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. (e) Evaluate these two o... 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
Evaluate Option 1: Becoming a Public Limited Company (PLC)
Answer
A public limited company is characterized by having shares that are publicly traded on the stock market, which provides several advantages. The primary benefit for Rolex in becoming a PLC is access to increased capital. This additional funding could facilitate expansion into new markets and enhance presence in online sales. Furthermore, a PLC status could elevate Rolex's public profile, reassuring stakeholders and investors, which in turn may enhance competitiveness against rivals like Swatch. However, becoming a PLC imposes accountability to shareholders, which may compel Rolex to pursue profit over quality. This could dilute the brand's reputation for craftsmanship. Additionally, with the luxury watch market becoming increasingly competitive, rapid adaptation and investment in R&D could be hampered by the pressures from public shareholders seeking immediate returns.
Step 2
Evaluate Option 2: Remaining a Private Limited Company
Answer
By remaining a private limited company, Rolex can maintain closer control over its operations without the pressure of public shareholder expectations. This structure allows for a focus on quality and exclusivity—key attributes of Rolex's brand identity. With the established Wilsdorf Foundation at the helm, Rolex can prioritize innovation and upholding craftsmanship standards instead of merely responding to market pressures. Furthermore, as the luxury market evolves, particularly with online sales growing, a private status can enable Rolex to remain agile and responsive to market trends, preserving the essence of its branding and product offerings.
Step 3
Recommendation
Answer
Considering the factors outlined, it is recommended that Rolex remain a private limited company. This approach aligns better with its core values of exclusivity and quality, which are essential for maintaining its competitive edge in the luxury watch sector. The pressures of public ownership could distract Rolex from its long-standing commitment to premium craftsmanship that sets it apart from competitors.