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Week 1:Public Limited Company: Hilton
Challenge A:
A public company is a company has a CEO which is the heart of the company and he/she also
maintains the power between the supervisory board and the executive board. Everyone who buys
shares and therefore invest in the company can’t be held responsible for any business losses, only
the amount invested. This means those buyers, which are called share holders have limited liability.
Public limited companies are obligated the share their annual financial accounts with the Chamber
of Commerce yearly, these figures in the annual report will be available for everyone.
Private Limited:
You have your private belongings, such as assets, separately. The financial liability of
shareholders is limited to their shares. When you go bankrupt, shareholders will keep all
their private assets.
You are the ‘’big boss’’. You can choose how to operate your business completely.
There is one group of shareholders, the stocks of the shareholders are named. Not just
anyone can buy shares of the company. It restricts the transfer ability of shares by its
articles.
You can’t issue prospectus to public.
Public Limited:
You are free to raise share capital and therefore you have better access to capital.
Shareholders are free to buy and sell their shares (they are not named).
Original owners may lose control and ownership of the business.
Professional directors and manager appointed to run the business may have different aims
to those of the shareholders.
Question: Is a public limited company the right choice for Hilton or not?
Yes, Hilton is a huge company which needs to be financed. Having a public limited company and
therefore easily tradeable and accessible shares will generate capital easily for Hilton which they
then can use to invest. Furthermore, there is limited liability which means when a crisis occurs you
can’t lose more money that invested at first.
Challenge B:
Franchise:
You already have brand recognition, you don’t need to create that yourself at the start.
You get start-up assistance and get experience of franchisor which will diminish the learning
curve.
You are not completely free to operate the business in the way you would like too. You are
stuck to the contract, you can’t just change things. You can’t use your full creativity.
Their may be poor performance on the part of other franchisees which can damage your
business.
Hotel Management Contract:
You hire professionals who will work for you. Therefore good quality is guaranteed.
You have low labor costs and therefore high profit.
You don’t have a face. The atmosphere is less.
No extra rewards for good performances if the management contract is run in a fee
structure without any incentive schemes. Also, there is minimum input in ownership
decisions. You have to share the profit!
Referral Organization:
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