Readings

Question 1

How many years must the company have usually operated for to issue standard shares on the London Stock Exchange?

Answer 1

0 years, anyone can list on London stock exchange, as long as you meet stock exchange requirements and laws.

Question 2

PLC is a company….

Answer 2

that chooses who buys it shares

Question 3

Discuss why institutional shareholders are so important to companies?

Answer 3

• Often own significant prop. Of shareholdings in companies
• If a party owns more than 50% of the normal shares in a company then they will usually have control of that company
• Individuals shareholders often have little power in companies. Institutional shareholders have power

Question 4

Nestle (CSV example)

Answer 4

• 1962 Nestle started in Moga district, India. As wanted to enter Indian Market.
• At time Moga was poor: no electricity, transportation or medical care. Farmers normally owned 5 acres of poorly irrigated and infertile soil with 60% of newborn calves dying. No refridgeration or transport meant milk could not travel far and would be contaminated.
• Nestle built refridgeration as collection points in each village. Nutritionists, agronomists and quality assurance experts also went. Medicines and nutritional supplements were provided for sick animals, and monthly training sessions were held for local farmers.
• Financing and technical assistance from Nestle meant improved irrigation (more food for cattle plus more crops for local), plus all the above.
• When nestle were first there 180 local farmers supplied milk, now 75,000 in the region.
• Death rate of calves dropped 75%. Milk production has increased x50. Nestle can pay higher then minimum wage to farmers.
• Moga 90% homes have electricity, all villages have primary school, has x5 the number of doctors then neighbouring regions.
• The increased purchasing powers of local farmers has also greatly expanded the market for Nestle products.

Question 5

If a firm’s suppliers have bargaining power they will:

porters 5 forces

Answer 5

• Exercise that power
• Sell their products at a higher price
• Squeeze industry profits

Question 6

Suppliers find themselves in a powerful position when:

porters 5 forces

Answer 6

• There are only a few large suppliers
• The resource they supply is scarce
• The cost of switching to an alternative supplier is high
• The product is easy to distinguish and loyal customers are reluctant to switch
• The supplier can threaten to integrate vertically
• The customer is small and unimportant
• There are no or few substitute resources available