The University of the West Indies, St.

Augustine
Faculty of Social Sciences
Department of Management Studies

Assignment for: ACCT 3040 – Accounting Theory

Submitted to: KEVIN KALLOO

Submitted by:

NAMES STUDENT’S ID EMAIL

1. Alisa Rampersad 816025276 alisa.rampersad@my.uwi.edu
2. Jacelle Chuck 816025260 jacelle.chuck@my.uwi.edu
3. Phoebe Sinanan 816030657 phoebe.sinanan@my.uwi.edu
4. Starshah Sagram 816023990 starshah.sagram@my.uwi.edu
5. Rebekah Mahabir 816024517 rebekah.mahabir@my.uwi.edu

Date of Submission: 11th April 2023

Title of Research Report: Analysis of IWear’s Business Development

CERTIFICATION OF AUTHORSHIP: We, the members of Group All Stars certify that we are
the authors of this paper and that any assistance we have received in its preparation is fully
acknowledged and disclosed in the paper. We have also cited any sources from which we used
data, ideas, or words, either quoted directly or paraphrased. We also certify that this paper was
prepared specifically for this course.

ALISA RAMPERSAD

JACELLE CHUCK

PHOEBE SINANAN

REBEKAH MAHABIR

STARSHAH SAGRAM
 TABLE OF CONTENTS

PART 1
(a) Analyses the environment in which IWear operates and consider how this might impact its
business model, mission, and strategic goals. ............................................................................. 1
(b) Assesses the major risks presented by IWear’s current business model and suggests
appropriate mitigating actions to manage these risks.................................................................. 3
PART 2
(a) Analyse the company’s strategic position in the Wakanda market to determine why
IWear appears to be performing so well in this particular country compared to Atlantis. .......... 5
(b) Evaluate the strategic and ethical implications to IWear of the planned shop closures in
Atlantis and the withdrawal from Sokovia. ................................................................................. 6
PART 1

Required: Prepare a briefing paper to be presented at the next board meeting, which:
(a) Analyses the environment in which IWear operates and considers how this might
impact its business model, mission, and strategic goals.

In an attempt to analyze the environment in which IWear operates, it is crucial to assess

the company’s external environment. Upon reviewing the facts presented in the case study of
IWear, it can be clearly seen that this business operates in an environment that is dynamic and
rather competitive, since several new entrants have entered into the market. Being in this type of
environment can give rise to several factors that can ultimately impact IWear’s business model,
mission, and strategic goals. The various environmental factors will be sectioned out to analyze
the company’s external environment by conducting a pestle analysis of IWear. The pestle analysis
would seek to analyze IWear’s macro environment on a general basis by means of how the
company operates through the scope of its key external forces consisting of its political, economic,
social, technological, legal, and environmental factors.

• Political - The political factor is the influence that the government has on the company.
Atlantis system is a democratically elected coalition government that essentially is
composed of two political groups with representatives in the legislature. Wakanda and
Sokovia have democratically elected governments, allowing citizens to decide legislation
and appoint officials. More than likely, the absence of detailed/accurate customer
information posed as an issue, which can be caused by laws put in place around data
privacy and security causing the company’s inability to collect detailed customer
information to improve business development. This ultimately impacts its business model,
mission, and strategic goals negatively and puts them at a competitive disadvantage with
rivals.

• Economic- Economic factors are the determinants of the economy’s performance. Atlantis
has suffered from poor economic growth resulting from unemployment rates, interest rates,
and inflation rates which can have a direct or indirect impact on IWear's long-term sales
and growth. Fluctuations in economic growth as a whole can indeed affect customers'
buying power overall and negatively impact IWear’s business model, mission, and strategic
goals. Looking at the data of all three countries, the unemployment rates in Sokovia are the
highest and are increasing by the year as well as inflation rates and interest rates that are
rising as well which essentially led to IWear’s financial performance decreasing over time.

• Social - The social dimension aspects of IWear are namely; population growth rate,
average annual earnings, and a shift in shopping patterns. With a population that is
increasing especially in Sokovia, it is seen that IWear’s customers had a change in their
shopping patterns and loyalty as they much rather purchase from e-retailers. This trend
toward e-commerce created a high demand causing IWear to be left behind since they never
exploited these opportunities causing them to lose sales to the competition. This can
negatively impact IWear’s business model, mission, and strategic goals as they can face
consumer backlash. They need to stay on top of the trends to create market success.

• Technological - With the exponential growth in technology, IWear however lacks the
technology in the business to consistently gather and evaluate client data. The lack of
adherence to technological innovations affects the industry’s operations and the market
unfavorably thereby negatively impacting the business model, mission, and strategic goals.
In accordance with Atlantis and Sokovia, their dominant business sectors don’t consist of
technology development which should in fact be a major sector as this creates opportunities
for IWear to better analyze customer data and thus enable them to succeed.

• Legal - Even though legal factors may have some sort of overlap with the political factors,
they, however, consist of laws that are more specific. Though it isn’t stated that IWear must
adhere to any laws, it is nonetheless subject to the regulation of being fully compliant with
the Atlantic Code of Corporate Governance since it is a requirement as this company is
listed on the Atlantic Stock Exchange. IWear had to issue a profit warning since forecast
earnings fell below expectations in accordance with the Atlantis Stock Exchange listing
rules. Non-compliance with this code could have serious implications on the business’s

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 success possibly leading to reputational risks, loss of confidence of investors, or perhaps
financial losses thereby negatively impacting the business model, mission, strategic goals,
and the company as a whole.

• Environmental - In analyzing the environmental factors of IWear, they do indeed have a

direct positive impact on the environment as a whole since their mission statement requires
that goods are to be responsibly sourced, and its strategic goals make sure that they have
high ethical standards of social responsibility and being a responsible user of natural
resources managed in a sustainable manner. Having sustainability goals for the company
essentially would make IWear’s customers more inclined to purchase from them which
creates a better reputation for the company and positively impacts the business model,
mission, and strategic goals.

Generally speaking, these external forces in the pestle analysis can impact various aspects
of the business. Regarding the business model aspect, the pestle could assist IWear in better
understanding the factors and so, the company can make suitable changes to its models to better
adapt to changes. The pestle can assist with the mission statement aspect to identify such changes
to be made and essentially make adjustments to its mission to better reflect the new norms. Lastly,
pertaining to the strategic goals aspect, the pestle would allow for the identification of likely
opportunities and threats that would have an impact on the goals. In the final analysis, IWear
should focus on having a good strategic direction more focusing on being in touch with their
customers which in essence, would prevent them from losing sales to the competition existing with
rivals, substitutes, and new entrants of the same market space.

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Required: Prepare a briefing paper to be presented at the next board meeting, which:
(b) Assesses the major risks presented by IWear’s current business model and
suggests appropriate mitigating actions to manage these risks.

Economic Risk
The poor economic conditions in Atlantis and weak performance in Sokovia have
negatively impacted IWear's financial performance. Atlantis stagnant economy with its high
unemployment rate of 8.8% and government-imposed austerity programme to increase tax revenue
is slowing the economy’s growth. Given this, and Atlanti’s unchanged low interest rate, there is
not enough wealth circulation the economy, which can lead to lower consumer spending, reduced
demand for products all while operating costs are increasing. On the other hand, Sokovia is an
emerging economy, whose dominant business sector is not retail, that coupled with its increasing
unemployment rate of 12% is not the deal market for IWear considering its financial situation.
Though its growth is 1.4, IWear can suffer inadequate labour, and insufficient raw materials, the
country’s rising inflation rate and interest rates can reduce consumer spending making it difficult
to maintain sales. The economic risks in both countries can further IWear’s detrimental financial
position, consequently causing IWear laying off workers and liquidation in the future, if the
company does not recuperate from their situation.
Mitigating Actions: By diversifying its operations in countries with more stable economies, IWear
can reduce its reliance on any single market. Monitoring economic indicators closely will help the
company anticipate changes in the market and adjust its product offerings accordingly. Adapting
products to cater to the needs of customers in difficult economic conditions can also help maintain
sales.
Financial Risk
IWear’s current financial performance concerns numerous investors. Not only have their
profit levels fallen but many investors are dissatisfied with the level of returns they are getting and
the significant fall in share price. The current state of finances has caused an issue of a profit
warning, thus deterring potential investors and collaborations for the company, as well as there is
the risk to current investors exiting the business. The company’s growth has escalated to the point
where it is experiencing diseconomies of scales and may not be able to cover its high infrastructure
costs and overheads due to low levels of revenue, incurring financial losses. Additionally, there is
concern at the Sokovia branch, who has the lowest earnings this year, and where their consumer
debt is 115% and rising. Given the country’s economic state of high inflation, interest rates, and
extended one can expect numerous bad debts, thereby reducing the companies’ assets significantly.
The reduced revenue earnings can hold back the company from paying its debt obligations as well
as putting the company at risk of liquidity.
Mitigating actions: Target to operate on a strict budget minimizing costs and debts, while saving
to maintain a steady cashflow. IWear can set thresholds on trade credit to protect against
insolvency. IWear can repurchase shares to increase their value to attract potential investors
through a tender offer or open market. Increasing prices accordingly and expanding to more
developed markets can improve sales.
Strategic Risk
Presently, IWear is failing to accomplish its strategic goals, i.e., offering significant growth
opportunities to satisfy the needs and demands of their customers which can be the cause of losing
sales. Moreover, the rise of e-commerce retailers has increased competition for IWear, causing
some customers to shift their loyalty away from the company. The lack of detailed customer data
hinders IWear's ability to effectively respond to market changes and identify new opportunities.
IWear lacks the digital technology and networks to ease their expansion, allow for business agility
and increased revenue streams. Due to this, IWear is unable to keep up with evolving customer
demands, financial issues and opportunities for growth, which can damage the company’s
reputation and feed into their current financial situation. The lack of developing technology
provides difficulty for IWear to analyse the underlying risks and issues for the low earnings in
Sokovia and Atlanits.
Mitigating actions: Developing a robust e-commerce strategy will help IWear compete with
online retailers and provide customers with a convenient shopping experience. Implementing a
customer data management system can help the company collect and analyze valuable information
about its customers, allowing it to target its marketing efforts more effectively.

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Risk associated with Supply Chain
IWear's reliance on key suppliers exposes the company to potential disruptions in supply
and fluctuations in prices. The dependence on key suppliers can result in the risk of limited stock
as there can be increased product defects, delays, and reduction shipment volume, all which foster
loss of sales. IWear was likely unable to keep up with its high demands initially and was not able
to manage their inventory having stockouts, allowing for unsatisfied customers and reduced sales.
This can be reason for the company’s failure in Sokovia and success in Wakanda as one of their
dominant sectors is shipping and transportation. IWear is currently maintaining tight cost control
over its suppliers, however in the near future, the company can incur higher procurement costs,
and manufacturing costs. IWear financial situation shows its struggle to cover costs, as such, with
its limited earnings there can be late payments to creditors or suppliers causing a strained
relationship with suppliers.
Mitigating actions: Establishing strong relationships with a diverse range of suppliers can help
reduce the risk of supply chain disruptions. Diversifying the supply base ensures that the company
is not overly dependent on any single supplier. Investing in supply chain resilience measures can
also help ensure the timely delivery of products, even during challenging times.

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PART 2

Required: Prepare a report for the board, in which you:

(a) Analyse the company’s strategic position in the Wakanda market to determine
why IWear appears to be performing so well in this particular country compared to Atlantis.

Firstly, in order to analyze the strategic position of IWear in the Wakanda market, we need
to assess the internal and external environments of Wakanda to determine their strengths,
weaknesses, threats, and opportunities. This can be done by producing a SWOT analysis, which
will show the company’s current state in the market. Other forms of figuring out the position of
the firm can be done through a PESTLE analysis, Porter's 5 forces, etc. It is important to note that
both Wakanda and Atlantis possess unique economic, political, and social environments that could
impact the operations and greatly affect the success of IWear.

Based on the comparative macroeconomic data table in the case, Wakanda is known as the
top performing country for its stable political environment and fast-growing economy over the
years, while Atlantis has been facing declining economic challenges for many years. One of the
many critical factors contributing to IWear's performance in Wakanda is its focus on sustainability
and low-cost products, which align with the values of Wakanda consumers. Additionally, IWear
has outlets in prime locations in Wakanda, which makes them more accessible to customers and
will give them a competitive advantage compared to other markets.

On the other side, there are a number of reasons behind IWear's depleting success in
Atlantis. First off, the nation's economic problems, such as slow growth and high inflation rates,
have had a huge negative influence on consumer purchasing power, making it difficult for people
to even afford cheap goods. IWear is also at a disadvantage when compared to competitors that
provide online purchasing, which is more efficient for clients, because of its absence of an e-
commerce presence. IWear may take into account adopting an e-commerce strategy to handle these
issues in order to reach more consumers and raise brand awareness. Also, the business may look
towards developing new product lines and pricing schemes that are better suited to the Atlantis
market. Lastly, IWear may collaborate with regional manufacturers and suppliers to develop a
more customized product line that appeals to customers in the area.

Swot Analysis of Wakanda:

• Strengths: Prime Locations, Growing Economy (GDP: 6.8%), Younger Population,

Developed Infrastructure, Strong market presence.
• Weakness: Shifting of consumers' shopping patterns and loyalty.
• Threats:Competition from e-retailers
• Opportunity: E-Commerce

Swot Analysis of Atlantis:

• Strengths: Lowest Interest Rate, over 100 outlets

• Weakness: High Inflation Rates
• Threats: External Environment
• Opportunity: E Commerce, Technology

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Required: Prepare a report for the board, in which you:
(b) Evaluate the strategic and ethical implications to IWear of the planned shop
closure in Atlantis and the withdrawal from Sokovia.

Strategic Implications

IWear would see substantial strategic repercussions from the upcoming store closings in
Atlantis and the withdrawal from Sokovia. IWear appears to be doing substantially better in
Wakanda than in its more developed homeland of Atlantis or in Sokovia, according to the data
presented.IWear could likely be able to free up resources that might be used to expand in Wakanda
further if it closed its stores in Atlantis and withdrew from Sokovia. This would enable the business
to concentrate on and further establish its brand presence in its strongest market.
However, leaving Sokovia and Atlantis might have unfavorable effects as well. Atlantis
shop closings could lead to a reduction in brand equity and customer loyalty. In the eyes of their
customers and investors it may be financial instability or lack of commitment, with this issue it
will be harder to convince investors to stay on as well as customers. Cost reductions for an
organization might also result from shop closings and market withdrawal. The closures and
withdrawal might save the company money on rent, inventory, and other costs that can then be
applied to other parts of the business if IWear's sales were dropping in these places.
Furthermore, leaving Sokovia might harm the business's standing in the area and restrict
its ability to grow in the future.The closing of stores and withdrawal from a market might provide
rivals the chance to increase their presence and take root in certain areas. Depending on how IWear
responds to these difficulties, this might result in increasing rivalry in the future, which could be
both a danger and an opportunity for the company.

Therefore, it is important to thoroughly weigh both benefits and drawbacks before deciding
to close the businesses in Atlantis and leave Sokovia, whether there are other elements influencing
IWear's performance in Wakanda, it may be worthwhile to do more investigation and analysis to
see whether these factors may also be applied to other markets.In the long term, this can assist the
business in more effectively allocating its resources and producing better outcomes.The company's
financial situation, its aims and objectives, the competitive environment in each market, and other
variables will all have an impact on the strategic ramifications of the planned store closures and
departure from Sokovia. Before making any judgments, IWear needs to thoroughly consider each
of these variables.

Ethical Implications using the six-step approach:

1. Obtain the relevant facts:
The present facts of the case are that the company is contending with new entrants into the
market that has explored e-commerce opportunities, as opposed to IWear. These new entrants are
attracting IWear’s traditional customers and thus, increasing competition. In addition, the negative
economic growth in Atlantis has made trading conditions tough for the business, and factors such
as the rising inflation rate in Sokovia have cost the company heavy losses, causing it to close retail
outlets in both countries. In these circumstances, a recent review of the company’s financial
performance is alarming and poses concerns to the board of directors. Whilst there are intentions
to evaluate the cause of the company’s poor financial performance, that has not taken place yet. A
Non-Executive Director (NED) is suggesting that IWear should not inform its investors about the
declining financial health of the company to prevent them from thinking that the company is in
financial distress.
2. Identify the Ethical Issues:
According to the case, the NED is acting unethically in his course of duty. As he stated,
“One of our larger institutional investors contacted me, because we have mutual business
interests…I would like to provide them with assurances that these rumors are wrong...” This
suggests that the NED has had discussions specifically with a key investor on the company’s
financial position and has further intentions to share confidential information regarding the
company’s plan of action to improve financially. This can be deemed as a breach of confidentiality.
Furthermore, his intention to inform the investor that they can expect the company’s share price
to rise again soon is committing the act of insider trading since he is entertaining discussions that
are not privy to the other stakeholders and investors. Ultimately, whether the information that he
has shared is favorable or unfavorable to the investor, it gives them an unfair advantage over the
other investors since they have insight into confidential information discussed at the board
meeting.

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 On the other hand, he disagrees with the stance of the Finance Director to issue a profit
warning by Atlantis Stock Exchange regulations and proposes that the company should not inform
the investors about the financial crisis of the company. However, misleading investors about the
financial health of a company can have significant ethical implications. Not only is the NED not
acting in the best interests of the investors, but he is encouraging the board to deliberately omit
important information that can affect investors' ability to make appropriate decisions. A Non-
Executive Director is usually an experienced company professional and as a result, he should
understand that all companies have an obligation to their shareholders to provide relevant and
reliable information relating to their financial performance on a timely basis regardless if it is
unfavorable.
3. Determine the individuals or groups affected:
In the circumstances, the investors of IWear as well as the employees will be mainly
affected by the NED’s unethical actions. In essence, if employees are not informed about the
company’s financial position promptly, this can lead to mistrust and uncertainty as they will
question their job security. Conversely, investors will be negatively affected as the inaccuracy of
a company’s financial performance can mislead them when making financial decisions. Therefore,
the NED’s unethical actions violate the trust and undermine the company’s ethical foundation of
the stakeholder-company relationship.
4. Identify the possible alternative solution:
The other board members should take the following plan of action to address the ethical
implications highlighted above: review the company’s code of conduct to highlight the NED’s
violation of ethical standards such as breach of non-disclosure documents, evaluate the extent of
damage caused and investigate exactly what was mentioned in his conversation with the investor
and enforce disciplinary action such as removing the NED from the company’s board.
5. Determine how various individuals or groups are affected by the alternative
decisions:
If the company informs the investors and employees of the situation, this fosters
transparency and accountability on the part of the company. Therefore, this builds trust among all
parties and reassures the stakeholders that the board of directors is acting in their best interest.
Moreover, an informed update helps them to understand the factors that are impacting the
company’s financial performance and thus, it can potentially increase their confidence in the
company’s ability to weather economic downturns.
6. Decide the appropriate action:
Conclusively, disciplinary action should be taken such as removing the Non-Executive
Director from the board entirely to prevent further instances of unethical actions from occurring
as this can have harmful impacts on the company’s reputation. Additionally, the company must
also inform the stakeholders of the company’s current financial position so they can make
appropriate investment decisions. Essentially, fostering a culture of transparency and trust between
all parties.

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