The North Face

In: Business and Management

Submitted By nanewhat
Words 1138
Pages 5
The North Face
The North Face expands market in China

Table of Contents

1.0 Introduction 1 2.0 Background: Company, Industry and Competitors 1 3.0 Business Issues/Challenges 3 4.0 Conclusion 4 Reference 5 Appendix A: Organization Structure of the North Face 6

1.0 2.0 Introduction
The North Face, founded in 1966 by Douglas Tompkins and produces equipment and apparel for outdoor activities such as mountaineering, rock climbing and hiking, action sports and performance activities (Zager, 2011). It's been over forty five years, and the company, is a leader in outdoor-lifestyle brands ( Stacy, 2012). However, after the North Face expanded into China in 2008, it was not popular and had little market share. This case study will analyse this situation in relation to information flows and decision making, strategy management and customer relations and communication. In doing so, it will access a range of source materials from general business websites (Stacy, 2012), academic journals and management texts (Schermerhorn et al., 2015; Krizan et. Al., 2011). These research resources will support the analysis of the challenge of the North Face to enhance performance and general acceptance by Chinese people. The case will provide key findings from the analysis and offer a range of recommendations for the North Face’s management to consider as solutions to address the identified management strategic challenge. 3.0 Background: Company, Industry and Competitors
In this section, it will provide company background and business model. After that, it will elaborate the industry analysis and competitor analysis minutely.

2.1 Company Background and Business Model

The North Face began as a San Francisco climbing equipment retail store, founded in 1966 by Douglas Tompkins. The North Face is a wholly owned subsidiary of the VF Corporation and it employs 450 people…...

Similar Documents

North Face Case Study

... North Face Case Questions 1. Should auditors insist that their clients accept all proposed audit adjustments, even those that have an “immaterial” effect on the given financial statements? Defend your answer. No, clients are not required to accept all proposed audit adjustments that need to be made to the financial statements. However, the auditor is required to challenge management to justify not recording these adjustments. Regardless of the justification, the auditor needs to be aware that even if theses misstatements don’t effect the financial statements they can lead to material misstatements that can be in other parts of the financial statements. The possibility of prior financial statements containing material misstatements is of concern as well as material misstatements showing up in future audits. The auditor is required to document the nature and effect of the misstatements as well as the conclusion as to whether the misstatements can cause the financial statements to be misrepresented (PCAOB. 2002). 2.       Should auditors take explicit measures to prevent their clients from discovering or becoming aware of the materiality thresholds used on individual audit engagements? Would it be feasible for auditors to conceal this information from their audit clients? The materiality threshold is going to vary from organization to organization but auditors have long used the materiality threshold in the preparation and audit of the financial statements of 5%. If the...

Words: 1307 - Pages: 6

North Face

...since they have an idea of what is being looked for. Now, is it feasible for an auditor to conceal this information? I believe it is almost impossible for this information to be held from the client. During an audit, often times the auditors will get assistances from the client’s employees to help with the cost. Auditors will usually ask them to pull records and help with other tasks that will pretty much show them what the auditor is looking for. 3. The FASB Concepts Statement No. 5 “Recognition Measurement in Financial Statements of Business Enterprises” and SFAS No. 48 “Revenue Recognition When Right of Return Exists” are guidelines that dictate when companies are entitled to record revenue. The FASB CS No. 5 was violated by North Face Inc.,......

Words: 314 - Pages: 2

The North Face

...THE NORTH FACE The North Face is an American outdoor clothing and goods brand formed in west coast San Francisco, 1968, by two hiking aficionados Douglas Tompkins and Kenneth Klopp. The given name references the notion that the north face of a mountain in the northern hemisphere is, by and large, the most difficult to scale. The company specializes in outerwear, footwear and equipment such as backpacks, tents and sleeping bags targeting climbing enthusiasts bound for The Himalayas. However, in the late 90s and early 00s with the emergence of 'wilderness chic' it became all the rage though for most of their fans driving a Range Rover to the ParknShop would be the most strenuous expedition undertaken. Spearheaded by like brands Timberland and UGG, it's audience has widen significantly in the last decade. The North Face's logo was designed by David Alcorn in 1971 and consists of a somewhat skewed quarter-circle with two lines threading within it. This logo is an illustration of Half Dome, a gigantic granitic monolith in Yosemite National Park. As an extra, The North Face is presently a subsidiary of the VF Corporation which is headquartered in Stabio, Switzerland. Other subsidiaries administered by said corporation include Timberland, 7 for all mankind, Wrangler and Vans. The North Face's logo has turned into such a ubiquitous sight on anybody shielding themselves from the cold that it is no real surprise that the brand utterly dominates the outdoor market by quite some......

Words: 2439 - Pages: 10

The North Face, Inc. 5.3

...5.3 The North Face, Inc. 1. Auditors should not insist that clients accept all proposed audit adjustments even those that have immaterial effect on the financial statements. The auditor can give their clients suggestions on where to make adjustments. If the client insists that doesn’t want to make any changes, then the auditor should exercise professional skepticism, when considering the possibility that a material misstatement due to fraud could be present (AU Section 316). 2. The auditor should design and perform audit procedures in a manner that addresses the assessed risks of material misstatement for each relevant assertion of each significant account and disclosure. In our case, auditors should not be aware of the materiality threshold. Also, the auditor should not reveal the materiality levels to their clients. For the second part of the question, it is not feasible as this information cannot be held away from the clients. Deloitte might have increased the substantive testing given Crawford’s barter transactions. 3. The FASB Concepts Statement No. 5 “Recognition Measurement in Financial Statements of Business Enterprises” and SFAS No. 48 “Revenue Recognition When Right of Return Exists” are guidelines that dictate when companies are entitled to record revenue. The two customers did not pay for the merchandise as they were made to sign for the merchandise they did not have, which means there was no exchange. Also, the transaction was not finalized until......

Words: 458 - Pages: 2

North Face Discussion

...North Face Case Discussion The North Face, Inc. tried to position its outdoor apparel and sporting equipment products at the “high-end” segment of the retail market. In order to maintain the quality of its merchandise, North Face manufacturing all of its products in-house rather than out-sourcing some of its manufacturing operations to third parties. As a result of North Face’s limited production capacity, the company faced quality control issues over the next several years making it difficult to maintain its image as the leading producer of high-quality outdoor apparel. The company went public in 1996 and was accused of violating the revenue recognition principle when preparing its financial statements. Management had inflated revenue in order to meet expectations. Basically, North Face was incorrectly recognizing revenue barter transactions. North Face’s CFO, Crawford, was a CPA and knew that if he kept these transactions under the materiality threshold, then the auditors would not look into the matter. Additionally, North Face arranged two large sales to inflate the company’s revenue; however, the two transactions were actually consignments rather than sales. North Face’s auditors, Deloitte & Touche, knew that they should reverse the barter transaction, but then changed their minds because it was immaterial. As a result, the advisory partner for the North Face audit engagement, Richard Fiedelman...

Words: 263 - Pages: 2

The North Face Case

...Unit: 2 The North Face Case AC503: Advanced Auditing 1. Should auditors insist that their clients accept all proposed audit adjustments, even those that have an “immaterial” effect on the given financial statements? No, if we consider overall accounting. Companies shouldn’t have to adopt an auditor’s proposal. Yes, if we consider this case with North Face. You see Crawford new Deloitte’s materiality threshold and expected them to propose adjustments but ultimately pass due to the fact there was no assumed “Immaterial” impact. However, it was later realized that Crawford did not inform the Deloitte auditors of the $2.65 million portion of the barter transaction. It safer to purpose and report then purpose and pass. 2. Should auditors take explicit measures to prevent their clients from discovering or becoming aware of the materiality thresholds used on individual audit engagements? Would it be feasible for auditors to conceal this information from their audit clients? I think so. It would avoid companies like North Face and individuals like Crawford to take advantage of these thresholds. I don’t know how feasible it would be since auditor’s live by certain standards and transparency. The goal of an auditor is to be objective and honest, by concealing materiality threshold they would doing the very thing they are trying impose. 3. Identify the general principles or guidelines that dictate when companies are entitled to record revenue. How were these principles or......

Words: 615 - Pages: 3

North Face

...http://www.academia.edu/9339215/CASE_STUDY_OF_THE_NORTH_FACE_INC._AUDITING_ Summary Founded in the mid-1960's by Hap Klopp, The North Face, Inc., was a premier supplier of high-quality hiking, camping, and outdoor gear. In July 1996, North Face's went public. Initially, it sold at $14 per share, then peaked at $30 per share. In March 1999, NASDAQ halted public trading of North Face stock following the company's announcement it would be restating financial statements due to "bad bookkeeping".Christopher Crawford (CFO) boosted company sales by negotiating a barter transaction structured to avoid triggering materiality levels. Result: In May 2000, VF Corporation bought North Face for $2 per share. (Knapp, 2013) Question1 Should auditors insist that their clients accept all proposed audit adjustments, even those that have an "immaterial" effect on the given financial statements? Defend your answer. AnswerforQuestion1: • Auditors should not insist that clients accept all proposed audit adjustments. • Auditors are not perfect and clients should therefore have the right to reject proposed audit adjustments. • If a client does not accept a proposed audit adjustment, the auditor should generally be more suspicious as to the possibility of fraud and misstatement. Question2 Should auditors take explicit measures to prevent their clients from discovering or becoming aware of the materiality thresholds used on individual audit engagements? Would it be feasible for......

Words: 4874 - Pages: 20

The North Face

... The North Face The North Face expands market in China Table of Contents 1.0 Introduction 1 2.0 Background: Company, Industry and Competitors 1 3.0 Business Issues/Challenges 3 4.0 Conclusion 4 Reference 5 Appendix A: Organization Structure of the North Face 6 1.0 2.0 Introduction The North Face, founded in 1966 by Douglas Tompkins and produces equipment and apparel for outdoor activities such as mountaineering, rock climbing and hiking, action sports and performance activities (Zager, 2011). It's been over forty five years, and the company, is a leader in outdoor-lifestyle brands ( Stacy, 2012). However, after the North Face expanded into China in 2008, it was not popular and had little market share. This case study will analyse this situation in relation to information flows and decision making, strategy management and customer relations and communication. In doing so, it will access a range of source materials from general business websites (Stacy, 2012), academic journals and management texts (Schermerhorn et al., 2015; Krizan et. Al., 2011). These research resources will support the analysis of the challenge of the North Face to enhance performance and general acceptance by Chinese people. The case will provide key findings from the analysis and offer a range of recommendations for the North Face’s management to consider as solutions to address the identified management strategic challenge. 3.0 Background: Company, Industry and Competitors In......

Words: 1138 - Pages: 5

The North Face

... The North Face The North Face expands market in China Table of Contents 1.0 Introduction 1 2.0 Background: Company, Industry and Competitors 1 3.0 Business Issues/Challenges 3 4.0 Conclusion 4 Reference 5 Appendix A: Organization Structure of the North Face 6 1.0 2.0 Introduction The North Face, founded in 1966 by Douglas Tompkins and produces equipment and apparel for outdoor activities such as mountaineering, rock climbing and hiking, action sports and performance activities (Zager, 2011). It's been over forty five years, and the company, is a leader in outdoor-lifestyle brands ( Stacy, 2012). However, after the North Face expanded into China in 2008, it was not popular and had little market share. This case study will analyse this situation in relation to information flows and decision making, strategy management and customer relations and communication. In doing so, it will access a range of source materials from general business websites (Stacy, 2012), academic journals and management texts (Schermerhorn et al., 2015; Krizan et. Al., 2011). These research resources will support the analysis of the challenge of the North Face to enhance performance and general acceptance by Chinese people. The case will provide key findings from the analysis and offer a range of recommendations for the North Face’s management to consider as solutions to address the identified management strategic challenge. 3.0 Background: Company, Industry and Competitors In......

Words: 1138 - Pages: 5

The North Face

... [pic] The North Face The North Face expands market in China Table of Contents 1.0 Introduction 1 2.0 Background: Company, Industry and Competitors 1 3.0 Business Issues/Challenges 3 4.0 Conclusion 4 Reference 5 Appendix A: Organization Structure of the North Face 6 Introduction The North Face, founded in 1966 by Douglas Tompkins and produces equipment and apparel for outdoor activities such as mountaineering, rock climbing and hiking, action sports and performance activities (Zager, 2011). It's been over forty five years, and the company, is a leader in outdoor-lifestyle brands ( Stacy, 2012). However, after the North Face expanded into China in 2008, it was not popular and had little market share. This case study will analyse this situation in relation to information flows and decision making, strategy management and customer relations and communication. In doing so, it will access a range of source materials from general business websites (Stacy, 2012), academic journals and management texts (Schermerhorn et al., 2015; Krizan et. Al., 2011). These research resources will support the analysis of the challenge of the North Face to enhance performance and general acceptance by Chinese people. The case will provide key findings from the analysis and offer a range of recommendations for the North Face’s management to consider as solutions to address the identified management strategic challenge. Background: Company, Industry and......

Words: 1131 - Pages: 5

North Face

...Describe your company, its location, and the product it makes or the service it provides. The North Face started in a small mountaineering retail shop in San Francisco’s North Beach by two hiker enthusiasts in 1968. Soon thereafter, The North Face moved to the other side of San Francisco to began designing and manufacturing its own brand of technical mountaineering apparel and equipment (Parker, Battles, Melechiori, Kim, Cummins, 2015). By the early 1980s, The North Face was taking exploration to the outer limits of the ski world, adding extreme skiwear to the product offering. By the end of the decade, The North Face became the only supplier in the United States to offer a comprehensive collection of high-performance outerwear, skiwear, sleeping bags, packs and tents (Johnson, 2015). Now, 48 years after its origin in the outdoor industry, The North Face provides an extensive line of performance apparel, equipment and footwear. Offering the most technically advanced products on the market, The North Face is the choice of the world’s most accomplished climbers, mountaineers, extreme skiers, snowboarders and explorers. The North Face is committed to pushing the limits of design; so that you can push your limits outdoors never stop exploring (Johnson, 2015). Develop an environmental analysis that includes competitive, technology and socio/cultural forces. Competition The North Face is known for their outdoor apparel and outdoor equipment. But in recent years other companies......

Words: 2810 - Pages: 12

North Face Case Study

...accomplished what it must do to be entitled to the benefits represented by the revenues” (Financial Accounting Standards Board). In this case, the customer did not pay for the merchandise, yet North Face recorded the transaction as a sale. The Statement of Financial Accounting Concepts No. 48 states that revenue cannot be recognized when the customer may return the product and when the payment depends on the customer reselling the product. (Financial Accounting Standards Board). Again, in this case, the client was allowed to return any unsold goods, and so the revenue should not have been recognized. 4. Identify and briefly explain each of the principal objectives that auditors hope to accomplish by preparing audit work papers. How are these objectives undermined by Deloitte’s decision to alter North Face’s 1997 work papers? The work papers in an audit are meant to support the auditor’s report. Altering the work papers defeats the entire purpose of work papers. According to AICPA, “the auditor must prepare audit documentation in connection with each engagement in sufficient detail to provide a clear understanding of the work performed” (AICPA) The work papers are an essential part of the audit. Deloitte destroyed audit evidence. This is against the guidelines of the AICPA. 5. North Face’s management teams were criticized for strategic blunders that they made over the course of the company’s history. Do auditors have a responsibility to assess the quality of the......

Words: 1200 - Pages: 5

North Face

...Corporate Strategy and Direction of The North Face Inc. Corporate Strategy and Direction of The North Face Inc. The North Face, Inc. sneaker industry, is a highly sophisticated designer, distributor, and marketer of technically innovative sneaker products. We have built a strong, widely recognized line of products, and have been established as the world’s premier brand for outdoor apparel. Our sneaker line offers state-of-the-art technology that offers comfort, support, and style, backed by a lifetime manufacturers warranty so that our consumers are provided with all of the luxuries that they deserve. 2.0 Situation Analysis The North Face, Inc., offers a wide variety of specialized sneakers, designed primarily for professional climbers, and outdoor enthusiasts. The North Face, Inc. offers incomparable state-of-the-art technology, which has satisfactorily led to increased levels popularity and customer loyalty. However, currently The North Face sneaker retains less than 5 percent of the market share due to the popularity and general distribution of our top competitors such as: Nike, Adidas, New Balance, and Saucony. Our North Face trail sneakers are primarily sold at specialty/outdoor sporting good stores for between $59.95 and $105.00. Adidas offers sneakers with minimal technology, which are trendy reasonably priced, with high-end retail prices of about $65.00. New Balance offers sneakers with limited technology, which are stylish and competitively priced, with......

Words: 4451 - Pages: 18

The North Face Case

...from their audit clients. In the North Face case, Crawford, The North Face’s CFO, knew the materiality threshold that Deloitte had established for them, and also knew that the gross profit of approximately $800,000 on the $1.64million fell slightly below Deloitte’s materiality threshold for North Face’s collective gross profit. He believed that company would pass on that proposed adjustment. If CFO of North Face didn’t know the threshold, it would be another story. Anyway, general acceptable accounting principle and other accounting standards have set up rules for companies to follow how to record its transactions, such as revenues recognition, match principle, and full-disclosure principle. The financial statements provided by companies should be free of material errors. Financial reporting information should have qualitative characteristics, which are relevance, faithful representation, verifiability, timeliness, and understandability. The function of the financial statement is to let company’s investors and creditors aware of its economic situation, and an auditor’s duty is to supervise companies to follow accounting rules. If companies failed to do so, it is fraudulence. For example, when internal auditing questioned about that large transaction with the Texas wholesaler, North Face paid its customer to fly to its headquarter and discuss that transaction with members of the audit committee. The night before the customer met with North Face officials and signed a......

Words: 627 - Pages: 3

North Face

...North Face, Inc. 1. Should auditors insist that their clients accept all proposed audit adjustments, even those that have an "immaterial" effect on the given financial statements? Define your answer. I think auditors should strongly insist that their proposed adjustments should be made. If the company makes the proposed adjustments, it would seem to allow for a lesser probability for misstatements to occur. Even though an adjustment may seem immaterial for one year's statements, a combination of these immaterialities over a 2-3 years timeframe could easily add up to be important, if not detrimental to the company's existence. In this case, luckily, North Face was able to recover from the fraudulent activity. 2. Should auditors take explicit measures to prevent their clients from discovering or becoming aware of the materiality thresholds used on individual engagements? Would if be feasible for auditors to conceal this information from their audit clients? I do not think that withholding the materiality thresholds is necessary nor is it feasible. In most cases, I think the thresholds are based on the client's industry standards and a percentage of a base number for the client, i.e. gross profit, revenues, net income, etc. Trying to conceal that information would be waste of time that could be better spent investigating the sources of the immateriality. I think that any item that comes within 25% of the threshold should warrant further analysis. 4. Identify......

Words: 604 - Pages: 3