Gnc Case Study

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General Nutrition Centers better know as GNC was started in 1935 by David Shakarian in Pittsburgh, Pennsylvania. Shakarian’s goal was to create a health food store where you can get the best products on the market for a reasonable price. He started off by selling only honey, grains, and sandwiches at a time that people believed that eating healthy was only a fad and would die out relatively fast as all fads do. During the first six months of being in business Shakarian was able to open up a second store front after only making $35 in his first day of sales. During the 60’s people began to embrace the concept of health foods and better nutrition. This was a time when bodybuilding was starting to become a well-known sport in the United States. …show more content…
The health and wellness industry has rapidly grown over the past couple years, giving GNC “a run for its money”. Due to this growth GNC has had to continue to expand its company by adding new locations around the United States. One of the risk factors that come along with the rapid growth is GNC’s ability to effectively manage its growth. Without proper management it could cause the finances of the company to be materially affected. Over the past year alone, they have added 129 company stores and 58 new franchise locations. With this growth it adds significant strain on management and it’s personal. The risk of adding so many locations means they need to keep a higher level of internal controls. Without effective internal controls management can be inclined to commit fraud due to the added pressure to continue to make sales and perform better than its competition. Another risk that GNC has that could affect its financials is the market they service. The supplement industry has also grown with GNC giving it more competition today than what it has had in the past. One of GNC’s biggest competitions in the supplement industry is an online retailer named Bodybuilding.com. This is an online merchant that sells supplements at a discounted rate. Bodybuilding.com is effectively undercutting GNC with its prices on supplements, which requires them to reduce prices to stay competitive. The risk of reducing …show more content…
Over the past couple of years GNC’s financials have been on a constant incline, but not one that is significant enough to assume any fraud involved in the company. GNC seems to have a great understanding in the industry that they are involved with and know how to manage its internal controls, although they had ”management realignment” I believe that GNC will effectively manage its operations. I also believe that GNC has a low degree of risk relative to fraud due to its strong understanding of internal controls. If they did not understand the importance of internal controls they would of never added more senior executives to join the company with its expansion in the prior

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