AG Construction: Analysing Growth Opportunities and Funding Options

This report examines the growth strategies and funding options for AG Construction, a company bidding for a hospital contract. It analyzes key opportunities using Porter's Generic Strategy Model and PESTLE analysis, evaluating factors like political, economic, social, technological, legal, and environmental influences. The report applies Ansoff's growth vector matrix to identify market penetration, development, and diversification strategies. It explores various funding sources, including bank loans and overdrafts, detailing their benefits and drawbacks. Additionally, the report outlines a business plan for growth and discusses exit or succession options for SMEs, providing a comprehensive overview of strategic planning and financial considerations for business expansion.

Planning for Growth

Table of Contents
INTRODUCTION...........................................................................................................................1
P1. Analyse key evaluation for opportunities and justify these considerations within an
organisational context.................................................................................................................1
P2 . Evaluate opportunities for growth applying Ansoff’s growth vector matrix.......................3
P3.Sources of fund available to business and their benefit and drawbacks................................4
P4 Business plan for growth.......................................................................................................6
P5. Explain exit or succession options for SME's and their benefits and drawbacks...............8
CONCLUSIONS-............................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
Planning for growth is a primarily concerned for every business organization. It helps in
higher production and bring stability in a company. This assist to prepare a realistic vision for
future of an organization and undertaking measures to achieve the same. A planning for growth
is beneficial for economic growth and development. It supports countries for an experience to
drive economic development due to economic growth which is being availed by an organisation.
The undertaken company in this assignment is AG constructions, this venture is bidding for a
contract of alterations of hand washing and building alterations of Princess Royal hospital
(Barbour, 2012). This assignment explains a key consideration for growth opportunities. It
provides an outline on Ansoff's growth vector matrix and benefits of sources of funding and its
drawback. This will bring highlights on a business plan for growth in financial and strategic
goals of an organization such as crowdfunding, angel venture finance and peer to peer lending.
The main steps in planning for growth includes PESTLE and SWOT analysis.
P1. Analyse key evaluation for opportunities and justify these considerations within an
organisational context
This phase of report covers of an organization is that, to understand about company and
its environment. Although, it involves analysing of an organization by its resources and
liabilities. PESTLE is one of a large tool for removing myth from an organisation by analysing
external factors of its business. Also, this part includes porter's generic strategy model to identify
where opportunities by expanding their business. These can be described as follows:
Porter's Generic Strategy Model
This model is used for building and analysing competitive strategies of a business firm.
For a long term basis it is necessary to take profitability for long run in existing competitive
world (Deakin, 2012). This model includes three basic types of competitive advantages, these are
as; cost leadership, differentiation and focus. In focus strategy it includes two variants, that is,
cost focus and differentiation focus.
 Cost Leadership: This part of model includes the leader in their cost in its industry or
market. This strategy is used in increasing profits by reducing cost of its product, in other
hand increase in market share by charging lower prices from customer this will helps in
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higher profit and increasing their shares of market. By using this strategy, this will
produce higher revenue for employees and sustain for longer period in competitive world.
 Differentiation: In this strategy, this involves making different products and services for
more attractive than remaining competitors (Beatley, 2014). By making variations it will
result in its features, brand image and effective sales and marketing, this will lead
capture customer eyes and influence them to purchase it.
 Focus: This strategy focus on a particular niche markets, which are understanding
changes of environment and their needs of a customers within it. As it focuses on
particular market their market segment result to less attractive to other competitors. This
includes two strategies, they are as:
◦ Cost focus: It seeks lower cost and a small market segment or can be a targeted
market. This help them to promote their product in small budget and increases sales
in a particular region. In result, increase the productivity and improves its quality by
maintaining its standard that effects to brand image of a product. It exploits cost
behaviour.
◦ Differentiation focus: It focuses on a differentiation in its target segment. This
exploits special needs of buyer in particular segment. This section depends upon a
company perspective which kind or where they want to target their customers.
Pestle analysis
This analysis is done for an external environment which help in to know about position in
large environment. These factors are described in brief as:
 Political factor: This aspect includes the laws and orders which effect a company image
due to change in policies as per the government rules and their legislation (Chen, 2014).
This bring effect to AG construction by adopting different laws at a same time.
 Economic factor: It will bring an impact on AG company due to inflation rate, there will
be a recession period for a company. In resultant lower profitability which will bring a
great impact on their brand image.
 Social factor: This factor is related to the culture and customer requirements. If AG
construction will not focus on their consumers needs and their demand. It will bring a
negative impact on a company reputation.
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 Technological factor: This aspect includes change in technology which will enhances
the working conditions of their employees and provide less labour intensive technique.
As company is upgrading technology in their organization they require training for this
which involves huge amount at the time of installation (Eddleston, 2013). It is an
negative impact for AG company.
 Legal factor: It includes AG companies legal legislation regarding their employees and
staff member. If employees are not satisfied from company's contract, it will result in job
insecurity, absenteeism or labour turnover.
 Environmental factor: This aspect includes an environmental friendly products which
improve AG construction reputation in competitive world. By reducing harmful things
such as plastic bags or which are non- bio gradable products, using three R's that is
reduce, reuse and recycle which improve the capabilities and use minimum utilization of
resources.
Factors which contributes in achievement of growth
Resources : It is an input to production process. Resources can be in form of tangible, as assets
of a company which ca be seen and intangible, including services.
Capabilities: It includes strategies for a long term profitability. By evaluating the overall
performance of an organization such as marketing, financing, management and so on.
Core competences: It is a combination of resources and experiences of a particular firm. This
includes durability, immobility and many others.
P2 . Evaluate opportunities for growth applying Ansoff’s growth vector matrix
The Ansoff matrix is commonly known as Product or Market grid. It helps in determining
a growth strategy for a company business and increasing sales. It helps construction company to
grab an opportunity through this model such as pushing existing product in current market
segment. Also, for developing new products includes building or construction site. It used to
evaluate opportunities to increase their sales through geographical locations. Ansoff matrix is an
essential for strategic planning to grow for a company developing new products and services.
This strategic marketing planning tool which links commerce plan of action with generic
strategic direction which are represented into four option. These are described in detailed as:
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(Source: Ansoff's Mattrix, 2018)
 Market Penetration: This means increasing revenue of a business by selling same
products into existing customers. It includes four main goals that is maintain or increase
market share of current product by using pricing strategies, sales, advertising and
promotion which can help in accomplishing these objectives of an organization (Galland,
2012). In a construction company they should applies the above strategies to achieve their
goals. It assist in focusing on market and product to know well as customers are investing
a huge amount for their desire. Therefore, it is necessary for AG company limited to fulfil
and provide facilities to their consumers. The strategy which is useful to attract existing
customers is to promote about diversified construction services which they provide in
their area. Also, introduce loyalty scheme and special offer for promotions.
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Illustration 1: Ansoff's Mattrix, 2018

 Market Development: This approach is used to attract new customers to an existing
product range in a market place. This means that product will be same but a customers
will be targeted to a new. It can be done with the help of a geographical locations and
demographic areas for filter. There are various other channels for market development
such as different pricing strategies to attract new customers and helps to make fresh
market segmentation. Using online or direct sales can help in development of AG
company.
 Product Development: This strategy is used in existing market for a new product. It can
done by variations or inventing new product to replace existing ones (Levy, 2016). And
any new development may influence by customer feedback. This can be done through
extension of products by using different variants of AG construction limited such as
using research and development on their services and improve standard of living.
 Business Diversification: This strategy done in a new market with a new products.
Basically, it includes diversification in a product as well as in a market. In this regard, it
will help a business entity in expanding their business organisation and also the new
product.
It is an important part in planning and growth which supports to improve abilities, skills
and knowledge of an individual in an organization. In above it is discussed that four strategies
form matrix, which help in to approach a market penetration and product development. Also, can
be grouped present product such as diversification and market development.
P3.Sources of fund available to business and their benefit and drawbacks.
In this report, the chosen organisation here is AG construction which is operating its
business activities on a smaller level. In this regard, the chosen organisation wants to launch a
new project and for that they are going to bid. The construction company want to achieve a
contract of the Princess Royal Hospital (MacLeod, 2013). They need to upgrade clinical hand
washing facility, partitions and fire door. For bidding a contract, the chosen organisation requires
approximately £ 100k and the company only have £ 20k. In this regard, it is necessary for the
chosen organisation to borrow some addition capital in order to operate bidding process.
The chosen organisation can raise funds from its internal and external sources. Funds will
help a business entity to successfully operate its business activities in a competitive business
environment. It include sources which are debentures,loan ,venture capital,shares,funds from
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financial institution. The construction company can borrow £80k from any of the below source
of funds.
Bank loan
Bank loan is the most important source of finance for small and medium organisations.
It's an amount which was borrowed from financial institution within an discussed repayment
schedule (Moseley, 2013). Payback amount will depend on the amount and duration of the loan
and the rate of interest. Bank usually provide loans to established business organisation who are
operating its business activities with large market share value but it is difficult for a start-up to
get financial help from banks. Bank provided it on the basis of past credit score of the business
along with established track record of profitability which tell the ability to repay loan and
interest. The business can arrange finance of £20 k from this source.
 Advantages - The business is get money for a long period which is basically for three to
ten years. The fund which is provided by bank need to pay the interest but not to provide
share in a business. Interest rates fixed for the term which help to forecast the repayment
amount.
 Disadvantage- The disadvantage of a bank loan is lack of flexibility that if people need a
loan of £20k but it don't get because of business profitability. This means they have to
take fund from other source of finance.
Overdraft
Overdraft is a temporary facility of the bank under which business or corporates can
withdraw funds from his current amount excess of the limit (Schetke, 2012). The bank charge a
fee and interest on the excess amount which depends on the duration of extra amount. The
construction company can withdraw £ 15k from this source.
 Advantages- The overdraft includes less paper work and it is very easy to avail as
compared to other sources of bank loans. There is also a flexibility regarding repayment
of the loan amount.
 Disadvantages- The cost involves in overdraft is higher as compared to other sources of
taking loans.
Crowdfunding
It is basically relevant to small and medium enterprise. crowdfunding is a financing
activity under which funds are arranged from large or small number of person. This technique
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comes from abroad which is known from social media platform. It can be used for operations,
travel abroad and repayment of debts. The construction company can borrow £ 10 k from this
source.
 Advantages Under this investor can keep track of business progress which induce to
promote your brand (Haase, 2012). It a good way to test the public reaction on the
product that if they are ready to invest in your business than that shows your idea is going
good.
 Disadvantages Protection of business idea is necessary with copyright and patent
otherwise plan is steal from crowdfunding site.
Peer to peer lending
Under this P2P lending is like a bank loan but in this lender loan to some unrelated
individual who is borrower through an online platform. The term of loan is varied between one
to five years. In P2P lensing is unsecured so borrowers need not to provide personal or business
asset.
 Advantages- It has lower interest rate as compared to credit card and other financial
institution. There is no prepayment penalty when borrower want to pay before due date.
 Disadvantages- If the company has less credit score than they charge high rate of interest
which harm in the long run. To borrow from there it is better to have good score.
Venture financing
Under this money is invested in a project which has a risk for future in the form of
profits and cash flow. A private institution invest money in small or exist undertaking due to
having huge potential to grow (Kötter, 2012) . When venture capitalist buys a share of some
organisation and become partner than it is venture capital investment.
 Advantages- Venture capitalist provide precious information, resources, technological
assistance which help to make business grow. With this method large amount was bring
to the organisation in the form of equity finance.
 Disadvantages- Under this due to the investment of lender , borrower become part owner
of his own organisation and his autonomy and control get lost.
P4 Business plan for growth
Overview
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AG construction which involve in the business of providing infrastructure. Their office is
situated at Cambridge,London. It a small business which work on the basis of contract. They are
offering road ,dam estate,bridge construction service. Their main mission is to provide world
class property to every individual. Their vision is to build best in class constriction company at a
global level.
Vision
It focus on customer satisfaction by enhancing their services through quality and standard
of living.
Mission
To strengthen the position of market leader.
Objectives
 To increase 10% revenue of the company in one year.
 To enhance profit of the company by 5% in one year that is in 2019.
STP analysis
Segmentation: The segment which is adopted by the cited organisation is geographic.
This is more relatable with the structure of organisation because this will helps to differentiate
their prices on the basis of the different requirements of consumers. This will helps to cater the
diversifies needs of different income people. In geographic segmentation is on the basis of areas
such as cities,countries and regions.
Targeting: The company is targeting can be done through email or on site to big projects
and people who are interested in investing their business (Todes, 2012) .
Positioning: The company can be positioned like budget free company,cost free
company or neighbour hood company. This strategy can be adopted by the present company to
enhance its sales.
Financials analysis
Cash flow Statement
Particulars Jan Feb Mar Apr May June Total
Cash inflows
Investment 5000 5000
Credit sales 1000 2500 3600 4000 1200 3200 15500
Total inflows 6000 2500 3600 4000 1200 3200 20500
Cash outflows
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Fixed : Equipment’s 3000 2000 2000 1500 1000 2000 11500
Variable : Direct
material 200 200 300 500 100 100 1400
Total outflows 3200 2200 2300 2000 1100 2100 12900
Net cash flow 2800 300 1300 2000 100 1100 7600
Opening balance 0 2800 3100 4400 6400 6500
closing balance 2800 3100 4400 6400 6500 7600
Cash flow is used in the business to know cash inflow and out flow in the particular year.
It inform about the business current situation whether it is going in profit or loss so that business
can make strategy and policies. Cash flow is the difference between the amount at the beginning
and the amount at the end.
P5. Explain exit or succession options for SME's and their benefits and drawbacks
There are various ways to exit or succession option for a small business with there
benefits and drawback. They are discussed in below as:
Liquidation: It is a way or an exit option for small business. It is defined as to a
procedure in which a limited company brought to a close by practitioner. The AG company
limited assets are then sold and realization of income as per the priory.
 Advantages: By using liquidation method for an exit option such as company debt,
investment funds can be focused through new business opportunities.
 Disadvantages: This will bring a negative impact by not paying personal guarantees,
assets cannot be retained from creditors.
Winding up: It is defined as condition when a life of a company is brought to an end.
This can be done by voluntary winding up or subject to supervision of court.
 Advantages: By winding up AG company partners can share their assets valuation.
 Disadvantages: By doing this, it will bring a Negative impact of AG company brand
name. therefore, it will bring misconception for the customer perspective.
Merger and acquisition- It is a situation in which two companies collaborate with each
other to become one new organisation. This will help a business entity in enhancing its overall
performance in a business environment (Valler, Phelps and Wood, 2012). It is other form of
expansion. Both the options have the same objective which is wealth maximization,and finding
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opportunities. Merger and Acquisition take place by purchasing asset,by purchasing common
shares,by exchanging shares for shares.
 Advantages:It provide power and control over the market to merging firm or acquiring
business. Decrease risk using innovative techniques because of combine .Merger and
acquisition provide business unique techniques which their competitive firm contain and
resultant in grow and success of the business. Construction enterprise can grow its
business through expansion which is in form of acquisition and merger. In acquisition
respective company buys a small company to form big company.
 Disadvantages: The collaboration between two firms will results in over capabilities of
activities. Cost would be increased if there is a delay in the M&A process. This will
results in huge loss if M&A will not be completed in a specific time period (van-Assche
and Beunen, 2013).
CONCLUSIONS
It can be concluded from the above report that planning plays a crucial role in the
organization as it helps in developing future strategies. The company is bidding for the
construction contract which has been provided by the government as an opportunity for growth.
The consideration of the external environment helps in availing opportunity of the market which
will be helpful to this organization in enhancing scale of operations of business. the additional
funds could be gathered from banks and venture capital so as it to fulfill requirement of the
contract. For further enhancing operations this business can collaborate its efforts with other
business working in the same field and can sustain in the market for longer duration.
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REFERENCES
Books and Journals
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Beatley, T., 2014. Habitat conservation planning: endangered species and urban growth.
University of Texas Press.
Chen, B., and et. al., 2014. Robust optimization for transmission expansion planning: Minimax
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Eddleston, K. A. and et. al. , 2013. Planning for growth: Life stage differences in family firms.
Entrepreneurship Theory and Practice. 37(5). pp.1177-1202.
Galland, D., 2012. Is regional planning dead or just coping? The transformation of a state
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Government and Policy. 30(3). pp.536-552.
Levy, J. M., 2016. Contemporary urban planning. Taylor & Francis.
MacLeod, G., 2013. New urbanism/smart growth in the Scottish Highlands: Mobile policies and
post-politics in local development planning. Urban Studies. 50(11). pp.2196-2221.
Moseley, M. J., 2013. Growth Centres in Spatial Planning: Pergamon Urban and Regional
Planning. Elsevier.
Schetke, S., Haase, D. and Kötter, T., 2012. Towards sustainable settlement growth: A new
multi-criteria assessment for implementing environmental targets into strategic urban
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Todes, A., 2012. Urban growth and strategic spatial planning in Johannesburg, South Africa.
Cities. 29(3). pp.158-165.
Valler, D., Phelps, N. and Wood, A., 2012. Planning for growth? The implications of localism
for ‘Science Vale’, Oxfordshire, UK. Town Planning Review. 83(4). pp.457-488.
van Assche, K., Lo, M. C. and Beunen, R., 2013. A perspective on planning, smart growth and
place branding. In International Place Branding Yearbook 2012 (pp. 69-77). Palgrave
Macmillan UK.
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