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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: Public Limited Company (PLC)
Answer
A public limited company (PLC) is characterized by limited liability, meaning shareholders are only liable for the amount they invested. This structure allows Rolex to raise capital through public share offerings, helping to finance expansion into new markets and invest in online sales channels.
Additionally, becoming a PLC could increase Rolex's public profile, which might become crucial in the competitive luxury watch market against brands like Swatch and Omega. Such exposure can boost customer confidence and potentially attract more investors.
However, the transition to a PLC could also expose Rolex to the pressures of shareholder expectations for continuous profitability, which may conflict with its commitment to quality and craftsmanship as emphasized by Hans Wilsdorf, the founder.
Step 2
Option 2: Remaining a Private Limited Company
Answer
Staying a private limited company would allow Rolex to maintain control and focus on its core values of quality and exclusivity. Without the pressures of public shareholders, Rolex could prioritize long-term design innovation without the constant need for immediate financial returns. This aligns with the vision set out by its founder, Hans Wilsdorf, who valued craftsmanship and unique selling propositions.
Moreover, remaining private allows Rolex to grow at its own pace and adapt to market changes without public scrutiny. Although it may restrict access to capital compared to going public, relying on the Wilsdorf Foundation and private investments provides a stable financial foundation.
In light of the evolving luxury watch market, especially with increased online demand, it may still be crucial for Rolex to have adequate resources for product development and marketing strategies.
Step 3
Recommendation
Answer
Given the luxury watch market's rapid changes and the potential for increasing online sales, I recommend that Rolex remains a private limited company. This strategy will allow Rolex to uphold its legacy of quality and exclusivity while also managing growth without the pressures of public investors. The market's competitive landscape suggests that a focus on craftsmanship and customer trust is more beneficial than public exposure and the pursuit of rapid profits. Therefore, remaining private aligns more closely with Rolex's brand identity and market position.