Photo AI
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: Public Limited Company
Answer
A public limited company (PLC) is a business with limited liability whose shares are publicly traded on the stock market. The main advantage of becoming a PLC for Rolex is the increase in capital. This additional finance could facilitate expansion into new markets and greater investment in online sales.
Moreover, becoming a PLC can enhance the public profile of the business, providing reassurance to both customers and investors. With the renowned founder Hans Wilsdorf's legacy, a heightened public profile could help Rolex compete against brands like Swatch. Additionally, developments in new materials and innovations within the luxury watch industry can be financed through the increased capital from public offerings.
Step 2
Option 2: Remaining a Private Limited Company
Answer
On the other hand, remaining a private limited company allows Rolex more control over its operations. The company can limit production and not be answerable to public shareholders, focusing instead on exclusivity and quality. Hans Wilsdorf emphasized maintaining high standards, and by not having public shareholders, Rolex can concentrate on producing quality timepieces without pressure to deliver short-term profits.
Furthermore, in the current luxury watch market, characterized by fast-changing consumer preferences, being a private company allows for agility in decision-making without public scrutiny. Private firms like Rolex can also prioritize customer trust and unique designs, as opposed to purely focusing on financial growth.
Step 3
Conclusion
Answer
In conclusion, while becoming a PLC presents opportunities for capital growth and wider recognition, the challenges associated with public ownership might dilute Rolex’s core values of quality and exclusivity. The luxury watch market is rapidly evolving, and Rolex's strategy must reflect its heritage and commitment to craftsmanship. Therefore, remaining a private limited company is likely the more effective option for supporting ongoing competitiveness in the luxury watch market.