Growth Opportunities and Exit Strategies for Prufrock Cafe

This report analyzes the growth opportunities for Prufrock coffee shop and provides a business plan and possible exit options. It discusses competitive advantage, opportunities for business, growth options, financing options, and recommendations for sustainable growth.

TOP9658 Unit 42– Planning
for Growth

Table of Contents
INTRODUCTION...........................................................................................................................2
PART 1............................................................................................................................................2
Competitive advantage for business............................................................................................2
Opportunities for business...........................................................................................................2
Growth options for the organisation............................................................................................3
Financing options.........................................................................................................................4
Recommendations........................................................................................................................5
Business plan...............................................................................................................................5
PART 2............................................................................................................................................7
Exit options for small businesses.................................................................................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Growth opportunities help business to expand and explore its existing capabilities so that
profitability and success of the business can be increased. Thus in long turn in order to success it
is very essential for the small business service providers to assess the existing growth
opportunities and to expand the business. While planning for the growth companies must also
evaluate the possible choices to exit the business so that risks can be minimised (Burns, 2016).
The report will analyse the growth opportunities for Prufrock coffee shop which is one of small
coffee shop based in London. The effective quality services make it possible for the organisation
to expand its business. The study will also provide business plan and possible exit options for the
coffee shop.
PART 1
Competitive advantage for business
One of the greatest advantages for Prufrock cafe is its quality services. The organisation
uses differentiation techniques and tries to serve the best products to its customers. Another
feature which differentiates the organisation with other competitors is its staff members. The
staff members are well trained and are highly efficient to gain the attention of the customers.
Along with the taste of coffee the staff members are highly efficient. The cafe conducts special
training programs for barista’s so that more and more people from community can engage and
staff members can make a unique identity among customers (McKenzie, 2015). The interactive
nature of the barista’s in cafe, attractive interior, special unique hand brew coffee makes the
organisation capable enough to completive with other organisations. Higher prices of coffee in
the local market can make it good choice for the customers who desires to prefer the good
quality product but does not take organisations such as Starbucks in their choice due to their
extreme high cost.
Opportunities for business
In terms of growth there is wide range of opportunities for Prufrock cafe. Currently the
organisation does not have any other outlet but is very popular among people. Using this
popularity the organisation can initiate by opening new outlets in different parts of London. It

will help organisation to serve different types of customers. The organisation can also extend its
services to lunch or breakfasts. To enhance the number of customer’s cafe can also provide home
delivery services or the online booking system (Weinstein, 2016). Since most of the hospitality
service providers allow their customers to have this facility Prufrock cafe can also launch a
system to deliver coffee or the food products in its nearby regions. The existing system of the
organisation is highly effective in terms of delivering services thus the online mobile based
application for the bookings can also be good choice for the expansion. In order to make brand
name more popular along with the effective promotional strategies organisation can merge or
work in collaboration with some well known and popular brand name (Burns and Dewhurst,
2016). With this option organisation can enhance its brand value. Acquisition, mergers or
franchises can be popular choices for the cafe.
Growth options for the organisation
The cafe can have vast range of growth options in terms of improving products or
enhancing the market scope. The growth possibilities can be analysed by using Ansoff matrix.
As per this analysis Prufrock cafe can opt for any of the following growth options.
Market penetration:
The first growth strategy which can be used by Prufrock cafe is to enhance its sales in the
existing market in which it is providing its services. This can be achieved by improving the
quality of services. For instance to make customer experience the organisation can provide a free
coffee on birthdays of individuals or a special cake for them so that people can emotionally
connect with the cafe and their memorable experience can force them to visit repeatedly. One of
the advantages of using this strategy is that it does not have any kind of risk though it can
increase the operational cost.
Product development:
Along with the emphasis on increasing sales in the existing market cafe can also launch
or introduce a new product which attract customers to visit again (Toymentseva and et.al., 2016).
For example the hand brew coffee with special or exclusive coffee beans can be one of the good
choices for Prufrock cafe. However such type of innovations in the product are cost and time

consuming and may fail to gain the immense support from the customers. In terms of benefits
this can be one of the good options for Prufrock cafe.
Market development:
One of the growth strategies which can be used by Prufrock cafe is the development of
market. Since cafe is operating in London only it can initiate its new outlets in new markets as
well. However this growth approach is very beneficial in increasing sales but it can be very risky
for the cafe. At first the cafe does not have any experience to operate in diverse market and as
compare to other competitors its brand value and popularity is low it can be challenging for the
cafe to sustain in any new market.
Diversification:
This is one of the most risks involving choice for the cafe as it aims to introduce a new
product in an entire new market (Zokaei and et.al., 2016). From the present analysis this can be
risky and challenging in terms of cost and success possibility but in future cafe can seek to this
option.
Financing options
Financing is one of the most important aspects for any business as it assures the
continuity and successful execution of the strategies. Prufrock cafe can access finance from
following sources:
Personal savings and internal funds: The cafe can use its profits and savings to fund the
growth plans. These types of funds are quickly available and reduce the cost as cafe does not
require paying interest. However this type of fund can be limited and thus it may insufficient for
the long term plans. Another significant benefit of this type of financing is that it allows
organisation to have full control over the process without any external influence or control.
Loans from commercial banks: Another choice which can be used by Prufrock cafe is to take
finance from the banks. Since this type of financing is very structured there are fewer changes of
conflicts (Kourdi, 2015). However it can have a great disadvantage that high interest rates may
force cafe to have huge repayment amount at the end. Thus it can reduce the profitability of the
business and can increase cost complexity.

Business angles: The cafe can receive finance form the business angles such as family, relatives
or small investors in terms of crowd funding. As compare to loans this source has less risk and
all capital needs can be fulfilled with minimum risks. However it is less structured and thus there
are high possibilities of conflict because the cafe may require sharing the control authority with
business angles.
Recommendations
It is recommended that for the long term and sustainable growth Prufrock cafe must bring
innovations its services and products. Along with the price differentiation cafe can also emphasis
on quality and experience differentiation for increasing customer loyalty. The lack of effective
promotion is also one of the reasons which limit the growth possibility of cafe. Thus it can use
social media and other effective promotional campaigns like loyalty scheme or the charity events
so that people can recognise the brand and its market share can be increased (Karami, 2016). It is
also recommended that cafe must monitor the policies and strategies of its leading competitors
such as Starbucks or McDonalds so that it can focus on innovative ideas to improve performance
with minimum risks.
Business plan
Objectives:
The objective of Prufrock cafe is to open up a new outlet in another borough of London
and to increase the growth by rate of %.
Competitive analysis:
The cafe may face tough competition from the local as well as international brands. There
are various cafe houses which are centre of attractions for tourist. Along with the local threats
UK has full dominance of companies such as Starbucks and Coasta thus it needs to be highly
effective in terms of service quality, product diversification, pricing strategy and promotional
events.
Marketing mix elements:
The cafe will serve customised coffee made from specialised coffee beans. The hand
brewing and advanced espresso machines will enhance the taste of the coffee so that wide range
of product choices is available to customers. In initial phases the organisation will follow low
cost pricing strategy so that it can establish its brand (Chen and Guo, 2016). The lower price will

help cafe to attract more customers. To promote the product Prufrock cafe can use social media
and attractive customer loyalty programs. The innovative and attractive interior of cafe and well
trained employees are best way to promote the services of cafe through means of mouth
publicity. The place chosen for the cafe is highly suitable for the business as in the local region it
does not have any big brand. Further the place is tourist destination and has various colleges and
public buildings in the nearby regions. Thus place is suitable for the business.
Target and segmentation:
The cafe will target the college going students, working adults and sophisticated
teenagers. These groups consider coffee as means of relaxation and their routine part of life.
Since the targeted group prefers coffee to be part of their busy schedule it will also be possible
for the cafe to serve breakfast or the food items along with the wide range of beverages. The
location of the cafe near public building will encourage these people to regularly visit the cafe.
Cost analysis:
Prufrock cafe will use its existing profits and assets to invest in the new project. The
initial cost of opening a new store depends upon location, equipments as well as size of the cafe.
Since the organisation is planning to have a sit down coffee store the initial cost will be in the
range£ 150000- £ 170000. The investment will include the staff cost, tax and other charges as
well. However for improving the quality of services the addition of more advanced espresso
machines, coffee bean roasters can also lead to additional costs of £30000 approximately. The
sales revenue is expected to grow by 50% within three years. The effective marketing and
operational strategies will help organisation to sustain 65% of its profit sales margin.
Failure risks:
It is possible that Prufrock cafe may fail to earn desired profits in the first few months as
most of the targeted customers may not prefer the products or services of the organisation. Thus
cafe is required to promote its services using very impressive promotional strategies. Along with
the product range it will also need to have advancements in delivery of services, marketing
approaches and management principles. For instance the failure to train employees can have
adverse impact on influencing the customers. In addition since the locality has lot of potential to
attract the customers there are constant threats of new emergent’s in the market (Appelbaum and
et.al., 2017). Thus Prufrock cafe must always have well defined strategies to deal with such
possible competitive threats. While using product development growth strategy organisation

must assure that its innovations are capable to meet the needs of its targeted customers and must
not dissatisfy people.
PART 2
Exit options for small businesses
An exit strategy is defined as the strategic plan through which organisations plan to
terminate or sell their ownership to other investors or organisations. The well defined and
planned exit strategies helps business owner to gain substantial profits or to minimise the stake in
the business operations (Akter and et.al., 2016). For the situations when business is not
performing well and service providers decides to take exit from the market then exit strategy
methods can help to limit the losses and to recover benefits from the available assets or market
share to the maximum extent. Prufrock cafe can use any of the following exit strategies:
Liquidation:
With this strategy organisation can sell all of its assets so that recovery from the losses
can be done quickly. This type of strategy is followed when companies are facing huge loss and
there is no other way to cope up with them. One of the advantages of this strategy is that it is
very quick and helps business to wound up at the earliest. It also provides a chance to the
business owners to return to market after some time with new plans or new investments.
However as compare to other business exit strategies liquidation provides the minimum value of
return of investment (Julien, 2018). The monetary benefits are received by selling equipments,
land and other assets but it may cause huge loss to the brand value of the owner and brand name.
Further the asset value of coffee machine or other equipment can be very low so this strategy
may not be good choice for the cafe.
Family succession:
Another exit strategy which can be used by the cafe shop is to handover the business to
any other family member. The exit strategy by grooming family successor is very smooth

process and thus owners can keep their dream business within family. Thus with this type of
strategy there are higher possibilities that legacy of business is maintained in a way service
providers desire even after wrap up process. It has advantage that it allows business owners to
even have contribution in the business process (Cosenz, 2015). However there are several
disadvantages associated with the strategy of family succession. The strategy can be hard to
implement as it can give rise to conflicts among family members regarding ownership. Further
the family members may not have necessary skills to resolve the issues and other clients may
also give their disapproval for management change. These controversies make the exit strategy
challenging and less acceptable to most of the organisation.
Selling to employees:
There are many employees and managers who have potential skills and investments to
buy the business. Thus it can also be consider as one of the effective exit strategy for business.
Since business is selling to existing employees there are high chances of success. They are
familiar with the business they can make good attempts to reinvest in the business. It can also
allow existing owners to have share in the company. However it is not possible that all
businesses have possible choices of the employees who are capable to take over the business.
Thus it can be very hard to find such suitable task for the owners (DeTienne, McKelvie and
Chandler, 2015). In addition the management changes may not be appreciated by clients and
other investors.
Selling to other organisations and open market:
This exit strategy is sometime refers as the most appropriate strategy for the small
businesses. The organisations can sell themselves to open market. The brand value of the
company and profitable nature of the business can attract huge number of buyers. It will allow
organisation to have maximum return value on the assets. In cases when existing business is
achieving marginal profits then organisations may receives lower selling prices than their
expectation (Eyvrigh, 2016). It also includes another risk factor that when business is closed by
selling to any competitor then in order to eliminate the competition completely from the market
buyers may completely fold the business. Such type of possibilities have good choice for the

organisation who desire to receive only good amount of sum as selling to competitors can meet
this objective.
Initial public offering (IPO)
For some of the specific small businesses IPO can also be one of the suitable exit
strategies. Taking the business to public is quite profitable as it can meet the profitability goals
from the exit strategy. However the process is very costly and in future it may become hard for
the organisation to withdraw its investment (Baginski and et.al., 2017). For coffee shop the
strategy may not be preferred choice as the cost may become one of the greatest barriers. This
can also be considered as one of the rare exit strategy for business.
Acquisition:
With this approach the potentially successful business can buy the small businesses. Thus
it can also be one of the effective exit strategies and for implementing this businesses must also
try to find out the potential acquirers who can show interest in the process. One of the benefits of
using this strategy is that with this approach businesses have fair chance to negotiate their price
with the buyers. However the acquisition process can be complex and may be difficult to
accomplish. In addition there are possibilities of failure or conflicts as well because there may be
cultural or operational differences between both the parties. Another advantage of this type of
exit strategy is that business owners can also demand higher prices and in a bidding war there are
possibilities of multiple acquirers if business has been successful and well known name in the
competitive market (Charles Jr, Schmidheiny and Watts, 2017). While using this type of exit
strategy business must be aware of the destruction of corporate culture and thus there are least
possibilities for the business to reappear in the market in the future.
CONCLUSION
It can be concluded from the above discussion that in this globalised and huge era there
are huge possibilities and growth opportunities for Prufrock cafe. Using the possible choices
from the Ansoff matrix the organisation can expand its existing services to new target customers
or market segment. However it must also analyse the possible risk factors associated with it. It
has been also analysed that companies must plan their exit in a systematic and planned way so

that they can get optimum recovery from the assets. It can also be concluded from the study that
business plan must also analyse the competitive threats and source of finance so that growth
options can be analysed and accomplished at the maximum without any threats.

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