Unit 42 - Planning for Growth: Assessing Models, Funding, and Business Plan for Coffee Republic

This report evaluates strategic business models such as Porter's generic and Ansoff's growth model to assess the growth opportunities present in the external market conditions for Coffee Republic. It also discusses numerous ways through which the company can obtain funding and designing a business plan for market growth.

Unit 42 – Planning for
Growth

Table of Contents
Introduction......................................................................................................................................3
MAIN BODY...................................................................................................................................3
PART 1............................................................................................................................................3
Assessing key models SME's needs to consider in order to evaluate growth opportunities:......3
Discussing numerous ways through which the company can obtain funding:...........................6
Designing business plan for market growth :..............................................................................8
Part 2..............................................................................................................................................11
Evaluation of the exit and succession options for a small business and explaining about
benefits and drawbacks of each option.....................................................................................11
Conclusions....................................................................................................................................13
References......................................................................................................................................14

Introduction
Planning for growth is the strategic framework adopted by managers in order to allocate
right resources needed to accomplish growth objectives of the company. The process assist the
top level managers to identify and evaluate growth opportunities in the external market and
allows them to explore opportunities by taking strategic actions. For this report Coffee Republic
is taken into focus. The Coffee Republic is the famous coffee restaurant chain brand situated in
London and founded in the year 1995. The report will highlight and evaluate strategic business
models such as Porter's generic and Ansoff' s growth model to assess the growth opportunities
present in the external market conditions. The report will further critically evaluate the methods
by which the company can raise funds to support its growth opportunities. In addition to this, the
report will include designing of business plan and assessing strategies essential for growth of the
business. Moreover, the report will also critically analyse various ways through which the
business owner can exit from the business.
MAIN BODY
PART 1
Assessing key models SME's needs to consider in order to evaluate growth opportunities:
The small and medium enterprises follows Key strategic models in order to identify and
growth opportunities present in the external market which are:
Porters Generic Model:
This business framework is undertaken by firm in order to enhance growth opportunities
and gain a competitive advantage in marketplace by deeply assessing its cost and product
development strategies (Firoz Suleman and et.al., 2019). In context to Coffee Republic, this
business model will support the company to analyses and evaluate its competitive advantages
that can allow it to tap into unexplored market successfully. The following elements practised in
this model are:
Cost Leadership:

This element of Porters model will assist the company to gain competitive advantage in
market when the cost of products and services are affordable as compared to their competitors.
This allow the firm to make optimal utilisation of resources with minimum wastage in order to
increase profit margin.
Differentiation strategy:
This strategy assists the company in making diverse products and services different from
the competitors in order to attain monopolistic position in the marketplace. This will support the
company to reach more customer base than competitors and leads the firm to attain competitive
advantage in the market by spending more on research and development areas(Vieira and
Ferreira, 2020).
The company can focus on enhancing growth opportunities of the business by laying
concentration on finding cost effective strategies or developing new variants of the same
products. This strategy is classified into two types:
Cost focus: The company can tap into unexplored market by focusing on lowering their cost of
products as compared to their competitors. This will help the company to addition chance of
making larger profits.
Differentiation focus: In this, the company can focus on providing different variety of products
in the foreign markets in order to enhance its competitive position in the market.
In context to Coffee Republic, the firm should consider Cost leadership strategy while
developing its growth strategies. This strategy will assist the firm to successfully attract the large
number of customers which will support the firm's developmental strategies(Chen and Wang,
2021).
Focus strategy:
PESTLE framework:
This strategic analysis tool will help the company to timely identify and evaluate the
forces of external environment in order form market growth strategies properly. In context to
Coffee Republic, this tool will support the firm to analyse various opportunities and challenges
present in the external market conditions that are critical while formulating growth
developmental strategies for entering into foreign market. The following are the external factors
that can impact strategies of Coffee Republic are:
Political factors:

The Brexit policies in UK can possess a challenge in the growth development strategies
of the business by imposing trade restrictions. The political influence into cafe industry can also
impact its growth objectives(Mishra and et.al., 2019).
Economic factors:
The Brexit policies can change the economic environment of the UK which can
negatively affect the pricing strategy of the company. It is essential for the company to make
effective analysis for identifying impact of economic forces.
Social factors:
The change in the behaviour of customers towards consuming healthy drink provides an
golden opportunity for the firm to enhance its operations in the UK market or into foreign
markets.
Technological factors:
The change in technologies such as online registration or online delivery provides an
opportunity for the company to adopt these changes in order to boost its growth developmental
strategies.
Legal factors:
The new and stricter food safety rules in UK provides an opportunity for the company to
further explore as it follows strictly with global safety standards for manufacturing products.
Environmental factors:
The increase in the focus to use recyclable items in packaging of products influence the
firm to adopt with the new policies in order to enhance its market growth strategies.
Ansoff's Growth Vector Matrix:
This business framework is critical in supporting top level managers to evaluate
challenges and risks of entering into new market by practising systematic risk analysis
(Kampanje, 2020). In context to Coffee Republic, this strategic tool will assist the company in
conducting risk evaluation of tapping into new markets or in increasing the portfolio of products
in the domestic or international market. The following are the four main elements of Ansoff's
matrix are:
Market penetration:
This option for market growth is considered as safer option as it deals with expanding the
growth of established products in the domestic market after clearly analysing the current trends

of the domestic marketplace. The main advantage of this strategy is that the company gets the
opportunity to save its cost for expanding the business outside. But its disadvantage is that the
company has to focus on new strategies and opportunities to enhance its sales.
Product development:
This approach for market development deals with launching new range of products into
existing market conditions after assessing properly the needs and preferences of the customer
present in market. Its merit is that the company gets the opportunity to meet the customer needs
in the form of introduction of new product while its demerit is that the company has to spend a
lot on market research in order to adopt this strategy.
Market development:
In this approach, the firm enters into new market conditions with their existing products.
This option for market growth is riskier option as the firm has to properly analyse unknown
market conditions in order to mitigate with any challenges(Chen, 2019). The main benefit of this
strategy is that the company has the opportunity to capture new market while its demerit is that it
is risky to implement.
Diversification:
This option for market development is considered as riskiest option as it includes
exploring into foreign marketplaces with the entirely new range of products in order to improve
competitive position. The main advantage of this strategy is that it helps in enhancing customer
base while demerit is that it is costly and risky to implement.
Recommendation
In context to Coffee Republic, It is recommended that the company should undertake
Market development approach as this will allow the company to tap into unexplored market
conditions and also supports in attracting new customers which can enhance competitive edge of
its business as compared to its competitors.
Discussing numerous ways through which the company can obtain funding:
The funds are necessary for the survival of every organisations and in order to carry
growth strategies in the proper manner. In context to Coffee Republic, the company can raise
funds after assessing the critical aspects of the external and internal sources of funds available. In
addition to this, the company should consider cost and risk associated with each source of funds
that will help it to select the best source available.

Internal sources for arranging funds are:
Owner's capital:
The fund which is arranged by owner itself in order to perform or carry out market
growth activities without disturbance. This type of fund is basically provided by owners as an
additional fund required to expand business operations(Ante, 2021). If Coffee Republic uses this
source of fund then it has to utilise its own funds and it is invested as per the will of owner only.
Advantages: In this type of fund arrangement the company is exempted to pay any
amount of interest to the owner.
Disadvantages: The investments made by owner heavily depends on his savings which
creates this a riskier option when the business needs large amount of funds for expansion.
Sale of fixed assets:
This type of fund is arranged by the company through selling unusable or obsolete fixed
assets in order to meet with the fund requirements for undertaking growth projects (Boschmans,
and Pissareva, 2018). This fund may be utilised by Coffee Republic by selling its assets so that it
can acquire funds which is sufficient to meet its daily operations.
Advantages: This is the most flexible option available to the company for meeting fund
requirements. In addition to this, no interest is payable by using this type of fund.
Disadvantages: There is a set limit of selling fixed assets which may or may not be
helpful for management to support developmental projects. In relation to this, this method is
also considered as a time consuming method.
The following are the external sourcing ways for obtaining funds:
Trade credit:
This type of fund is sourced with the motive of satisfying short term fund requirements of
the company. It is the process under which the supplier allows the business owner to purchase
raw materials on credit terms and conditions. This way of fund raising support the company
Coffee Republic to use available funds in the most efficient manner(Short, Fleming and Witt,
2021).
Advantages: The firm who enjoys great reputation in the market can easily access this
type of funds in order to support its market growth strategies.
Disadvantages: The company through this way can only source limited amount of funds
and also for a less time period.

Financial institutions (Banks):
The firm can also meet its fund requirements by taking loan from the commercial and
national banks. The bank provides numerous types of loans such as cash credits, overdraft
facilities, term loans and many more. In addition to this, it is mandatory for the company Coffee
Republic to pay rate of interest while using this type of funds. Moreover, the bank can also ask
for assets as a collateral when giving loans to the business owners.
Advantages: This type of raising funds provides a security to firms by keeping their
confidential information private and secured from unethical parties. In addition to this, the
business owner can pay its loan in instalments also making it a better way for raising funds.
Disadvantages: The process of applying for bank loans is considered a time consuming
and tedious way of raising funds. In addition to this, the bank can sometimes ask for collateral in
exchange of giving loans(Stoker and et.al., 2021).
Recommendation
In relation to Coffee Republic, from the above understanding it has been recommended
that the firm should opt Trade Credit in order to meet with their financial needs for growth and
expansion of the business into new market conditions. As the firm enjoys a respectable position
in the market it will be easy and convenient for the firm to raise funds in the timely manner. In
addition to this, this method of fund raising will also allow the business owner to establish better
relations with their suppliers that can support it in effectively leading growth and expansion
strategies.
Designing business plan for market growth :
Organisational overview:
The Coffee republic firm is the British owned brand of cafe chain established in the year
1995. The company is currently owned by Bobby and Sahar Hashemi in London's South Molton
Street. The business has established itself as the most famous brand among coffee lovers due to
its high quality and delicious range of coffee. The company lays its focus in adopting latest
technological trends of market in order to find most innovative way for developing its products.
In order to meet with the growth objectives it is critical for the company to open a chain of its
brand in secondary market with its existing products. This move will allow the company to
attract large amount of customers and will also support the company to achieve competitive
position in the domestic market(Haleem, Jehangir and Ullah, 2019).

Mission:
The mission of the business is to tap into foreign market conditions with their existing
portfolio of products. The mission will guide the organisation to build a new customer base as
well as allow it to use new technologies that is present in the foreign market places. Moreover,
the achievement of the mission will assist the company to meet its growth objectives.
Vision:
The vision of the company is to become global brand of selling high quality coffee in
foreign marketplaces. In addition to this, the vision of the company is to attain sustainable
growth by using environment friendly methods of producing coffee. Moreover, the firm will also
lays its focus on utilising pod technology for reducing the cost associated with packaging of its
products which will directly reduce its costing without compromising quality.
Goals and Objectives:
The objectives for the company is to boost market share by 6% within one year of time
period through tapping into new market conditions. In addition to this, the aim of the firm is to
discover new ways of offering products in an effective and efficient manner and also reduce cost
of products by 2%. Moreover, the goal of the firm is to enhance its marketing strategies while
focusing on using social media platforms in order to improve customer base by 2%
(Dimitrakopoulos, R. ed., 2018).
The stakeholders of the company who may show particular interests and can influence
the operations and financial position of the company can be classified into internal and external
stakeholders. The internal stakeholders includes employees of the firm whereas external
stakeholders includes suppliers (coffee farmers) and potential customers.
Promotional strategy:
The company will emphasis on enhancing its digital presence by using social media
platforms in order to effectively attract large number of customers present in secondary market.
In addition to this , it will allow the company to cut marketing cost to an extent which can
contribute to cost savings. Moreover, this will also help company to effectively analyse tastes
and preferences of foreign customers which will support the company to decrease the chances of
failure and losses(Deacon and et.al., 2018).
Stakeholders:
Pricing strategy:

In order to successfully tap into foreign markets the firm will emphasis on providing
value based pricing structure in the foreign market without compromising the quality of
products. The correct pricing formula will cater the company to force new customers present in
foreign market to give it a try once which will assist the company to reach into the wider base of
customers.
STP analysis
Segmentation:
The segmentation of the market will include the customers falling between the age of 17
to 50. In relation to this, the market segment will be primarily based on the needs of middle and
upper middle classes because of the cost of the high quality products. Moreover, the company
will focus on developing products according to the desires of people of working
background(Seiwert and Rößler, 2020).
Target market:
The company will mainly target younger generation of customers present in the
secondary market by focusing on using social media platforms such as Facebook or Instagram.
The using of this digital platforms will allow the company to reach into younger customers in an
cost effective and efficient manner. In addition to this, this will help the firm to increase
customer base as well as market share in the secondary market. Furthermore, it will also support
the organisation to enhance innovation in its business operations that will allow the company to
cater successfully with the needs of the young customers present in the foreign market.
Positioning:
The company will operate from its new outlets that will be open in secondary market
with an objective of increasing market share as well as customer base. In relation to this, the
organisation will also put emphasis on practising social media platforms and developing its own
website in order to support customers to order their beverages just by sitting at home. The correct
positioning will assist the company to save unnecessary costs and help the company to support
its market development strategies. Furthermore, this will also allow the business to interact
properly with the customers of foreign market as well as building a good brand image in the
minds of customers(Cotei and Farhat, 2018).
Budget:
Profit and loss account

Particulars Year 1 Year 2
Sales 250000 350000
Less: cost of goods sold 40000 50000
Gross Profit 210000 300000
Less: Expenses
Administration expenses 50000 55000
Selling and distribution expenses 60000 60000
Fixed Expenses 75000 75000
Operating income 25000 110000
Add: Indirect income 45000 20000
Net Profit 70000 130000
Cash flow statement:
Cash flow statement
Particulars Year 1 Year 2
Cash received from sales 150000 200000
Less: payments
Payment to creditors 20000 25000
Rent 1500 1500
Purchases 15000 20000
Net cash after payments 113500 153500
Add: receipts
Received from debtors 23000 34000
Commission received 1000 1800
Net cash 137500 189300

Opening cash balance 150000 287500
Closing cash balance 287500 476800
Part 2
Evaluation of the exit and succession options for a small business and explaining about benefits
and drawbacks of each option
There are certain exit and succession options for a small business which have their own
advantages and disadvantages as well. This is explained into the following manner:
Liquidation: It basically refers to the process where business comes to an end position and
distributes their assets to other people. It is a situation where it usually occurs in that case when
company becomes insolvent which means that it can't pay its obligations when they are due(Doss
and et.al., 2015). In context to coffee republic, they can liquidate their business into those
condition when they observed that they can't stand competitively at the organisational level.
Advantages of liquidation:
 When liquidation have done at the organisational level then there are no debts after this
situation.
 There has been no legal actions against the organisation when company got liquidated.
Disadvantages of liquidation
 In the liquidation situation, the business is no longer be able to trade and will likely to
restrict from using the same name into the future. In this situation, shareholders have to repay the illegal dividends and the persons who lost
the job will be responsible for their own future.
Family Succession: Within the family succession process, it is about the strategic planning,
financial planning, estate planning and human resource planning as well. It is also the process of
pinpointing the main needs of leadership and intellectual talent throughout the organisation over
the period of time(Dale and et.al., 2016). In context to coffee republic, they can plan into the
every aspect and also be able to analyse the leadership talent into intellectual manner.
Advantages of Family Succession:
 It basically contribute in terms of resolving family ownership and family business
leadership issues.

 Family succession remain in the synchronized and integrated manner as well. In addition
this, the family wealth remains into the form of protected and managed form as well.
Disadvantages of Family Succession
 Within the family succession, it lead towards the conflicts from work to the home which
disturbs the peace of every family member Within family succession, it somewhere results into breaking of rules due to which it
creates negative impacts on the employees working at the organisational level.
Selling the business: When business can't be run into successful manner then the ultimate result
is that they can be sold out to other people or party as well(Hahn and et.al., 2020). In context to
Coffee Republic, it has been observed that when they can't generate optimum level of revenue
for running themselves then they can be sold out.
Advantages of selling the business:
 Selling the business can give opportunity to pursue other options into appropriate manner
for further exploring into positive aspects.
 Through selling the business it allows for paying off personal debts.
Disadvantages of selling the business:
 The legal cost of selling the business act as in the form of expensive parameter.
Evaluation of the exit options available to the business owners are:
The correct exit plan can allow the business owners in enhancing the chances of gaining
financial return without much losses. This provides the business owner to successfully transfer
the company without experiencing more challenges and risks. There are several ways through
which the business owner can exit from the organisation. One of the exit way is through
Liquidation of business operations which is considered as the least effective approach as it can
damage the reputation and goodwill of business owners in marketplace. Moreover, the other
method can be to transfer ownership of the business to family members which is good as it
enable business owner to take control over business operations during tough times but the
successor is not capable mentally to manage business then it is considered as an ineffective
method of exiting . Furthermore, sale of business option can also be considered as the option for

exiting from business as this will not damage the legacy and goodwill in the
market(Sardeshmukh, Goldsby and Smith, 2021).
Recommendation
In context to Coffee Republic, After properly analysing above strategies it has been
recommended that the business owner should sale the ownership of business to interested parties
as this will help the company to retain its established goodwill in the mind of customers. In
addition to this, this method will also generate greater profits as compared to other exiting
options.
Conclusions
From the above study it has been analysed that planning for growth is critical for every
company in order to increase its market share in new market or adding new portfolio of products.
It was understood after analysing business frameworks that the company should deeply analyse
external forces in order to find available challenges and opportunities present in the foreign
market. This will allow company to tap into foreign market successfully. Furthermore, it has
been concluded that with the support of Trade credits the business an arrange funds in order to
carry smooth operations. It was further concluded that suitable business plan including vital
strategies can support the organisation to enter into new market successfully. It was further
concluded that sale of business option is most appropriate strategy in order to exit from the
business.
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