Strategy of Employing Combination of Short-Term and Long-Term Profitable Companies - Essay Example

Teacher If we will only have a nominal amount of money of £10,000to buy shares of a company as an investment that will do well over the next six months and give us a good return on your investment, we will invest it in Cupid PLC, Starbucks and Samsung electronics. Our strategy is to employ a combination of short-term and long-term profitable companies. Short-term stocks are those fast rising stocks that have shown fast growing sales and revenue in the past few years such as Cupid PLC. While these companies have fast-growing sales and revenue, we have to caution ourselves that these companies are not yet established and therefore, vulnerable to market changes. Of all the stocks in our portfolio, these stocks are the one that we should monitor the most especially if there are significant events that may influence the company’s stock prices. The other group of investment will be allocated to long-term investment – they are Starbucks and Samsung. These companies may not show dramatic profit in six months but they are very likely to profit in the long-run. These companies are already established in the market and have experienced markets up and downs, financial crisis and intense competition. Needless to say, these companies are already tested and durable. Companies to invest in Short-term Cupid PLC Price : 41.50 PEST Analysis Political – Cupid PLC is a dating company and makes it vulnerable to controversy which could affect its viability in the market. This same prone to controversy however made the company attractive to many people that made the company profitable. Economic – As of 2011, the company made a turnover rate of 202% or £25.7m with a pre-tax profits increase of 325% making the company the fastest growing company in UK thus making it a favorable company to invest to profit in the short run. Social – people has social needs to date and meet people for relationship which many companies are timid to cater. Cupid PLC caters to this relatively new niche in the market making it profitable. Technology – Cupid PLC is an online dating business making it cheap to operate which probably explains its high profitability. Long-term Starbucks Price 73.96 PEST Analysis Political environment The political environment is the regulatory atmosphere of which Starbucks operate as a business. The political environment could determine whether Starbucks can open a franchise in a certain country or if its bean can be had without any regulatory issue (issue of quota, banned goods, taxation etch.,). This is non-issue to Starbucks because Starbucks enjoys good corporate citizenship that its franchises are virtually welcome anywhere in the world making it a good investment. Economic environment Economic environment determines the financial capacity of its market. In the case of Starbucks, economic environment made Starbucks reconsider its position in the market when the financial crisis hit in 2008-2010 that companies were compelled to adapt to the new market realities to stay afloat as a business. Starbucks however was able to weather it and remain a profitable company making it a durable company to put our money into. Social Starbucks enjoy the goodwill of its customers due to its ethical business practices that made it as one of the most ethical company in the world. As a result, it was able to justify its premium prices making the company profitable in the long run. Technological environment The use of technology is one of the advantage s of Starbucks from its competitors. Despite the crisis, it still managed to keep in touch with its customers with its web platform where customers can discussed about coffee. This became an online community where Starbucks reinforce with its own ingenuity of sending greetings during the customer’s important personal events such as birthdays. In addition, its Gold Card Holder facility through a cellphone helped maintain customer loyalty during the company’s trying times. This serves as Starbuck’s competitive advantage making it a viable company in the long run. Samsung electronics Price: 670.50 PEST Analysis Political –Samsung has undoubtedly strong brand recall. This is substantiated by Fortune’s ranking of Samsung Electronics as the second most admired company in global electronics which bids well for Samsung in its position in the market. A strong brand recall provides a company a strong competitive edge because consumers tend to patronize brands that they trust making it a sound investment. Economic – Samsung is a stable and profitable company. It has positioned itself to grow revenue and profits in many areas. It did not merely focus on a single or few sector in consumer electronics (i.e. smartphone and Smart TV) that will make the company vulnerable during any uneventful development in the market but has rather diversified itself to distribute the risk and revenue centers (i.e. home appliance, camera, etch). In short, Samsung has placed its eggs in many baskets to shield itself from market risk making it a safe investment in the long run. Social – Samsung’s product have become virtually part of our everyday lives and this guarantees that the company will remain relevant and profitable for a long time making it a good investment in the long run. Technological – the electronics industry is a very competitive industry (due to its profitability). New technological advances can easily debunk market leaders such as the case of Nokia which used to be the market leader but was suddenly overtaken by Samsung and Apple. Samsung is forward looking and is not likely to be debunked from its market leader position due to better innovation of its competitors. Samsung has heavily invested in Research and Development and is in fact part of the company culture to always engage in R&D. Research and development is one of the strongest if not the strongest component of Samsung Electronics as a company. This constant focus on research and development enabled the company to become one of the leading brands today from being a nuisance brand in the 1990s. This penchant for research and development has been the company’s practice since 1990s particularly during the Asian Crisis where it was the only activity in the company that Samsung did not cut on cost. It continued its focus on R&D that in 2010, it spent as much as 5.9% of its total revenue in research References London Stock Exchange . (n.d.). London Stock Exchange . Retrieved June 13, 2014, from http://www.londonstockexchange.com/exchange/prices-and-markets/international-markets/indices/company-summary.html?symbol=SBUX&market=NAS CUP CUPID PLC ORD 2.5P. (n.d.). CUPID PLC ORD 2.5P. Retrieved June 13, 2014, from http://www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary/company-summary.html?fourWayKey=GB00B4NJ4984GBGBXASQ1 Foroohar, R, & Lee, B 2004, Masters Of the Digital Age, Newsweek, 144, 16, pp. E10-E14, Academic Search Complete, EBSCOhost, viewed 06 June 2014. SMSN SAMSUNG ELECTRONICS CO LTD (ATT) GDR (REP 1/2 COM STK KRW5000)(REG S). (n.d.). SAMSUNG ELECTRONICS CO LTD (ATT) GDR (REP 1/2 COM STK KRW5000)(REG S). Retrieved June 13, 2014, from http://www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary/company-summary.html?fourWayKey=US7960508882ZZUSDIOBE The Top 50 Rising Stars - UK fast-growth companies 2011. (n.d.). Growth Business UK. Retrieved June 13, 2014, from http://www.growthbusiness.co.uk/research/features/1654783/the-top-50-rising-stars-of-2011.thtml Read More