Reference no: EM132840046

Geedy's Guitars

Geedy's Guitars is a brand of guitars located in Edinburgh, Scotland. The business has 1 large factory just outside the city and 1 smaller factory located on the island Islay, just off the west coast of Scotland. The business was initially set up as a sole trader back in 1976 by Bruce Geedy when the business was still unincorporated. Bruce left university with dreams of being a pop star but after a few years decided this wasn't going to happen so started his business. Initially he considered the possibility of making his business a social enterprise but decided against the idea.

Geedy's Guitar has earned a reputation for producing expensive acoustic guitars with high sound performance. Whilst they do not use the best quality wood or other materials, their manufacturing process ensures that the guitars are put together to make a pure sound. The guitars are popular with serious guitar players and there is even a semi-famous musician who uses the brand. Bruce is extremely passionate about his guitars, especially the quality and the sound that they make. So far Bruce has ensured that the business has focused on maintaining the high quality of the product. He has also been working on a project on his own for the last 5 years to make a new production method which will further increase the quality of sound that the guitars make. Others in the company know about the project but not what he is working on as he chooses to work on the project at home.

In 2005, Bruce decided to incorporate and become a private limited company and become the new CEO. There were many investors interested and he was able to raise a significant amount of capital, which was mainly used to finance the building of the smaller factory in Islay. Bruce still maintains a majority ownership of the business. However, the other investors have become increasingly frustrated with his poor management of the company, which led to lower profits. The economy has also become worse recently and last year the company made a loss. Bruce is also well-known for his bad temper and he has walked out of previous board meetings when disagreements occurred.

In the last few board meetings, the other investors have brought up the idea of going through an IPO and turning the business public. Initially, Bruce was against the idea (he stormed out of the last meeting). However, he has recently started to give the idea more thoughts, especially as he is nearing retirement and wants to buy a holiday mansion in the south of France to live in. The board have also brought up the idea of expanding the company to produce a cheaper version of the guitar which would be more affordable to consumers.

A) List 5 types of social enterprise {not for-profit or for-profit}

B) Explain three disadvantages of Bruce agreeing to take Geedy's Guitars public

C) Explain three advantages of Bruce agreeing to take Geedy's Guitars public

D) Outline if you think Bruce should take Geedy's Guitars private or stay as a public limited company