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For a company that is trying to expand into a new market, creating an initial public offering (IPO) may become the ultimate path to succeeding. According to Sorkhi and Paradi (2019), an IPO is “an event where a private company (an issuer) sells a portion of its authorised shares to the public investors for the first time” (p. 733). Therefore, the company will gain greater support from investors, which will allow it to establish itself firmly in the UK setting. Given the current competition rates among organisations in the milk production and selling business, financial assistance and extended relationships with local organisations that can provide support are essential components of success.
The advantages that an IPO provides to an organisation are quite substantial, For example, the financial support that a company receives once creating an IPO can be used to establish an effective infrastructure within the target market in order to build a highly efficient supply chain. In addition, the financial resources that an IPO will provide to a company include the opportunities for increasing the initial capital and expanding eh relationships within the UK market. Moreover, with the focus on stock options as one of the key competitive advantages that an IPO-based firm can offer, one will be able to create a highly functional HRM strategy for talent management. As a result, the current staff members will receive an opportunity to increase the extent and depth of their knowledge and prowess. In addition, options for professional growth will be provided (Brigham and Ehrhardt, 2016). Finally, with the rapid rise in the value of the company’s shares, it will become quite attractive to potential investors, thus increasing the amount of financial support received in the target economic setting.
However, an IPO also has several disadvantages that are worth discussing. For example, an IPO is likely to take a substantial amount of money and effort from company leaders. Indeed, sustaining IPO is a challenge that an organisation may fail to meet, especially in the context of modern economically challenging setting. Therefore, an IPO may become an excruciatingly difficult notion to support for a company, especially for small or medium entrepreneurship (SME). Moreover, as an IPO, an organisation is likely to attract close attention of regulators, which may entail multiple legal complications. Thus, it is critical for an organisation that decides to use the IPO approach in the UK to consider legal risks and threats of the target market. Another important disadvantage to remember is that the owners of the company cannot take a significant part of shares for themselves (lu and Derindere, 2019). The specified problem is linked to the fact that the IPO may entail a loss of ownership control, thus allowing the organisation to be managed by the parties that have a rather vague idea of its goals and capacities.
Overall, an IPO as a strategic choice has its advantages and disadvantages, yet it currently seems to be the most effective way of introducing an organisation into a new market. Despite the issues that this company may face, the use of an IPO will allow it to receive the needed support, thus gaining an opportunity to work on its competitive advantage and its representation in media to target customers. As a result, the business will find its customers and its place in the hierarchy of the selected market.
Reference List
Brigham, E. F. and Ehrhardt, M. C. (2013) Financial management: theory & practice (15th ed.). Boston, MA: Cengage Learning.
Lu, K. and Derindere, S. (2019) Valuation challenges and solutions in contemporary businesses. New York: IGI Global.
Sorkhi, S. and Paradi, J. C. (2019) ‘Measuring short-term risk of initial public offering of equity securities: a hybrid Bayesian and Data-Envelopment-Analysis-based approach’, Annals of Operations Research, 288, pp. 733–753. Web.
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