Growth Planning - Aston Chemicals

PLANNING FOR GROWTH

CONTENTS
INTRODUCTION...................................................................................................................................1
LO-1.........................................................................................................................................................2
P1 Key considerations for growth options...........................................................................................2
P2 Opportunities for growth using Ansoff’s matrix............................................................................3
LO-2.........................................................................................................................................................5
P3 Potential sources of funding available to Aston Chemicals – their benefits and drawbacks.........5
LO-3.........................................................................................................................................................7
P4 Designing a business plan...............................................................................................................7
LO-4.......................................................................................................................................................11
P5 Exiting and succession options for Aston Chemicals – Benefits & drawbacks...........................11
CONCLUSION......................................................................................................................................12
REFERENCES......................................................................................................................................13

INTRODUCTION
In the present times, the small and medium enterprise are in great need to strategize
their business system prior stepping towards the implementation phase. Concerning this,
effective planning allows the business concern to carry out effective analysis of the internal
as well as external priorities (Burns, 2011). In the current research report also emphasize on
different theories of enterprise and the strategies that helps for boom of the SME employer.
Further, the main component that has been mentioned in the current study is specifically
dependent at the graduation of the new enterprise known as Aston Chemicals, which is an
independent distributor of speciality chemicals to the European personal care industry. It is
based in Buckinghamshire, UK. The firm needs to invest an overdraft facility available with
the bank of around £2.0 million that has not been utilized till date. As a Junior Manager in
Aston Chemicals, the main task is to give input in the strategic planning of the company.
1

LO-1
P1 Key considerations for growth options
As business earn higher profits than just desire to earn more by expanding their
activities and business in both national as well as international market. Same is the case with
Aston Chemicals, which has an overdraft facility available with the bank of around 2.0
million that has not been utilized till date. The firm want to make use of this amount and is
keen to move the firm forward by massive expansion. This will support the firm to gain
competitive position as well as long term sustainability in the market (Aston Chemicals,
2015). Thus, it is essential to analyse the opportunities for growth in the current business
environment. This can be done by adopting different strategies which supports in scrutinizing
the long term growth and success for the firm. At the time of selecting the growth options, it
is vital for the firm to consider many considerations and these are being defined underneath:
 SWOT analysis – Conducting internal analysis of the company will have Aston
Chemicals to evaluate its strengths, weaknesses, opportunities and threats. The firm
supplies innovative raw-materials for personal care industry of Europe and is quite
good at customer service. Pertaining to this, they have a large base of customers. They
sell, high quality products to their clients that helped them to secure a good brand
image in the market. Further, the current opportunities in the personal care industry
will open door for further expansion of Aston Chemicals (Burns, 2014). The turnover
of the firm is quite high and are technical expertise. All this will help them to
overcome their weaknesses and threats such as financial crisis, competition from the
existing firms and legal rules and regulations. The major source of competitive
advantage for Aston Chemicals are innovation, technical expertise, quality products,
good brand image and exceptional customer service.
 Competitor analysis – Seeking help from this analysis, the firm will be in a position to
evaluate their probable competitors and can plan strategies based on that evaluation.
The competitor’s analysis can easily be carried out by adopting porter’s five force
analysis. Since, personal care industry is recession proof industry, the growth
prospects are quite high too. There are numerous suppliers existing in the market who
are supplying products to personal care industry of Europe (Assess your options for
growth, 2018). This signifies that the bargaining power of the buyers is too high as
they have too many options available. The supplier’s power will be low because of
many suppliers available. However, Aston chemicals high quality product and
2

innovation in services can help them to achieve an edge over the other competitors in
the market. Too many competitors are available in the market of UK, thus competitive
rivalry will be intense. Thus, it is vital for the company to have detailed knowledge
about their competitors’ strategies and plan their practices and tactics accordingly.
 PESTEL analysis – Another consideration that should be taken into account at the
time of selecting the growth options is PESTEL analysis, a tool for conducting
external business environment. There are many external factors such a political,
economic, social, technology, legal and environmental that impacts the effective
functioning of any business organization. In UK, the political environment is stable
and the government is also proactively making arrangements for SMEs to grow. This
can add a benefit to Aston Chemicals in their massive expansion. Further, product
safety is hot topic in the nation and thus, Personal care product safety act needs to be
followed by the firm which allows the safety of the products (Personal Care &
Cosmetics Products United Kingdom, 2018). People in UK have high standards with
high purchasing power. This will boost up the sales of the company if high quality
products are being served. Additionally, UK has good access technology and has
effective laws pertaining to intellectual property rights. Many legal regulations also
need to be followed that might impact the working of the concern.
Thus, from the above discussion it can be attributed that the current position of Aston
Chemicals is very strong, as they are continuously innovating their products and services and
rendering high quality products and services to their clients. Further, the external business
environment is also proving promising for the firm and will offer different opportunities to
Aston to grow and expand their business. Considering these consideration, it will become
ways for the firm to take decisions regarding the growth options by significantly analysing
both positive and negative aspects. The best option for Aston Chemicals considering the
above analysis of the internal and external business environment is to adopt massive
expansion by opening new branches in the new market (Eurostat, 2011). They should in same
products and services but into new market which has not been explored till yet. This is being
suggested considering the prevailing market conditions and personal care industry of UK.
P2 Opportunities for growth using Ansoff’s matrix
Currently, Aston Chemicals is achieving higher sales and profits because of its brand
image in the market. The company is supplying high quality chemicals for the raw-materials
in personal care industry of Europe. Because of its innovation and technical expertise the firm
3

is offering highest possible level of customer service and thus, attaining greater heights.
Aston Chemicals further want to expand its business and want to achieve pinnacles. Since, it
belongs to the SME sector, after a considerable period of time, available opportunities in the
market needs to be grabbed for achieving further growth (Ansoff, 2004). Through adopting
massive expansion strategy, Aston Chemical will be in a position to gain maximum amount
of profits and will attain a competitive edge from the other rivalry firms operating in the
market of UK. Considering the internal as well as external environment of the company, the
company wants to explore the new market opportunities with the same products and services
so that they can have more clients base. However, it is vital on the part of the firm to ensure
that their present market area should run efficiently with a view to gain support from the
existing customer base in terms of proper cash flow for the expansion process. Further, the
growth options can better be analysed by making use of Ansoff’s growth matrix and is
explained below:
 Market penetration – It means selling existing products and services in the same
market and just enlarging their share in the market. Firm considering this option need
to develop ways of increasing customer loyalties, innovating products and services
and readily availability of things.
 Market development – Market development is a growth strategy in which the same
products and services are offered in new and different markets (Moore, 2014). The
selection of the new markets are based on demographic and geographic factors. A
new marketing campaign with different channels can be utilized for targeting new
customer base for the business.
 Product development – In this type of growth strategy, new products and services are
being sold in the existing market. As Aston Chemicals deals in different product lines
so such type of strategy can prove to be useful and successful. Aston Chemical can
also achieve competitive advantage over the other rivalry companies in the market by
adopting the new product development growth strategy (Ashill, Frederikson and
Davies, 2003).
 Diversification – This is also an important growth strategy described in the Ansoff’s
matrix. Firm adopting this strategy sells new products and services in completely new
market. In such a strategy, both the products or services and market are new to the
business. Pertaining to this, this strategy is quite risky growth option as well.
Nevertheless, if the business handles and manage the risks, returns in such strategies
are also very high. If Aston Chemicals adopts diversification strategy than it is
4

required to carry out effective market research and strategic planning, as it has no
experience of the new market and products. Thus, for having immense profits and
success, the risk being determined should be compensated through the market
opportunities.
Consequently, from the analysis it can be uttered that there are variety of growth
options available with Aston Chemicals and it can choose the best option by considering the
risk involved, profits, returns and future avenues. Further, considering the current business
and market position of the firm in UK, it is suggested to the company to make use of market
development strategy (Blanchard, Oncken and Burrows, 2011). The firm should sell their
existing products and services in entirely new market. This will help them to expand their
market coverage and will gain support from the existing customer base, brand image and
position as well. However, market development strategy involves numerous risks. One of the
major risks concerning this is it involves huge capital investment as the firm is required to
build completely new location and expand their marketing efforts to new territories. And if in
case the new opportunities does not work than the whole capital being invested goes in vein.
The risk can be mitigated by ding effective market research and comprehension of the
customers.
LO-2
P3 Potential sources of funding available to Aston Chemicals – their benefits and drawbacks
Whether the firm choose for market penetration, diversification and market or product
development, there is a need of effective financial planning because it is the key foundation
in business. Since, Aston chemicals is expanding into new location and market i.e. Scotland,
huge capital investment is needed for building the new office and location. Further, there will
be a need of sourcing the business by adopting various options (Bryson, 2011). In addition to
this, it is also significant for the Aston Chemicals to forecast the cash flow because they are
expanding their market. Consequently, their expenses will increase more than their revenue in
the initial years. Moreover, the existing business and market of the company should have
surplus amount so that the process of expansion can occur hazel free. Below, some of the
internal as well as external sources available to the company are described:
 Bank loan – Availing loan from banks is considered as vital source for funding SMEs
like Aston Chemicals. Banks offers varieties of methods and options which can be
selected by the company as per their suitability and demand of the business. If this
option is selected by the company than the control of the business will remain with
5

the owner. But this process involves huge time and lengthy documentation (Abraham,
2005). Further, the amount taken from the bank needs to be repaid within a stipulated
time period. Aston Chemicals can make use of different schemes like funding of
lending scheme, Community Development Finance and Loan Guarantee Scheme for
funding their expansion.
 Venture capital – There is another source of funding available with Aston Chemicals
known as venture capital. It involves raising share capital from the external investors.
The investors are given share of the firm in return. They get associated with the
business and offers many advantages to the firm and its business. With this method,
the firm can raise large amount of capital and there is no requirement of monthly
payment. Further, networking opportunities are also offered in venture capital.
However, the major drawback of this method is that the owner losses control over the
because of the participation of so many external investors. Additionally, the overall
cost of financing is quite expensive and there are chances of losing business for the
founders. Further, investment can be availed in venture capital through many other
schemes as well like UK Innovation Investment Fund and Seed Enterprise investment
scheme.
 Crowd funding – Crow funding is a source of funding in which the finance is made
available to the business by collecting small portion from the large population through
the means of internet. Seeking help from the social platforms, large groups of people
including family and friends are being approached for accumulating the amount. This
is done for the purpose of attracting new investors for the business (Basili and et.al,
2009). Further, with this method, finance can be made available to the business from
range of investors without any difficulty. Nonetheless, this process need more time
and positive outcomes can be reaped out only through proper dedication.
 Owner’s investment – It is being referred as the method in which the money comes
into the business from the owner’s own saving. It can be in the form of start-up capital
or additional capital being used for expansion. One of the major advantage of this
method is that it doesn’t need to be repaid and there is no interest payable. However,
it has some disadvantages as well. There is some limitation to the amount an owner
can invest.
 Retained profit – This type of source is available with the business who are trading or
working for more than a year. Since, Aston Chemicals is working from past several
years. The firm can make use of this method to source their financial needs. In this
6

method, the profits being earned by the business are being plunged back to the
business. Retained earnings does not need to be paid again and there is no interest
payable on such amount. But, this is not suitable for new business and there are
chances that the business might not make enough profit to plough back.
To be concluded, Aston Chemicals has many options through which they can source
finance for the expansion process. Each and every method have some benefits and
drawbacks. Therefore, it is essential for the company to select that method which best suits
them and is favourable for their business as well. Looking into the present condition of the
firm, it is suggested to the company to avail finance from bank loan under the scheme
National Loan Guarantee Scheme. Through this, finance will be available to them at cheaper
rates and there are many banks as well which are offering such schemes like Lloyds and Bank
of Scotland (Meyer-Stamer, 2005).
LO-3
P4 Designing a business plan
Business plan – Summary
Aston Chemicals is achieving higher sales and profits because of its brand image in
the market. The company is supplying high quality chemicals for the raw-materials in
personal care industry of Europe. Because of its innovation and technical expertise the firm is
offering highest possible level of customer service and thus, attaining greater heights. Aston
Chemicals further want to expand its business and want to achieve pinnacles. Many growth
options were available with the firm. But, they want to sell their existing products and
services in the new market and location by considering the market development strategy
(Bangs, 2001). Presently, the firm has its office mainly in England and now, they want set up
a new location in Scotland so as to widen their market. The new location will capitalize on
the recent trends and will develop new formulations so as to better satisfy the needs and
desires of the customers. The new location will also deal with supplying quality personal care
ingredients with a range of functions such as exfoliate, anti-pollution, cooling, anti-acne, hair
lose, hair styling, anti-oxidant, anti-ageing and many more. The start-up cost of the new
location in Scotland will be around £600000
Business objectives
The main aim of Aston Chemicals by opening a new location or stepping into the new
market is to expand their reach and achieve growth by having larger number of customers
7

from the worldwide market. They will offer quality personal care ingredients and innovative
formulations to personal care industry of UK.
Mission of Aston Chemicals
The main mission of developing a new market or location is to tap a new
manufacturers and customers and serving them quality products.
8

Start-up summary of the company
The start-up cost will primarily involve inventory and other chemical manufacturing
equipments. The owner of Aston Chemicals will contribute around £200000. It is estimated
that the start-up expenses of the firm will be approximately £500000 which will include all
marketing, legal, rent, insurance, advertising, cash for recruiting people, display set-up,
inventory for setting up a new location and others (Pinson, 2008).
Sources of finance
Aston Chemicals also has an overdraft facility available with the bank of around 2.0
million that has not been utilized till date. The firm want to make use of this amount.
Consequently, two major sources of finance will be used by the firm i.e. bank loan and fund
of the owner. The owner of the company will bring £200000. The left over amount of
£200000 will be availed from bank as loan.
Market analysis and market segmentation
The personal care market of Scotland is quite mature and saturated with many brands
competing with each other. Aston Chemicals will target the suppliers and manufacturers
engaged into manufacturing of personal care products (Kongmanila and Kimbara, 2011).
People now demand quality products and services and are more conscious towards their
beauty and look. Thus, the main focus of the company will be the companies and brands
manufacturing personal care products in Scotland.
Projected cash flow
9

10
CASH FLOW STATEMENT
CASH RECEIVED YEAR 1 YEAR 2 YEAR 3
Cash from operations
Sales £300000 £420000 £550000
Cash from receivables £350000 £445000 £400000
SUBTOTAL CASH FROM
OPERATIONS
£650000 £865000 £950000
Additional cash received
Sales tax, borrowing, VAT, long
term liabilities
0 0 0
Sales of other current asset 0 0 0
New investment received £50000 0 0
Subtotal cash received £700000 £865000 £950000
EXPENDITURES YEAR 1 YEAR 2 YEAR 3
Expenditures from operations
Cash spending £300000 £220000 £350000
Bill payments £60000 £250000 £200000
Subtotal cash spent £360000 £470000 £550000
Net cash flow £340000 £395000 £400000

LO-4
P5 Exiting and succession options for Aston Chemicals – Benefits & drawbacks
This section of the study will focus on exit strategy and succession options available
with Aston Chemicals, if in case the new location or market of the company fails to execute
the new business in Scotland. In other sense, if the new business unit or location of the firm
does not reaps out sufficient profits to run the business effectively than exit or succession
strategy can be adopted (Baumgartner and Korhonen, 2010). Throwing light in relation with
the succession planning, it is a decision being taken by the owner to leave the business or
retire and do something else. Further, it involves a transfer of ownership from head to his
successor. It can be because of many reasons such as retirement and death. This process is not
as easy because the successor will have different processes and ways of carrying out the
business (Succession planning, 2018). In this, Aston Chemicals can sell its present business
to friendly buyer or can sell the neighbours of the business. Some of the ways of carrying out
exit or succession planning are being described underneath:
 Acquisition – This is considered as one of the most significant process in which the
other sound business organization purchases the firm by the way of negotiation.
Such type of technique is very crucial for small and medium enterprise like Aston
Chemicals. Because with this method in place, the owner will receive high amount
if in case the strategic value of the company is quite high (De Toni and Tonchia,
2003).
 IPO (Initial public offering) – If the new business or location of the company fails
and does not reaps out enough revenue than they can opt for initial public offering.
Seeking help from this method, the firm will be in a position to sell their shares to
institutional investors. With the popularity of the company, the prices of the shares
also increases. However, it is a time consuming process and very lengthy too.
 Liquidation – If the firm adopts this method, than the new business or location being
created by Aston chemicals will be required to sell-off all their assets which might
encompass furniture, vehicles, workplace premises and many others. They are also
required to repay the loan amount that has been taken from the bank as a loan. Thus,
liquidation is simply closing the business (Johnson and Scholes, 2003). It is simple
process and very easy way to close the functioning of the firm. But, Aston
Chemicals will significantly get very low rate of return on its investment.
11

 Selling to friendly buyer – In this method of succession planning, ownership of the
company is being transferred to the other member of the family or a close friend or
to a neighboring business. The main advantage of this method is that it involves less
chances of risk as well as fraud. Further, the buyer of the new business is also
known to the seller. Further, this method has some disadvantages as well. It is more
likely that business might be taken by the other partners or buyers because of
jealously and this might ruin the whole process (Schechter, 2016).
 Bankruptcy – It means a break in the business set-up of Aston Chemicals which was
not worked pertaining to many reasons. Since, the business or location was set up
conjointly by loans from the external parties, the suppliers of the corporate funding
can file a petition against the company and thus, the company is required to pat to
their creditors by analyzing their assets and can declare bankruptcy. In such a case,
the owner of the firm might not need to repay the debtors.
Thus, it can be said that there might be numerous reasons pertaining to which the
business was not successful and failed completely such as no proper planning, wrong
implementation of strategies, selection of wrong location, in-efficient management of
resources, over expansion etc. nevertheless, sometimes it might happen that though business
is achieving heights and reaping out good profits, the owner just want to leave the business
and transfers the ownership to other member of the family (Succession planning, 2018).
CONCLUSION
Consequently, from the above study it can be attributed that there is a need of efficient
planning, capital, strategies and effective execution of plans for taking the small and medium
enterprise like Aston Chemicals to greater heights. Further, before making any decision
related to expansion, it is crucial to evaluate all the possible growth options through applying
effective tools and techniques and finally, firm should go for those options that can exploit its
strengths and opportunities. Additionally, it was also originated from the study that
irrespective of the growth strategy being adopted by the firm, business will succeed only
through string financial as well as strategic planning.
12

REFERENCES
Books and journals
Abraham, S., 2005. Stretching strategic thinking. Strategy & leadership, 33(5), pp.5-12.
Ansoff, H.I., 2004. Implanting Strategic Management. Prentice-Hall.
Ashill, J.N., Frederikson, M. and Davies, J., 2003. Strategic marketing planning: a grounded
investigation. In: European Journal of Marketing, 37(3/4), pp.430–460.
Bangs, D.J., 2001. The Business Planning Guide. 8thed. Advantage Quest Publications.
Basili, V.R. and et.al, 2009. Determining the Impact of Business Strategies Using Principles
from Goal-oriented Measurement. In Wirtschaftsinformatik, 25(1) pp.545-554.
Baumgartner, R.J. and Korhonen, J., 2010. Strategic thinking for sustainable development.
Sustainable Development, 18(2), pp.71-75.
Blanchard, K., Oncken, W. and Burrows, H., 2011. The One Minute Manager Meets the
Monkey. London: Harper Collins.
Bryson, M.J., 2011. Organizations: A Guide to Strengthening and Sustaining Organizational
Achievement. 4thed. John Wiley & Sons.
Burns, P., 2011. Entrepreneurship and Small Business. 3rded. Basingstoke: Palgrave
MacMillan.
Burns, P., 2014. New Venture Creation: A Framework for Entrepreneurial Start-ups.
Basingstoke: Palgrave MacMillan.
De Toni, A. and Tonchia, S., 2003. Strategic planning and firms’ competencies: Traditional
approaches and new perspectives, International Journal of Operations & Production
Management, 23(9), pp.947-976.
Eurostat, 2011. Key Figures on European Business – With a Special Feature on SME.
Eurostat Pocketbooks.
Johnson, G. and Scholes, K., 2003. Exploring Corporate Strategy. 6thed. London: Prentice
Hill.
Kongmanila, X. and Kimbara, T., 2011. Corporate Financing and Performance of SMEs:
The Moderating effects of Ownership Types and Management Styles. SAGE.
Meyer-Stamer, J., 2005. Micro-Level Innovations and Competitiveness. World Development,
23, pp.143-148.
Moore, G., 2014. Crossing the Chasm, 3rd Edition: Marketing and Selling Disruptive
Products to Mainstream Customers. New York: HarperCollins.
13

Pinson, L., 2008. Anatomy of a Business Plan: A Step-by-step Guide to Building the Business
and Securing Your Company's Future. aka associates.
Online references
Assess your options for growth. 2018. [Online]. Available through:
<http://www.infoentrepreneurs.org/en/guides/assess-your-options-for-growth/>.
[Accessed on 4thJuly 2018].
Aston Chemicals. 2015. [Online]. Available through:
<http://www.aston-chemicals.com/products-overview/functions>. [Accessed on 4thJuly
2018].
Personal Care & Cosmetics Products United Kingdom. 2018. [Online]. Available through:
<file:///C:/Users/Admin/Downloads/UK%20Personal%20Care%20and%20Cosmetics
%20Country%20Guide_FINAL.pdf>. [Accessed on 4thJuly 2018].
Schechter, M., 2016. Succession Planning and Exit-Strategies Are Too Important to Ignore.
[Online]. Available through: https://www.financialpoise.com/succession-planning-and-
exit-strategies-are-too-important-to-ignore/>. [Accessed on 4thJuly 2018].
Succession planning. 2018. [Online]. Available through:
https://www.smallbusiness.wa.gov.au/business-advice/exiting-business/succession-
planning>. [Accessed on 4thJuly 2018].
14