Table of Contents INTRODUCTION...........................................................................................................................1 TASK 1............................................................................................................................................1 P1 Evaluate key considerations to evaluate growth opportunities along with justifying them in context of organization................................................................................................................1 P2 Mention some growth opportunities by applying Ansoff's growth matrix...........................4 TASK 2............................................................................................................................................6 P3 Define the potential funding sources available for businesses along with their drawbacks and benefits.................................................................................................................................6 TASK 3............................................................................................................................................7 P4 Create an effective business plan which involves strategic objectives and financial information to scale up business.................................................................................................7 TASK 4............................................................................................................................................9 P5 Define succession and exit option for small business along with their drawbacks and benefits.......................................................................................................................................9 CONCLUSION...............................................................................................................................9 REFERENCES..............................................................................................................................10
INTRODUCTION Planning for growth is defined as a measure in which business-owner or other any other individual working in an organization formulate different tactics and activities so that high profits can be earned. Without appropriate planning, no business firm can attain desired growth and success due to lack of objectives and vision(Barnett, 2017). This assignment is based on Newbury news which is a UK based local weekly newspaper, headquartered in Newbury, Berkshire. Website of this paper is called as Newbury Today. This report will cover about the basic considerations which are needed to evaluate growth opportunities along with Ansoff's growth matrix to identify proper strategy for growth. Beside this, potential funding source are mentioned along with their advantages and disadvantages. A business plan is formulated which involves strategic objectives and financial information to scale up business. At last, succession and exit options from a business involving their drawbacks and benefits are mentioned. TASK 1 P1 Evaluate key considerations to evaluate growth opportunities along with justifying them in context of organization Newbury news is a local newspaper company which provide news on daily basis to local residents of West Berkshire and Newbury. Company is a SME which operates within a limited region only. Owner of business is planning to expand their business in new areas so that business can achieve desired success and growth without any complexities. In this context, there are differentframeworkswhichcanbeusedbyanorganizationtoevaluatetheirgrowth opportunities in a proper manner(Colantoni and et. al., 2016). In case of Newbury news, manager of company can use Porter's Generic strategy to acknowledge the desired growth strategy for company. Below are mentioned some aspects of porter's generic framework: Porter's generic strategies:This strategy defines the manner in which a business firm pursues competitive and other advantages within selected market. There are three kind of generic strategies which are differentiated, lower cost and focus. A business organization can choose any one strategy to attain high advantage over rivals. In context with Newsbury news, these strategies are mentioned below: Cost leadership strategy:In this strategy, an organization increases their revenues and market shares by offering services to cost conscious customers in less amount. It is 1
carried out by offering lower priced products in the targeted market. For example, the manager in Newbury news can enhance their profits and market shares by reducing production costs and charging average price to customers for these products. This will allow the company to achieve high revenues. Other than this, company can enhance their market shares by charging less price to customers as due to lowered price, sales will be increased(Fahlvik, Elfving and Wikström, 2014). Risk from this strategy and ways to mitigate the risk Low cost strategy can be a risk if other organizations operating in same industry will also reduce their costs. Due to this, Newbury news will not be able to achieve competitive advantage. Also, those organizations which targets narrow market can reduce their costs due to which Newbury news will face high competition. Low price can also create negative attitude of customers towards services of company.In this context, manager of Newbury news is required to advertise about their services more so that customers can trust them and prefer their services. Differentiation strategy:Under this strategy, a firm tries to offer a new and unique products or services to their customers. This benefits the organization in increasing their customer base and sales due to which organization is able to achieve high profit margins. In context with Newbury news, to use this strategy company is required to perform wide market research. This strategy will help Newbury news in gaining competitive advantage over rivals due to which high revenues can be earned. Risk associated from this strategy and ways to overcome it Main risk from this strategy is imitation by competitors and potential changes in the demands and preferences of customers. Beside this, the organisation which are using focus generic strategy can get more greater differentiation in market segment. Newbury news can overcome these barriers by appropriately carrying out research in market. This will helps in understanding the unfulfilled requirements of customers more deeply. By this, advantages over rivals can be attained as Company can offer highly differentiated service to their customers (Gallent and Tewdwr-Jones, 2018). Focus strategy:This dimension of porter's generic force is not any separate strategy and organisations which prefer differentiation strategy can use focus strategy in conjugation. This strategy is mostly used by small business organisations which are not able to compete with large companies. In this strategy, a company focuses on limited target 2
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market. Choice of offering differentiated service or low cost service depends upon selected segment. In respect with Newbury news, company can use this focus strategy to gain attention of customers in large numbers. This will benefits in achieving high market shares. Risks involved in using this strategy and ways to manage it Majorriskassociatedwiththisstrategyisinvolveschangesintargetsegments. Disappearance of target market is a danger as needs and preference of consumers can vary according to changing time. To overcome this problem and barrier, manager in Newbury news is needed to add something unique or more in their product so that customers can get attracted and risk of disappearing target market can be lowered. In case of Newbury News, company can adopt cost leadership strategy in which services given by company will be given to customers in lower prices so that their sales can enhance in a considerable manner. Due to reduced prices, services of companies will be highly appreciated due to which organisation will be able to achieve desired success(Gatukui and Katuse, 2014). PESTLE analysis:This framework is a strategic tool which can be used by a business organisations to identify external market and business environment in a deep and appropriate manner. With the help of this tool, organisations such as Newbury news can identify if they want to operate in a particular area or not. This tool will helps in acknowledging aspects like legal factor, political factor, technological factor etc. Political factor:UK comprises of Wales, Ireland, Scotland and England and considered as one of the most advanced and powerful nation. UK is politically stable due to which operating in UK is beneficial for business organisations as political rules and laws do not change often. Also tax rates and trade tariffs in UK is low due to which Newbury news will have benefits of operating in UK. But due to Brexit, some political uncertainties are faced by UK that can impact company in negative way. Economic factor:These factors are related with the growth rate, GDP, inflation and interest rate, purchasing power of people living in a place. As UK is a economically stable nation and people lives their standardised life due to their disposable income. It will be advantageous for Newbury news to operate in UK, people will prefer to buy their services as newspaper and books educate people about day to day activities both at national and international level(Horowitz, 2017). 3
Social factor:This factor of PESTLE framework is related with the opinion, preference, lifestyle, behaviour and attitude of people. Population is UK is well educated and prefers to acknowledge all important news and activities related with UK and other parts of world. Due to this, offering newspapers to the people is good idea to earn high revenues and profits. In context with Newbury news, manager of company can provide latest and accurate news to the people so that they can trust them and prefer their services over other local and regional newspapers. Technological factor:These factors are concerned with the innovation and advanced technology. Updating their machines and equipments as per latest trends will allow the company to perform their business activities and operations in a effective manner. If Newbury news will not update their technology, satisfying customers will be difficult due to which revenues of company will be reduced(Huang and Zhang, 2014). Legal factor:It include the legal laws, norms and procedures which are formulated by UK government so that people of UK as employees or customers can be secured from the bad practices of business firms and vice-versa. In context with Newbury news, owner of company is needed to follow all legal norms in a proper manner so that company can work efficiently. If company will not follow legal laws in a proper manner, victim individual can file a case against company. Environmental factor:This factor is related with laws and rules which are created by the UK government so that environment can be preserved from harmful business practices. There are some restrictions on business organisation while operating their business activities so that environment can be preserved. If owner in Newbury news will not follow these rules then their brand reputation will reduce due to which their sales will impacted negatively. P2 Mention some growth opportunities by applying Ansoff's growth matrix Ansoff's Matrix is defined as the strategic planning tool which helps or guide the management team that how they can expand their business at greater platform. It is necessary for any of the organisation because it help to increase the overall profit of the company if proper planning can be done by management team. In context of Newbury, it is necessary for them to understand that how they can perform well to achieve their target and for that Ansoff's matrix can be beneficial for them(Kemp, 2018). 4
Market Penetration:It is the situation where any of the organisation tries their best to expand the size of their business within the same market where they have been perform their business activities since longer period of time. In context of Newbury, they will have to find some of the different way through which they can perform attract the customer to show more focus upon the company. Here, customer can create negative mindset for company if they reduces the price of product to increase their sale. So, Newbury should try to do advertisement, promotional work to expand the business. Market Development:It is the situation in which it is said that organisation try to expand their business within the new market with the help of existing product. Here, Newbury news will have to go with in the new market with existing product and services which they deliver in other part. The chances of facing the problem in this is as there are several news agencies which is performing well. So, this problem can be over come if they can be able to deliver the news which is based on facts. Product Development:It I the situation where organisation is required to develop any of the new product any try to target the existing customer who have been helping the organisation to earn profit. In context of Newbury new, they will have to think differently and add on some of features in their company to perform better. Here, they can try to introduce the services through online media and that can be one of the costly method. It is necessary for company that they will need to collect the additional amount of fund to add on the new features within the company (Mason, 2015). Diversification:It is one of the situation where any of the organisation is required to try that how they can enter into the new market with the help of lunching new product. In this, it is more important for Newbury to add on the new features and try to enter into the new market. It is one of the risky style which company can adopt to earn profit. Here, company might face the problem of customer and to overcome they can try to find that what is the requirement of local public and how they can deliver the best to them. In short, Newbury news should try to adopt market development strategy to expand their business through which they can give them additional chance to earn more profit. Company is going to introduce their new branch in London. 5
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TASK 2 P3 Define the potential funding sources available for businesses along with their drawbacks and benefits Newbury news is a SME which is successfully operating in West Berkshire and Newbury. Owner of company is planning to expand their business by opening a new branch in London. For this business expansion, company needs funds and finances which can be collected through different funding sources. These funds will benefits the company in performing their business activities and operations in a desired manner. For collecting required amount, company is required to take help from different funding sources which are mentioned below: Internal sources:-These are defined as number of options and alternatives which can available within the organisation so that funds and finances can be collected easily. For example, taking help from a friend, selling assets of company, reducing number of employees etc. This method can be used by Newbury in situation where less amount of funds are required(Wu, 2015). External sources:-These are the sources present outside the company to collect required funds in a timely and proper manner. Some of these sources are mentioned below: Bank loan:-This is a common way to collect required funds. In this method, bank provide desired amount of loan for specific time in return of some collateral and assets. Amount given for loan is charged a certain interest rate(Van den Berg, 2016). Advantage:Amount is given for specific time due to which company can easily repay the amount in instalments until time limit is completed. Disadvantage:Company is required to give some asset or collateral as a security which ca n be seized if payment is not given on time. Crowdfunding:-In this source of collecting fund, small amount of fund is collected from maximum number of people rather than taking large loan from one or two individuals. Advantage:Collectingfundsfromthissourceiseasierthanconvincinga single individual or institution to provide large amount of loan. Disadvantage:If interest of people is not generated then it is not possible for Newbury news to collect required amount. Company can take help of bank loan to satisfy their requirement of funds. This method will help company in collecting required funds in a simplified manner. 6
TASK 3 P4Createaneffectivebusinessplanwhichinvolvesstrategicobjectivesandfinancial information to scale up business Business plan is defined as a formal document which involves information about finances, mission and strategic objectives so that a firm can attain required revenues and profits desirably. As concerned company wants to expand their branch in London, it is important for them to formulate an effective business plan. In case of Newbury news, business plan is prepared below: Vision :-Main vision of company is to provide accurate and important information to customers so that they can sustain a strong presence in marketplace. Mission :-The mission of Newbury news is to provide exceptional services to customers so that they can expand their business in entire UK in a successful manner. Strategic objectives:-Company can formulate strategic objectives with the help of SMART framework which is mentioned below: Specific:The specific objective of company is to expand their business by introducing new branch in London so that market shares can be increased by 17%. Measurable:Company can measure its performance through KPI method. Achievable:Newbury news is hiring new staff and providing training to employees so that business can expand desirably. Relevancy:Company want to expand their profit by 12% along with market shares. Time-bound:Organisation is planning to achieve their objective in 6 months. Financial information:In context with Newbury news, company needs 5 million pounds to expand their business in London. Out of the total amount, company already have an overdraft of 2 million pounds from bank. Other 2 million pound amount will be arranged by company through their revenues and other internal sources like friends and relatives(Ward, 2016). Total budget- Particular31/12/15 ($)31/12/16 ($)31/12/17 ($) Implementing technology cost 16000-- 7
Promotional expense800080009000 Advertisement expense 900036005800 Catalogues400080004000 Training charges850080008500 Total Cost455002760027300 This budget will helps the company in performing their activities and operations in accordance with availability of funds. 8
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With the help of above mentioned cash flow, it is summarised that organization has enough finance to pay off their debt and liability. The cash in hand for year 2015, 2016 and 2017 are $102203, $200354, $238503 respectively and average income estimated is $72001 for three years. TASK 4 P5 Define succession and exit option for small business along with their drawbacks and benefits As the new bury is the weekly news in the English newspaper which is operating its business in Berkshire is a small business enterprise which is planning strategies so as to massive expansion of its business and enhance maximum profits and productivity for the business organisation. Therefore respective company operates in a dynamic business environmental factors has to face various unforeseen risks and uncertainties s as to conduct its business activities in a appropriate manner (Dimitriou, 2013).Moreover if the business enterprise is not working in a appropriate manner managers have the option of closing down the business unit or have further succession options to continue their operational and functional activities. There are different types of exit and succession options for the business enterprise which is discussed as follows- Exit options for the company-When the business enterprise is not working in a appropriate manner and is incurring losses, there is a option for the owner of the business enterprise to close and shut down their business unit. Therefore closing down the business removes all the viabilities and responsibilities of the business owner towards the enterprise. Therefore various exist options for the business enterprise is discussed as follows- Winding up-It is the easiest exit option for the small business enterprise in which owners or the managers of the company closes down its business and therefore pay all its debts and liabilities by selling down the business assets andpay all its debts and liabilities to the creditors. This also removes the responsibilities of the business managers towards the company and also do not have option to continue the business with the same future name of the company, for this it will require new license for conducting the business activities in a appropriate manner. This option has various advantages and disadvantages discussed as follows- 9
Advantage- Major advantage associated with the winding of the business is to settle down the business effectively by repaying all its debts and liabilities and could continue new business operations with new et effectively. Disadvantage- Disadvantage associated with the option is business owners within the company has no liability to undertake same business , because there is no authority with the owners to continue the business operations (Gleeson, Dodson and Spiller, 2012). Selling the business in the Open Market-This is the effective way in which the business can close their business and sell their business to third party in the market place. It is the effective way of closing down the business in which the future business operations arecarried in a effective manner but the owner loses all the responsibilities and liabilities from the business. This option of closing business has various advantages and disadvantages discussed as follows- Advantages- This is the option of not closing down the business totally, furthermore this option of existing business has the opportunity for running and continuing the business operations in the effective manner but by the third party. There is advantage that business operations are not affected by the closing down of the business unit by the owner. Disadvantage- Disadvantage associated with this option is that business owner has no right to make further decisions in context to the business enterprise and also has no authority to involve in business operations and continue their work. These are the various exit options available to the respective business enterprise so as to shut down its small business and make further decisions to join new business and this allows the owner to take decision in a effective manner (Haughton, Allmendinger and Oosterlynck, 2013). Succession Options-It is a future plan which allow the business owners to frame appropriate strategy and take effective actions so as to conduct the business activities in a appropriate manner. Therefore this succession plans are realistic and achievable and helps the business organisation to continue their business operations in the most successful manner. There are various succession options available to the small business enterprise. It is described as follows- Merger– It is the most effective succession options which determines that merger is a condition in which two companies in which two companies agree to continue their business operations in a joint form. Under the merger option two companies shares their 10
assets and liabilities in a successful manner andhas equal ownership towards running and taking the decision in the positive manner. Advantage- This option assist the business enterprise to conduct business activities in a successful manner by sharing proper knowledge and ideas and leads to providing services in a an appropriate manner. Disadvantage- This option has the disadvantage that ownership, funds and capital of both the companies have to be shared between both the companies, this makes the Business owner to take decision in combined manner (Holman and Rydin, 2013). Acquisition- It is a succession option in which big business enterprise acquires the small business so as to conduct the business enterprise in an appropriate manner. It is an opportunity fo r the small business enterprises to have access to large funds and resources and provide products and services to the customer according to their requirements. This option has various advantages and disadvantage discussed as follows- Advantage-This option has the advantage for small business enterprise to conduct their business activities by having proper sharing of resources and provide innovative products and services and captures larger market share. Disadvantage-Sometime it causes to unrelated acquisition of the companies which creates complexities for the large companies to conduct their business activities in a appropriate manner. It has been recommended to the company to adopt merger as a succession plan so as to continue their business activities in a proper manner by proper sharing of resources, tools and provide effective services to the customer. CONCLUSION From above mentioned report, it has been concluded that it is not possible to gain desired growth and success in a business without formulating an effective plan. There are different growth strategies which are offered by frameworks like Ansoff's growth matrix and Porter's generic forces like differentiation, diversification, market penetration etc. with the help of these strategies, desired growth and profits can be earned in business. A business plan helps an organization in acknowledging their strategic objectives and vision in a proper manner due to which competitive advantage against rivals can be achieved in a desired manner. There are different sources of funds like crowd funding, bank loans, angel investing which benefits a 11
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company in managing their finances. With the help of exit or succession options like Merger, acquisition, selling assets in open market, business owner can prevent uncertainties in a desired manner. 12
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