Evaluation of Growth Opportunities Assignment

Planning for Growth

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK1.............................................................................................................................................1
P1. Key Consideration for Evaluating Growth Opportunities................................................1
P2. Evaluation of Growth Opportunities by Ansoff's Matrix.................................................2
TASK2.............................................................................................................................................3
P3. Sources of Funds with Benefits and Drawbacks..............................................................3
TASK 3............................................................................................................................................5
P4. Business Plan for growth including strategic objectives and financial information........5
TASK 4............................................................................................................................................7
P5. Assessment of various exit options along with their advantages and disadvantages.......7
CONCLUSION................................................................................................................................8
REFRENCES...................................................................................................................................9

INTRODUCTION
Planning is the most important function of management. It refers to the decisions took by
entrepreneurs on how to pursue a business activity. It sets up a framework on which the
operations of the company are based to achieve organisational success (Chapin, 2012). It is
important as it facilitates optimum utilisation of various resources like finance, technology,
human resource, etc. The following assignment is based on the company RICHMOND
RESTAURANT, which is a theme-based restaurant in United Kingdom. It has entered into a
contract with Food and Beverage Delivery Service for College of Policing London Office.
The assessment includes analysis of the growth opportunities for the company, analysis of the
potential sources of funding, its business plan for growth along with its financial information and
its exit strategies in future.
TASK1
P1. Key Consideration for Evaluating Growth Opportunities
Planning for growth is a strategy for business activities that qualify a businessman to
make a plan for different growth and opportunities sectors that helps to run a business for long
time and earn more revenue. 'Richmond Restaurant' is established in UK which deals in food and
beverage sector. For evaluating better growth opportunities in food market owner have different
key considerations, which are as follows:
Porter's Generic Model
This model focuses on new small and medium enterprises. It make strategies regarding
how to control cost and focuses on launching a new product to gain competitive advantage.
There are four generic strategies are as follows:- Cost Leadership- The main objective of this strategy to minimise cost of production and
increase revenue (Barbour and Deakin, 2012). Richmond Restaurant is a new firm so
from starting it should make strategy to control cost and other expenses. Cost Focus- Businessman should focus on cost advantage with optimum utilisation of
resources. Richmond Restaurant have to make food products with good quality
ingredients and minimum wastage. Differentiation focus- Every enterprise aims to make their products different from others
with unique features and qualities (Schetke, Haaseand Kötter, 2012). Richmond
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restaurant is also focuses on large number of customers and make quality product with
taste and preference of consumers.
 Differentiation leadership- With the help of this strategy business make a target to
achieve competitive advantage and cover maximum area. Richmond can also use this
technique to attract customers and earn profit.
PESTEL Analysis
This technique is used by an organisation to analyse external environmental factors in
market segment, which affect the organisational activities. Detailed discussion of PESTEL
analysis are as under:- Political- This factor includes stability of political party, taxation system, fiscal and
monetary policy etc. Richmond Restaurant is affected by this factor because at the time
of start up it follow policies as per current government scenario but after election
government may be change and their policies also. So, firm have to adopt new policies
and change their strategy (Beatley, 2014). Economic- Country's economic growth rate, national income, GDP, interest rate,
inflation and deflation are make a large impact on Richmond's profitability. Social- This factor makes direct impact on organisation's success and failure. So
Richmond restaurant should make quality product with determining the social norms and
culture for better growth opportunities. Technological- Technologies are continuously changes with more innovation. So,
Richmond has to use upgrading technology for making and packing their food products
for better growth. Environmental- Environment of a market should be positive and ethical. Before,,
entering a new firm in market they analyse the environment and it make a large impact on
small and medium enterprises like Richmond restaurant.
 Legal- There are some legal factors like consumer protection act, health and safety,
standard of advertising are the key evaluation of growth opportunities for Richmond
Restaurant.
P2. Evaluation of Growth Opportunities by Ansoff's Matrix
Ansoff matrix was developed by Igor Ansoff in 1965. It is used to develop strategical
choice for an organisation. This technique is used to analyse and evaluate the growth
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opportunities for a business (Eddleston and et. al., 2013). Richmond Restaurant use this tool to
launch a new product or develop existing product and services in market to earn more profit.
Description of Ansoff matrix is as follows:- Market Penetration- In this strategy, company tries to increase its market shares by
improving the quality of existing product. It is less risky because firm increase their
resources and capabilities in existing marketplace (Ansoff Matrix. 2018). Promotion and
distribution system is increases and price of a product is decreases in this strategy. Market Development- This technique is used by an entity when he want to develop their
business in other place or countries with existing product. It is the best growth
opportunity for a firm to expand their branches in different geographical area. Product Development- Product development strategy is used by a company when they
want to introduce a new product in an existing market. Product should be launch with
some quality features and unique packing style which attract more customers and take
advantage from competitors. It helps a business to evaluate better growth opportunities in
market.
 Diversification- This technique is more risky because in this strategy a new product and
market both are developed. For growth and development firm use diversify their
business. They establish a new market in different area with different products and
services.
Richmond Restaurant is a new small and medium enterprise. So, it can only use diversification
technique for successful growth and achieve better opportunities (Grover, Bokalo and Greenway,
2014). Market penetration, market development and product development techniques can use
only by existing firms. In some cases, it may be possible to adopt market development strategy
by a new firm to start their business in other place with exiting product available in the market.
TASK2
P3. Sources of Funds with Benefits and Drawbacks
A business cannot established without money and the amount required by a firm to run
business activities is called funds. Richmond Restaurant is a new enterprise which need 60000£
to start its business. But currently, it has 20000£ and need 40000£ more. So, Richmond
Restaurant is enters in a contract with 'Food and Beverage Delivery Service for College of
Policing London Office'. It helps to small and medium enterprises to raise their funds and start a
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new business. There are different sources from where company can get funds. These are as
follows:-
Bank Loans:
For small and medium size business enterprises bank loans are the most common used
source of monetary fund. It is an amount borrowed by a firm for a certain period of time
(Keough, 2015). Repayment the amount of loan by firm is depends on rate of interest, and time
duration. Richmond restaurant have an option of bank loan to get funds and established business.
Advantages-
There are following benefits of bank loan given as under:-
 Bank loans are flexible, because they only need payment of instalment on time and bank
are not usually monitor that how borrower use loan amount. Bank loans are cost effective in terms of interest rate because interest rate of bank loans
are low in compare to overdraft and credit cards. So, it helps to save money.
Disadvantages-
Certain drawbacks of bank loans are as follows:-
 There is burden faced by borrower at the time of repayment the loan amount. There are
already many types of cost incurred for a start-up business and profit is very low. So, it is
difficult to pay instalment amount.
 It is difficult to determine exact amount of payment when loan is taken with variable
interest rate. Because interest rates are change according to market condition. So,
irregularity of payment amount is arises in this situation.
Crowdfunding:
Crowdfunding is one of the best option for small enterprises to raise funds (Kim, 2017).
In this technique, large number of individuals are invest their funds for one business. Richmond
restaurant should also use this source to raise funds.
Advantages-
There are following advantages of crowdfunding:-
 Richmond set a target amount that they want to need for their start-up and then they get
proportionate amount from every investors. In crowdfunding process, firm can take feedback about their ideas and need of
improvement.
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Disadvantages-
Drawbacks of crowdfunding are as follows:-
 If a business is not able to accomplish the target amount then investors get their amount
back and firm cannot achieve success.
 Crowdfunding is visible and finite, if a business is not visible then this technique cannot
succeed.
TASK 3
P4. Business Plan for growth including strategic objectives and financial information
A written statement which states a company's financial objectives, including its financial
strategies to achieve those objectives is known as a business plan (Li, Mobin and Keyser,
2016). Richmond Restaurant will have to adopt a business plan which would help it penetrate
the UK market and assure its sustainability for a foreseeable future.
Company Overview:
Richmond Restaurant is a theme-based restaurant in UK which provides food, beverages
and other numerous services to its patrons at a minimum price for people of every stature to raise
their standard of living(Grover, Bokalo and Greenway, 2014)). It has certain objectives which
would allow the firm to develop strategies to develop a competitive advantage and create a
strong customer base.
Vision and Mission: A new business always begins with a vision, which sets up a framework for
its operations. The vision and mission of Richmond Restaurant are stated below: Vision: Since its the first of its kind, Richmond Restaurant has a vision of being a
market leading firm with multiple chains in the span of 5 years. Mission: The mission of this firm is to provide best services to its customers in terms of
food and beverages, and engage more customers through periodic modification in its
theme.
Strategic Objectives:
As stated above in the report, Richmond Restaurant has entered into a contract with
Food and Beverage Delivery Service for College of Policing London Office, which would
help the firm to achieve a budget of £60k, £20k of which has already been arranged by the
company earlier. For the remaining amount, the firm has used external resources like bank loan
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and crowdfunding to acquire funds. Richmond Restaurant have certain strategic objectives to
facilitate a smooth running of its business operations. For instance, the company has to create a
customer base, as to which it is using social media as a prime source for its marketing. Other
than that, the firm is using print and television media as well. A near about 5% of the total
budget is being utilised on marketing. Also, the company is planning for a revenue of £100,000-
£120,000 for its first 3 years. This would help the company to cover the cost and earn profits
while modifying its theme periodically. Along with this, the restaurant plans to keep all the food
costs at less than 50% of its revenue, which includes excessive labour, food waste and other
unnecessary expenditure. To achieve this, the firm would focus on affordable vendors, and low
waste of food and other resources.
 Total Forecasted Budget:
PARTICULARS 31/12/18 (£) 31/12/19 (£) 31/12/20 (£)
MANUFACTURING
COST
2700 - -
PROMOTIONAL
EXPENDITURE
1200 1150 962
ADVERTISEMENT
EXPENDITURE
780 765 800
TECHNOLOGICAL
ADVANCEMENTS
1020 1210 1395
CATALOGUES 300 545 433
TOTAL COST 6000 3670 3590
From the above forecasted budget, we can denote that the company should spend more
on technological advancements to attract more customers and have a competitive edge over its
(competitorsMason, 2015). The firm should also spend more in catalogues and promotions as
the customers should be aware of the change in the restaurant's theme.
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TASK 4
P5. Assessment of various exit options along with their advantages and disadvantages
Sooner or later, life of every business comes to an end. There are many reasons due to
which entrepreneurs exit their businesses. These reasons include reduction in profits, intense
competition, changes in personal goals, succession, etc.
But before exiting the business, one must assess various exit options as it is a difficult
and a lengthy process (Mitchelmore and Rowley, 2013). An entrepreneur must develop certain
strategies to exit their business. In case of Richmond Restaurant, there are some viable exit
options which are as follows:
Liquidation: It is the process of closing the business and putting an end to its business
operations. In case Richmond Restaurant gets insolvent in future, this is the best exit option of
the company. In liquidation, the assets of the firm are redistributed among the claimants
according to their priority. For instance, the first priority is given to the secured creditors, who
can seize the asset and sell them accordingly. Then comes the unsecured creditors, and so forth.
It has certain advantages and disadvantages which are as follows:
Advantages:
 The biggest advantage of liquidation is that it is a settles the collateral debts of the
company, which is a major concern for the entrepreneurs. If the companies are facing any legal action, these are halted after the company
undergoes liquidation. This facilitates further opportunity seeking for the owner of the
company.
Disadvantages:
 The money which is generated by liquidation is through the disposal of company's assets
like land, inventory or equipments. Which results in a very low return on investment. Most of the funds generated through liquidation are claimed by the creditors of the
business. The entrepreneurs have a very few funds in their hands when they acquire them.
Open Market Selling:
If, in the future, the entrepreneur of Richmond Restaurant wants to retire, they can
choose this option (Moseley, 2013). It would generate adequate value of the business to its
owner. However, it has some advantages and disadvantages stated below:
Advantages:
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 If the profits of the business are high at the time of its selling, then it would attract a lot of
potential buyers who would give a handsome amount for the business. When the business is valued, the goodwill and assets are also incorporated which
provides the owner maximum return for the business.
Disadvantages:
 It takes a lot of time to find a potential buyer for a profitable business is time.
 Selling price of the business can be lower than expectations as valuing a business to its
true extent is a complex process.
CONCLUSION
It is thus concluded by the above assessment that RICHMOND RESTAURANT can use
PESTLE Analysis to determine the external environment and plan its strategies to penetrate and
diversify in the UK market. Furthermore, the company can apply Ansoff's growth vector matrix
to evaluate the opportunities for growth. The best sources for funding for the firm is through
acquiring a bank loan or crowdfunding. The company should abide by their strategic objectives
and forecasted budget to scale up the business. Also, the exit strategies for the firm are also
assessed which would help the entrepreneur in exiting the business.
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REFRENCES
Books and Journals
Chapin, T. S., 2012. Introduction: from growth controls, to comprehensive planning, to smart
growth: planning's emerging fourth wave. Journal of the American Planning
Association. 78(1). pp.5-15.
Barbour, E. and Deakin, E. A., 2012. Smart growth planning for climate protection: Evaluating
California's Senate Bill 375. Journal of the American Planning Association. 78(1).
pp.70-86.
Beatley, T., 2014. Habitat conservation planning: endangered species and urban growth.
University of Texas Press.
Eddleston, K. A. and et. al., 2013. Planning for growth: Life stage differences in family
firms. Entrepreneurship Theory and Practice. 37(5). pp.1177-1202.
Grover, B. E., Bokalo, M. and Greenway, K. J., 2014. White spruce understory protection: from
planning to growth and yield. The Forestry Chronicle. 90(1). pp.35-43.
Keough, S. B., 2015. Planning for growth in a natural resource boomtown: Challenges for urban
planners in Fort McMurray, Alberta. Urban Geography. 36(8). pp.1169-1196.
Kim, K. J., 2017. Inner-city growth management problem in Seoul: residential rebuilding boom
and planning response. In Towards Sustainable Cities (pp. 267-284). Routledge.
Li, Z., Mobin, M. and Keyser, T., 2016. Multi-objective and multi-stage reliability growth
planning in early product-development stage. IEEE Transactions on Reliability. 65(2).
pp.769-781.
Mason, P., 2015. Tourism impacts, planning and management. Routledge.
Mitchelmore, S. and Rowley, J., 2013. Growth and planning strategies within women-led
SMEs. Management Decision. 51(1). pp.83-96.
Moseley, M. J., 2013. Growth Centres in Spatial Planning: Pergamon Urban and Regional
Planning. Elsevier.
Schetke, S., Haase, D. and Kötter, T., 2012. Towards sustainable settlement growth: A new
multi-criteria assessment for implementing environmental targets into strategic urban
planning. Environmental Impact Assessment Review. 32(1). pp.195-210.
Online
Ansoff Matrix. 2018. [Online] Available through<https://www.smartdraw.com/ansoff-matrix/>./
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