Planning for Growth

This report explores the key considerations for evaluating growth opportunities for SMEs, using Ansoff's Matrix and identifying sources of funding. It also includes a business plan for growth and evaluates exit options for small businesses.

Planning for Growth

Table of Content
INTRODUCTION...........................................................................................................................1
LO1..................................................................................................................................................1
P1: Growth Opportunities............................................................................................................1
P2: Ansoff's Matrix......................................................................................................................5
LO2..................................................................................................................................................6
P3: Sources of Funding................................................................................................................6
LO3..................................................................................................................................................7
P4 Business plan for growth........................................................................................................7
LO4................................................................................................................................................10
P5 Exit options for small business with drawbacks and benefits of each approach..................10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................14

INTRODUCTION
Small medium sized are enterprises boost the economic growth in country by bringing
innovative technologies, products and services. Federation coffee is an emerging coffee shop,
SME in UK which serves various varieties of coffee products and services catering to comfort of
all customers. This report explains the key considerations for evaluating growth opportunities for
SME in highly volatile business environment, how it can establish strong business practises. It
evaluates the growth opportunities through Ansoff Matrix and how cafe can emerge with new
business strategies to enhance its presence within the new target customers. This report also
explains the potential sources of funding available to SME companies with the strengths and
drawbacks and the business plan which includes strategic objectives and financial information
regarding scaling up of business. This report also evaluates the various exit options for small
business companies with their drawbacks and benefits of each approach and how federation
coffee can use the most viable option.
LO1
P1: Growth Opportunities
There are many growth opportunities currently existing for the Federation Coffee. This
coffee shop plan for expand their business in new markets for gain more profit, in which the
management of shop need to follow the concept of Porter's Generic Strategies (Harding, 2017).
On the basis of these strategies, the coffee shop will able to identify their growth opportunities in
the market. Under identification of growth opportunities here is PESTLE analysis also included
which will help to the federation coffee to understand the impact of external factors.
Porter's Generic Strategies
These strategies are basically modern business strategies which uses by the companies for
gain high competitive advantage in the market. In 1985, Michael Porter first introduced these
strategies in his book “Competitive Advantage”. Porter's generic strategies are mainly focuses on
three major terms (1. Cost Leadership, 2. Differentiation strategy, and 3. Focus strategy) which
discusses below;
Cost Leadership
Cost leadership strategy is helpful to any business to gain high market share (Muia,
2017). According to this strategy, a business needs to provide its products and services at the
lowest cost in the market. This is necessary to the company to gain more profit. The concept of
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this strategy says if any business offer its quality product or service on the cheap price, then that
business is able to achieve large customer base. Quality product with cheap rate highly attract
customers in the market. So, the business also able to take huge advantages from cost leadership
strategy. In this case the business shop needs to implement some technology in its workplace
which improve the quality of products and reduce the cost. People in the United Kingdom are
only give priority to those products and services which available in the high quality with low
cost.
Competitors of a business are also uses this strategy in their operations. This is the main
risk factor to it, but most competitors are only focuses on reducing cost without maintaining
good quality of products. In this situation here is great opportunity to a business to gain high
profit in the market by provide good quality products with cheap prices. It is not easy task to the
business to provide product on low price than competitors, in which the management of shop
need to focus on its research and development aspect. According to this aspect, it able to
innovate good products with cheap prices. The business need to focus on its marketing aspect
also, because providing quality products with low rates is not enough to gain high market share.
Differentiation Strategy
Differentiation strategy says a business need to develop its products or services
something unique and different in the comparison of competitors. Currently, there is high
competition in the market of the United Kingdom (Ceptureanu, 2016). Lots of businesses putting
their great efforts to gain high market share in the market. So, this market competition is too
challenging to a business. In this case, the management of a business needs to produce an
exclusive range of products to attract customers in the market. The management firstly need to
hire some skilled employees in its business environment to produce an exclusive range. People
of the United Kingdom are ready give any cost for buying quality products, in which the
business is responsible to provide best of the best quality products to the customers.
This is the main risk factor of differentiation strategy. In other side, this strategy offers
great opportunities to a business to gain high profit in the market. For example; differentiation
of products creates value of brand, helpful in build large customer base, helpful in business
expansion, etc. With the help of this strategy, the business is able to become a leading company
in its particular market segment. This is the biggest advantage of differentiation strategy.
Exclusiveness of products is too necessary for gain huge people attention in the market. The
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management of a business needs to expend some fund on its innovation aspect to produce such
different range of products. Favourable and customer friendly prices are also playing great role
under this strategy. The main reason behind last statement is, provide exclusive products on low
prices is more attract people in the comparison of provide exclusive products on the high prices.
So, while producing different products or services the management needs to focus on its pricing
strategy as well.
Focus Strategy
This is the third strategy under porter's generic strategies which completely focuses on
gain high competitive advantage in the particular market segment. According to this strategy, a
business need to focus on fulfil main demands of customers in selected market segment. The
focus strategy is divided into two parts; Cost focus and Differentiation focus.
1. Cost Focus: Cost focus says a business need to provide its products and services to the
customers on the lowest prices in the particular market segment (Kaliappen and Hilman,
2017). With the help of cost focus strategy the business is able to gain high publicity in
the small segment of market. This is really too helpful for the growth of the business.
2. Differentiation Focus: On the basis of this strategy the management of a business need
to focus on produce different products which much productive than competitors. In this
case the management need to launch these different products only in the small market,
because with these steps the business is able to gain loyal customer base in that particular
market.
The risk factor of focus strategy is, the business needs expend too much time and money
in the proper implementation of this strategy. The chances of effective results are also lower in
the comparison of other porter's generic strategies, because many competitors are perfectly
knows the advantages of focus strategy. In other side, proper implementation of this strategy will
provide great opportunities to the business to gain high competitive advantage in the market.
Cost leadership is the most appropriate strategy to the federation coffee, because with
the help of this strategy it'll easily gain high competitive advantage in the market. Coffee shop
able to gain high customer base also with the support of this strategy. So, the cost leadership is
most favourable strategy to the shop.
PESTLE Analysis
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PESTLE analysis is an important tool to the businesses which helpful in identification of
external factors of the business environment. These external factors impact to a business in both
terms; positively and negatively (Choudhary, 2019). It is included six major factors which
discusses below;
 Political Factors: These factors are highly impact to the federation coffee shop, because
it needs follow all regulations and terminologies of the UK's government. Political factors
are too supportive to the coffee shop, because government of the United Kingdom
providing many financial facilities to the small business. In this case, there are great
opportunities to the coffee shop to grow its business through these government facilities.
Many times government imposes high taxation rates on business. So, it is the main threat
of political factors.
 Economic Factors: UK is one of the richest countries in the world. So, people are here
easily able to afford products and services of the federation coffee. The management
needs to improve their business strategies to gain high customer base in this developed
economy. There are various opportunities to the coffee shop to achieve more profit in the
market. For example: Gain high profit by providing quality coffee, build large customer
base by giving different offers, etc. In other side, currently many competitors are also
completely know the advantages of these factors. So, it is the biggest threat for the
federation coffee.
 Social Factors: Social factors of the United Kingdom are too favourable to the
Federation coffee, because most of the people in this country are completely literate and
ready to pay any cost to buy quality products. In this case, here is opportunity to the
coffee shop to grow its business by provide quality products and services to the
customers. People have many options to purchase including coffee, it is the main threat of
these factors.
 Technological Factors: There are great opportunities to the coffee shop to take huge
advantages from the technological factors of the United Kingdom (Ansah and
Sorooshian, 2017). All the latest technological gadgets and tools are available in this
country. So, here is opportunity to the management to improve its coffee shop's
performance in the market by implementing these gadgets and tools in the operations.
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Implementation of the latest technology is very expensive, it is the main threat of
technological factors.
 Legal Factors: Federation coffee need to follow all laws of UK's government. The
coffee shop need to follow the rules and regulations of the Food Standard Agency also
which works for quality control in the food & beverage industry of the United Kingdom.
In case, if the management not follow these laws in their operations, then it'll face many
issues. For example; court hearing, loss of goodwill etc. and this is the main threat of
these factors. In other side, there are opportunities to the coffee shop to improve quality
of products and services through legal factors.
 Environmental Factors: The management of federation coffee need to consider these
factors also in its business operations. With the help of environmental factors the coffee
shop is able to avoid such all attempts which harmful to the environment. There are many
opportunities to the shop to fulfil its social responsibility by following law related to
environment. In case the management not follow environmental regulations, then it needs
to pay large amount in penalty and fine. This is the main threat of these factors.
P2: Ansoff's Matrix
Ansoff's matrix is a very useful tool to the businesses. With the help of this tool the
coffee shop is able to grow its business. This model was developed by H. Igor Ansoff in 1957,
has included four major marketing strategies which mentioned below;
Market Penetration
According to this strategy, a business is able to increase its profit aspect through selling
existing products in the present market segment (Hanlon, 2019). The management need to
develop its business strategies to increase sales in the present market. For increase sales of
existing products a business firstly need to reduce its prices. So, with the help of low prices it'll
able to attract present and new customers in the existing market. This is the main advantage of
this strategy. In other side, this strategy not promote innovation factors in the business
environment. So, this is the disadvantage of this strategy.
Product Development
Products development strategies says a business need to develop new products for the
present market to gain high competitive advantage. In this case the management of the business
is also responsible to innovate new products to launch them in present market. With this strategy
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it able to gain profit in the market, it is the advantage of product development strategy. In other
side, this strategy is something expensive in the implementation. So, it is the main disadvantage
of this strategy.
Market Development
According to market development strategy, The management need to enter the new
market segment by launching exiting product range. This strategy is helpful to the shop to
expand its business operations in the new markets. By using market development strategy it able
to increase its market share also, which is too good in the growth of the business. This is the
advantage of market development strategy. In other side, Market competition of the new market
will give tough challenge to a business. It is the disadvantage of this strategy.
Diversification
With the help of diversification strategy a business is able to introduce new product in the
new market. Some risk factors also existing in the use of this strategy, because many times
people reject new products in the new market (Dombrowski, Krenkel and Wullbrandt, 2018). So,
the management need to develop its marketing strategies to gain huge customer attention in the
new market towards new products. Diversification strategy is helpful in develop innovation
aspect in business environment, it is the advantage of this strategy. The disadvantage of this
strategy is, it is too much time-consuming and costly strategy to the business.
Diversification strategy is the most appropriate strategy to the Federation Coffee, because
this strategy will give the great opportunity to the shop to grow its business by gain high market
share.
LO2
P3: Sources of Funding
There are various funding sources available to the Federation coffee which discusses
below;
 Banks: Banks are the greatest source of the funding to the coffee shop, because these are
providing loan facilities to the businesses. Banks are providing loans in the both terms;
Short term loans and Long term loans. So, with help of this source the coffee shop is able
to fulfil its financial needs. Banks are charging high interest rates for loans, it is the
biggest drawback of this source. In other side, bank loans are temporary debt to the
business, it is the main benefit of this source.
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 Investors: Angel investors are also good option for the federation coffee to fulfil its
financials needs (Piette and Zachary, 2016). The management able to rise huge fund from
the investors by approaching them. These investors always ready to invest in those
businesses which plan for business expansion. In case if coffee shop rise fund from this
source, then it loss its full command on business. It is the main drawback of this source.
On the other side, process of raise fund from the investors is too easy, because here is the
management no need to fulfil various formalities like bank loans. It is the major benefit
of this funding source.
 Customer Advance: Under this source, the federation coffee need take some additional
charges as advance money from the customer when they buy any product or service. The
coffee shop is responsible to return that advance money to the customers after certain
time period with effective interest rate. Convince customers to give additional amount on
buying is too challenging for the coffee shop. It is the main drawback of this source. In
other side. Coffee shop no need to pay high interest rate, it is the main benefit of this
source.
Banks are most appropriate funding source to the federation coffee to fulfil its financials
needs, because banks not interfere in the business operations. Banks are most legal way also for
rise fund. So, that's why this is the best option.
LO3
P4 Business plan for growth.
MISSION : Federation coffee mission is to establish long term growth in the industry, offer high
quality services and products to all consumers in the cafes. The mission of company is to expand
its business scale with large number of cafes in UK market and international markets with
services catering to new preferences of customers.
OBJECTIVE: The objective of Federation Coffee is to increase the market share and
profitability margins within the markets of UK.
Smart objectives:
Specific:It is objective of Federation coffee to expand its business within the markets of UK in
order to increase the market spread and large scale productivity levels.
Measurable:Success of this plan can be measured if company is able to expand its business with
large scale profit margins.
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Attainable:This objective can be easily available by developing proper marketing strategies for
generating awareness which can help in meeting the objectives and mission of company.
Realistic:This objective of company is quite realistic as there is huge opportunity for the
company available in market.
Time bound:This objective can be achieved within 1 year.
Situational Analysis- Company situational analysis can be understood through SWOT which
includes deep analysis of various internal factors affecting the business of company.
 Strengths- Federation coffee has wide range of coffee products and services in its menu
which attracts large number of customers.
 Weaknesses-Federation coffee currently has only limited cafe stores in UK which makes
its availability limited for consumers.
 Opportunities- Federation cafe has large opportunities to expand its market share by
opening new cafes all over UK and channelizing with the highly volatile business
environment in the industry.
 Threats- There are large number of cafes emerging in the competitive industry every
day, which implies an increasing threat to Federation Coffee for high competitive growth
in the target customers market (Behrens and Helfen, 2019).
PEST analysis enables the study of external forces of market environment affecting the business
of company in the long term growth.
Political- Federation coffee must aim to establish firm position in changing political conditions
of UK, which will enable long term business growth.
Economical- Company must aim to stabilize itself firmly in various economical situations which
are an important external factor affecting company.
Social- Company can formulate strategies to enhance services catering to social needs of
customers which includes
Technological- Company should adopt innovative technologies in offering various products and
services for gaining edge in competitive environment.
Federation coffee has been operating in less number of stores in UK currently which makes its
availability limited. Company can operate strategies to spread in market share by enlargement in
their number of cafes to cater to large number of new customers. College going youngsters and
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people who look for having comfortable experience in affordable prices at coffee bistros can be
targeted by company.
Marketing strategies-
 Product- Company by including new coffee products and variety of beverages in the
menu promote its market to higher business levels
 Price- Company by using attractive price strategies enable large customer growth in the
market share. Federation coffee by using marketing pricing strategies as free Wi-Fi
services along coffee drinks and services at cafe,attract the college going young
generation.
 Promotion- Federation coffee will use various promotional strategies by advertising
about cafes and products on various social media platforms
 Place- Company will operate its business and expand cafes in new locations which offer
attractive marketing strategy for establishing long term growth (Bołkunow, 2019).
 Packaging- Company will work towards enhancing the packaging services of various
products according to changing customer preferences.
 Positioning- Company will position itself firmly in the marketplace by opening large
number of cages all over UK for easy availability of services, target the customers by
serving them with high quality products.
 People- Company will focus towards enhancing customer satisfaction by delivering high
quality products and targetting new segments of customers.
STP
Segmentation- It involves segmenting the customers according to their common needs and
behavioural approach which enables company to deliver their business goals
effectively(Hartmann, 2019). Demographical, geographical, physiography, behavioural are the
various patterns on which Federation Coffee can segment its customers.
Targeting- It involves targeting the most profitable customers according to their size, potential
growth and marketing the strategies. Federation coffee can target the potential customers by
analysing the various categories and segments of customers on basis of their tastes, preferences
and age groups.
Positioning- Federation coffee by positioning itself with unique products and brand services, can
create a specific value proposition in the competitive industry.
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Financial plan-
Jan Feb March Aprilo May June
expenses
rent 5000 5000 5000 5000 5000 5000
salaries 8000 8080 8160.8 8242.408 8324.83208
8408.080400
8
utility bills 2000 2010 2020.05 2030.15025
2040.301001
25
2050.502506
2563
other
expenses 1500 1507.5 1515.0375
1522.612687
5
1530.225750
9375
1537.876879
6922
Total cash
out flow 16500 16597.5 16695.8875
16795.17093
75
16895.35883
21875
16996.45978
67484
income
Sales 15000 16000 17000 17500 19000 20000
Other
income 2000 2500 3000 3200 3500 3800
Total cash
inflow 17000 18500 20000 20700 22500 23800
Net flow 500 1902.5 3304.1125
3904.829062
5
5604.641167
8125
6803.540213
2516
Federation coffee will aim to keep the cash outflow and expenses equal with the cash
inflow for attaining high profitability margins and sustain long term growth in the business
environment.
Monitoring and controlling- Federation company can monitor and control the functions
effectively by setting various parameters of performance standards to monitor performance
levels and enhance cost efficiency.
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LO4
P5 Exit options for small business with drawbacks and benefits of each approach
Business exit strategy is an entrepreneur strategic plan to sell the ownership of company
to investors of another company by reducing or liquidating the business operations entirely. If
the business of company is running unsuccessful and cost efficiency is reduced due to frequent
losses, organization must use exit strategies to enhance the future worth of business (Hauser,
Eggers and Güldenberg,2019).The various exit strategies for SME companies with benefits and
drawbacks can be understood as:
Liquidation- If the business of company are not able to pay debts, business liabilities
exceed the total assets of firm liquidation is one of the exit strategy where firm financial reports
of company gets closed in legal and organized manner. When an enterprise goes into
liquidation,a liquidator is appointed to oversee the whole process of company where the role
includes taking over company financial affairs, ceases the operations permanently. Federation
coffee by using this exit strategy can wind up the functioning of enterprise in a legal way by
ensuring proper distribution of assets and minimize the risk of insolvent trading. Voluntary
liquidation usually occurs when company inner shareholders and directors decide to liquidate the
company's the business operations are not running viable enough to earn good profit returns
(Kapparov, 2019).
 Benefits- Insolvency practitioner held the whole responsibility of business owners,
directors during liquidation and the company is no longer required to file annual
accounts, tax returns.
 Drawbacks- It involves an elaborative procedure which may take up a lot of time for the
company to wind up the whole operations legally and is much slower administrative exit
strategy.
Management buyouts- It can be understood as the approach of selling the business operations to
existing employees and management teams which is faster and quick exit strategy for companies.
The practises are passed on to people who are already known to the environment of company
which establishes a known trust in mind of sellers. Federation coffee by using this exit strategy
can enhance their functioning performance levels by selling it to employees working already in
enterprise. It will enable streamlined success and sustainability in the business environment for
future growth of company.
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 Benefits-It is great alternative to start a business from scratch, which contains high risk
and can take longer time to see positive returns. Management buyouts involves the
procedure of handling trusted employees the authority to run a company with new
investments (Meliciani and Tchorek, 2019).
 Drawbacks-The management teams and employees does not always have full
potentiality and investment funds to run a low efficient company. It is not a reliable
approach always as there is need of right skills to run a business with profitable margins.
Mergers and acquisition- This exit strategy means merging with other companies who have the
contemporary professional business skills and the financial capital to run a successful enterprise.
A stronger and bigger company with large capital sources and strong financial reports takes over
the less powerful company whoopsie financial reports have not been effective enough to reach
profitable margins. It opens up the market for both companies and adds more value to combined
entity whee business gains expansion in a cost effective way. Federation coffee by adopting this
exit strategy can merge with other cafes and bistros who have been able to run their companies
with higher profit margins and reach efficient performance levels (Povolná, 2019).
 Benefits- Company is able to gain completive edge in market with cost efficiency and
high performance in targeting the new customer segments.
 Drawbacks- The new company taking over small enterprise can gain new price strategies
which will lose number of consumers. It is normally an elaborative procedure which
implies a lot legal formalities for company to undergo.
The various exit strategies companies can undertake, with analysis study of their benefits
and drawbacks, Merger and acquisition is the valid recommendation for Federation coffee
(Vaughn,2019).By undergoing mergers with other cafes and bistros, it will be able to foster
growth with boost of financial capital and an increase market share will help cafe to enhance its
position.
CONCLUSION
This report concludes that small enterprises are backbone of UK economy and there are
various opportunities for growth with various risk associated with them and way they can be
mitigated. Planning for growth explains how enterprises work towards enhancing their
performance levels and aim towards becoming increasingly global with sharing new ideas,
exploring new market opportunities. Federation coffee has been taken as the company which
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concludes the growth opportunities by SME in market share with goals to reach high
productivity levels. The various sources of funds which are bank loans and investors who offer
large benefits for company with cost efficiency and high profitability goals of SME. This report
concludes with constructive business plan having various strategical tools which company can
adapt to enhance its positioning in the market share. It also concludes various exit strategies
options which are mergers, management buyouts and liquidation with various advantages and
drawbacks available for Federation coffee. This report concludes Mergers with other coffee shop
companies as exit strategy is the best option for Federation Coffee in case it is not able to meet
the targeted financial goals with sustainability in market share.
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