Business Planning and Exit Strategies

This assignment delves into the importance of business planning for expansion and growth. It discusses Porter's generic model for competitive advantage, Ansoff's matrix for identifying growth options, and various exit strategies such as liquidation, selling in open market, and merger & acquisition. The report concludes that planning plays a crucial role in an organization's success and provides insights into effective business management.

Planning for growth

Table of Contents

INTRODUCTION
Planning is the process of identification various approaches that are effective for
expansion and growth of company. Company has main purpose of performing activities that are
important for development (Allmendinger, and Haughton, 2012). This report is based on small
manufacturing company Azio which is established in UK and produces different type of
keyboards such as wireless, gaming keyboards, designer keyboards and also offers various kind
of earphones. This report contains key elements that are helpful in growth of business and attains
the competitive advantage. Pestle analysis help in minimizing the threats and maximize
opportunities. Porter's generic model also consist in this file which tells about competitive
advantages over rivalry along with Ansoff's matrix i.e. utilised for determining growth options.
Business plan is also discussed in project which provide the strategic objectives of firm. This file
also contains various sources of arising fund and about exit & succession plan that helps in
effective business operations.
TASK 1
P1. Key concept which provides options of business growth
Planning is very essential for achievement of an organisational goal. Planning process
starts with analysing current operations and identifying what is to be improved in future.
Business growth is stage where business reaches to the highest level of expansion and wants to
add more option to generate maximum profit. Azio is keyboard manufacturing company, which
can expand their business by producing other related products like mouse, monitor and many
more.
Competitive advantages:
This is a favourable position of an organisation that helps in becoming more profitable
than its competitors. There are different resources that are required to perform business
operations which seeks to attain targets (Berger, and Berger, 2011). Azio has various factors that
are useful for making effective changes in business operations. For achieving competitive
advantage, there are some elements that are as follows:
Resources: This is tangible tools that are used by organisation to differentiate their product from
others. Azio uses advance technology and exclusive design with premium materials and
intuitive functions that seeks in achieving competitive advantage.
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Capabilities: Azio has high skilled employees and experts that helps organisation in achieving
objects and it also provides edge over rivalry.
Core competencies: This is mixture of multiple resources and skills which differs a firm from
its competitors. Azio uses updated technology and skilled worker that helps in production
process. Company has variety of keyboards by which they can satisfy demand of customers.
Porters generic model:
This strategy can be used for identifying the direction of an organisation. Porter gives
four strategies that company uses for achieving sustainable competitive advantage (Blackburn,
Hart, and Wainwright, 2013)
The four strategies are as follows:
 Cost leadership: This strategy focuses on the broad market and offer the lowest price to
their customers. There are two options that can be selected by firm that is to keep the
prices low or assure large market share with average price. If Azio opt this strategy than
than they must focus on large market and offer low prices of their commodities.
 Differentiation leadership: In this strategy of Porter, company targets the broad market
by offering unique features of their product. This strategy helps in making product more
attractive than their competitors. Azio must select this option as it helps in expansion and
growth because it concentrate on large marketplace and provides unique features in their
products.
 Cost focus: This strategy concentrate on niche market that is focused or less competitive
market and offers the lowest price to their ultimate customers. Under this strategy,
company can understand dynamics of market and also produces product according to the
demand of customers. If firm use option than they have to offer low prices to there
customer which helps in increase the sale of company.
 Differentiation focus: In this strategy, company target on focused market and offers
unique features in their product and services (Crow, 2011). It is very essential to ensure
that the product remain unique to stay away from their rivalry. Azio choose this strategy
than company offer product with unique feature in niche market.
Azio uses 'differentiation leadership strategy' of Porter's generic model in which company
focuses on broad market and offers unique features in their products. This helps organisation for
expansion and growth in effective manner.
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PESTLE Analysis:
This is a analytical tool for understanding external factors on business environment.
PESTLE stands for Political, economic, social, technological, Legal and Environment and these
factors are as follows:
 Political factors: This element is related to the government policies, internal political
issues, local commissioning processes and trading policies that have impact on business.
Government made certain policies like no taxes on trade that are helpful for Azio in
expanding their business.
 Economic factors: This element includes local economy, taxation, inflation and
economy trends. As manager of Azio has less finance, so company must uses affordable
and readily available resources that helps in smooth running of enterprise as they work as
per there financial capabilities (Denton, Forsyth, and MacLennan, 2017).
 Social factors: These component are related to beliefs, attitude and cultural aspects that
affects the demand of company. Azio manufacture products as per the needs and
demands of customer that helps in growth of business.
 Technological factors: This element are related to innovation, technological legislative
and intellectual property issue that affects the business operations. As Azio is
manufacturing company, so when there is changes in technology than there is impact on
business performance.
 Legal factors: This component is related to the tax regulations, laws and legislation
which affects the business operations. There are some rules and regulations decided by
the government of country under which Azio has to work. When company does not
operate according to rules than work or operation is considered as unethical and
organisation have to pay against the misconduct.
 Environment factors: This elements includes environmental regulations, impact of
adverse weather and ecological regulations that impacts the functioning of an
organisation (Galland, 2012). Azio is manufacturing company that uses different kind of
chemicals, equipments and machinery in their operations that affects the environment
adversely.
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P2. Opportunities for growth by applying Ansoff's growth vector matrix
It is very essential to employ adequate growth opportunities in organisation that helps in
expansion and also assist in achieving the competitive advantage over the rivalry. There various
opportunities for growth that company must adopt new technology which helps in expansion to
their business.
Ansoff's matrix is a marketing planning tool which helps a business to identify its product
and market growth strategy (Ansoff Matrix, 2018). This model help in understanding the possible
growth strategies for an organisation. There are four type of strategies that are as follows:
 Market penetration: This is the first element in the Ansoff matrix that is adopted when
an enterprise has an existing product in present marketplace and wants expand their
business in present market (Goodfellow, 2013). Azio has major advantage of adopting
this strategy is company has good knowledge about competitors and customer demand.
 Market development: This is another strategy of Ansoff matrix, in which sells its
existing product and services into new market. Market development is more risky than
market penetration as it focuses on new market. If Azio opt this strategy than it will help
in expanding their business in other marketplace also.
 Product development: This strategy means to launch new product in existing
marketplace. Product development is best suitable strategy for an organisation because
product is differentiated from their rivalry to remain competitive. This element needs the
development of new competencies in form of modified products that introduce into
existing markets. Azio adopts product development strategy by introducing new products
like mouse, printers, monitors in existing marketplace. It is very beneficial for company
as they know about needs or wants of customers and also their competitors.
 Diversification: This strategy of Ansoff matrix in which company introduce new product
in new marketplace (Huang, and Zhang, 2014). It is the most risky strategy because
organisation moving into a market where there is less knowledge about competitors and
demands of consumers.
This strategy of Ansoff matrix help in growth of business. Azio can use product
development strategy for expansion their business. In this strategy, company can sell new
product in existing marketplace. It is less risky for firm as they already know about customer
demand and their competitors.
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TASK 2
P3. Potential sources of funding with their advantages & disadvantages:
Finance is very necessary for firm to operate their business effectively and efficiently. It
is very important factor by which company purchase raw materials and give remuneration to
their employees. This is a medium through which company raises funds for their business
operations. There are two major types that are internal and external sources of funds (Mason,
2015).
Internal sources: This is also known as own fund that means funds that are available
inside business such as retained earning, capital reserve and profit kept back etc.
External sources: This is also known as borrowed fund that company raised by fund
from outside such as bank loan, creditors, crowd funding, etc.
Sources of funds are adopted by Azio are as follows:
 Bank loan: It is amount of finance received from bank in exchange for future repayments
with interest. Repayment amount is depend on the time period, size and rate of interest on
loan. This source of fund is more suitable for growing and well established business
rather than the start ups.
Advantages:
 Bank loan is cheapest option compared to overdraft as it has low interest rate and is more
cost effective.
 Another benefit of bank loans is to provide tax benefit which means amount which
company pays as a interest on loan is tax deductible.
 Advantage of bank loan is that it can be used for short term as well as long term
financing.
Disadvantage:
 One of the major limitation of bank loan is borrowing too much from bank can leads to
reduction in cash flow of firm.
 Another drawback of this some bank loans carry prepayment penalty.
 In some cases, bank loan do not provide whole amount, it gives lower cash than
demanded.
Overdraft: This is source of fund in which bank or financial institution allows an
expansion of credit when amount in account reaches to zero. This method of finance gives
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permission for withdrawing funds even there is no money to cover the amount. Overdraft more
suitable for covering short falls. It is not good for covering long term debts.
Advantages:
 Bank overdraft is best suited for business who has great movement of cash flows as it
helps in handling mismatch flow of fund.
 Another advantage of bank overdraft is it calculate only amount which is used. By using
this method of finance, it allows more saving in interest cost as compared to bank loan
that has fixed interest rate.
 One of the major benefit of this is, it has flexibility. Company can take money at any
time. It is not rigid in nature as firm can take amount as and when needed (Moseley,
2013).
Disadvantage:
 Bank overdraft facility given to company against inventory and collateral such as life
insurance policies, shares etc. There is more risk as company not able to repay the
amount than there assets are being seized.
 Limitation of overdraft is interest rate of overdraft are flexible in nature so it become very
difficult to forecast and prepare budget accurately.
 Overdraft has another drawback that it is more expensive in long run.
Crowdfunding: It is method of source of fund that used for raising funds in small
amounts from large number of people using social media and internet.
Advantages:
 Benefit of crowdfunding is the fastest method of raising funds with no upfront fees.
 Another important advantage of this method is company get a marketing platform for
their new project that results in media attention.
 Investor may become company's loyal customer in financing process.
Disadvantage
 It is complex process as compared to other sources of fund as it is not a platform for all
types of projects.
 When company failed in project than there is more risk of degrade in reputation of
company.
 Another drawback of this it is very time consuming process.
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Peer to peer lending: This is method of raising funds that enables individual to lend and
borrow money with the use of banks or any financial institution. Peer to peer lending eliminates
the middleman from process but it is more risky and time consuming as compared to other
sources of fund.
Advantages:
 One of the major benefit of peer to peer lending is, there is access to higher returns as it
has lower interest rate.
 There is fixed interest rate and monthly payment are available with no upfront or hidden
fees.
 Another advantage of this method is there is no prepayment penalty.
Disadvantage:
 The major drawback of this method is money not be lend as and when required.
 Another disadvantage of peer to peer lending method is the amount of interest is not tax
free.
Angel financing: It is type of equity financing in which investor supplies funds in
exchange of getting the equity position in company. This method is more suitable for non-
established businesses that not have enough collaterals and cash flows that secure business loan
from financial institutes.
Advantages:
 The major advantage of this source of fund as it is less risky than debt financing.
 It is more suitable for long term and angel investor has personal opportunity as well as
investment
Disadvantage:
 Using angel financing as a source of fund has a disadvantage that it takes long time to
find a suitable investor.
From the above discussion, it is concluded that potential sources of funding is important
for business to fulfil their growth aim. Fulfilling such requires funds for business expansion or
launching the new products. Angel investors are the most suitable for generating funds, as it
doesn't creates any burden of the business firm as compared to bank loans and borrowings. Azio
should consider angel investor, as most suitable source for raising the funds.
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TASK 3
P4. Business plan for growth of business
Business plan is tool that is used by manager of Azio for effective functioning and how to
achieve their targets. It is very necessary for company to have business plan which helps in
expansion and growth of an organisation (Planning Commission, 2011).
Overview of the company: Azio is a small scale manufacturing company which offers
different type of keyboards such as gaming keyboards, wireless keyboard, vintage designed
keyboards etc.
Products & services: Azio has product portfolio of Retro compact keyboard, retro classic
BT, Classic Mouse pad and other accessories. There are products are very popular over the
globe.
Vision: Their vision is to become one of leading company in this sector and satisfy
demand of customer by offering different type of keyboards with quality.
Mission: Mission of Azio is “to reinvent the art of peripherals”.
Strategic objective: The main objective of Azio is satisfy their customers and their aim to
increase their profit from 10% to 30% in next 3 years. The set objectives are achieved with the
help of SMART goals that means objectives are specific, measurable, achievable, realistic and
time bound.
Entrepreneurial strategies: Strategies for Azio would be consists of targeting the niche
market, which will target the audience with common choice & budget looking. Thy are focused
towards the development of their self gaming software which are initiated to provide the suitable
gaming experience to the people. The targeted audience will be teenager, because they are the
highest consumer of it. Further, they would thinks for other age group targets.
Investors: For this product development, angel investor will be taken care to generate the
required funds/money. This has been initiated to get assess to the money.
Financial information-
Finance is required for performing business objectives in efficient and effective manner.
There are various kind of sources to raise fund, so it is very necessary to select a method which is
suitable for business. Financial image of company must be strong, it helps in borrowing the fund
from different sources (Vallance and Dixon, 2011). There are various cost associated in proper
functioning of company such as training, advertisement, transportation, raw material, etc.
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Total forecasted budget
Particular 31/12/15 ($) 31/12/16 ($) 31/12/17 ($)
Implementing
technology cost
15000 -There are various
companies in business
environment. Firm
which are successful,
wants to expand more
than they must
formulate better
succession plan. There
is possibility that Azio
does not able to work
effectively and can not
meet their set
objectives. Than it is
very necessary for
manager of company
to formulate exit and
succession plan. There
are various strategies
that can be used for
entry and exit plan
which are as follows:
-
Promotional expense 9000 8000 6000
Advertisement
expense
6000 5600 5800
Catalogues 2000 4000 3000
Training charges 6500 8000 8500
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Total Cost 38500 25600 23300
From this budget, manager of Azio get idea about the expenses that has been incurred by
firm in order to come with new technology.
Cash flow budget:
From the above cash flow, it present that company has enough funds by which they can
pay off their quick liabilities. Azio has to pay tax whose rate changes every year. Cash receipt
from repayments of loans and dividend has same amount every year. In the end cash in hand of
2015, 2016 and 2018 are $102203, $200354, $238503 respectively. Estimated annual average
income of three years is $ 72001
TASK 4
P5. Succession and exit plan for small business with its advantages and disadvantage
Expansion of business not always gives positive results, there is a possibility of negative
outcomes too (Wynn, 2017). Negative results may leads to failure in business. There are various
techniques and strategies by which company can increase their goodwill as well as growth of
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business also possible. Managers of Azio have to formulate plan for succession and exit for
effective business operations.
Different ways of succession and exit strategies
In business environment, there are distinct types of firm which are operating affairs to
expand more than they must formulate better succession plan. There is possibility that Azio does
not able to work effectively and can not meet their set objectives. Than it is very necessary for
manager of company to formulate exit and succession plan. There are various strategies that can
be used for entry and exit plan which are as follows:
Winding up: This method of exit plan means ending or dissolving a business by selling
its assets to paying off all liability and remaining assets distributes to their shareholder or
partners (Wey, 2015). It is the end the trading life business by putting company into formal
liquidation.
Advantages: The major benefit of winding up business is it removes the responsibility
from the directors and the business owners. When company is winding up than there is no
ongoing pressure of debt repayment. So, the available fund may be used as other business
opportunity.
Disadvantages: Drawback of winding up business is, it is time consuming process as
there is legal procedure for liquidation. Another limitation of this method of exit is company will
loose the productive employees and teams.
Selling in open market: In this method, exit plan is selling ongoing business in open
marketplace. The image of company is not disturbed as other company will purchased. There is
rebate in taxes to other party who buy it.
Advantages: One of the major advantage of selling business in open market is there
image of company do not get disturbed. It also helps in improvement in economy of country.
Operations of business not changed as other company purchase their ongoing business.
Disadvantage: Drawback of this method is financial status of company is comes in front
of external parties and this leads to reduce the image of company. This affects the reduction in
value as compared with other organisations. Another drawback of the exit plan is skilled
employees may leave the firm which affects the functioning of company who purchase that firm.
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Merger & Acquisition: Merger means combination of two business to form one
company. Acquisition means taking over other company. These two are the major factors of
corporate world.
Advantages: Benefit of this is synergy that means magic power i.e. useful in increased
value efficiency of new business and it also gains the economies of scale as they share resources
and services. Another limitation of this method is it reduces the risk of using innovative
techniques and tools for managing financial risk. There is one more benefit of this is it has tax
benefits.
Disadvantage: Drawback of this method is company may looses the experienced staff
member. Merging of two company leads to doing similar things and may be there is duplication
of work. Another limitation of this exit plan is it increases the cost of company that results in
management of modification and there is delay in implementation of merger and acquisition.
CONCLUSION
From the above report it is concluded that planning plays important role in an
organisation for expansion and growth of business. With the help of business plan, operations of
business are performed in effective and efficient manner (ZHANG, ZHAO and CHEN 2013).
Porter's generic model is used for attaining competitive advantage over their rivalry and Ansoff's
matrix is helpful in identifying growth and expansion options. It also important to formulate
strategies for exit and succession plan. There are various sources of funds which are helpful in
running the business effectively and efficiently.
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REFERENCES
Books and Journals
Online
Ansoff Matrix. 2018. [Online]. Available Through: <http://www.ansoffmatrix.com/>.
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