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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 an entity that allows shares to be traded on the stock market, providing access to raise capital.
If Rolex becomes a PLC, it could increase its capital significantly, allowing for investment in new markets and expanding online sales channels. This capital can be crucial for research and development, necessary for innovation in a competitive luxury watch market.
Additionally, being publicly listed could enhance Rolex's brand profile, reassuring investors and consumers about the company's stability and growth potential. However, this also means Rolex would need to answer to shareholders, which could pressure the company to focus more on profitability than on quality, contradicting the brand's foundations laid by Hans Wilsdorf.
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 disclose financial information to the public. This allows Rolex to focus on its brand values, emphasizing exclusive designs and high-quality craftsmanship without the pressure to meet quarterly earnings expectations that public companies face.
The current ownership structure under the Wilsdorf Foundation further allows Rolex to maintain its legacy of quality and exclusivity without external shareholder influence. This can foster long-term strategic decisions essential for sustaining competitiveness in the luxury market, especially given the rising e-commerce trends.
Though lacking access to public capital, remaining private enables Rolex to prioritize product quality and customer trust, key aspects that differentiate it from competitors like Swatch.
Step 3
Conclusion
Answer
Given the evolving luxury watch market and the critical need for brand integrity and product quality, it appears that remaining a private limited company is likely the better option for Rolex. This structure allows for continued emphasis on quality and exclusivity, while the pressures of shareholder expectations in a PLC could detract from these values.
Ultimately, maintaining Wilsdorf's legacy and commitment to superior craftsmanship positions Rolex to sustain its competitive edge without sacrificing its core principles.