Ansoff Growth Matrix for Business Expansion

This assignment requires an in-depth analysis of the Ansoff Growth Matrix, a strategic tool used to identify four ways to grow a business. The matrix includes illustrations and explanations of market penetration, market development, product development, and diversification strategies. Students are expected to understand the implications of each strategy on business growth and provide a comprehensive guide for businesses looking to expand.

Planning for growth

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Key considerations for the evaluation of growth opportunities............................................1
P2. Evaluation of growth by applying Ansoff matrix ................................................................3
TASK 2............................................................................................................................................5
P3 Source of funding along with their advantages and disadvantages.......................................5
TASK 3............................................................................................................................................7
P4 Business plan for growth.......................................................................................................7
TASK 4..........................................................................................................................................10
P5 Exit or succession option for owner of a small business.....................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12
.......................................................................................................................................................13

INTRODUCTION
Every organisation starts their business for earning profit by selling good of services.
They understand that if they will not do planning for growth of business then it will ultimately
result in shutting down of company (Aguiar and Amador, 2011). Small enterprise always face
issues relating to low profit and market reach. Their main area of focus is to reduce the cost of
business and increase sales in order to attain more profit. Technology can assist them in
achieving this objective. Unicorn grocery is a small firm in Manchester where almost 70 people
are working in this organisation and their turnover is around 1 million pounds. This assignment
will concentrate on various main considerations which play a crucial role in analysing the growth
opportunities. Ansoff matrix will become a significant part of this file because it assists in the
evaluation. There are different sources of funding and they will get covered in this report.
Business plan will be made for long term growth of the organisation. Exit options which are
available for small firms will be explained at the end of this project.
TASK 1
P1. Key considerations for the evaluation of growth opportunities
Unicorn grocery is operating at a very small level but they have huge potential of growth
if they use digital technology in their business. Their employee’s strength is 70 and their turnover
is near to 1 million pounds. There are various aspects which this company should check at the
time of analysing growth opportunities which are standing in-front of them:
Competitive advantages – This organisation is known for selling organic items. Demand
of these kinds of products is continuously growing and it can support the firm in attaining
competitive advantage over their competitors (Barca, McCann and Rodríguez‐Pose, 2012). They
can upgrade digital technology which they are using in the present scenario by en-cashing an
extra edge which they have on their rivals. Selling something special is significant for attaining
the fast growth. It also provides stability to business organisation especially in the long run. By
focusing on competitive benefits, evaluation of future development of corporation can be done.
New product and services – Every item which Unicorn grocery is selling has a life.
Analysing demand of various goods can assist this organisation is finding growth opportunities.
BCG matrix is a significant tool for identifying the areas where firm can invest in upcoming time
along with the investment which they should sold for improving their financial position.
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Innovation also plays an important role in the development of new product or service. By
spending some money on research, this enterprise can attain growth in different areas. But there
is a risk attached to this option i.e. if buyer will not like the new product which are selling in
store then they may loss some of their permanent customers.
External environment – PESTLE analysis is one of the most popular techniques for
determining impact of external factors on organisational performance. It can also be used for
evaluating expansion opportunities which are present in the business environment. Unicorn
grocery can understand outer circumstances of economical, political and technological condition
of UK. Brexit is going to make huge changes in retail industry and this firm can make necessary
adjustment in their working style for earning more profit in forthcoming time (Croce, Martí and
Murtinu, 2013). There is a huge risk associated with depending on external environment i.e. it
can change in no time and reduce significance of the strategies made by company for attaining
growth.
Collaboration – Unicorn grocery is a SME, if they want to develop their business swiftly
then they can think about option relating to entering in a partnership or merger of their company
with another one. Every firm has their own strengths and weakness, if two of them initiate a
strategic alliance then they can cover each other’s shortcomings and increase their sales by
remarkable percentage. Integration is of two types, if Unicorn grocery go for vertical then instead
of merging or buying a corporation of same size and field, they have to amalgamate with another
organisation who can assist them in doing their work in more effective way. Like, they can
acquire a logistic firm who can support them in delivering goods to the house of customers. This
is increase in the growth opportunities for them and they can register more profit in less time.
Key risk associated with this option is that if this organisation fail to keep fine relationship with
their partner then their whole company may face huge loss (Ding and Lichtenberg, 2011).
In today's business environment, if an organisation wants to expand their operations then
they have to adopt new technology in their enterprise. In case Unicorn grocery adopts any of the
growth opportunities by completely evaluating them, they have to spend money on upgrading
their correct techniques of working. This enterprise can choose any of the above mentioned
option according to their suitability. Every consideration has their own advantages and
disadvantages as well as they should go for one which can increase number of their customers
and profit in the long run.
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P2. Evaluation of growth by applying Ansoff matrix
Ansoff matrix is a significant tool for development of business. It mainly has four
components i.e. new market, new product, existing marketing and existing product. Below is the
use of Ansoff matrix for analysing growth of Unicorn grocery:
Market penetration – In this strategy, an existing product is sold in active market. Some
people may not find it very effective because there is nothing new in it. This work is done by
spending money on advertising and promotion of company and its various commodities. Unicorn
grocery can grow their business by adopting market penetration strategy. They can lower down
prices of their goods so customers feel that they are getting more value compared to the amount
which they are currently paying for buying products (George, McGahan and Prabhu, 2012). This
will increase their sales and they will easily get competitive advantage on other players of this
industry.
In order to sell more existing products, Unicorn grocery should concentrate on three key
areas. First is existing customers, they are very important because they provide stability the
organisation. Second is buyers who are buying same commodities from competitors. By giving
them heavy discount, their trust can be gained. They role is significant in growth of business.
Last one is those customer who can buy existing items but because of their less knowledge they
are not doing this. By concentrating on customer value, development of business can be done in
an effective way. But this option is bit risky for Unicorn grocery because if they will give heavy
discount to customer then they may face short term loss and other problems relating to liquidity.
Market development – Under this strategy, an organisation try to enter in new market
by selling existing product. This kind of expansion is not unique and it is adopted by most of the
firms. Unicorn grocery can also expand their business in more territories where scope of rapid
and long term growth is high. Technology has changes style of conducting business for many
small firm and this can also adopt use latest technology like online shopping and delivery of
goods for covering more geographical area. If they will go for this option then they do not need
to spending money on opening physical stores. This organisation do not have deep pocket so
using their financial resources in proper way is important for them.
Currently they are operating at local level, market development strategy will assist them
in moving forward step by step, i.e. from local to regional, then national and finally international.
Market development may not work for Unicorn because in new territory, necessary adjustment is
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needed to done for selling existing item (Hughes and Ensor, 2011). Culture and buying habit of
people changes indifferent regions so selling same product is very difficult.
Product development – Every product has a life, once it achieve its optimum level then
it does not remain much profitable to the company. Product development strategies focuses on
replacement of old commodity with a new one. This activity is done for introducing a better item
in market because expectation of customers always enhances. Unicorn grocery should also think
about this option at the time of expanding their business (Ansoff Growth Matrix – Four Ways To
Grow A Business., 2011). Product development will play significant role in promoting the idea of
''One Stop Shop''. Besides replacing old product with better one, this organisation can also sell
new item which they were not selling in past. This will enhance number of their customer and
assist them in moving close to their vision. Risk with offering new product is that it existing
customer may leave this organisation if they would not like new commodity. They may result in
reduction in figures of permanent customers.
Diversification – This tactics is relating to selling new product in new market. It is very
risky but at the same time it has potential for providing huge growth to a company is short period
of time. Adopting this strategy is not easy because it requires more resources and huge
expenditure on research and development. Unicorn grocery can take their business in more
region of UK and they can also start selling new item which are not available in their store
presently. It is a big gamble but so the risk is high and it can derail complete operation of
Unicorn but if things go according to them then they profit will be reward of risk (Juergensmeyer
and Roberts, 2013).
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(Source: Ansoff Growth Matrix – Four Ways To Grow A Business. 2011)
TASK 2
P3 Source of funding along with their advantages and disadvantages
If a company want to attain growth then they have to focus on some key areas like
decision relating to investment. Most of the small firms make mistake in this area, they do not
have much financial resources and poor investment decision is prime reason behind they low
growth or shutting down of their business. Suppose Unicorn grocery want to open new store. In
order to check its profitability they have to consider two prime factor which are as follows:
Payback period – This is the time period in which company will cover amount of their
total investment. It shows break even point and determining this component is essential for
finding whether investment should be done or not. Unicorn grocery should consider this
significant component at the time of expanding their business. They should check liquidity of
business along with payback period. If it is 3 or 4 years then they should go for it but if it is 8 –
10 years then it would not be appropriate for them because they cannot wait for long time period
in order to register profit from an investment.
Net present value – NPV shows present value of a future investment. It does not have any
significant connection with profit, it mainly focus on finding value of the amount, which they are
investment in present time, after decided period of time. If Unicorn grocery want to determine
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Illustra
tion 1: Ansoff Growth Matrix – Four Ways To
Grow A Business

value of investment after 7 year and it comes positive then they should go for it but if its negative
then it mean that even after completion of 7 years, the project where they have invested will not
become profitable (Kotavaara, Antikainen and Rusanen, 2011).
Source of finance along with their merit and demerit
Bank loan – This is most common source of funding where Unicorn grocery can take
loan from any bank. They have to pay this amount back to them in decided period of time along
with the amount of interest. Terms and conditions of repayment differ from banking company to
company, this company should take loan from someone who can offer them more money at low
interest rate and for more time period.
Merit – Prime advantage of this option is that company do not have to loss their equity
against money. This will play crucial role in keeping decision making power in their own hands
and reduce influence of external element on Unicorn grocery. This enterprise can earn tax benefit
by raising money through bank. It is a flexible option, banking company do not care how loan
taker is using money they just focus on its timely repayment.
Demerit – Fulfilling all the condition demanded by bank is not an easy task. They ask for
collateral security and charge huge rate of interest (Wheeler, 2013). Burden of repayment can
negatively impact liquidity of firm.
Crowdfunding – In this method, company raise small amount of money from many
people, normally through internet. This is a new source of financing and if Unicorn grocery
choose it then they have to start a campaign for making people aware that they can invest in this
firm.
Merit – Ownership of enterprise remain in hand of management. In case of successful
crowdfunding, Unicorn grocery will gain free promotion on internet i.e. without spending any
money on advertising. It is legitimate and people who invest in company generally become loyal
customer of the firm. This provide stability to business.
Demerit – Campaigning is crucial part of crowdfunding and most of the time, campaigns
fail. It involves lot of insignificant work and if company will fail to reach their set target i.e. the
amount which they want to raise then they have to return pledged amount to investors (Kulke
and et. al., 2011).
Angel finance – Angel investor is a person who provide capital amount to a company.
They can do one time investment or inject money in regular interval of time.
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Merit – Their is no requirement to repay the amount invested by angel investor.
Repayment is a big burden for SMEs. Unicorn grocery do not need any collateral security if they
adopt this option. They can seek valuable advice from angel investors because they have good
knowledge about market and they understand how to make correct decision.
Demerit – Finding appropriate angel investor is time consuming process. If Unicorn
grocery will take money from this source then this mean that they are inviting other element in
decision making process. Senior manager of this company will loose significant amount of
control on their business if they will take financial assistance from angel investors.
TASK 3
P4 Business plan for growth
Without a plan, an organisation cannot proceed in right direction and they may start
spending their money in the wrong areas and fail to attain growth specially in long run (Leigh
and Blakely, 2016). Unicorn grocery is known for offering variety of product but they still need
to work on their financial position.
Mission: “To provide best customer experiences to the people who visit store of Unicorn
grocery”.
Vision: Unicorn grocery want to offer new and more products in their stores. Company want to
sell good quality and become table leader in retail industry. Firm is concerned with health and
welfare of public, their aim is to increase the sale of organic products.
Values and ethics: Selling premium quality is core part of Unicorn grocery's value. Stakeholder
are significant for them, maintaining good relationship with them and solving their problems is
their high priority. Fair trading and saving nature are two areas where Unicorn grocery do not
compromise because of their ethical standard.
Strengths
Wide portfolio – Unicorn grocery is offering different types of products at best price. Organic
product is company's specially and this is one section where growth is and will be tremendous.
All new product are available in firms stores and various brand of single item can be found in
organisation's outlet.
Permanent customers – Company have thousands of permanent customer who provide financial
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stability to the enterprise. Their contribution in profit is significant and number of this kind of
buyer is continuously increasing.
High profit margin – Unicorn grocery mostly sell those item in their stores who provide more
profit the corporation. This is prime reason behind competitive advantage which firm is
regularly earning.
Opportunities
 Unicorn can enhancing variety of organic product which they are currently offering.
 Company can open more stores in different part of London and Manchester.
 Firm can open online stores and hire a logistic corporation for delivering their
commodities to the customer on same day.
Expectation of stakeholders – Many people are either directly or indirectly relating to
this organisation. They are known as company's stakeholder. Employees are one of them and
they want management of Unicorn grocery to provide better workplace environment and more
remuneration (Levy, 2016). Supplier seek timely payment of delivery goods along with more
order from the side of enterprise. Local authorities and competitors of this firm seek fair trading,
they want this organisation to follow ethics.
Successful entrepreneur opportunities
 Niche market – Instead of investing funds in different areas and focus on various market,
they can keep their concentration on increasing sale of organic items. Demand of organic
products is growing with a high rate in upcoming time it may provide huge profit to this
firm.
 Do not stop reinventing company – Market tread is continuously changing and instead of
opening physical store, Unicorn grocery can commence online marketplace. Customer
can buy their product by using mobile application or through their website.
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Business case for investment
Key part of business plan – Using updated technology and starting online store will be main aim
of this plan. Opening of more physical outlets is not an attractive idea, customer like to do
shopping through online websites because it is easy to use and more products can be found in it
(Niess, 2011).
What investors want – Investors always want to invest in something different and trendy. They
do not want to invest in a company who can provide them fast return.
Strategic objective and presentation of plan - Business plan will be presented to investors by
meeting them on regular basis. Unicorn grocery want to enhance their sale by 15% and they seek
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investment for commencing their online store. In next couple of years, they are going to focus in
Manchester and after that their prime aim is to enter in online retail market of London.
TASK 4
P5 Exit or succession option for owner of a small business
Failure and success are part of business. An organisation can fail because of two factors,
external and internal. Prime one is relating to political, technological, social, economical reason.
Conflicts between management, poor performance by employees, etc. are some of internal
factors behind failure in business. Exit or succession plan for Unicorn grocery:
Turnaround – If this company opt turnaround as an option for succeeding then they
have to sell those part of their business which is not generating much revenue for them (Unger
and et. al., 2011). If all the sections which are main reason behind loss are sold at a good rate
then this will reduce burden of debt on company and they can keep their focus on those sections
which are delivering more profit.
Benefit – Financial position of this corporation will improve if underperforming units are
sold at appropriate price. Money earned through selling business can be invested in new
technology, like online sales. This will result in more profit in forthcoming time.
Drawback – Turnaround may result in termination of employees, this lower down morale
of company and make a negative impact of organisation that they have sell their business
because of poor performance.
Liquidation – This option can be selected in worst case scenario i.e. failing to reach
break even point and finding buyer for the business. Unicorn can choose this option in order to
avoid further loss.
Benefit – Company can save unnecessary loss by shutting down their business operations.
If they will run their firm for more time then it will increase burden on debt and at the end,
management may have to loose money from their pocket (Porter, 2012). Liquidation can stop
this.
Drawback – If an enterprise will shut down their business then this mean that they cannot
enter in same sector again because investors will not rust them. It taint their image and result in
end of hope. Legal trouble is another demerit of liquidation.
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Merger and acquire – If Unicorn grocery can think that they cannot achieve more
revenue then they can merger their company with a similar size organisation. They can also
amalgamate it in a big corporation. Selling whole business is also not a bad option.
Benefit – Investors can get decent amount of money if they will go for selling their
business. Presence of new partner (merger) will result in distribution of profit. It is always better
than turnover and liquidation because they clearly mean loss and failure of business.
Drawback – If company is not performing well then they can think about making new
strategies, merger or selling organisation mean that Unicorn grocery do not have potential to earn
revenue by standing alone. This is not good for their revenue (Tewdwr-Jones, Phelps and
Freestone, 2013).
CONCLUSION
From the above report, it can be concluded that every organisation has various growth
opportunities. Ansoff's matrix is appropriate tool for identifying opportunities of growth in
existing or new market by selling present product or a new one. Their are various source of
finance like bank loan and angel investor, company should choose one which is suitable their
vision and mission.
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REFERENCES
Books and Journals
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intervention: place‐based versus place‐neutral approaches. Journal of regional science.
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Croce, A., Martí, J. and Murtinu, S., 2013. The impact of venture capital on the productivity
growth of European entrepreneurial firms:‘Screening’or ‘value added’effect?. Journal
of Business Venturing. 28(4). pp.489-510.
Ding, C. and Lichtenberg, E., 2011. Land and urban economic growth in China. Journal of
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George, G., McGahan, A. M. and Prabhu, J., 2012. Innovation for inclusive growth: Towards a
theoretical framework and a research agenda. Journal of management studies. 49(4).
pp.661-683.
Hughes, C. and Ensor, R., 2011. Individual differences in growth in executive function across
the transition to school predict externalizing and internalizing behaviors and self-
perceived academic success at 6 years of age. Journal of experimental child psychology.
108(3). pp.663-676.
Juergensmeyer, J. and Roberts, T., 2013. Land use planning and development regulation law 3d
(Hornbook Series). West Academic.
Kotavaara, O., Antikainen, H. and Rusanen, J., 2011. Population change and accessibility by
road and rail networks: GIS and statistical approach to Finland 1970–2007. Journal of
Transport Geography. 19(4). pp.926-935.
Kulke, M. H. and et. al., 2011. Future directions in the treatment of neuroendocrine tumors:
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Leigh, N. G. and Blakely, E. J., 2016. Planning local economic development: Theory and
practice. Sage Publications.
Levy, J. M., 2016. Contemporary urban planning. Taylor & Francis.
Niess, M. L., 2011. Investigating TPACK: Knowledge growth in teaching with technology.
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Porter, D. R., 2012. Managing growth in America's communities. Island Press.
Tewdwr-Jones, M., Phelps, N. and Freestone, R., 2013. The planning imagination: Peter Hall
and the study of urban and regional planning. Routledge.
Unger, J. M. and et. al., 2011. Human capital and entrepreneurial success: A meta-analytical
review. Journal of business venturing. 26(3). pp.341-358.
Wheeler, S. M., 2013. Planning for sustainability: creating livable, equitable and ecological
communities. Routledge.
Online
Ansoff Growth Matrix – Four Ways To Grow A Business. 2011. [Online]. Available through
:<http://www.differentiateyourbusiness.co.uk/ansoff-growth-matrix-four-ways-to-grow-
a-business>.
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