Planning for Growth

This document discusses the key considerations for evaluating growth opportunities for a small coffee house in London. It explores Porter's generic strategies and PEST analysis to analyze the external factors affecting growth. The document also includes an Ansoff Matrix analysis and potential sources of funding for business growth.

PLANNING FOR
GROWTH

Table of Contents
INTRODUCTION...........................................................................................................................1
LO 1.................................................................................................................................................1
P1 Key consideration for evaluating growth opportunities.........................................................1
P 2 Ansoff Matrix Analysis of Prufrock......................................................................................4
P 3 Potential sources of Funding ................................................................................................7
P 4 Business Plan ........................................................................................................................9
P 5 Exit Strategy For Small Business .......................................................................................14
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Growth planning is essential for the growth of business unit, it is considered as strategic
business activities that aids in generating revenues in the firm (Olesen and Carter, 2018). It helps
companies in utilising resources appropriately and make necessary changes at workplace
according to the need or market. Present study is based on Prufrock coffee café, it is the small
size coffee house which operates in central London. It delivers quality coffee material to the
consumers and also offer various tasty seasonal food to buyers. It serves friendly services to the
customers so that they become loyal towards the brand. Study will evaluate growth opportunities
available for the Prufrock coffee café. It will justify these growth opportunities. In addition,
report will explain various sources of funding that can be used by business to run its business
successfully and to meet its financial need. Advantage and disadvantage of these sources and
their suitability will be explained in this assignment. Furthermore, report will design business
plan to scale up the business. Ansoff matrix model will be applied to the business in order to
evaluate opportunities for growth.
LO 1
P1 Key consideration for evaluating growth opportunities
Porters' generic strategies are used by business to evaluate growth opportunities for
companies. Small companies need to analyse or evaluate each opportunity in appropriate manner
so that it can meet its organizational goal otherwise firm may face difficulties in managing the
operations in the external market.
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Figure 1Porter's generic strategy
(Source: Porter's generic strategies, 2019)
Cost leadership
One of the best tactic that can be used by Prufrock coffee café, by being low cost
producer firm can gain success. This is the key consideration element that must be considered by
SME. If it becomes the low cost producer, then it will be able to attract more customers towards
the brand which will help business in gaining competitive advantage in market. It is traditional
method in which enterprise produces large number of goods in order to minimize production
cost. By this way resources are being utilized properly and it also minimizes wastage as well. By
this way Prufrock coffee café can be able to enjoy high profit and can run operations successfully
in the market.
Cost focus
This is another strategy in which company can concentrate on one particular market
segment in order to generate lower profit. Being a SME there is need to concentrate on risk and
capital investment as well. Hence, Prufrock coffee café has to ensure that it focuses on small are
and to get lower cost advantage first (Ćwiek-Kupczyńska and et.al., 2016).
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Differentiation focus
In this kind of growth opportunity enterprise can offer unique products to the wide range
of consumers. People like to buy items that have some unique features, by this way business will
be able to gain competitive advantage and to make money as well. But there is need to have
knowledge about current market so that needs of customers can be analysed properly. That
would help in communicating the unique feature of product of organization.
Differentiation leadership
In this tactic firm always concentrates on large market in order to get more profit. It tries
to become the market leader. Prufrock coffee café will have to develop its market position by
meeting needs of potential buyers. In this, firm may charge higher prices for the services provide
by it. But firm has to maintain the quality and will have to develop brand loyalty (Šljivo and
et.al., 2018).
PEST analysis
Rather Porter's generic strategy, PEST analysis also helps an organization or Prufrock
coffee café to analyse all external environmental factors that can impact on its performance in
both positive and in a negative manner (Aristizábal, Bustillo and Arthurs, 2016). Coffee industry
is the one who has higher intensity of competition as there are several cafe and restaurants which
offers the best quality of coffee and food products. Some factors are shown below:
Political: Government attitude and trade relationships between coffee producing country
and stability of politics of UK are some factors which can affect to the great level to performance
of the company. It is stated that due to high anti-American sentiment of some countries, it can
face some problems in operating business.
Economic: The main element and factor in this context which is affecting coffee
companies and the whole industry is the spending power of customers of a particular area in
which the company operates. For increasing sales, it is important to operates in more spending
power ability of customers. Exchange rates of other countries in high and it can decrease sales of
the company as import of raw material for manufacturing coffee can become expensive.
Social: It is stated that people of the UK are becoming more health conscious, and they
know that consumption of coffee can be injurious for their health as it contains of caffeine. Due
to high level of caffeine, it can lead to sleep disorders, irregular heartbeats and migraine as well.
These changes and health consciousness can decrease productivity and profit of this Prufrock
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coffee café. So, it is important to use high quality of coffee beans that consists of low % of
caffeine. On the other hand, caffeine is known as metabolism booster which helps people in
loosing weight. So, there are different impacts of it which needs to be considered by this
company (Lu, 2018).
Technological: Better brewing techniques can make production of coffee more effective
and also can allow manufacturer to realize and get better profit. With the help of using an
effective techniques, this cafe can develop newer as well as better varieties which can help it out
in taking competitive advantages and become the market leader. On the other hand, advanced
technology is increasing competition to the great extent which can lower profits margin.
Investment in technology can also increase operational cost of the company.
So, from the above discussed both Porter's generic and PEST analysis, it can be said that
Prufrock coffee café can expand its business and make an effective position in the market by
analysing all factors in detailed manner.
P 2 Ansoff Matrix Analysis of Prufrock
Due to market competition beguines organization needs to formulate effective business
strategies to increase potential growth of organization and compete in market effectively. Ansoff
matrix analysis is adopted by Prufrock to analyse the available resources to facilitate the growth
of company and provide better results. This analysis helps Prufrock to determine all the factors
which can increase market share and satisfy customers to increase customers base of the
company. Strategies will also identify the risk associated with it which will help the company to
decrease the risk and increase profitability in the market and achieve competitive advantage.
Marketing is very essential to capture the market and increase sales which will also help
organization to promote effective expansion in the market with customers satisfaction.
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Market Penetration
This strategy will focus on existing resources and products which will help business to
grow in the existing market with effective strategies to increase customers market and formulate
effective marketing strategies. Prufrock cafe also need to analyse the market competition and
conduct an effective research to identify the customer behaviour to increase efficiency of their
products and services which will also attract more customers. Cafe also need to analyse the tastes
and preferences to identify the changes which can be done in the quality of products and
services. It will also help cafe to make effective changes in prices by decreasing cost of operation
and also increasing efficiency of employees to work more effectively. Advertising cafe and the
products will help Prufrock to increase sales and provide effective customer base. This will
strategy will also help to maintain the distribution channel to minimize cost and increase
productivity of employees. Cafe can also penetrate in the market with purchasing of competitor's
business which have goodwill in market which also increases the capital of cafe but also
integrates all customers for one business. Cafe have evaluated to focus more of moderate priced
products as they are highest sold to customers and this will also increase profit margins. Prufrock
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have also analysed market penetration strategy is having low risk for growing business in the
market and increasing efficiency of it.
Market Development
Another business growth strategy is market development in which new market is selected
to sell existing products and services. This growth strategy will also limit investment and
increase customers base and profitability in market. This will help cafe to expand its business in
different geographical locations which will provide effective information for business to improve
products and services. This will cafe to develop new market segments to penetrate in the market
and it will also decrease the increase the risk as new market will not have any knowledge about
the products and services (Hunt and DeVries, 2019). This will also help cafe to increase
knowledge about customers behaviours to increase the efficiency of coffee and other products
according to preferences and tastes. With adaptation of technology in new market Prufrock will
also increase customers base and provide better facilities to customers by decreasing the waiting
lone and online delivery of coffee and food which will help customers to increase their
satisfaction level. Prufrock have the efficiency top maintain the quality of employees as they
have opportunities to decrease the cost of labour by entering in high unemployed labours. This
will also help company to focus on higher social class of society to attract more customers and
set brand image in market which will help the cafe to establish effectively.
Product development
This strategy provided business to develop new products and services in the existing
market to increase customer base and also target maximum customers of all segments which
were not covered before, this will also help company to increase sales. Prufrock needs to analyse
internal and external factors of business environment to determine available resources by which
new products can be developed and it can also increase customer satisfaction to support café's
growth. Cafe will also determine new raw materials which will change the tastes of coffee and
also develop some new flavours which can also attract new customers, like caramel, cappuccino.
This will help cafe also to develop food which is not provided before and help customers to
increase number of options for them. This will help customers to increase satisfaction level and
become loyal to Prufrock coffee cafe. Product Development strategy is much more risky than
market penetrations as it involves lot of investment.
Diversification
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It is very risky strategy but also got much higher returns if it successful. In this strategy
business organization develops new products in new market to grow the business and this will
also help business to increase customers and sales. Prufrock coffee cafe also need to develop new
products like cold coffee, shakes, fruit juice crush, and different types of coffee depending on the
region. This will also help cafe to provide better offers to customers and help them to increase
their knowledge abut the products to attract them. Diversification strategy also have to compete
with existing competitors in market and also develop effective product which is compatible with
beliefs, culture and values of new market customers.
P 3 Potential sources of Funding
Funding is very essential factor to grow any business as it is the financial support to
operate all the activities in business organization (Kim and et.al., 2018). It is types of financial
money which help the business to grow by covering in the operation which is lacking efficiency
and have potential to grow. This is also helped nation to grow its economic activity and growth
which in return help the population of nation to increase their standard of living and providing
potential to improve the level of income level. This will also help business to develop more
effective strategies by improving the employees potential by higher funding. The success of
business is also dependent on financial capacity and it will also help the products to increase its
efficiency to increase satisfaction level of customers.
Credit Trade
Credit funding is the type of borrowed money which is based on trust and not on legal
consideration. Credit arises when the one business fails to pay the considerations which was
promised on the particular date and is liable to pay in future in exchange on goods or services
which they have already taken.
Advantages
 This helps to reduce the use of capital to minimum and operates the business on trust.
 Credit funding also provides offers which may help to provide discounts for instant
payments and promote the sales of company with higher margins.
Disadvantage
 The interest rates can be stressful and it can also increase the cost of products and
services which Prufrock cafe needs to offer their customers.
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 It is not possible without trust to any history of transactions between the company.
Angel Investors
Prufrock need to analyse the market growth and also assess the required funds. As angel
investors are always available to private with funds, and they are help the private sector to
provide funds. This is an individual or group of individual help small start-ups and businesses
which are in need with their financial support as they in return take that ratio of shares fro the
business.
Advantages
 This does not require any security for providing funds to business organization.
 Motivate business due to capital invested by others.
 This funds also relives owners from interests on the funds.
Disadvantage
 This is difficult to find in the market to in vest in the business and in case of emergency it
is not effective. This funding also reduces the shares from the business and reduces the ownership
percentage.
Venture Capitalists
This is the private investment which is made to business to increase their potential as
venture capitalists are investment which have free funds and always looking for the business
which have the potential ideas to grow and also increase their profitability (Mazza, 2017). They
invest in business in exchange for shares and also decreases the ownership of entrepreneurs.
Advantages
 It also helps business to grow by providing expert solutions and also support the
operations of the business.
 Venture capitalists can also integrate all the business they own and make more profits.
 It also help to grow the business effectively and make the products and services more
efficient.
Disadvantage
 This will decrease the control of business as Venture capitalist are also the part of
ownership of business.
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 This can also loose the culture value of business due to interference of venture capitalist
in decisions of business.
Debt Financing
Debt financing is the process of taking loans from the financial institutions in exchange
for interests. This requires a promise which is legal in nature to repay the principal amount with
interest at the future fixed date. This funding also help the start up and small and large scale
business with capital to support their business and increase efficiency of their products and
services attract customers.
Advantages
 It helps to protect the ownership of the business firm with providing them loan against
interest on principal amount at particular rate of interest.
 This will reduce the gross revenues to escape from paying extra taxes and increase cost of
business (Dierwechter, 2017).
 Owners have potential to make decisions of their own and also innovate the products and
services.
Disadvantages
 Business have to pay interests which decrease the part of their profit margins and
decrease the efficiency of business.
 It will also impact the goodwill and creditability. It is also a big issue for the business
which have low credit scores in the market.
 This also creates risk on assets in case of failure of repayment of debt.
P 4 Business Plan
Prufrock have to analyse the business plan in order to increase efficiency to compete in
market and achieve competitive advantages.
Mission
Mission of Prufrock Coffee cafe is to provide quality coffee with high value of satisfaction at
very low prices.
Objective
 To Develop new products in new market to expand business operations.
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 To increase quality of products and services to satisfy customers at lower price range.
 To assess all the challenges faced in growth of business in new market.
Situation Analysis
SWOT Analysis
It is internal analysis of business factors to assess growth of business to formulate
effective strategies.(Swan and et.al., 2018)
Strengths  High quality Foods and Coffee.
 Focus on customer satisfaction.
 Produces their own raw materials.
 High efficiency of employees which provide better facilities to
achieve customer loyalty.
Weaknesses  Poor interiors which decreases the satisfaction level of customers.
 High prices as compared to quality of coffee.
 Lack of adequate funds from the market.
Opportunities  Technological advancements to decrease the waiting line of
customers.
 Online stores for fresh delivering of coffee.
 To construct interiors according to customer’s behaviors and
beliefs, cultures and values.
 To expand business to different countries which are still
developing.
Threats  High Competition in market.
 Change of substitute products prices which will impact the sales
of company.
PEST Analysis
Prufrock need to analyse the external factors which will impact positively and negatively
in new market. This analysis will help business to formulate effective strategic plan to increase
the growth and increase customers satisfaction of new market customers.
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Political Factors  Changes in governmental policies and laws will impact business
activities.
 Employment laws of new market.
 Stability of government in new market.
Economic Factors  Evaluation in changes in GDP of new market, inflation rate,
taxation rates, foreign exchange rates.
 Income level of customers should also be determined as it will
impact the sales of company.
Social Factors  Changes in Lifestyles of customers, behaviour patterns, cultural
values, ethics, morale, education level of customers will also
help business to formulate effective marketing plan (Levy,
2016).
 Education level of customers will develop the better
understanding about vision of company and support the sales of
company.
Technological Factors  The importance of technological changes as it will also help
business to increase their efficiency with educated customers.
 Innovations in products and services with the help of
technological equipment will also help the customers to
maintain the quality of business.
Marketing Strategies
Product  Cafe provides quality products and services to their customers, and
they also have adopted product differentiation to attract more
customers and increase efficiency of business.
 Cafe also provide eateries to increase the customers which are
having preferences of coffee with some food.
 The taste of natural coffee also attract young customers to have the
part of the cafe to consume coffee and food.
Price  Analysis of customers expectations is very important to understand
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their willingness to pay for the coffee. This will cafe to increase
sales with increased customer base.
 High skilled labours also help to decrease the cost of operations at
cafe. This will decrease the price and increase profit margins.
 Cafe also need to identify the value of products and services to
formulate effective pricing strategies (Huang and van Weesep,
2019).
Promotion  Cafe need to advertise the products and also the uniqueness of
products in market to differentiate it with competitors and attract
customers easily (Albert, 2017).
 Promoting brand with free sampling and with word of mouth will
also help to increase the sales.
Place  Place of cafe will also help to support marketing and promoting the
cafe.
 Distribution of products also need to be effective and cafe need to
open a take away counter for customers which want to leave
immediately.
Segmentation, Targetting and Positioning
Segmentation- Prufrock have its customer segmentation according to age which is from 16 to 40
in this segmentation students, young employees and teachers are included which are the major
focus of the cafe (Angotti, 2018). Cafe also focused on cultural value of customers to segment
them and increase the sales and increase profitability.
Targetting- Prufrock cafe targetted on middle and higher social class of customers of
segmentation. The marketing strategies also includes promotion of customers who are young and
also like to have coffee. Cafe also need to analyse effective strategies which can attract the
customers and support the sales of cafe to increase the growth of business.
Positioning- Prufrock have also positioned the cafe as the hanging place and also the business
meeting place foe employees (Kinossian, 2018). With the lower prices and also the place which
have better quality of products and services. Cafe also positioned the quality of their products
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and ambiance of cafe in such a way which attract customers to be their second home and very
peaceful.
Monitoring and Controlling
Prufrock will need to monitor and control the planning which they have done in order to
increase the efficiency of the cafe (Levesque, Bell and Calhoun, 2017). Cafe will adopt
monitoring and controlling process in which in includes, measuring the performance of business,
analysing the efficiency, identifying challenges in following the business plan, solving the issues
and follow up. Management information system will also help cafe to increase the monitoring
and controlling process with the help of accurate data which is collect. This can also be effective
with the help of accounting system to project effective financial position of business in new
market.
Financial planning
Particulars January February March April May June
Cash inflows
Opening cash inflow 6000 6500 8500 12500 16470 30000
Sales revenue 8000 9000 9300 10851 12800 25400
Other income 3000 3100 3500 5200 6400 80510
Total cash inflows 17000 18600 21300 28551 35670 135910
outflows
Raw Material 4500 4000 1500 4500 2000 4800
Labour 4000 4100 4100 4100 4100 4100
Other expenses 1000 1100 1500 1580 1650 2500
Electricity 1000 1000 1000 1000 1000 1000
Total cash outflows 10500 10200 8100 11180 8750 12400
Cash deficit / surplus or 6500 8400 13200 17371 26920 123510
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closing cash balance
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The expected gross revenue form operations of Prufrock coffee cafe in January will be
17000 Euros and is forecasted to be 1,35,910 euros by end of June month (Rudolf, Kienast and
Hersperger, 2018). Where the expenses of raw material was not that flexible and labour expenses
and electricity expenses were fixed. Total income of January is expected to be 6500 Euros and
by the end of June it will be 1,23,510 Euros. This is the maximum growth which cafe will expect
and it will also increase the profit marketings with the above business plan.
Mergers With other Business Organisation
Merger happens when two business organization collaborate together to increase the market
share to grow new business. This also helps to improve customer base and sales in order to gain
better profitability. This also helps to compete in market with higher capital strength.
Acquisitions
Acquisitions is the taking over major part of shares of other companies to attain control over that
company. Acquisition benefits the firm which is acquiring the shares other firm as it helps to
increase customer base. This also allow increasing productivity of parent firm to develop new
products and services to increase productivity effectively.
Integration
Horizontal integration helps to collaborate with the business which are part of value chain
of a company. This helps to reduce cost and focus on quality of products and services to improve
satisfaction to customers.
Vertical Integration is the process of joining with other business or same nature to
business but at different size this helps to increase the size of businesses separately and provide
support to each other to increase customer satisfaction and profitability.
Recommendation
Prufrock Cafe need to adopt integration strategies which also helps to reduce th cost and
increase market share effectively. This helps to increase the growth rate of coffee cafe to increase
profit margins.
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P 5 Exit Strategy For Small Business
Exist strategy is the exit of business from the market at the stage which have maximum
returns and have used the resources optimally. This will also help the business owner to extract
the capital from the business and it is also important to value the invested capital in the business.
Liquidation
Prufrock can also use this strategy to extract all the capital form the business as this
strtegy is only used when business will be closed and all the liabilities will be adjusted and all the
assets will be liquidated to gain the capital to recover all the investments.
Advantages
 Very easy to close the business (Duncombe, 2017).
 No Involvement of other parties other than owners and creditors at the time of shut down.
Disadvantage
 The sudden liquidated assets does not have high value returns and may also decrease the
recovery capital. If there are creditors at the time of shut down owners are liable to pay them first and them
recover their capital (Zhou and et.al., 2017).
Selling business to Open Market
Prufrock can also sell their business in open market who are wiling to buy all shares of
business and transfer the ownership with all the assets and investments and in this strategy there
is no stress of recovery as the amount will be paid by the buyer of business.
Advantages
 High goodwill will pay higher amount.
Disadvantage
 It is typical to evaluate the actual value of business to evaluate the price to sell in market
(Baschat, 2018).
CONCLUSION
This study concludes that growth strategies of Prufrock made the effective strategies to
increase the efficiency of business and attract maximum customers. Cafe also analysed the
market factors which helped the cafe to expand their business across the country effectively. This
also helped Prufrock to innovate and increase their quality of coffee and eateries provided in the
cafe.
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http://www.quickmba.com/strategy/generic.shtml>
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