Diversification Strategies for Business Growth

The assignment explores various diversification strategies for a company looking to expand its operations. It involves conducting a detailed PESTLE analysis and Porter's generic model to identify the company's present core competencies and potential threats. The Ansoff Matrix is also used to determine the best diversification strategy for the product launch. Additionally, the study includes an in-depth examination of different sources of funding, their pros and cons, and a detailed exit and success plan.

Planning for Growth

Table of Contents
INTRODUCTION ..........................................................................................................................1
TASK 1 ..........................................................................................................................................1
P1. Key considerations for evaluating the growth opportunities...........................................1
P2 Evaluation of growth opportunities by applying Ansoff's growth matrix ........................4
TASK 2............................................................................................................................................5
P3 Potential sources of funding and their advantages and disadvantages..............................5
TASK 3............................................................................................................................................7
P4 Designing business plan for growth of organisation.........................................................7
TASK 4............................................................................................................................................9
P5: Succession and exit plan for small business with its advantages and disadvantages.......9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Planning for growth is a process that initiates with identifying present competencies of a
business and enables to firm to ascertain operations that requires improvement in response to
changes that are occurring in market dynamics. Successful are those business that continuously
reviews its business growth and keep on making necessary alteration in its strategical plans to
ensure it continues to cater its customer's requirements (Barbour and Deakin, 2012). The project
is based on a new venture Mystik Glow which is a new cosmetic venture that belonging to beauty
and skin care industry. The company deals in wide range of beauty and skin care products. The
report will discuss about various growth opportunity that firm strives to achieve by entering into
a contract with Primary Care Provider Development and Resilience in London. The project will
also evaluate various factors that SME’s needs to considered to attain higher growth and
prevailing market opportunities. Further various sources of funds along with their probable
advantages and disadvantage will also be explained that company could determine to raise its
funds.
TASK 1
P1. Key considerations for evaluating the growth opportunities
Mystik Glow is a medium scale UK venture that offers a complete head to range of make
up and skin care products. Being in a cosmetic sector firm has a wide scope of opportunities to
expansion and grow its brand portfolio through introducing innovative and revolutionary
products. In recent times customers are extremely conscious about their health and are aware
about impact of synthetic and harmful chemicals present in various beauty products on their
skin. This has lead to growing need of consumers shifting towards organic or more skin friendly
products. This aspiration and requirement have paved a way for Mystik Glow to provide
something innovative for catering needs of its target audience that would enable firm to enhance
its growth and to diversify its brand name.
With this view firm is thinking to introduce a complete range of Mystik Glow foundation
and skin care cream that contains pro biotic ingredients and skin micro biota -protective actives
that promotes skin's own defence mechanisms and support biodiversity and homeostasis of skin
micro biome. This will be one of the new product which is also delivered to the contractor. It is
one of the latest technology that is a perfect combination of metagenome and biogenetic
technologies (Chapin, 2012). In UK, cosmetic product market is worth of $11.2 billion and is
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saturated with many competitive brands. Also in terms of market share colour cosmetics
constitute 16% and facial make up captures 42% in this industry. Thus, company's new product
is expected to support firm to establish its brand name and fulfilment of all the demands of
contractor and will provide many opportunities to earn profits from new and present customer'
needs. However prior launching its new range of Mystik Glow foundation and skin care cream it
is essential and beneficial for firm to thoroughly analyse and determine its micro and macro
business environment that are probable to posses certain threats or provide various opportunities
for Mystik Glow. Mentioned below are some prominent analysis that is necessary for company to
undertake:
Porters Generic Model
This model will help Mystik Glow to develop its key operating process and outsmart its
business rivals. This techniques is based on three interconnected concepts choosing any one
which a firm can attain edge across its chosen market scope.
Cost Leadership: This strategy mainly focuses on getting an edge over business
contenders by offering quality products and services at relatively lower or affordable prices. Firm
that applies this strategy usually have considerable investment capital at their disposal, cost-
effective logistics and lower costs when it comes to labour and raw materials (Porter’s Five
Forces of Competitive Position Analysis, 2018.).
Differentiation: The main emphasis of this strategy is to offer exclusive, most
innovative and distinctive products that are a notch higher in terms of quality, usefulness and
benefits in comparison to other substitutes available in market. To attain success by
implementing this strategy requires excellence in research and development, innovation, creative
thinking and capability to deliver premium products. Also extensive and effective marketing is
major requisite to communicate benefits of firm's products to its target audience.
Focus Strategy: This strategy basically emphasizes on narrowing scope of competition
within the chosen industry through market segmentation. It strives to identify and analyse a niche
market audience for firm's product. It has two variants: Cost Focus: The main objective of this variant is to attain cost benefit by analyse and
evaluating different cost behaviours in its niche target audience. Here in company tries to
offer its products in lowest possible price to its focused market.
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 Differentiation Focus: The focus of this strategy is to seek brand differentiation in niche
target audience by providing unique and distinctive products and services.
Mystik Glow which is about to enter in a new contract with Primary Care Provider
Development and Resilience in London which will enable company to get assisted in its new
project (Christofakis and Papadaskalopoulos, 2011). In this context, differentiation will be most
appropriate strategy for the firm to implement and follow. It is due to reason that as company
also providing innovative product range which is most appropriate and creative steps to cater
unfulfilled needs of its target audience.
PESTLE of Mystik Glow
PESTLE analysis enables a firm to identify and study various external environment
factors that are to impact business and its operations in some or other way. Mentioned below is
the PESTLE analysis of Mystik Glow:
Political factor: These factor involves various government rules, norms, political stability
etc. that a firm is requisite to incorporate in its business operations. For instance, after Brexit
personal care and cosmetic industry is expected to suffer a slow down until 2019, with an
enhancement of average growth of 1.2% in this year. This is to reap benefit for Mystik Glow.
Economic Factor: It consists of factors such as interest and exchange rates, taxes,
demand and supply and so on. In context to UK economy, there is apparent enhancement for
cosmetics specifically designed for rapidly increasing ethnic customers, largest being Asian.
Also there is there is high demand of anti ageing cosmetics which UK has to export from
France, Germany China and US to meet up needs of its increasing population of people aged 65
and above (Eddleston and et. al., 2013). This provides numerous opportunities to Mystik Glow
and its new range of foundation and skin care cream having pro biotic ingredients and skin micro
biota -protective actives that will fulfilled the aspirations of its population who want a safe skin
defence system.
Social Factor: It take in to consideration factors such as health consciousness, buying
habits, emphasis on safety etc. by people. Mystik Glow is offering products that not only is a skin
friendly but also will help in rejuvenating its customers skin by activating body's skin defence
system. Thus, it is a perfect solution for health conscious people.
Technological Factors: Mystik Glow is making use of high technology that is a perfectly
combines metagenome and biogenetic technologies to develop their new range of Mystik Glow
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and Foundation cream that supports biodiversity and homeostasis of skin micro biome. Also for
its product promotion firm is to make extensive use of online and social media such as internet,
Facebook, Instagram etc. to reach out its target audience in cost and time effective manner.
Legal Factor: This factor involves various laws and regulations that are enforced by UK
government. For instance, it is highly requisite for Mystik Glow to comply with EU Cosmetics
Regulations ( Grover, Bokalo and Greenway, 2014). Also it is mandatory for company to label
all its products having proper description of all ingredients that product contains along with date
of its manufacturing , expiry, warning statements and precautions.
Environment factors: Adhere by its commitment towards green consumerism Mystik
Glow make use of all ingredients that are safe and contains good yeast that are good for health
and is helpful in enhancing skin's defence system.
P2 Evaluation of growth opportunities by applying Ansoff's growth matrix
Ansoff growth matrix is to benefit Mystik Glow to determine various opportunities in its
business market and to formulate most appropriate strategies, policies that could capture
attention of its target audience. Further, it will also assist company to get an insight about
strategy that company could probably implement as firm is to undertake contract with Primary
Care Provider Development and Resilience in London. Following is explanation of Ansoff
growth matrix for the company: Market Penetration: It is the most safest strategy among the all the four. It emphasize on
selling company's current products in its existing target market for expanding its market
share. Applying this strategy firm is sell its products at relatively lower price to cope up
with high market competition and to capture large share of market (Keough, 2015). It is
less risky and focuses on enhancing its sales volumes as firm is having intensive
knowledge about the demand and buying behaviour of its audience. Product Development: This strategy focuses upon introducing new product in existing
market scenario by introducing certain modification in firm's business activities such as
R&D function, process etc. It is concerned with building up company's inner capabilities
and competencies that can drives innovation in firm's products. Market Development: Under this strategy company focuses on selling its present product
or service in an entire new market with immense growth and development potential.
Implementing this strategy involves firm's to add on new channel of distribution, put
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focus on geographical market place, product dimensions and formulation of new
segmentation by adopting differential pricing policies.
 Diversification: This is the most risky of all the above mentioned strategies as it is
concerned with launching an entire new product in a new market (Li, Mobin and Keyser,
2016). For a firm to gain profits and success by applying this strategy it is requisite to
have excellence in both operational and marketing functions that is subject to huge
capital requirements.
In reference to Mystik Glow the most appropriate strategy to be chosen is diversification. The
reason behind is that company is planning to introduce an innovative product i.e. Mystik Glow
foundation and skin care cream with probiotic ingredients and skin micro biota -protective
actives. Also by entering into new contract with Primary Care Provider Development and
Resilience in London company is availing an opportunity to diversify its business in other parts
of UK (MacLeod, 2013). Thus, this strategy perfectly aligns with company's aims to expand its
business operations by introducing new cosmetic range on new market.
TASK 2
P3 Potential sources of funding and their advantages and disadvantages
Mystik Glow is a self owned business that primary deals with in cosmetic and skin care
products. For attaining growth and business expansion firm is to introduce a new range of
foundation and skin care cream with probiotic ingredients and skin micro biota -protective
actives by realizing the demand and requirements of UK population who are skin health
conscious. Along with that they enter into contract in which enterprise is about to get enter has
£300,000 as its last limit to bid out of which firm is already having £20,000 with it. For
balancing amount i.e. £280,000 company is to raise funds through below mentioned sources by
critically ascertaining their advantages and disadvantage:
Bank Loan: It is one of the simplest, common and easiest way to fulfil fund
requirements. It could be explained as the amount that is been borrowed from bank by an
enterprise for a certain period of time, on which firm is required to pay fixed rate of interest
(Mitchelmore and Rowley, 2013). For Mystik Glow bank loan is most profitable and feasible
source to fulfil its capital requirements source as interest paid on bank loan is tax deductible.
Advantages
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 The biggest benefit associated with bank loan is that client is just need to be regular in
making timely payment of interest. This source of fund is having major advantage over
bank overdraft facility where in borrower is requisite to make full payment as and when
bank demands irrespective to consider their capability to pay or not. Another significant benefit of bank loan is that with digitalization it has become
extremely easy to apply and take loan. It is because with introduction of bank apps and
online banking now there is minimum paper work and formalities to be done (Moseley,
2013). Also, with increase competition in this industry as well bank are providing various
attractive schemes and loan offers to motivate people to apply for loan.
Disadvantage
 Bank loan requires borrower to lend some collateral security as a mortgage against loan
applied by them. Without fulfilling this clause bank does not sanction loan amount Also, clients are required to pay regular interest on time. Any delay in this respect or non
-payment of loan amount make bank legally authorized to seize borrowers assets.
Crowd Funding : Under this method amount is borrowed from large crowd or group of
people vis internet source. It is one of the popularly emerging alternative source of finance.
This funding option is generally consider by business persons that are seeking funds for their
new venture or new product launch. This source of fund make use of wide network of people
through websites, social media or other crowd funding official portals that provides common
platform to entrepreneurs and potential interested investors (Todes, 2012). It gives an
opportunities for an individual to raise funds from any person who is having huge capital and is
interested in investing in its some good business ideas. Also, with digitalization, it forms one of
the easiest option for Mystik Glow to fulfil its funds requirements for its contract with Primary
Care Provider Development and Resilience in London.
Advantages
 With increased popularity of digitalization crowd funding forms one of the quickest and
cost effective medium for raising money without any upfront charges to be paid. Also, it provides an opportunity to the entrepreneur to reach most appropriate investors
who shares same vision, interest out of large number of online clients (Valler, Phelps,
and Wood, 2012).
Disadvantage
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 Crowd funding although being cost effective is quiet a complex procedure for raising
funds as it involves lot of legal formalities.
 Further, there is high certainty of stealing or duplication of innovative business ideas or
concept in case entrepreneur has not patent or copyright it.
TASK 3
P4 Designing business plan for growth of organisation
Business plan is a written document that is been prepared by manages of Mystik Glow to
determine their future strategies and course of actions in order to achieve their goals and
objectives within specific time frame. It involves details about nature of business, different
strategies related to company's marketing, finance , P&L statements etc. It also gives synopsis
about firm vision, mission, objectives and includes information related to sources its funds and
other associated information.
Vision and Mission
Vision : the vision of Mystik Glow is to fulfil needs and aspirations of all women and men
around the globe and to promote establish its brand as qualitative, innovative and skin friendly.
Mission: Mystik Glow works with the mission to provide best cosmetics and skin care
innovation in terms of efficacy, quality and safety.
Objectives
Strategic objective of Mystik Glow is to expand its business operations in other part of UK by
introducing an entire new range of Mystik Glow Foundation and Skin Care Cream with
probiotic ingredients and skin micro biota -protective actives within December, 2019. For
achieving this goal firm will follow SMART objectives. This specify that objectives to be set
by enterprise needs to be specific, measurable, achievable, realistic and time bound.
Implementing this firm is planning to achieve these targets within time period 1 year and 4
months. For successfully attaining this company is introducing new range of foundations and
skin care cream with metagenome and biogenetic technologies that supports biodiversity and
homeostasis of skin micro biome. The target audience for this product are women of every age
who are skin conscious however niche market for this remains women above 30 years of age
who are developing sign of ageing. Through this innovative product firm is expecting
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considerable enhancement in its market share and brand image.
Financial information
To launch its new range of Mystik Glow Foundation and Skin Care Cream with probiotic
ingredients and skin micro biota -protective actives with the main objective of firm's business
expansion . Mystik Glow required to raise funds for introducing new technology in its business
operations. For fulfilling its capital requirements firm is raise funds from various different
sources such as bank loan and crowd funding that is to generate maximum outcomes. Further, it
is requisite for firm to adopt various electronic, online and social media for advertising and
communication its target audience about its products and associated benefits. Mentioned below
is the forecast for launching its new product:
Total forecasted budget
Particular 31/12/15 ($) 31/12/16 ($) 31/12/17 ($)
Manufacturing cost 2000 - -
Promotional expense 900 800 600
Advertisement
expense
600 560 580
Cost of adopting new
technology
700 800 850
Catalogues 200 400 300
Total Cost 4400 2560 2330
From above discussed budget, it could be ascertained that managers of Mystik Glow are
required to pay attention to firm's cost of manufacturing. In addition to this, there is critical need
for company to invest in its product promotion in order to capture attention of its potential
target market. Catalogues are requisite for firm as they assist in enhancing knowledge of people
about different types of foundations and skin care cream available according to skin types.
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TASK 4
P5: Succession and exit plan for small business with its advantages and disadvantages
There are a number of options that are available with owner of Mystik Glow that could
be taken into consideration while making decisions related to disclosure or continuing of
business activities in upcoming years.
Various ways to exit business
Liquidation: This alternative could be taken into consideration by owner of Mystik Glow
in case firm is subject to encountering losses for prolonged period and there is no further
evidence or changes for company to regain its original product demand or sale (Wu, 2015). In
such situation when there is nil chances for Mystik Glow to attain stability owner can wind up
firm's business.
Advantages:
 Outstanding debts off company is written off due to owners incapability to pay off
existing debts and thus it offers an escape route from this 'no win' scenario. Also any legal action against firm is stopped on liquidation that leaves owner free to
explore new business options without being bothered by creditors.
Disadvantage
 Liquidation leads to selling off all the personal assets of the owner to recover business
debts as much as possible and to provide dividend to creditors.
Sell the business in open market: In case owner does not want to shut the business
operations and is willing top further continue its business activities he/ she have an alternative to
sell it some other entrepreneur of company against certain amount or price. This is beneficial for
owner as it give opportunity to them to at least earn actual investment on its business activities
that further could be invested in some other venture or new start up.
Advantages
 It is less time consuming as compared to other business exit options. It does not create any impact on goodwill of the enterprise thus leading to company
earning stable sales volumes.
Disadvantages
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 There is high probability that amount received after selling business is quiet lower than
than the actual capital invested in it.
 Also, it makes it difficult for the owner to formulate appropriate promotion plan in order
to rephrase its firm's image in the market.
Ways of succession:
Merger and acquisition: It is one of the best, most appropriate and most profitable
method for a company to build up its brand value and product portfolio in market. It involves
combining of two or more business ventures and their operations with the objective to diversify
their reach and capture large market share.
Advantage It benefits company by providing then chance to enhance their quality of their products
and services and to get benefit of creative thinking and innovation provided by the
Disadvantage The chances of monopoly of one product increase that night further leads to emergence of
conflicts between management of companies.
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CONCLUSION
The project undertake concludes that planning forms an integral part for growth and
success of a firm. The report is about Mystik Glow which is a new venture that is to launch a
new range of foundations and skin care cream that promotes skin's own defence mechanisms and
support biodiversity and homeostasis of skin micro biome. The firm with the view to diversify its
business operations has conducted detailed PESTLE analysis and Porters generic model to know
its present core competencies and probable threats it is likely to encounter in due course. Further
through Ansoff Matrix company has identifies diversification strategy for its product launch.
Also firm has undertaken in depth study of various sources of funds along with their pros and
cons to opt for most suitable ones. Lastly a detailed study of certain exit and success plan is done
that firm could consider in near future.
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REFERENCES
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Online:
Porter’s Five Forces of Competitive Position Analysis. 2018. [Online]. Available through:
<https://www.cgma.org/resources/tools/essential-tools/porters-five-forces.html >.
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