Problems of Transition in Size

1. Problems of Transition in Size A2 Business Studies Objectives and Strategy - Unit 6

2. Private to Public • Problems arise when growth involves changing from private to public limited company status. • Floating shares on the stock market • Being listed on the stock market gives a higher profile and more capital • The number of listed companies has declined sharply in recent years • 1997 – 1,600 companies2003 – 910 companies • Drawbacks of floatation = answerable to shareholders and investment analysts will scrutinise accounts, shareholders may only want quick profit at the cost of long term success

4. BBC, 2004

5. Public to Private • A number of companies have changed back to avoid the pressures of being a Plc • Such as Virgin, Fitness First, and The Body Shop • More privacy and less pressure from share price changes • Allows management to take a long term view • Trend of turning Plcs into Ltds is growing mostly through management buyouts

6. Failures include: National to International Firms frequently assume - What works in the UK will work elsewhere! Often this is not the case. Limited opportunity for growth in the home market and competition policy may make firms move form operating in national to international markets. It is often difficult as firms lack understanding of: • Local markets • Consumer tastes • Consumer attitudes • Location of outlets • Delegation of authority etc.

7. UK Meal – No mash, no gravy and no biscuit bun US meal:- Chicken, coleslaw, mashed potatoes, gravy and a ‘biscuit’ bun. Example of a success… • 4,500 restaurants in the U.S. and 1,000 outside the U.S. mostly in Australia, Britain & Japan. How is that different from the UK menu?

8. Case Study-From National to International • Read articles 1&2 on KFC • Identify why the KFC company was successful (& thereby identify why UK companies have not been successful) • [e.g. What did they modify to suit the Japanese market]

9. Problems of Transition in Size Lesson 2 A2 Business Studies Objectives and Strategy - Unit 6

10. Public and Private • What are the + and – of a Ltd company vs. a plc?

11. Retrenchment-“the reduction of expenditures in order to become financial stable” As firms cut back on their scale of operations to reduce costs and focus on core activities, but it may impact negatively on morale and trust: • Stop recruitment, early retirement, voluntary redundancy • Delayering (empowerment, enrichment, work intensification? stress? motivation?) • Closing a factory, outlet or division (capacity utilisation, difficult to reverse) • Making targeted cutbacks and redundancies throughout the business (reorganisation)

12. Student Activity • Read case study 1 and answer the question using a mind –map, with arguments for and against on either side. Come to a judgement and write a paragraph to evaluate. (Page 452) • Complete Case study 2 (page 453)