Planning for Growth in Small Business Firms

Unit 42 –
Planning for
Growth
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Contents
INTRODUCTION...........................................................................................................................2
MAIN BODY...................................................................................................................................3
TASK 1............................................................................................................................................3
P1 Analysis of main considerations for growth opportunities evaluation and justification in
organisational context.............................................................................................................3
P2 Application of Ansoff’s growth Matrix............................................................................5
M1 Discussion on progress options to depict understanding of competitive advantage........6
D1 Critical evaluation of growth options and understanding associated risks and ways of risk
mitigation................................................................................................................................7
TASK 2............................................................................................................................................8
P3 Assessment of potential funding sources available to business........................................8
M2 Evaluation of sources of funding with justification of appropriate sources for funding in
organisational context...........................................................................................................10
D2 Critical evaluation of funding sources with justified argument for adoption of specific
source....................................................................................................................................12
TASK 3..........................................................................................................................................12
P4/D3 Business plan for growth with financial information and strategic objectives.........12
M3 Development of a suitable and detailed business plan for growth.................................13
TASK 4..........................................................................................................................................14
P5 Assessment of exit or succession options for small business firm..................................14
M4 Compare and contrast succession or exit options for small business with suitable
recommendations..................................................................................................................14
D4 Critical evaluation for exit or succession options for small business with suitable course of
action, justified recommendations to assist in implementations..........................................15
CONCLUSION..............................................................................................................................15
REFRENCES.................................................................................................................................16
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INTRODUCTION
Small business firms aim to expand their business operations and attain beneficial
position in their industry. Small business organisations need to complete various tasks such as
identification of appropriate growth and exit options so that business objectives are attained in a
timely manner. Skin Elixir is the small business firm selected for this report. Skin Elixir was
established in the year 2016 and is headquartered in Nottinghamshire, UK. The company
produces handmade, organic, vegan, non-toxic, synthetic free, pet friendly beauty and skincare
products which are suitable for every skin type. In addition to physical store, the company has an
online website to acquire online sale (Skin Elixir, 2021). The present report analyses
considerations for growth opportunities and evaluates specific growth options in relation to Skin
Elixir. Sources of funding available to business firms are evaluated with justification for
adoption of specific funding source in context of Skin Elixir. Detailed business plan for growth
in case of Skin Elixir is provided in this report. Exit options for small business firms are
evaluated in this report with justified recommendations for Skin Elixir.
MAIN BODY
TASK 1
P1 Analysis of main considerations for growth opportunities evaluation and justification in
organisational context
The primary consideration which helps a business firm effectively evaluate growth
opportunities is determining the competitive advantage gained with each growth option available
(Bock and George, 2017). Competitive advantage need to be the foundation of growth
opportunity for Skin Elixir. The Human resources present in the company who play an important
role in production of nourishing toxin-free skincare products can be used by the company to gain
competitive advantage in their industry. In addition to this, Skin Elixir can also base their
capability in producing vegan skincare products for every skin type which provides the company
competitive advantage. This is because toxin-free vegan products are sustainable alternative to
mainstream skincare product range which are created with usage of non-vegan raw materials and
are not suitable for every skin type. The company can use the human resources and unique
capabilities as a foundation for future growth.
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Porter’s generic strategies
This framework needs to be considered in order to ensure effective evaluation of growth options
as it provides information about strategies which provide the company competitive advantage.
Each of the strategies in this framework have advantages and disadvantage. Effective growth
option can be selected for Skin Elixir by determining the most favourable strategy which will
assists in attainment of competitive advantage.
Cost leadership strategy
This strategy provides business firms competitive advantage by catering to price sensitive
consumers. In order to adopt this strategy the company needs to sell their products or services at
industry average prices while reducing costs of the firm (Bongomin, and et. al., 2017). Direct and
indirect operating costs of the company can be lowered by offering standardised products in the
market on large scale.
The primary advantage of this strategy is that it helps the company enhance market size
and profit margins quickly.
The main disadvantage of this strategy is that it hinders innovation which is crucial for
continuous improvement of the company. This occurs as finances to critical business operations
such as R&D are curtailed in favour of cost reduction.
Differentiation strategy
This strategy revolves around building unique aspects of the products or services offered
by the company in order to stand out from business rivals and gain competitive advantage. This
strategy is most effective in an over saturated market by targeting on consumers which are not
price sensitive. This strategy provides the company competitive advantage by using the unique
capabilities and resources of the company to solve unlooked needs of the consumers.
The primary advantage of this strategy is that adoption of this strategy leads to creation of
unique product portfolio which lacks substitute and helps the company secure beneficial market
position as the sole producer of the product.
In order to build intellectual property, technical expertise or talented workforce required
for adoption of differentiation strategy business firms have to invest large amount of money into
HR and R&D departments (Greeven and Wei, 2017). The huge expenditure associated with this
strategy is the main disadvantage of differentiation strategy.
Focus strategy
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This strategy revolves around targeting of niche market segment and developing a
strategy according to the market conditions and needs of the specific niche segment. Under the
cost focus strategy, business firms aim to gain cost advantage in the specific segment while for a
differentiation focus strategy enterprises aims at offering the target market consumer’s
differentiated products and services. Business firms gain competitive advantage in niche market
segment their industry with adoption of this strategy.
The main advantage of using focus strategy is that it helps enterprises build strong
relationship with the target consumer base in specific market (Kariv, Cisneros and Ibanescu,
2019).
The disadvantage associated with this strategy is that the strategy works on the specific
target market which might not work in other market segments and limits.
Partnership
This strategy involves partnering with commercial enterprise in which the relationship
between two enterprise is formalized by one or more business contracts. Constructing strong
partnerships with business firms to introduce new products or expand in different international
markets.
The main advantage of this strategy is that it increases the possibility of success in
entrepreneurial venture as the company utilises expertise and resources of experienced company.
The main disadvantage of this strategy is the lack of control of business firms which have
entered a partnership on daily activities of the establishment.
Franchising
This strategy focuses on building franchises of the company in different locations by
granting individuals right to sell intellectual property of the company by utilising the business
system of the firm. The individuals who gain the right to open a franchise have the origins owner
of the intellectual popery and business model who are called franchisors royalty as per the
franchising contract. Franchisors gain royalty and are able to expand their business by using this
strategy.
The main advantage of franchising is that it limits the risks and liability of the company
while increasing the growth of the organization.
The disadvantage of this strategy is lack of privacy and threat of damaged company
image because of the action of the franchisee owners.
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Introduction of new products
This strategy involves introduction of new product lines and venturing into newer
business sectors to increase consumer base. This strategy enables the company to interact with
larger consumer base and expand the offerings of the brand.
This strategy can be used by business firms in order to exploit technology advancement
and gain leading position in the industry which is an advantage.
The disadvantage of this strategy is that it involves high initial investment to develop new
product and build infrastructure to deliver the product effectively.
In context of the British Skincare enterprise Skin Elixir the firm needs to consider the
role of the strategy in providing competitive advantage to the company. The most suitable
strategy for the firm is differentiation strategy as it will help the company gain a loyal consumer
and build a distinguished brand identity base in an over-saturated market.
P2 Application of Ansoff’s growth Matrix
Ansoff’s growth matrix is a strategic planning framework which assists in devising
strategies for future growth. The four strategies present in the Ansoff’s growth matrix are
provided below in context of Skin Elixir:
 Market Penetration: This growth strategy focuses on development sale of current product
range to the existing consumer base of the company. The aim of this strategy is to
enhance the market share of the current product portfolio, gain dominant position in
existing market, increase product usage by current consumers and make the market
unsuitable for competitors (Khan and Naeem, 2018).
Advantage: It enables the business firms to increase their market share.
Disadvantage: This strategy can cause harm to the reputation of the company.
Elixir Skincare can adopt this strategy by constructing loyalty schemes and discount offers to
increase market share of the firm. This act will attract more consumer, enhance consumer loyalty
and decrease market suitability for competing firms contributing to the growth of the company.
 Market Development: As per this growth strategy, business firms sell their current
product portfolio in an unexplored market. This includes entering new geographical
location, expanding distribution channels such as addition of online sales channels or
building new product dimensions such as packaging.
Advantage: This consumer base of the company is increased with this strategy.
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