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External Factors Affecting A Business

INTRODUCTION EXTERNAL FACTORS AFFECTING THE COMPANY'S BUSINESS AND PROSPECTS There are many factors that affect the Company's business and the results of its operations, some of which are beyond the control of the Company. The following is a description of some of the important factors that may cause the actual results of the Company's operations in future periods to differ materially from those currently expected or desired. OBJECTIVE The objective of this paper is to introduce the external factors affecting the jeans industry from a business view. 1. GENERAL ECONOMIC AND INDUSTRY CONDITIONS Any general economic, business or industry conditions that cause customers or potential customers to reduce or delay their investments in the jeans industry could have a negative effect on the Company's strength and profitability. For example, a softening of demand for jeans ware may result in decreased revenues (or at least declining revenue growth rates) for jeans manufacturers in general and the Company in particular and may result in pricing pressures for products that the Company sells. 2. COMPETITION The jeans industry is highly competitive. The intense competition inherent in the industry could result in the loss of customers or pricing pressures. 3. INTERNATIONAL ACTIVITIES The Company's future growth rates and success are in-part dependent on continued growth and success in international markets. As is the case with most international operations, the success and profitability of the Company's international operations are subject to numerous risks and uncertainties such as local economic and labour conditions, political instability, tax laws, local and national government regulations. 4. PRODUCT, CUSTOMER AND GEOGRAPHIC MIX The profit margins realised by the Company vary somewhat among its products, its customer business units and its geographic markets. Consequently, the overall profitability of the Company's operations in any given period is partially dependent on the product, customer and geographic mix reflected in that period's revenues. 5. SEASONAL TRENDS The Company experiences some seasonal trends in the sale of its products. For example, sales to the European region are often stronger than the Asian region. Social and cultural elements are strong contributing factors. 6. TECHNOLOGICAL CHANGES AND PRODUCT TRANSITIONS The jeans industry is characterised by continuing improvements in fashion and design which result in frequent introduction of new products, short product life cycles and continual improvement in product price/design characteristics. The Company must effectively manage a product transition and incorporate technology that will improve customer service and demand. 7. INVENTORY MANAGEMENT/SUPPLIES/RAW MATERIALS The Company's ability to manage its inventory has been enhanced by favourable supply conditions in the industry. The Company's manufacturing process requires a high volume of quality components that are procured from third party suppliers. Reliance on suppliers, as well as industry supply conditions, generally involves several risks, including the possibility of defective parts, shortage of components and reduced control over delivery schedules and increases in component costs. 8. RISK ON FINANCIAL INSTRUMENTS The Company regularly utilises derivative instruments to hedge its exposure to fluctuations in foreign currency exchange rates and interest rates. SUMMARY The eight external factors highlighted in this paper are identified as primary factors in this industry.

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