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In order to remain competitive in the luxury watch market, Rolex could become a public limited company or remain a private limited company - Edexcel - A-Level Business - Question 1 - 2022 - Paper 1
Question 1
In order to remain competitive in the luxury watch market, Rolex could become a public limited company or remain a private limited company. Evaluate these two optio... show full transcript
Worked Solution & Example Answer:In order to remain competitive in the luxury watch market, Rolex could become a public limited company or remain a private limited company - Edexcel - A-Level Business - Question 1 - 2022 - Paper 1
Step 1
Option 1: Becoming a Public Limited Company (PLC)
Answer
A public limited company is a business with limited liability where shares are traded on the stock market. By becoming a PLC, Rolex could increase its capital significantly, allowing for expansion into new markets and investment in online sales. Such financial growth could enhance Rolex's public profile, reassuring stakeholders about its commitment to quality and innovation. Given the modern challenge of competing with brands like Swatch, a PLC status could provide the necessary funding for research and development.
However, being publicly traded may force Rolex to prioritize shareholder profits over product quality and exclusivity, potentially harming its brand reputation. Roland Wilsdorf’s vision relied heavily on maintaining high standards, and becoming a PLC may dilute this focus as the company responds to market pressures.
Step 2
Option 2: Remaining a Private Limited Company
Answer
As a private limited company, Rolex has more control over its operations and does not have to answer to public shareholders. This allows the company to focus on its core values of craftsmanship and quality, reflecting Hans Wilsdorf's vision that each new product embodies excellence. The Wilsdorf Foundation could continue to support Rolex without the pressures associated with a publicly traded company.
Remaining private would allow Rolex to invest in research and product development on its terms, emphasizing trust and quality rather than short-term financial gains. This is increasingly important in a luxury market that values heritage and exclusivity.
Step 3
Recommendation
Answer
Given the current dynamics of the luxury watch market, remaining a private limited company is likely the better option for Rolex. This choice will allow the brand to maintain its commitment to quality and exclusivity, factors that have historically set it apart from competitors. A private structure aligns with Wilsdorf’s original values, emphasizing craftsmanship and innovative design without compromising on quality due to external shareholder pressures.