Airport Cafe: Expansion Plan, Growth Strategies, and Funding Analysis

This report provides a comprehensive analysis of the Airport Cafe's growth strategy, focusing on its expansion plans within Heathrow Airport. It begins with an introduction outlining the company's current operations and its objectives for growth, specifically targeting Terminal 5. The report delves into key considerations for evaluating growth opportunities, utilizing Porter's Generic Strategy Model and PESTLE analysis to assess the external environment and competitive landscape. The report then applies Ansoff's growth matrix to evaluate potential strategies, focusing on market development. Furthermore, the report explores potential sources of funding, including internal and external options such as bank loans and venture capital. A detailed business plan for growth is presented, including an executive summary and company overview. Finally, the report briefly touches on exit strategies, offering a holistic perspective on business development and expansion.

Planning for Growth

Table of Contents
INTRODUCTION...........................................................................................................................4
PART 1............................................................................................................................................4
Analyse key considerations for evaluating growth opportunities and justify these
consideration in context of organisation.....................................................................................4
Evaluation of opportunities for growth using Ansoff's growth matrix ......................................6
Access the potential sources of funds available to the businesses..............................................7
Business Plan for growth............................................................................................................8
PART 2..........................................................................................................................................11
Exit Plan....................................................................................................................................11
CONCLUSION..............................................................................................................................13
REFERENCES................................................................................................................................1

INTRODUCTION
Growth is strategic business activity which helps the owners of the business to plan for
the growth of their business. To ensure the survival of the business it is important to plan for the
growth and this can be done by tracking their revenues. With the help of planning for growth the
businesses can allocate their resources to various activities which can help them to be focussed.
This make the companies to be goal centric by providing differentiation products and services.
The growth plan includes various strategies and tactics that focusses upon key drivers which
generates revenue for the businesses. The company which is taken into consideration is Airport
Cafe, which is located at Heathrow airport. The cafe is in business from last three years which is
open for seven days a week. It offers beverages, food and others to the customers along with this
they have a sitting time for diners eating. In this report the key growth opportunities are analysed
with which they can expand their business by opening a cafe on the Heathrow Airport but now at
Terminal 5. For this the conditions of the market need to be analysed and on the basis of which
the expansion plan will be identified. Along with this various strategies will also be formulated
which will help the company to adopt the plan.
PART 1
Analyse key considerations for evaluating growth opportunities and justify these consideration in
context of organisation
It is important for the company to identify the growth opportunities as it ensures their
sustainability. To evaluate the opportunities for growth the Porter's Generic model can be used
by the company. It helps to understand the strategy which can provides the competitive
advantage to the company (Bridge and Dodds, 2018).
Porter's Generic Strategy Model: The model helps the company to identify the scope
for competitive advantage in the target market. This model suggest four strategies with the help
of which the company can take competitive advantage. It can be done either by focussing on the
cost or on differentiation. The strategies which can be used by the company are:
 Cost leadership : In this strategy, the company aim to provides the products and services
at the lower cost with little differentiation in the offerings and such products are generally
acceptable by all. This can be done by the company by way of utilising their capability to

a greater extend. For Airport cafe this strategy may not be suitable as they operate at
small level.
 Differentiation leadership : In this strategy, the focus of the company is to take the
competitive advantage by way of differentiated products. This can be done with the help
of better quality of the products, innovation etc. Airport cafe can adopt this strategy for
growth as they provide differentiated products to the visitors at the airport (Deligianni,
Voudouris and Lioukas, 2015).
 Focus : The focus strategy emphasis on the narrow segment of the market which can be
by way of cost or by way of differentiation. Such strategies are adjusted by the
organisation as per the needs and wants of the customers. Airport cafe can adopt this
strategy as adjustment can be made in them. If the customers are price sensitive the cost
focus can be adopted by the Airport cafe while if the customers seeks differentiation then
they can consider differentiation focus.
The appropriate strategy for the Airport cafe is differentiation leadership for expansion of
their business as it will help them to attract more customers to the cafe. The products which they
will provide will be of better quality and with unique features.
PESTLE Analysis of Airport cafe: To analyse the growth opportunities it is important
for the company to identify the impact and influence of various external factors on the
operations. As the company have no control over such factors so it becomes important for the
company to formulate policies by analysing the impact. Various factors of external environment
are:
 Political factors: Political factors are the most influencing factors as they impose various
regulations on the business which they organisations have to comply with. The UK
maintains healthy relations with other countries which helps them to attract more of
people in their country. This offers an opportunity for Airport cafe to expand their
business as the increase in number of passengers will increase their business
(Wonglimpiyarat, 2015).
 Economic factors: Economic factors are associated with the employment rate, inflation
rate, wages etc. which has influences on the businesses as they have to modify their
policies according to them. The unemployment situations in UK is favourable for Airport

cafe as the unemployment rate is high which will make them labour easily available to
them at lower rate.
 Social factors: These factors are associated with the lifestyles, trends, culture etc. of the
economy in which the company operates. The passengers prefers to have better products
in a better environment which is provided by the Airport cafe at Heathrow easily. This is
an opportunity for them as they can open new cafe with all such similar product and
services.
 Technological factors: Technological factors are associated with automation, innovation
etc. Airport cafe uses self service counters and easy payments which attracts customers
easily so they can expand their services with the similar services.
The Airport cafe has opportunity for growth as their existing strategies are efficient
enough to attract and serve people. With the help of similar services and menu they can open
new cafes easily.
Evaluation of opportunities for growth using Ansoff's growth matrix
The growth opportunities can be evaluated with the help of Ansoff's Matrix as it will help
the companies to formulate various strategies. The company can plan growth by way of
introducing new product in new market or by targeting new market with the existing products
(Grindsted, 2018). The four strategies are:
 Market Penetration : This is the strategy in which the organisation focusses on their
existing market with the existing products. It can be done by way of aggressive
promotion, revised pricing strategies of the company, by improving the distribution
system etc. Such strategy is suitable when the company do not want to invest more.
 Product Development : In this strategy, the aim of the company is to introduce new
product in the existing market. This provides the companies to take the first mover
advantage as for this the organisations has to focus upon the market conditions which has
influence on the new product such as taste and preference of the customers, competition
etc.
 Market Development : As per this strategy the focus of the companies is on entering the
new market with the existing products. This can be done by developing the understanding
of the market in which the company wants to enter. The strategy can be risky as the

customers may not respond positively towards the products so launched by them (Abe,
Troilo, and Batsaikhan, 2015).
 Diversification : The strategy of diversification is suitable for the pure growth of the
company as in this new products are launched in the new market. The risk associated
with this strategy is high as the company enters into new market with new products
whose success depends upon the acceptance by the customers.
Airport cafe can use the strategy of market development as in this they can expand their
business at another terminal or at any other locations with the same offerings. It will be easy for
them to attract more of customers as they have awareness about the products and services at the
existing cafe.
Access the potential sources of funds available to the businesses
The Airport Cafe situated on Heathrow Airport is planning to expand its business. For
expansion, the business requires substantial funds which are either contributed through its
internal sources, or raised from the external sources. The internal sources of raising capital
include the use of retained earnings, selling of big amount assets, reducing working capital
requirements etc. whereas raising funds from the external sources include borrowing from
investors in form of issuing equity shares, preference shares, debentures or bank loan (Storey,
2016). Other sources of external financing include angel and venture investments, crowdfunding,
lease financing etc.
The internally generated funds will not create a burden for the company (Interest or
dividend obligations), also the cost of raising funds from internal sources is comparatively lesser
as compared to external sources. However, a business cannot contribute heavy amounts of funds
through its internal sources only which is its biggest disadvantage.
Airport cafe can raise heavy funds through its external sources, which will further help it
to expand its business which could be purchase of new machineries or extra space in the airport
or even could be a new cafe somewhere else. However the external sources of business comes
with its disadvantages too, it creates interest and dividend payment obligations for the business,
which increases its overall risk or results in dilution of control of owners. Its various sources are
described below:
Bank Loan: United Kingdom ranks at 8th position in ease of doing business index and is
one of the most favourable nations for generating funds for expansion. Bank loan is an easy way

to get financed in small period of time and with least finance cost for the cafe. However, getting
funds from bank comes with high interest rates which is unfavourable for business.
Bank Overdraft: Overdraft financing is often used by businesses to solve their short
term financing needs. It happens when the cafe pays amounts from its current account more than
its balance to its creditors. Its the easiest way of short term finance but suffers from drawback of
heavy fines if the businesses fail to pay overdue on time (Pulaj, Kume and Cipi, 2015).
Venture Capital: Airport cafe can convince venture capitalist firms to invest in its
expansion project. The investors fully fund the project on their risk without the obligation of
repayment on a particular date by the business. However, inviting and convincing venture
capitalists is a long and tough process without the guarantee of success of raising funds.
Crowdfunding: It is one of the less popular ways of raising finance through external
sources as the investors are basically the costumers or associates of the business. It involves
extensive use of media (Social and traditional), inviting crowd to come and invest in the venture.
It is one of the fastest ways to raise finance and there is a high chance of investors becoming
regular and loyal customers of the firm. Its major drawback is that its success completely
depends on brand image and popularity of the business.
Business Plan for growth
Business plan is a document which includes all the goals and objectives of the company
which they have to achieve and the time limit in which they have to achieve. It includes all the
details of the strategies which the organisation has to follow (Morden, 2016).
Executive summary: The Airport cafe is planning for growth by way of expanding their
business and this can be done by opening restaurant on airports as its scope is high. The location
at which the cafe is location is so profitable as they are achieving the growth of 10% every year.
This compel the company to look forward for the growth opportunities. Due to this they are
planning to open up a restaurant at Heathrow Airport at Terminal 5.
Company overview: The airport cafe is owned and operated by the Airport Cafe Ltd.
The cafe has been operating for last three years at the Terminal 3 of Heathrow airport. It provides
beverages, foods and other eatables on which the consumers spend their amount. The company
has a lease of 10 years at terminal 3 for which they have paid premium which will be amortised
in the period of lease.

 Vision and Mission : The vision of the company is to provide the healthy and tasty food
while travelling. Whereas the mission of the company is to be a sustainable restaurant by
offering best food and services.
 Objectives : The objective of the cafe is to increase the revenue by 10% in next two
years by opening a new cafe at Heathrow Airport on Terminal 5.
Market/Competitors analysis: While expanding the businesses it is important for the
company to analyse their competitors. For this the Airport Cafe need to analyse their competitors
such as Caffe Nero, Costa, Giraffe Stop etc. The major competitors of the Airport Cafe is which
offers handy food to the passengers and this has impact on the business of the company. For
market analysis market segmentation need to be done which offers opportunities for more than
5,00,000 passengers at the terminal 5. Out of them they can target business travellers, holiday
travellers etc.
Marketing and sales: With the help of marketing and sales the company can take
competitive advantage as they make the location of the restaurant easily accessible to all. Along
with this they focusses on providing the flexible dining experience to the customers, in addition
to this they plans to provide them the wi-fi facility (Komninos, 2016). The another marketing
strategy which they can focus upon is reducing the time of the waiting by providing the foods as
quickly as possible.
`Management: The managers of the company includes various managers who work in
two shifts, four waiting staff, one head chef etc. Along with them the cafe can hire some part
time personnels when they feel that the number of passengers are increasing. This generally
happens in the holiday period. New people need to be hired by the cafe for the cafe at terminal 5
while some can be used by them from the cafe at terminal 3.
Financial forecasts: The cafe aims to provide finance with the help of working capital.
The financial plan of the company need to have some assumption which includes that their will
be constant growth in the economy and no unforeseen change in the technology. The Airport
Cafe targets to earns a profit of 14% at least from both the cafe i.e., from cafe at terminal 3 and
terminal 5. The projected cash flow of both the cafe are:

Financial requirement: The business is planning to expand their business for which they have
to procure funds which can taken from various sources. They management and the owners of the
Airport Cafe can gather funds from the bank loan, bank over draft, venture capitalist and through
crowdfunding. But as they plans to use working capital so they can rely more on bank overdraft.

Further they can take loan which will help them in injecting the funds. The term of the loan must
be 5 years which will help them to repay it efficiently without any delays (Rowley, 2016).
PART 2
Exit Plan
Business is the most rewarding as well as the most riskiest investment. Everything in a business
must be done with proper planning, as it has effect of its operations on owners, employees,
customers, government, investors and other stakeholders. Just like a performance plan or
succession plan, every business needs to have an exit plan. A business exit plan is a strategy for
transition of business's control and ownership to another investor or organization. Their are
various options available to the owner to make its way out of the business, the prominent ones
being letting business run dry; selling off to an employee group or competitor; or the owners can
liquidate the business as and when required. The importance of selection of a business exit
strategy is phenomenal as a lot of stakeholders rely on the business. For instance, if the Airport
Cafe shuts down its operations at the Heathrow Airport, the staff of various airlines will be
troubled, the arriving passengers at the airport will face troubles, the employees at the cafe will
have to look for different jobs and not only this, Mr and Miss Smith would also lose their
profitable venture, and as per the terms of liquidation, they will not be able to use the name of
the business in future too. Thus, of the following, the business exit strategy should be chosen
wisely.
 Plunging out profits: One of the famous business exit strategy followed by small business
owners or sole-proprietors is of plunging out business profits as salaries and bonuses to
owner and let the business dry. The remaining debts are settled off by coming revenues and
liquidating assets, and when all debt is paid and assets are sold, the business winds up. The
beneficial factor in this strategy is there are no liquidation costs or legal fees associated with
this and it is best suitable for small business organizations (Hawkey, 2017) . However, the
biggest disadvantage is would be, that large salaries withdrawn by owner would also attract
more personal tax liability. It also makes the business look less attractive due to its low or
negative profits.
 Selling off business to others: Another strategy is to sell off a part or whole business to a
competitor, investment firm, a group of employees or anyone who offers a better value for

the avenue. In this setting, the business does not liquidate, it continues to go on with the
same name and brands. Often legal and valuation personnel are involved in the process of
transferring the company to others which increases the cost of transfer. The primary
advantage is the gains coming out of the deal; the owner is benefited with the amount of
valued goodwill as the business might of substantial interest to someone else. The
disadvantage associated is that the business continues to go on, and the previous owner is
often blamed by public for mistakes the business commits in future.
 Transfer of business to Family: This strategy is for people who do not want to let go of
their business even when they are not in the condition to manage it. Business requires
dedication of time and effort for ensuring functionality and profitability. For ensuring
continuity of the business, they pass on the business to their successor or younger ones, so
that the business goes on. The advantage of this type of business ownership transition is the
smooth transfer of business to the family. Also, one can still advice or take part in some
activities of business even after letting go. The disadvantage associated is that it may lead to
clashes among family due to inequality in distribution of business. The business can also
crash to the fact that new owner may not possess the relevant skills.
 Initial Public Offering (IPO): Another important strategy which is often used by big
business groups is taking the business to public and selling off the stake. This invites huge
profits for the owners and is often used by many start-ups in current market scenario.
However, becoming a public company is a lengthy and costly process in its own and even
after that the possibility of capital gains in quite low.
 Liquidate: The simplest strategy advising to sell everything, pay-off the debts and go. The
assets will be sold off at market values which could be either profitable or may incur losses
to the firm. The Advantages of liquidation is that all the assets are sold off and creditors are
paid off, but if repayment of unsecured debts remains then the owner is not personally liable
for it. The disadvantages of liquidation is that business will not be in operations and cannot
use the same name in future for any business (Mokhber, 2017).
Evaluation of different exit strategies for choosing the ideal strategy for Airport Cafe
Referring to the above discussed strategies, the best exit plan for Airport Cafe owned by
Mr and Miss Smith would be to plunge profits out by withdrawing high salaries and bonuses
from the business. For this they will need to plan it out and will need a period of 6 to 12 months

at least to use this alternative. The other most feasible option would be sell out to someone else,
as the Smiths deal in ordinary cafe products and there's no popular name of Smiths associated
with it. Thus, these two exit plans are advised based on the duration available for making out
exit.
CONCLUSION
It is concluded from the above report that every business need to plan for growth with the
help of analysing the internal and external factors. With the help of generic porter model and
ansoff matrix various strategies can be identified which will help the companies to formulate
various strategies. Further it is concluded that the company has to identify the sources from
where they can procure funds. Also with the help of business plan the company can formulate
the plan for growth. The plan so formulated may fail for which the exit plan is also need to be
prepared by the companies.