Planning for Growth: A Case Study of TXO Systems

TXO SYSTEMS
PLANNING FOR GROWTH

Table of Contents
INTRODUCTION...........................................................................................................................................2
TASK 1..........................................................................................................................................................3
P1 ANALYSING KEY CONSIDERATION FOR EVALUATING GROWTH OPPORTUNITIES AND JUSTIFY THEM
IN REFERENCE TO TXO SYSTEMS.............................................................................................................3
P2 EVALUATING THE OPPORTUNITIES FOR GROWTH APPLYING ANSOFF’S GROWTH VECTOR MATRIX 8
M1 DISCUSSION OF GROWTH OPTIONS USING RANGE OF ANALYTICAL FRAMEWORK TO
DEMONSTRATE THE UNDERSTANDING OF COMPETITIVE ADVANTAGES FOR TXO SYSTEM.................10
TASK 2........................................................................................................................................................13
P3 ASSESSING THE POTENTIAL SOURCES OF FUNDING AVAILABLE TO BUSINESS WITH BENEFITS AND
DRAWBACKS OF EACH SOURCE.............................................................................................................13
M2 EVALUATION OF POTENTIAL SOURCES OF FUNDING AND JUSTIFICATION FOR ADOPTION OF
APPROPRIATE SOURCE OF FUNDING FOR TXO SYSTEM........................................................................15
TASK 3........................................................................................................................................................16
P4 DESIGN A BUSINESS PLAN FOR GROWTH THAT INCLUDES FINANCIAL INFORMATION AND
STRATEGIC OBJECTIVE FOR SCALING UP A BUSINESS............................................................................16
M3 DEVELOP AN APPROPRIATE AND DETAILED BUSINESS PLAN FOR GROWTH AND SECURING
INVESTMENT, SETTING OUT STRATEGIC OBJECTIVES, STRATEGIES AND APPROPRIATE FRAMEWORKS
FOR ACHIEVING OBJECTIVES.................................................................................................................16
TASK 4........................................................................................................................................................21
P5 ASSESS EXIT OR SUCCESSION OPTIONS FOR A SMALL BUSINESS EXPLAINING THE BENEFITS AND
DRAWBACKS OF EACH OPTION.............................................................................................................21
M4 EVALUATE EXIT OR SUCCESSION OPTIONS FOR A SMALL BUSINESS COMPARING AND
CONTRASTING THE OPTIONS AND MAKING VALID RECOMMENDATIONS............................................21
CONCLUSION.............................................................................................................................................24
REFERENCES..............................................................................................................................................25
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INTRODUCTION
Small and Medium Enterprises (SMEs) faces various difficulties in sustaining themselves in this
competitive market. The given study is based on one such SME, TXO Systems which is world’s
leading supplier of new and used multi-vendor telecoms network equipment. The company
would apply various technologies so as to identify factors which would help it in finding
opportunities for achieving significant growth. The study would also analyse the source of
investment finance and the procedures through which TXO tries to attract its customers.
Furthermore, the study would provide importance of making informed choices for
understanding risks and rewards associated with growth.
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TASK 1
P1 ANALYSING KEY CONSIDERATION FOR EVALUATING GROWTH
OPPORTUNITIES AND JUSTIFY THEM IN REFERENCE TO TXO SYSTEMS
SMEs are considered as lifeline of a majority of the economy. In the UK, they are responsible for
providing employment to half of the total employees and add a significant amount of income to
the government revenue. However, there are various problems which hamper its growth and
results in their standstill. These factors are bad management and investments, apathy towards
the employees, economic and competitive shocks (Lanchard, et al. 2011). In order to overcome
such factors, the SMEs such as TXO System have to consider various aspects so as to evaluate
growth opportunities. These aspects are:
I. Competitive Advantage
It could be defined as an advantage which is offered by the company over its competitors by
offering greater value of the products to the consumers as compared to competitor’s offer. It
uses competitive analysis to identify their key competitors so as to access their strength and
weakness and then selecting which competitors to either attack or avoid. To achieve the
competitive advantage TXO Systems has applied theory of resources and capabilities which are
a business strategy which is used in the formulation of company's strategy (BURNS, 2011).
Figure 1: Resource-based Theory for Competitive Advantage
Source: [MOORE, 2014]
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In the resource-based theory, the resources of the company are given major role in accessing
its objectives of achieving higher organisational performance and competitive advantage.
Resources are an important part of a company and if the company use it for its own advantage
wisely, it would be difficult for the competitors to imitate it easily.
There are various competitive strategies which could be utilised by TXO Systems for its own
competitive advantage (BURNS, 2014). One such strategy is Porter Five Force Analysis which
could be explained as follows:
Figure 2: Porter Five Force Analysis
Source: [Dobbs, 2014]
The threat of new entrant:
Two issues must be evaluated for while considering the threat of new entrant. The first issue is
their impact on market and second issue is the barriers faced by them while entering the given
industry. Due to high licence fees, high infrastructure cost, easy accessibility to distribution
channel and low customer switching cost; the threat of new entrant is comparatively low
(Chailan, 2013).
Bargaining Power of Buyers
It analyses competitive advantage as it assesses the lower price of a product of a firm, improved
product quality and efficiency in service. Due to low switching cost, lack of differentiation
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among the products and full information about the product by the buyers makes bargaining
power relatively high.
Bargaining Power of Suppliers
It analyses supplier power of an industry and is relatively low for the company due to
standardisation, lack of differentiation and low switching cost.
The threat of Substitute Product
It focuses on the production of similar services developed by the competitors to hamper the
growth of a company. TXO has low threat due to low-quality substitute product and its low
price.
Industrial Rivalry
As there is less rivalry among the competitors, the threat of industrial rivalry on the company is
low (Scarborough, 2016).
II. Innovation
In order to increase the growth of its business, TXO Services would have to bring innovation in
its manufacturing and promotion of its products and services. It should develop products such
as high-quality optic fibre reflectometer, cloud-based communication channel which would
help the company to have a competitive advantage over its competitors. Furthermore, it could
also utilise the services of various portfolio strategies such as BCG Matrix. Moreover, Diffusion
of Innovation Theory is utilised by the company to explain the idea which has been adopted by
the company is gaining momentum and is diffusing through a specific population (Lanchard, et
al. 2011).
Figure 3: Diffusion of Innovation Theory
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