Key Considerations for SMEs in Evaluating Growth Opportunities

This document discusses the key considerations for SMEs while evaluating growth opportunities. It covers topics such as competitive advantage, new products and services, growth options, collaboration, and more. The document also provides insights into methods of accessing funding and different types of funding available for SMEs. Additionally, it includes information on business plans and exit strategies for small business owners. The content is relevant for students studying business management or entrepreneurship courses.

UNIT 42
Planning For Growth

Table of Contents
INTRODUCTION...........................................................................................................................1
LO1. Key Considerations for SMEs while evaluating growth opportunities..................................1
Competitive Advantage..........................................................................................................1
New Products and Services....................................................................................................3
Growth Options......................................................................................................................5
Collaboration..........................................................................................................................7
Benefits of Horizontal and Vertical Integration.....................................................................8
LO2. Methods to access funding along with different types of funding.........................................9
Investment Decision Making..................................................................................................9
Sources of Finance...............................................................................................................10
LO3. Business Plan and communicating the intention to scale up by the business.......................11
Business Plan for Bonmarché...............................................................................................12
LO4. Various ways small business owner can exit the business and implications of each option14
Exit: Success and Failure......................................................................................................14
Growth and succession in the family business.....................................................................16
CONCLUSION..............................................................................................................................17
REFERENCES .............................................................................................................................18

INTRODUCTION
Growth is the motive for which each organisation functions within the market place. The
following project is based upon Bonmarché which is a renowned clothing retailer engaged in
provision of women apparel. The project contains growth considerations for SMEs. Additionally,
it encompasses methods to access funding together with different types of funding. Apart from
this, it includes business plan as well as exit strategies.
LO1. Key Considerations for SMEs while evaluating growth opportunities
To attain growth and development, it is important for SMEs to take into account certain
key considerations. Furthermore, resources, capabilities and core competencies provide aid to
organisation in gaining an edge over rivals (Anatolie, 2019). The same are analysed in context of
Bonmarché as under:-
Competitive Advantage
Basis of Competitive Advantage
Resource: The main resources of Bonmarché include human resource which is
responsible for producing fashionable clothes for women. Other types of resources held by it are
physical, technological and financial, that aid in attaining growth.
Capability: The fashion retailer has the capability to gain access into new markets by
capitalising upon the available resources.
Core competency: The core competency of the respective firm lies in its approach to
market research and innovation owing to which it is able to cater to the needs and demands of
customer base.
Porter Generic Strategies
Michael Porter is the management specialist who first started the analyses of the business
using 3 generic strategies. These strategies are discussed as follows:-
Cost Leadership: The best way to beat the level of competencies is to grab the distinct
market position. Through various measures but according to cost leadership strategy there are
two ways to attain the organisational objectives by focusing on the costings. One is to minimize
the manufacturing cost of product for higher profit growth. As other factor is to decrease the
actual price to get ahead of the competition and catch the customer attraction to cover more of
the market share.
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Differentiation: Making the brand and product more classified is the focal point of
differentiation strategy (Bautista, 2019). This is the effective measure to increase the popularity
of brand. Differentiation can only be achieved by continuous innovations and trend adoption
Focus: It is necessary for a SME like Bonmarché to focus dynamically on both of the
strategies to achieve the desired goals. In the cost focus, the major stress is put on the lower
market niches as it is to make sure to implement the lowest possible cost. The another category
in market growth focus is differentiation, it is performed by providing the product and services in
a unique segment for the upper level branding of business and to get the targeted market share.
On the basis of above analysis, cost leadership is ascertained to be the best strategy for
Bonmarché as it enables the firm to reduce the overall cost of operations and enhance the profits.
PESTLE Analysis
Bonmarché is one of the most popular brands among the clothing market of United
Kingdom. The management of this company has applied PESTLE analysis as under:-
Element Description
Political UK Trade policies are constant as the ruling party is common since a long
time period. It helps in setting up of fix rules and regulation for the ethical
working process of Bonmarché.
Economical Due to the low inflation rate and flexible economy development UK has
always been a favourable destination for the FDI (foreign direct investment).
Thus it gives certain growth chances for SMEs such as Bonmarché to
enlarge their brand value scale.
Social UK is ranked as the worlds third best country, due to the higher literacy rate
and its multicultural environment. Thus, Bonmarché gets more spending
customers and it becomes easier to target and position them.
Technological Major SMEs of the UK set up new technological trends in the domestic as
well as in international market. As the emerging technologies are needed to
be adopted by the business to maintain the growth and survival in market.
Legal Certain regulations are there for the commencement of new trade. According
to the UK business laws there is a balanced level of flexibility and rigidity
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(Brinckmann, 2019).
Environmental Issues regarding the climatic and whether conditions which affects cycle of
trading. In the present time as the country is not going through good climate
situations. Corporations are needed to take genuine initiative in the way to
solve out the problem to increase the growth and moral of organisation.
New Products and Services
Development of products and services as a basis for growth
For a SME to attain growth and development in a rapid manner, organisations like
Bonmarché should focus upon new product and service development procedures. This would
provide aid to the corporation in gaining the attention of large number of customers in a rapid
course of time, thereby appealing to them with high quality products offered by company at
market place.
Portfolio Strategies
It is important for Bonmarché to take into account portfolio strategies so as to facilitate
growth and enhancement of scope of operations.
Boston Consultancy Group Matrix
BCG matrix is the systematic module first introduced by Boston Consulting Group. The
main aim of using BCG matrix is for the planning of long term future oriented decisions. In this
matrix there are four quadrants classified respectively as dogs, question marks, star and cows.
Each segment represents the particular shares of market.
Dogs: This is the product segment which holds low market share as opposed to rival
firms and thus function in a steadily growing marketplace. In general, they are not worth
investing in because they generate low or negative cash returns. Within the confines of
Bonmarché, footwear falls under this category (Casas, 2019).
Cash Cows: This product segment is the most profitable brands and should be “milked”
to provide as much cash as possible. The cash gained from “cows” should be invested into stars
to support their further growth. In relation to this, dresses of Bonmarché pertain to this category.
Star: This product segment operates in high growth industries and maintain high market
share. Stars are both cash generators and cash users. They are the primary units in which the
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company should invest its money, because stars are expected to become cash cows and generate
positive cash flows. With regards to Bonmarché, accessories come under this category.
Question Mark: This is the product segment which requires much closer consideration.
They hold low market share in fast growing markets consuming large amount of cash and
incurring losses. It has potential to gain market share and become a star, which would later
become cash cow. In context of Bonmarché, it is recognised that winter wear falls within this
category.
General Electric / McKinsey Matrix
(Source: GE / McKinsey Matrix, 2020)
Bonmarché is a female fashion retailing company which carries out its operations within
the confines of UK. Looking upon the performance of this organisation at market place, it is
analysed that this business unit is moderately strong. Further, it is seen that the fashion industry
across the globe is highly attractive (Gosling, 2019). Thus, the integration of both the results as
per the GE Matrix reflects that Bonmarché should invest in the company and facilitate growth of
its scale as well as operations.
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Il
lustration 1: GE / McKinsey Matrix

Diffusion of Innovation
This theory was coined by EM Rogers during the year 1962. This theory was developed
with a view to provide knowledge of the manner in which, with the evolution of time, a product
or an idea initially gains momentum and then diffuses via a certain population. The consequence
of such diffusion is that individuals who are an active part of the social system, get influenced to
adopt a product or service. Hereby, adoption implies acquisition, purchase, consumption or any
new behavioural pattern witnessed in association with the product or service. Whereby the
management of Bonmarché considers to come up with a new product or service at market, it
should make use of DOI theory to gain positive results out of such launch.
Growth Options
Ansoff Matrix
The Ansoff Matrix is a management tool used by firm to identify the strategies of growth
and expansion of business. It is a marketing tool that assist in determining the product and
market growth that increase the productivity of an organization. Bonmarché is one of the popular
brands of clothing retail in UK. The manger of this firm has applied this strategy to determine
the right kind of strategy for the corporation. The concerned firm has analysed the four strategies
of Ansoff matrix as follows:
Market Penetration: This strategy emphasises on increasing sale of existing product in
the existing market. Market penetration aids the organisation in increasing its market share. If
Bonmarché adopt this strategy then it can grab the attention of large number of customers. For
this, the firm can focus on more promotional activities and decrease their prices. This will lead to
increase in sales as well as profits of Bonmarché in United Kingdom (Hatta, 2019).
Product development: This strategy focuses on introduction of new product in the
existing market. The aim is to modify the product and improve the quality of a product so as to
increase the customer base. In the context of Bonmarché, the firm can gain competitive
advantage by extending its product line in the current market to meet the needs of customers. In a
competitive era, changes are required in the organization as it results in development of new and
innovative products according to the customers' taste.
Market development: In this strategy, company enters a new market with their existing
product. This can be possible if a company has a strong brand name, and provides products at
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affordable prices. If Bonmarché applies this strategy then it can elaborate its existing market
reach and gain access to other parts of the globe to create a large customer network.
Diversification: This strategy emphasises upon new products in emerging and developed
markets. This strategy is considered as risky because there is a chance of failure while entering
the new market with unknown characteristics. This strategy is regarded as expensive for
Bonmarché as it is a SME and too much investment resulting into failure would be adverse for
the corporation. The company has to organise new marketing plans or campaign to gain the
attention of customers in new marketplace (Koreen, 2019).
The above research shows that Bonmarché can apply the market penetration strategy. In
this, the management of the firm can lower the price and can develop various promotional
strategies to provide attractive products and gain access to large number of customers within
United Kingdom.
Identifying and mitigating risk
Whereby Bonmarché seeks to make use of market penetration strategy, it would face
certain risks. One of the most crucial risks is that the firm would not be able to leverage market
opportunities in terms of expansion and growth. Yet another risk associated with this strategy is
that lack of access to new markets may restrain the respective fashion retailer from earning high
profits. To mitigate such risks, it is important for Bonmarché to ensure that it incorporates
innovation in its products to come up with unique offerings at due intervals of time.
Exploiting technologies and digital platform to expand network and generate growth
Being a customer interaction based business Bonmarché always faces the difficulties in
connecting with a wide area network of consumers. Although SMEs do not have a larger
operational field of work, it demands a much bigger network for the growth of the business to
capture the effective market share. With a view of current situation it can be justified as this is
the era of digitalisation, many small big industries participates in the E-commerce market to get
maximum coverage for their product and services. There are certain technologies which became
an integral part of big scale industries and and its necessary for the efficient SMEs like
Bonmarché to adopt such new techniques and technologies for the growth of business. For the
network expansion of trade company can leverage various digital promotion tools other than its
website such as using major social media platforms, making appearance at other E-commerce
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portals. Applying these steps can actually boost the business networks and captivity within the
market position (Malkar, 2019).
Collaboration
Growth options for small businesses
There are several growth options available for small businesses. These are discussed
below along with their advantages and drawbacks:-
Merger:
Merger is an agreement in which two companies join together to form a new corporation.
Merger of two organisations is done to increase the market share, reduce cost of operations and
also to expand in territories.
Advantages: Merger is essential for enterprises to facilitate expansion in new areas and
increase market share. It also increases the resources of a organization which help in company's
growth. This results in raising sales and profits of the business association.
Disadvantages: The biggest drawback is that due to merger, a big company is formed
which creates monopoly in the market. This leads to increase in prices of products. This hampers
the development of firm and declines the growth of a new company formed as the customers are
not willing to invest too much for purchasing the organisational offerings (Mamman, 2019).
Acquisition:
Acquisition means when a company purchases whole or more than 50% of another
company's shares. The main purpose of acquisition by a company is to expand its operations in
different parts of the country to create a solid base within the marketplace.
Advantages: The biggest merit is that the corporation can get access to latest technology
and reduce the competition. This promotes the growth and development of an organization. This
leads to reduction in cost and increment in the profits of entity.
Disadvantages: One of the drawbacks of this method of collaboration is that there can be
clashes among the culture of companies if the nature of work of both the organisations is similar.
This leads to duplication of activities that results in job cuts of employees as companies is not
likely to spend money on keeping more than one employee for same work.
Joint Venture:
Joint venture is a business entity in which two or more parties join together to accomplish
a specific task. It can be applicable to sole proprietorship, partnership or limited liability
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companies and other business entities. Many companies combine with foreign companies to
become technologically advanced and to scatter in different parts of the country.
Advantages: When one company enters into joint venture with another company, there
are wide opportunities open in market. One of the advantages of this is that the firm brings
innovative technology with new ideas at marketplace which promotes organisational growth and
success.
Disadvantages: The objectives of joint venture are not clear as different companies work
together which results in imbalance of balance sheet of companies. Also, there is lack of
communication because of different nature of companies (Manninen, 2019).
Benefits of Horizontal and Vertical Integration
Integration is the term in corporative sectors used for the acquisition of one company by
another company. It is done in majorly two aspects, which are classified as horizontal and
vertical integration.
When a company take on some other organisation which is either its competition or an
existing entity in the same market place dealing in similar products and services is referred as the
horizontal integration. There are certain benefits of this kind of integration. Hereby, revenue gets
increased as a effect of merging of two companies of same stream it gets a bigger market share.
The quality and quantity of products gets enhanced with the combination of various techniques
and and strategies of both company under the single brand name.
Vertical integration means when a parent company owns the supply chain and a level
above or below organisation to capture more of the market share. It results in involvement of two
or more businesses to strategically obtain the organisational objectives. In this structure there are
comparatively more benefits which are discussed further. It helps in the cost control of product
as the management can monitor the overall process from production to retail sale. Coordination
among different levels gets increased and the brand gets more opportunities to connect with the
market on an extensive level.
Partnerships in Value Chain
Companies in the modern era realise the significance of entering into partnership with
other strong firms to build their networking as well as to developed a stronger value chain. By
operating in a collaborative manner, organisations along with their vendors can gain an edge at
market place by creating an effective value chain. One of the best examples of this is bidding
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consortia. Bonmarché can leverage this opportunity to gain a competitive edge over rival firms
present within fashion industry and foster increment in profits (Mughal, 2019).
Potential of Franchising for expanding a business
Franchising is the systematic legal business body which is transferable by parent
company to any of the potential individuals or groups for its own interests. In case of a SME like
Bonmarché, its a huge opportunity to leverage the franchising system as it gives a vast market
scope to its products. As the company would get support from its franchisees and the trade
network, it would facilitate organizational expansion along with more wide and independent
work system. It also leads to improvement of brand image at market place.
LO2. Methods to access funding along with different types of funding
Investment Decision Making
It is important for a firm to take decisions regarding investments. For this purpose, two
options are available, pay back period and NPV. Both of these are explained with the help of
calculations as under:-
Pay Back Period Method
Calculation of Accounting Rate of Return (ARR)
Cash inflow £85,000
Cash outflow £12,500
Net cash flow
(Cash inflow – Cash outflow) £75,500
Step 1447
Year £ Net cash flows
£ Residual
value £ Depreciation
Annual
profit
1 72,500 0 38,958.33 33,541.67
2 72,500 0 38,958.33 33,541.67
3 72,500 0 38,958.33 33,541.67
4 72,500 0 38,958.33 33,541.67
5 72,500 0 38,958.33 33,541.67
6(Cash flows + residual
value –year depreciation) 72,500 41,250 38,958.33 74,791.67
Step 2
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Average profit = (year 1+…+year 6 profit) / numbers of years
£ 242,500.02 / 6 = £ 40,416.67
Step 3
Average capital = (initial cost + residual value) / 2 = (£275,000 + £41,250) / 2= £ 158,125
Step 4
ARR= Step2 / Step3 * 100% = £40,416.67 / £158,125 *100% = 25.56 % profitability
Net Present Value (NPV)
Cost of capital 12% (R1)
Year £ Cash flows Cost of capital (12%)
(annuity table)
£ Present value (cash flow*cost
of capital @12% from
annuity table)
0 (275,000) 1 (275,000.00)
1 72,500 0.893 64,742.50
2 72,500 0.797 57,782.50
3 72,500 0.712 51,620.00
4 72,500 0.636 46,110.00
5 72,500 0.567 41,107.50
6 ( cash flow +
residual value) 113,750 0.507 57,671.25
NPV (year 1+...
+year 6)-year0 44,033.75
Sources of Finance
In a business every task and all the planing is based on to achieve certain organizational
objectives. This is necessary for the growth and survival of the corporation. Being a renowned
brand in the garment sector Bonmarché has its own typical pathway to follow and apply the
principles of growth and development. Resourcing of finance for the overall functioning of
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company is also a crucial part to attain by its finance managers. Fund sourcing of Bonmarché
from its different aspects is as follows:-
Venture Finance
A financing pattern which is mostly used by entrepreneurial industries and early start-ups
where the returns on investment are generally higher as compared to any other investment.
Whereas in venturing finance risk of getting low interest or nil return is also uncertain. Venture
finance is term used by financiers when there is a scenario of a corporation who willingly invests
in new and potential start up business with in exchange of fixed units of new company's equity
share. Venture financing faces a number of advantages and disadvantages by both the parties. A
brief information about the benefits and drawbacks in respect of the start up company which is
getting the financial value is given as below:-
Benefits- Major benefit of venture financing is there is no such compulsion to repay the
invested amount in case of business's low growth or start-up failure
Drawback- The right of ownership is at extensive risk as in most of the cases the
investing organisation acquires half or more than half of the total company shares.
Angel Investors
Those investors who deal in the sector of market finance and shares on investment are
generally used to invest in SMEs and new start ups where they observe perfect opportunities to
raise their finance (Nafiu, 2019). An angel investor is that individual who has a minimum net
worth of $1 million and provide the financial aid to new business in place of the permanent
equity shares of the venture. They are also known as seed investors, angel funders, informal
investors and business angels. Similar to other finance sourcing it certainly have some benefits
and drawbacks, which are discussed as follows:-
Benefits- Business start-ups get managerial and corporative help other than finance from
angel investors as there is no pressure of repayment involved.
Drawbacks- Its a long time taking process as to find out a genuine angel investor and
planning of all the conditions.
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LO3. Business Plan and communicating the intention to scale up by the
business
Growth is regarded to be the primary motive for which each and every corporation is
setup. Within the confines of hyper competitive market place, it is important for organisations to
continuously undertake measures through which it can enhance its positioning across the
marketplace. In this respect, it is quite essential for companies to devise effective strategies to
attain growth in rapid course of time. This provides aid in ensuring long term survival in hyper
competitive corporate world. Bonmarché is a recognised female fashion retailer which takes into
account the significance of planning to facilitate growth and expansion. Moreover, it is
acknowledged that business plans lays down the structure with the help of which small entities
can attain growth. Looking upon this, the management of the respective fashion retailer has come
up with a business plan with a view to grow and develop at market place. With respect to this,
the business plan includes aspects such as Overview of the organisation, Strength and
Opportunity Analysis, Values, ethics, vision, mission, strategic objectives, entrepreneurial
strategies, Monitoring and Controlling, Source of Finance and Communication Strategy to
inform Investors. By following the planned pathway, the company would be able to achieve the
desired target of inflating its market value and brand positioning. In this way, the concerned firm
would be able to capture a large market share which leads to increase in sales and promotion of
growth of Bonmarché.
Business Plan for Bonmarché
Overview of the company: Bonmarché is women apparel retailing company operating
within the boundaries of United Kingdom.
Strengths and Opportunities: Bonmarché is a renowned fashion retailer that leverages its
strengths to capitalise upon the market opportunities. Below mentioned are the strengths and
opportunities of this firm:-
Strengths Opportunities
 Bonmarché has a low costing structure
which provides aid to the organisation
in carrying out production at low cost.
 The firm has facilitated automation of
 Bonmarché can leverage the
opportunity of expanding its presence
online and facilitating communication
with customers over internet.
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certain section of production which has
enabled optimum usage of resources
and decline in overall cost of business
operations.
 Bonmarché invests heavily in imparting
training to its workforce, owing to
which it has a strong base of skilled and
proficient employees.
 This organisation has shown strong
financial performance over the course
of time to the extent that it has been
making profits since last 5 years
(Nantaba, 2019).
 The respective fashion retailer also has
the capability as well as resources to
capitalise upon social media marketing,
thereby creating awareness among the
people about its offerings
 Bonmarché can automate some of the
operational processes to facilitate
decline in cost.
 Increase in consumer spending over the
course of time has opened the
opportunity for increment in
consumption of merchandise sold by
Bonmarché.
Values: Business values are the principles that are inherent within the corporate culture
of an organisation. Every company has its unique set of business values which provides aid to it
in achieving the organisational objectives within due course of time, in an ethical and legal
manner. With respect to this, it is identified that the values of Bonmarché are acknowledged to
be Integrity, Respect, Friendly Service and Professionalism.
Ethics: Bonmarché has been given full membership in Ethical Trading Initiative which is
an entity promoting regard for the rights of workers worldwide. The organisation became a part
of ETI as foundation member during 2013, however, it got upgraded owing to its commitment to
ethical business practices and provision of support to vendors. In future also, the firm would be
seeking to conduct business activities which are ethical in nature and do not cause harm to the
environment.
Mission: “To developed products aligned with market needs and demands to gain high
customer satisfaction.”
Vision: “To be the leading ethical firm within fashion retail sector across the globe.”
Strategic Objectives: “To raise the profits of company by 11% by the next 6 months”
Entrepreneurial Strategies: Bonmarché would be leveraging cost leadership and market
penetration strategies with a view to facilitate increment in scale of operations of company
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within the confines of domestic market. In addition to this, the firm would be capitalising upon
the implementation of latest technologies and usage of digital platforms to facilitate rapid
expansion of sales volume and profitability. This would aid in enhancing the market value as
well as positioning of corporation at market place in upcoming time period.
Monitoring and Controlling: To monitor and control the results of business plan, the
management of Bonmarché is making use of 2 techniques, namely, benchmarking and KPI. This
would aid in recognising the deviation from expected performance and thereby taking corrective
actions to deal with the same in an effective manner (Owusu, 2019).
Source of Finance: Out of the variety of sources of funds available to Bonmarché such
as angel investors, venture finance and bank loan, the management would be leveraging bank
loan to facilitate growth and expansion as hereby money is offered at low or fixed interest rate. A
brief overview of bank as a source of finance is given beneath:-
Bank Loan
The lending of value in any term such as money, good, property etc. within the
consideration of future repayments along with certain interests and other financial charges is
referred as a loan. A loan could be lend by any potential and needy individual, group or
organisation, from any financial institution, a relent group or by a person. In case of taking loan
by anyone from a registered bank its called as a bank loan. A bank loan consists of multiple
terms and conditions regulated by the respective bank which are mandatory for loanee to agree
upon. All those regulations with a bank loan comprises limited benefits for the company as it
also have contains certain drawbacks, these are discussed as below:-
Benefits- Interest rate in a bank loan is fixed for the lifetime of repayment as it provides
safety and security also.
Drawbacks- In case of payment failure there are certain chances for the seizure of
business and also of personal property.
Communication Strategy to inform Investors: It is essential for a business to keep the
investors informed about the business decisions and strategies. In this regard, Bonmarché would
communicate the business plan by making use of strategies or media such as via mail, by
conducting meetings or through fax.
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LO4. Various ways small business owner can exit the business and
implications of each option
Exit: Success and Failure
Key reasons for business failure (external and internal) and how business failure it might be
prevented
Internal reasons for business failure External reasons for business failure
Ineffective leadership: This can be prevented
by taking business coaching. With the help of
such sessions, the existent knowledge and
skills of leader can be enhanced to meet the
needs of business.
Failure to understand the preferences of
target market: This can be prevented by
conducting constant market research which will
help in gaining knowledge of needs, demands
and preferences of target customers.
Zero cost control and accountability: This
can be prevented by keeping a track of each
financial transaction taking place in the
company. Constant monitoring of expenditure
would save the business from spending excess
funds upon a non operational area and thereby
incurring losses or witnessing failure.
Ineffective business model: This can be
prevented by researching and reviewing the
manner in which other organisations within the
same sector operate. This will help in creating
an effective business model which caters to the
existent working conditions and can appeal to
people at market.
Mechanism for exit in the event of failure
There are 2 mechanisms for business exit in the event of failure, namely, voluntary and
involuntary exit. Voluntary exit refers to the exit of business on the intentions of owner while
involuntary exit takes place in terms of liquidation or by court order.
Exit options for the SME
Every company is established with the motive of attaining growth and development.
However, there are times when a business is not able to function in a profitable manner. In such
case, it is better that the small business owner exits the business. The same has been analysed in
case of Bonmarché which is not earning adequate amount of revenues as well as profits. Owing
to this, it is suggested that the entity should execute the exit options by leveraging any of the 2
below mentioned ways:-
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Liquidation: This is defined as the legal procedure wherein the small business owner
sells all the assets for paying off the debts prior to the execution of exit option by the entity.
 Advantage: This helps the business to come out of financial crisis that has been placing
impact over its operations or goodwill over the course of time (Sreenu, 2019).
 Disadvantage: Here, assets can not be sold at a higher price owing to the fact that
shareholders and creditors claim the property and intend to authorise it in accordance
with sharing ratio and credit amount.
Sale of business to stakeholders or family: Hereby, an existing organisation is accessible
for sale within open market. It is generally seen that the business is undertaken by employees,
manager, friend, family or acquaintance. This is an effective strategy for SMEs as it does not
lead to decline in name and goodwill of company at market place.
 Advantage: This needs less time to be executed as the new owner of the business is
among the management, employees or family. In addition to this, it is analysed that
owing to possession of adequate knowledge of the business operations and functioning,
the new owner is able to effectively take over the activities.
 Disadvantage: A number of times, this strategy seems not to be fruitful as it does not
provide a significant price for assets and the overall business.
Growth and succession in the family business
Consideration of Growth affect family business
The aim of each and every business entity operating within an economy is to foster
growth. In this regard, family businesses also look out for growth, however, their ways of
growing is different from other forms of organisations. The common ways through which such
businesses can attain rapid growth and development are creating a long term vision, facilitating
healthy relations with stakeholders, leveraging family values, fostering effective family
governance and enabling trustworthiness among the members of family business.
Areas of potential conflict
Family businesses are posed to the risk of emergence of potential conflicts with the
passage of time. There are several areas as per which the conflicts may emerge and these are
listed beneath:-
 Lower level of interaction existent among the family business members
 Diversity in work ethics of the different family members
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 Absence of effective future direction
 Financial mismanagement
 Some family members taking crucial decisions without consent of others Decisions regarding management or ownership succession
Succession Planning
Succession planning can be referred to as the procedure of pinpointing key requirements
for leadership as well as intellectual talent across the organisational premises over the passage of
time, thereby preparing personnel for current and futuristic operational roles. Within a family
business, this planning encompasses strategic, financial, estate and HR plans. In other words,
succession planning in family business is a process through which the skills will be pointing out
of each individual of the family and this will help the business to assign the responsibility to
every family member of the business. With respect to this, It is important as it describe the
function of every member with that assign the duty as well that makes an easy environment to
work in and reduce the complexity of the business. With that, it also defines the best plan of
succession for the business to measure the growth and development.
Cultural issues
One of the foremost cultural issue that is prevalent within family businesses is the
concentration of authority in the hands of senior persons of the family. In addition to this, yet
another issue is the prevalence of informal structure as well as organisational culture that leads to
emergence of conflicts.
CONCLUSION
On the basis of above discussion, it can be said that SMEs should strive to undertake
effective course of action to attain growth and development in due course of time. In addition to
this, it is analysed that Ansoff Matrix and Porter Generic are 2 business models which provide a
strategic direction to the organisation. Further, it is recognised that there are various sources of
finance which are available as option for SMEs.
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