A/S Business Homework for 18th October 2018 - Feedback
In 2014
Poundland Ltd announced plans for a £750 million flotation on the London Stock
Exchange. This process created Poundland plc.
Assess
the possible advantages and disadvantages to Poundland of becoming a public
limited company.
Always
start with a definition:
Flotation
is the term given to the launch of a company on to the stock market by the
offer of its shares to the public.
A public
limited company (PLC) is a limited liability business with over £50,000 of
share capital and a wide spread of shareholders. PLCs are the only type of
company allowed to be quoted on the London Stock Exchange.
Sample
paragraph.
Make the
point (P)
Give examples (E)
Explain the point (E)
The main
advantage in the minds of the Directors of Poundland is the ability to raise a
vast amount of capital through a stock market flotation – indeed £750 million
pounds is a considerable sum of money.
This cash
could be put to a number of hopefully positive uses. One option
for the company is to grow the business.
Poundland
could open a number of new outlets in towns where it is not currently present.
This could have two benefits. Firstly increased footfall should deliver
higher revenue with the very real prospect of higher profits. Secondly, having
more stores gives Poundland greater buying power with suppliers as it can
negotiate larger discounts on larger orders. The benefit of this to the company is that the profit margin on each item sold is maintained or improved.
If
Poundland was seeking rapid expansion it could use some of the cash from the
flotation to acquire a rival business such as the 99p chain. Not only
would this increase the customer base of the company it would remove
competition from the market place. This is beneficial to the company because those consumers who are attracted to discount retailers will probably continue to shop in a rebranded former 99p store.
A further
option would be to use some of the cash to refurbish existing stores. Customers
generally respond positively to an improved instore experience and the
company should benefit from increased customer numbers and hopefully an
increasing customer spend.
Why:
Hopefully?
Should?
Generally?
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