Business Strategy: Niche Markets, Ethical Sourcing, and PLC Formation

Business Operations and Strategic Decisions

3. Market Segmentation, Finance, and Ethics

3 (a) Defining a Niche Market

The term niche market refers to a small, specialized segment of a larger market, such as the case of catering to Indian ladies within the large Indian population of the city.

3 (b) Retailer Sourcing Decisions

Retailers may choose not to buy clothes directly from primary suppliers for several reasons:

• They may not require such large quantities of products.
• They might lack the necessary storage space to keep inventory.
• They may be unable to sell the entire volume purchased.
• They might not have established contacts in foreign countries where suppliers are located.

3 (c) Impact of Currency Appreciation (Country Z)

If the currency of Country Z appreciated in value, Sudnir’s business would likely become more profitable. Since Sudnir imports products, a stronger local currency makes imports cheaper.

This increase in profitability can be utilized in two main ways:

1. The company can afford to offer lower prices, potentially increasing sales volume and market share.
2. The company can maintain current pricing and retain the money saved from cheaper imports, thereby increasing profit margins.

3 (d) Ethical Sourcing Dilemma

This ethical problem represents a very complicated decision for many companies globally. Sudnir faces a choice between ethical responsibility and business competitiveness.

Sudnir's Ethical Responsibility

I believe Sudnir should not continue buying from these firms, as doing so implies supporting these activities, or at least failing to stand against them. Furthermore, if society becomes aware of this business relationship, the reputation of the business could be greatly damaged.

Business Competitiveness Trade-off

However, it is true that by changing suppliers, Sudnir’s business would become less competitive and could lose many customers if he is forced to increase prices.

3 (e) Compliance with Consumer Protection Laws

Consumer protection laws regarding materials impose stricter controls and regulations that Sudnir’s business will have to comply with. Consequently, Sudnir must ensure that his clothes match the required specifications by carefully analyzing and contracting his suppliers.

If these clothes do not comply with the regulations, he will have to contact new suppliers, which would inevitably mean higher costs for the business.

4. Organizational Structure and Technology Adoption

4 (a) Transitioning to a Public Limited Company (PLC)

Changing the business structure to a Public Limited Company (PLC) brings both advantages and disadvantages:

Advantages of a PLC

• Increased Investment: More money becomes available for investment, sourced from shareholders.
• Limited Liability: Shareholders will not be forced to sell their personal possessions to pay business debts.
• No Interest Charges: Unlike loans, equity financing does not incur interest charges.

Disadvantages of a PLC

• Increased Regulation: More regulations and controls will be applied to the company.
• Complexity: The formal process to form a PLC is complicated and time-consuming.

4 (b) Cost Reduction through New Technology

New technology can significantly cut business costs. Modern technological machinery can successfully perform human work in less time, thereby reducing the need for paid employees, which lowers labor costs.

Furthermore, new technology can increase production volume and efficiency, meaning the business will spend less money on solving errors and correcting defects.