Planning for Growth in Small Business: An Analysis of Opportunities, Competitive Advantages, and Financing Options for Coffee Culture

This report analyzes the key considerations of a SME named Coffee Culture, including competitive advantages, opportunities for growth, financing options, and Ansoff's growth vector matrix. It also provides recommendations for the business.

Planning for Growth

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Explanation of the basis of competitive advantage for the business...........................................1
A critical assessment of the opportunities available to the business...........................................2
A critical assessment of the options for growth, applying Ansoff’s growth vector matrix with
an assessment of the risk of each option......................................................................................4
Critical evaluation of the options for financing growth and sources of funding.........................5
An appraisal of the exit or succession options for the business or social enterprise, critically
evaluating different options to assess benefits and drawbacks....................................................7
Justified recommendations for the business................................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Planning for growth is a strategy used by the entrepreneurs that helps the business owners in
making tactical planning for the growth of the business. This is an approach by which the
business organizations allows to access how the company is performing and identifying the key
components that are used for expanding the business (Li, Xu, and Li, 2020). Growth and
development are the two very important aspects for running any business as it provides a
realistic vision for the future of the business.Similalry, the aim of the report is to analyze the key
considerations of a SME which a newly started cafeteria named as “coffee culture”. The reports
will various methods by which the small business can get funding. Along with this, the report
will also focus on developing a business plan and access various method by which the business
owner of a small medium enterprises business can exit their trade and also the implication of
each method that has been used for exit process.
MAIN BODY
Explanation of the basis of competitive advantage for the business
The company which is covered in this report is a small medium enterprise and it is a newly
opened cafeteria whose name is “coffee culture”. The Cafeteria is a small business and offer
coffee and food items to their customers with proper hygiene and good quality. The food
products are of very good quality and good for the health of customers. The food products have
fewer calories in them as well as glutton free and are good for the health of every age group.
This newly started business of a cafeteria “coffee culture” has multiple competitive advantages
in order to sustain in the target market (Lorenzo, Rubio, and Garcés, 2018). Having a small
business swill help in taking the decisions faster for the innovation of the products. The business
will have fewer employees and because of which it becomes easy for the owner to take fast
decisions for process. This small business of cafeteria can bring some innovative changes
according to the market criteria in a quicker way by as compared with large scale business. By
starting a small business, the organization has the opportunity to target the niche market.
Targeting the niche customers and markets will help in gaining and retaining a good market
share. Along with this, the owner of the newly started venture of cafeteria will help the owner in
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empowering and developing a good team and a strong team will always make the difference in
the target market. Small business allows for more attention and the issue of each employee can
be addressed easily so as to improve the productivity of the business organization. The concept
of starting a small size business will help the organization in building a connection with the
customers and can develop a customer oriented approach.
Similarly, the owner of the cafeteria can take the views and opinions about the food quality they
are offering and can personalized the customer service according to the needs and demands of
the customers. This helps in retaining the customers and provides higher satisfaction to the
customers as well. A small business competitive advantage is that it can build and prioritize the
connection with the local communities. In the same way when the business of cafeteria” coffee
culture” support the local fundraisers and helps in the community projects then it shows that the
organization care about the customers and valued them .one of the major competitive advantage
of a small sized business is having less establishment as it deals with faster decision making
process and due to which the business organization is able to innovate faster and setting the
business in standing out in the target market along with the other competitors(Hatten, 2018). In
addition to this, the business of cafeteria “coffee culture” can also focus on the specializations as
this allowed the organization in targeting the specific customers and building a good reputation
in the target market. One major competitive advantage in the small medium enterprises is it has
the ability to select the best software for the employers as well as for the customers. In context
with this, the “coffee culture “ have a big advantage of changing and adopting new technologies
and saving the time as well as money of the customers and allowing them in providing a good
experience. There will be no risk in changing the software and technologies in the small
business.
A critical assessment of the opportunities available to the business
In this modern culture, everyone likes to spend their time with their friends or family members.
Therefore having a coffee shop near by your home or workplace will benefit the employees and
individuals in having some good quality time. The report is about starting a small size business
of a coffee shop whose name is “coffee culture” and the aim of the cafeteria is to offer coffee
and good quality food products to the customers. In starting this business there are numerous
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opportunities available for expanding and for achieving growth and development in the target
market. Some of the benefits and opportunity available for starting a Cafeteria are as follows:
Being Profitable- Earning profit from a cafeteria business will always be great achievement.
One of the major aims of the entrepreneur is to make profit and loving what they like to do.
Retail coffee can be very profitable and this can be proved from various examples such as star
bucks dunkin donuts and many others as well (Horváth, and Szabó, 2019). This is one of the
most important opportunities available to the entrepreneurs of the coffee shop.
High service culture – starting a business of a coffee shop is a quick turnaround business. This
business provides an opportunity of bringing high service culture to their customers by
providing neat and clean area for sitting and a good and responsive staff. This will help in
increasing the sales and retaining the customers as well.
Continuous Sale- The business of a cafeteria will help in providing a continuous sale as the
customers love to have coffee in all the seasons and the customers can also use the area for
doing their office work and having coffee along with this. Customers also love to spend time
with their relatives and friends in the coffee shops and hence results in increasing the sales and
revenue of the business organization.
Direct relationship with the customers- By starting a small business of a coffee shop, the owner
of the enterprise can directly communicate with the customers and get their reviews and
opinions regarding the products they are offering to their customers. This business provides an
one to one conversation and reviews or feedbacks regarding the cafeteria and can innovate some
changes accordingly.
Customer focused strategy- The business of a coffee shop will have customer centric approach
and help in providing customer satisfaction as per their needs and requirements (Dwivedi, and
et.al, 2021). The aim of this business is to serve their with better quality food products and
coffee as compared with their competitors in the target market. The customer centric approach
will help in retaining the customer and increasing the potential margin.
Quick and motivated staff- In the business of coffee shops the daily work routine is very simple
and the staffs know the process they have to perform again and again. Also, in this type of
business there is a continuous movement of customers and the staffs get rewarded from the
customers for their god work and this helps in keeping motivated.
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Highly focused niche – The business of a cafeteria “Coffee culture “have a nice and highly
purposeful niche venture. It is a type of general store where one can focus on variety of food
products of multiple taste and the one major focus of the business is to serve coffee and food
products to their customers as per their taste and choices.
A critical assessment of the options for growth, applying Ansoff’s growth vector matrix with an
assessment of the risk of each option
Growth is very important for the long term success of any business. In starting a new business, it
is crucial for the entrepreneur to look out for the available options for growth and development
as by this only the business will able to sustain in the competitive market. Growth helps in
gaining more assets, attracting new talent and funding investments as well. It also helps in
driving business performance and profitability. Growth strategies are important for inventive
goals and involve the process of introducing new products into the target market for increasing
the sales and productivity of the organization similarly, in the small business of a cafeteria which
is “coffee culture” for assessing various options for growth, one of the major matrix can be used
and which is Ansoff’s growth vector matrix. The Ansoff’s growth matrix is also known as
product/ market expansion grid. It is basically a two by two structure which is used by the
management team as well as by the analyst community for helping plan and evaluating growth
proposal. This process will help the employees in conceptualizing the level of risk which has
been associated with various strategies used for growth plan(Dawes,2018). It is one of the
simple tools that is used by the business organizations when considering growth opportunities.
This growth matrix is used for analyzing relative attractiveness of growth strategies that involve
existing as well as new products. This growth matrix consists of four different components and
which are market penetration, market development, product development and the last one is
diversification.
Market penetration- Market penetration is the process of increasing the sales by selling the
existing products into the existing target market. This one is the least risky concept used in the
growth matrix. In this matrix, the management sell the existing products more into the market in
which they are familiar with and have some old relationship. This helps in increasing the
marketing efforts, decreasing the cost factor for influencing the customers and for attaining
competitors in the target market.
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Market Development- the market development strategy is the next approach used in the growth
matrix and it is the next less risky. It does not require any type of investment in the Research and
development strategy. In this approach, the management team will help in selling the existing
product into the new market. This strategy involves three basic factors and which are targeting
new customers, entering into a new local market and also entering into a foreign market for
expansion. It is quite less risky because of the concept of selling existing products into an
established roadmap (Chintalapati, 2020).
Product Development- product development is the process of introducing new products into the
existing market. This factor plays a important role in the brand loyalty by focusing on three
major factors and which are investing in the research and development for developing an new
product, attaining the right of producing and selling the products of another company and
generating a new offer by branding a white label product which has been produced by a third
party.
Diversification-it is one of the most risky concepts used in the Ansoff’s Growth Matrix and it is
the process of selling the new product into the new market. There are two types of
diversification and which are related and unrelated.
Critical evaluation of the options for financing growth and sources of funding
Starting any venture require some funding and investment for setting up the trade in the
competitive target market. Therefore it is very important to know the ways and options available
for financial growth and for funding as well. In the same way, the business of cafeteria “coffee
culture “will also require an evaluation of the options that are available for financing growth and
sources of funding. Some of the major options available for funding the small business are as
follows:
Savings/ own capital:
One of the easiest way of funding the small business is to utilize the own capital and savings. At
any point of time when an entrepreneur needs to fund the business then they can use their
savings and own capital such as stocks, mutual funds, fixed deposits and real estate. They can
also sell the assets for raising the capital or can invest in personal savings (Pakhnenko, 2019).
Banks:
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Bank is one of the biggest sources available for the entrepreneurs for providing funding in the
form of loans. The entrepreneur can take loans from the banks and then deposit the same
according to the tenure. for taking loans from the banks, the company “coffee culture” have to
fulfil the minim criteria of the banks which includes annual turnover, GST , credit sources and
many more. Bank offer multiple types of loans like working capital loan, business loan, credit
limit and many more.
Crowd funding:
It is a new method for funding the business and it is a process of raising funds by borrowing a
small amount of capital from a large group of individuals. One of the advantage of using crowd
funding as a source of funding is that the small companies can make flexible proposals as per
their needs and requirements. This can offer equity against the money and can also take loan on
the money (Janaji, Ismail, and Ibrahim, 2021).
Small business loan:
Each and every country has some financial subsidiaries or banks that can help the newly started
ventures in providing funding by paying them a business loan. One of the examples of such
institution in USA is SBA. The main aim of this institution is to loan some money to the small
business.
Trade credit:
One of the most common ways of rising funding in the newly started small business is to do
trade credit in which the suppliers are willing to sell on credit and these credit ranges from one
month to four months. This is one of the most effective ways for funding for a short period of
time by the small business and also very inexpensive source of financing growth.
Private Equity Firms:
Private equity firm is basically a kind of equity firm which has been not mentioned in any type
of stock exchange. These financial institutions raise the funds by the help of investors and after
this they invest the fund for starting any new venture. The entrepreneur has their full control on
this type of funding and which sometimes brings conflicts.
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An appraisal of the exit or succession options for the business or social enterprise, critically
evaluating different options to assess benefits and drawbacks
It is very important for the entrepreneur to know the exit strategies for winding up the business if
the profit margin is not more than the amount invested for starting the business. In the same
way, the entrepreneur of “coffee culture” can also use some approaches and strategies for exit
management. There are eight types of strategies that can be used for exit management and which
are merger and acquisition exit strategy, selling the business to a partner or to a investor , family
succession , acquihires, management and employee buyouts , initial public offerings , liquidation
and the last one is bankruptcy. The merger and acquisition strategy is one of the most effective
approaches used by companies for exit management and in this they sell out their business to
some other companies. The benefit of using this strategy is that this strategy helps in maintaining
control over the cost negotiation factor and setting their own terms and conditions. The
drawback of this strategy is that it is more time consuming and expensive as well (Lokuge, and
et.al, 2021). The second way is to sell the business to some investor or to partner and in this type
the term “friendly buyer “is used as the one to whom the business is going is trustworthy and
well-known.the benefit of using this strategy for exit management is that the company will able
to run with minimum disturbance and keeping the revenue stable. The negative side of this
strategy is that it becomes difficult for the owners to find the suitable partner or investor for
selling the business. Another strategy that can be used for exit management is Initial Public
Offering and in this strategy the one is taking the business to the public and selling the shares as
stocks to the investors. This approach have a huge potential of earning profitability and the
drawback of this can be its due diligence as it is very difficult, costly and also require labor for
doing this.
Acquihires is also a strategy that is used by the entrepreneurs for exit
management and in this the organization is bought individually for attaining its talent(Ndombi,
2021). This approach is very beneficial for the talented and skilled employees as they will look
after the business once it gets sold out. The benefit of using this strategy is the owner will able to
do negotiation in terms of acquisition and the negative side of this approach is that it is quite
difficult to find a buyer and becoming challenging and more expensive. The last approach that
can be used by the owners of the business for exit management is Bankrtuptcy.this strategy will
results in seizing the assets and impacting the credit but will relieve the entrepreneur form the
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financial debts. The benefit of using this approach for exit management is that the owner will
feel fewer burdens and have no financial responsibility of the business. But on the other hand,
the drawback of this strategy is that one can have a struggle in borrowing credit in the future
business.
Justified recommendations for the business
For any type of business it is very important to understand the exit management
strategies(Rabbi, and et.al, 2018). There are many entrepreneurs who are designing strong exit
strategies but do not follow when the time comes to take action then it becomes devastating.
When making a strategy for exit management the owner should initiate the process by measuring
the reward and risk level which is prior to enter the business and after this use this levels as a
type of blueprint for exiting the business at the best price. Knowing the value of the market is
one of the major things to know when exiting the business. One of the major factors that need to
be considered for exit management is using the concept of stop loss and scaling methods which
have been used by the methodical investors for protecting the profits and reducing the losses.
For exiting a business it is important to prepare a exit plan which includes closing down a non
profitable trade, executing an investment or business venture when the objectives of the profit
are met, closing down a business for some effective changes in the market conditions, selling an
investment, selling unsuccessful company to limit the losses and reducing ownership in a
company.
Some of the strategies used by the business “coffee culture” for exit
management are Initial Public offering (IPO), by strategic acquisitions, by management buyouts,
merger and acquisition exit strategy .liquidation, family succession and bankruptcy. The exit
management strategy is very important because it helps in providing health issues or a family
crisis; it helps in economic recession and helps in providing defined goals. It helps in allocating
the owner to move rapidly for selling the trade if unpredicted situation demand a quick vending.
Deteriorating for establishing an exit plan leaves the business owner at risk of monetary losses
be supposed to the corporation fail, and need to be get rid of speedily (Ozkan, 2020). In addition
to this , the best eight practices that should be followed by the entrepreneurs for exit
management are passing the business to a close relative so that the entrepreneur will have trust
and faith, exploring a merger or acquisition , pursuing an acquihires,having some existing
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employees who are very skilled and talented and can buy out the business , selling the stake to a
partner or to a investor as well, liquidating the business and the last one is filing for bankruptcy.
CONCLUSION
Growth planning is very important for sustaining in the competitive market. Growth plan will
help the business organization in clearly defining the objectives and goals and also the ways for
achieving the same for growth and development. The report has concluded the competitive
advantage that covered in the small business of cafeteria which is “coffee culture”. the various
opportunities available for a small size business of a coffee shop are described in the report and
also the various option available for growth are explained by the help of Ansoff’s growth matrix
along with the risks associated with them. Along with this , the sources of funding are also
mentioned in the report and the various strategies used for exit management are covered in the
report with their benefits and drawbacks.
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Ndombi, C.L., 2021. Project Exit Strategies, Stakeholders Management, and Project
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