Sample External Analysis Essay

858 Words Mar 9th, 2008 4 Pages
There are many factors that can affect a company's overall profit and performance, some of which are beyond the control of the company. In the case of Fossil Corp., we will be focusing on the major external factors that may have caused the company's actual revenue and growth to differ materially from the expected future figures.
Economic Conditions
Economic Cycles:
The retail market is a highly elastic sector and as such is affected by current economic conditions. Since Fossil Corp. is in the retail market, they will find that differing fluctuation in their gross profits are directly dependant on the current economic cycle. If the economy is weak, demand for their product will decrease and purchases of their products will decline as the
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Compliances: Since Fossil Corp. is an american company, they are subject to regulations by the government, such as the U.S. Food and Drug Administration. If the government decides to alter these regulations, Fossil Corp. will have no choice but to meet these demands. This could result in higher operating costs and consequently a decrease in overall profit. As well, Fossil Corp. might be required to completely redesign a given product or hence stop production of that product.

Manufacturing
Third-Party Manufacturers: Fossil Corp. products are produced by third party manufacturers. Unfortunately, Fossil Corp. does not have long-term contracts with these manufacturers but instead relies on the business relationships that they have developed with these companies. Although this is a common and acceptable practice in the business world, it creates an uncertainty that might turn out to be very costly for the company.
As well, Fossil Corp. cannot oversee the labor practices of these third-party manufactures. This in turn places Fossil Corp in danger of losing a supplier or even worse, possibly tarnishing the image of the company, if the manufacturer does indeed participate in illegal labor practices. Similar cases have already occurred to such well-known companies as Nike and Gap.
Fluctuation, Quality and Availability of Raw Materials: Fossil Corp. has manufactures all around the world, specifically in the Far East. The availability,

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