audit graduate. The new Managing Director Neil Jenkins ischanging its business strategy, which aimed at repositioning itselfin the market. The new MD has a turnaround plan. He says that âCooland Cuteâs must redirect its focus to customers, the style ofclothes parents desire to buy for their kids and enhance customersâexperience in the stores. To achieve this, investment will berequired in new design of products, marketing channels and onvarious customer communication mediums.â

Competition in the market

In recent years, clothing retailers in Australia and New Zealandhave struggled. Although Cool and Cute is the biggest player in themarket, it claims to have only 4.2% of the kids fashion market. Itcompetes with brands carried by department stores as well as smallboutiques such as Seed, H&M and Cotton On Kids etc.

Financial situation

Cool and Cute delivered a $9,079,000 after-tax loss for the yearended 31 December 2016, an improvement compared to the prior yearloss of $11,495,000. Jenkins said "the financial position of thecompany has improved significantly over the last year in particularand we have formed a very strong working relationship with thebank. Over the last 12 months, we have made significant progress inreducing inventory level. Our debts (interest bearing liabilities)also have dropped from over $60 million last year to around $40million this year. In our view, this is material and has createdthe platform for us to move forward."

The structure of the Board of Directors

The board of directors consists of five members: the ManagingDirector and four independent directors at end of 2016 financialyear. Three of the four independent directors are also members ofthe Audit Committee. The Company has a formal Code of Conduct andEthics Policy. This policy provides guidance to all Directors,managers, employees and contractors of Cool and Cute Limitedexpected conduct when undertaking business on behalf of thecompany.

Communication with the prior auditor

With the clientâs approval, the predecessor auditor shared theiraudit file for the last financial year. You noted in the auditfile, a concern regarding the valuation of inventory. Thepredecessor auditor believed that the one of the inventory rangecalled âComfort maternity 5 wearâ had a long turnover time andshould be written off. The value of this particular label was 10%the total inventory. However management believed that it can stillbe sold at cost. Eventually no write-off was made for thisinventory range in the last financial statements. The previousauditor also noted that they questioned about the companyâs risk ofbreaching its bank covenant because the turnover was disappointing.The management argued that the company is in a transition periodand the poor performance was partially contributed by the failureof two suppliers because of a major flooding in a key supply regionin China.

Required:

A. Referring to the case facts, identify and explain potentialthreats to professional independence. Discuss possible safeguard toaddress each threat?

RETL 485 Lecture Notes - Lecture 2: Swot Analysis, Microsoft Powerpoint, Human Resources

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