Unit 42: Planning for Growth | Analyze key considerations for evaluating growth opportunities

Unit 42: Planning for Growth
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Table of Contents
Introduction......................................................................................................................................4
Company Overview.........................................................................................................................4
Task 1...............................................................................................................................................5
a) Analyze key considerations for evaluating growth opportunities such as competitive
advantage, new products & services, innovation etc. and justify these considerations within an
organizational context (p1)..........................................................................................................5
b) Evaluate the opportunities for growth by applying Ansoff’s growth vector matrix (market
penetration, product/service development, market development, unrelated diversification) (p2)
.....................................................................................................................................................6
Task 2...............................................................................................................................................7
Assess the potential sources of funding available (i.e. bank loans, crowd funding, peer to peer
lending, angel and venture finance) to businesses and discuss benefits and drawbacks of each
source. (P3)..................................................................................................................................7
Task 3.............................................................................................................................................10
Using the example of a small business of your choice; design a business plan for growth that
includes financial information and strategic objectives for scaling up a business (P4)............10
Task 4.............................................................................................................................................18
As a small business owner, assess exit (i.e. selling or floating the business, valuing the
company) or succession options for a small business explaining the benefits and drawbacks of
each option (P5).........................................................................................................................18
References......................................................................................................................................21
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Introduction
According to European Commission (2017), SMEs are those businesses that are starting business
and/or are small and medium sized companies. These businesses have generally less than 250
staffs and their average revenues are about 50 million pounds. The average balance sheet cannot
expect 43 million pounds in a year. This assignment is divided into four main tasks. Different
key considerations are analyzed for evaluating the growth opportunities in the first task. Then,
several sources of funding are assessed in the second task. After that, business plan for growth is
designed in the third task. In this section, the business mission, vision, aims and objective are
designed along with the marketing budgets. Then, effective marketing strategies are developed
for the proposed business. In the last section, several exits procedures and opportunities are
discussed.
Company Overview
The chosen company for this assignment is Ades. Ades is well known and small and medium-
sized wholesale groceries super shop in the South East London. Ades creates quality African and
Caribbean drinks/foods which are affordable as well as accessible to the customers in UK,
London and EU. It increases its range of quality products including foods and drinks and sells
these products with competitive prices to continue its business in the wider marketplace (Ades,
2018). Ades sells different items such as grocery items, food, vegetables, poultry, fish and ethnic
foods, health and beauty products, baby products and provides catering services. As Ades (2018)
notes, the aim of this enterprise is to create quality foods and drinks which are affordable as well
as accessible to the customers in London. However, this enterprise is controlled by a loyal team
with the wide experience in food sector and has managed better reputation in the supermarket
sector from many years.
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Task 1
a) Analyze key considerations for evaluating growth opportunities (P1)
Competitive Advantages
The term “Competitive advantage” is the circumstance which takes the company in the favorable
business position. If an owner can develop the competitive advantage for the small business,
he/she will be capable to trade the products and service profitably and easily (Tutor2u, 2018).
However, a good competitive advantage means that the business is likely to thrive and is capable
to grow. Competitive advantage is so significant for the owners of small business. A small
business has some features and from that features any one can be turned in the competitive
advantage. These features include the product, the business, competition and the customers.
While it comes to embrace new and digital technologies, small businesses face several
opportunities and challenges (Tutor2u, 2018). However, small businesses have a chance to take
protest on their competitors by being more agile in implementation of new solutions.
Porter’s Generic Strategies
Porter Five Forces includes bargaining power of buyers, bargaining power of suppliers, and
threat of new entrants, competitive rivalry and threat of substitutes.
Bargaining power of suppliers mentions that how much the power is exchanged for the
products’ price (Hanlon, 2016). If small or start-up enterprises (including Ades) make products
with rare inputs that are retailed by other companies, suppliers have created the bargaining
power. For example, suppliers of Walmart have limited bargaining power where top chef’s
suppliers who need rare ingredients.
Bargaining power of buyer states to significantly the similar thing like the bargaining power of
suppliers. However, it is applied to the customers. It is difficult to get the similar products where
there is less bargaining power of buyers. Ades has also the bargaining power of the buyers
(Hanlon, 2016).
Threat of new entrants denotes to the obstacles of entry in business industry. A new or start-up
business (Including Ades) could be flooded with the threat of new competitors.
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Threat of substitute products denotes to the customer’s ability to choose to apply several
products (Hanlon, 2016). It means that customers decide is not essential to purchase any
products. Threat of substitute products is frequently unnoticed by the new entrepreneurs who will
enter and say that they have the latest product without competition.
Last of all, the final step is competitive rivalry. This step is self-explanatory and denotes to the
other companies in the marketplace with whom the start-up enterprise contend.
Portfolio strategies (BCG Matrix)
BCG matrix model includes stars, cash cows, dogs and question marks.
STARS are the products which presently make many cash for business but managing the
position in the marketplace (NetMBA, 2017). If an enterprise can manage good marketplace
share then the stars may become the cash cows.
CASH COWS are the previous stars, and make many cash for its business, even after
marketplace growth has reduced because marketplace growth has reduced and competitive
pressure is minimized.
A number of cash cows will ultimately become DOGS, giving the enterprises with little cash.
Dogs need to be recognized before they consume essential resources (NetMBA, 2017).
QUESTION MARKS are the products which presently make little cash but that show growth
potential.
b) Evaluate the opportunities for growth by applying Ansoff’s growth matrix (P2)
Ansoff growth vector model includes market penetration, product development, market
development and diversification. This is the method which supports the businesses to select the
proper products and market growth policy (QuickMBA, 2016).
Market penetration is less risky policy which is concentrated on selling the existing products in
the existing marketplaces to develop the market profitability. This can be gained by developing
the brand image and marketing promotions and several loyalty programs in the innovative
methods.
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Product Development can be categorized as the strategy carrying a medium degree of risk. It
includes the new products’ introduction in the existing marketplaces (QuickMBA, 2016). The
start-up or new enterprises also tries to increase the range of products and develop its products in
the marketplaces.
Market Development is the strategy where a business leads existing products in the new
marketplaces. A business always focuses on the customer sectors. However, the success of the
businesses is enhanced by the latest products’ introduction in the new marketplaces (QuickMBA,
2016).
Diversification stage takes the huge risk between all of the stages. An enterprise must assess the
assessment to diversify with comparatively more restraint. A number of companies, for example
Virgin, have usually diversified very effectively.
Task 2
Assess the potential sources of funding available to businesses and discuss benefits
and drawbacks of each source (P3)
Sources of finance
Bank loans
Bank loan is the common source for the small and medium-sized enterprises. The businesses can
apply for short term loan or long-term loan. How much loan the business can get from the
lenders depends on the business performance. That is why the businesses need to show all the
required documents of business performance including balance sheet, income statement, cash-
flow statement, and future plan of the businesses. There are both advantages and disadvantages
of bank loans. The key advantages are: a) it is appropriate for medium and long term solutions;
b) arrangement fees and interests are tax deductible; c) giving loan repayments in time may
develop the credit score of the business; d) bank loans are the cheapest option compare to the
overdrafts and credit cards in terms of interest rate etc. (Green, 2018).
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