Introduction
The proposal the new Chief Executive, Gemma Mabbutt, is risky and irreversible and therefore must be successful and profitable for the business.
Arguments for the proposal
Superstyle’s gearing ratio is currently at 28%. This indicates that Superstyle is low geared. This identifies that Superstyle has capacity to borrow money from the bank as explained previously with a gearing ratio low at 28%. The gearing ratio alongside the current ratio of 2.79:1 shows that the company is not is a bad liquidity state and so would be able to handle a long term loan (e.g bank loan) because it has a substantial amount of assets which would be able to cover a loan. Gemma Mabbutt, the chief executive of Superstyle, is required to raise 200 million to finance her proposal and so the low gearing ratio shows that the business is able to obtain some of this finance through a long term loan.
Another reason to suggest the proposal should go ahead is that, considering the resource material, the plan will achieve growth though expanding internationally into a low risk franchise. This means people in that country will operate separate Superstyle stores while giving a proportion of profit to Superstyle. This is low risk as the people operating in the stores will have knowledge of the market they are featuring in and so will know if the customer demand. The growth will increase brand recognition of Superstyle making it a stepping stone towards aim of becoming a ‘global brand’ meaning that it will operate internationally. Although the growth will bring short term losses through establishing itself abroad, it will bring sustained profit in future times.
Arguments against the proposal
From a HR perspective employee morale will fall if the proposal goes ahead, the proposal changes the HR strategy from a soft to hard management style; this will result in more staff being employed