Unit 42: Planning for Growth - Growth Strategies for Bonmarché SMEs

This report provides a comprehensive analysis of growth strategies applicable to Bonmarché, a clothing retailer, focusing on key considerations for Small and Medium Enterprises (SMEs). It delves into competitive advantages, including resource analysis, capability assessment, and core competencies, and explores Porter's generic strategies (cost leadership, differentiation, and focus) and PESTLE analysis. The report examines product and service development, portfolio strategies using the BCG matrix and GE/McKinsey matrix, and the diffusion of innovation theory. It then analyzes growth options through the Ansoff matrix (market penetration, product development, market development, and diversification), identifying risks and mitigation strategies. Furthermore, the report investigates methods for accessing funding, including investment decision-making and various sources of finance. A business plan for Bonmarché is outlined, along with a discussion on communicating the intention to scale up. Finally, it explores different exit strategies for small business owners and their implications, including growth and succession in family businesses. The report concludes with a summary of findings and references.

UNIT 42
Planning For Growth

Table of Contents
INTRODUCTION...........................................................................................................................1
LO1. Key Considerations for SMEs while evaluating growth opportunities..................................1
Competitive Advantage..........................................................................................................1
New Products and Services....................................................................................................3
Growth Options......................................................................................................................5
Collaboration..........................................................................................................................7
Benefits of Horizontal and Vertical Integration.....................................................................8
LO2. Methods to access funding along with different types of funding.........................................9
Investment Decision Making..................................................................................................9
Sources of Finance...............................................................................................................10
LO3. Business Plan and communicating the intention to scale up by the business.......................11
Business Plan for Bonmarché...............................................................................................12
LO4. Various ways small business owner can exit the business and implications of each option14
Exit: Success and Failure......................................................................................................14
Growth and succession in the family business.....................................................................16
CONCLUSION..............................................................................................................................17
REFERENCES .............................................................................................................................18

INTRODUCTION
Growth is the motive for which each organisation functions within the market place. The
following project is based upon Bonmarché which is a renowned clothing retailer engaged in
provision of women apparel. The project contains growth considerations for SMEs. Additionally,
it encompasses methods to access funding together with different types of funding. Apart from
this, it includes business plan as well as exit strategies.
LO1. Key Considerations for SMEs while evaluating growth opportunities
To attain growth and development, it is important for SMEs to take into account certain
key considerations. Furthermore, resources, capabilities and core competencies provide aid to
organisation in gaining an edge over rivals (Anatolie, 2019). The same are analysed in context of
Bonmarché as under:-
Competitive Advantage
Basis of Competitive Advantage
Resource: The main resources of Bonmarché include human resource which is
responsible for producing fashionable clothes for women. Other types of resources held by it are
physical, technological and financial, that aid in attaining growth.
Capability: The fashion retailer has the capability to gain access into new markets by
capitalising upon the available resources.
Core competency: The core competency of the respective firm lies in its approach to
market research and innovation owing to which it is able to cater to the needs and demands of
customer base.
Porter Generic Strategies
Michael Porter is the management specialist who first started the analyses of the business
using 3 generic strategies. These strategies are discussed as follows:-
Cost Leadership: The best way to beat the level of competencies is to grab the distinct
market position. Through various measures but according to cost leadership strategy there are
two ways to attain the organisational objectives by focusing on the costings. One is to minimize
the manufacturing cost of product for higher profit growth. As other factor is to decrease the
actual price to get ahead of the competition and catch the customer attraction to cover more of
the market share.
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Differentiation: Making the brand and product more classified is the focal point of
differentiation strategy (Bautista, 2019). This is the effective measure to increase the popularity
of brand. Differentiation can only be achieved by continuous innovations and trend adoption
Focus: It is necessary for a SME like Bonmarché to focus dynamically on both of the
strategies to achieve the desired goals. In the cost focus, the major stress is put on the lower
market niches as it is to make sure to implement the lowest possible cost. The another category
in market growth focus is differentiation, it is performed by providing the product and services in
a unique segment for the upper level branding of business and to get the targeted market share.
On the basis of above analysis, cost leadership is ascertained to be the best strategy for
Bonmarché as it enables the firm to reduce the overall cost of operations and enhance the profits.
PESTLE Analysis
Bonmarché is one of the most popular brands among the clothing market of United
Kingdom. The management of this company has applied PESTLE analysis as under:-
Element Description
Political UK Trade policies are constant as the ruling party is common since a long
time period. It helps in setting up of fix rules and regulation for the ethical
working process of Bonmarché.
Economical Due to the low inflation rate and flexible economy development UK has
always been a favourable destination for the FDI (foreign direct investment).
Thus it gives certain growth chances for SMEs such as Bonmarché to
enlarge their brand value scale.
Social UK is ranked as the worlds third best country, due to the higher literacy rate
and its multicultural environment. Thus, Bonmarché gets more spending
customers and it becomes easier to target and position them.
Technological Major SMEs of the UK set up new technological trends in the domestic as
well as in international market. As the emerging technologies are needed to
be adopted by the business to maintain the growth and survival in market.
Legal Certain regulations are there for the commencement of new trade. According
to the UK business laws there is a balanced level of flexibility and rigidity
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(Brinckmann, 2019).
Environmental Issues regarding the climatic and whether conditions which affects cycle of
trading. In the present time as the country is not going through good climate
situations. Corporations are needed to take genuine initiative in the way to
solve out the problem to increase the growth and moral of organisation.
New Products and Services
Development of products and services as a basis for growth
For a SME to attain growth and development in a rapid manner, organisations like
Bonmarché should focus upon new product and service development procedures. This would
provide aid to the corporation in gaining the attention of large number of customers in a rapid
course of time, thereby appealing to them with high quality products offered by company at
market place.
Portfolio Strategies
It is important for Bonmarché to take into account portfolio strategies so as to facilitate
growth and enhancement of scope of operations.
Boston Consultancy Group Matrix
BCG matrix is the systematic module first introduced by Boston Consulting Group. The
main aim of using BCG matrix is for the planning of long term future oriented decisions. In this
matrix there are four quadrants classified respectively as dogs, question marks, star and cows.
Each segment represents the particular shares of market.
Dogs: This is the product segment which holds low market share as opposed to rival
firms and thus function in a steadily growing marketplace. In general, they are not worth
investing in because they generate low or negative cash returns. Within the confines of
Bonmarché, footwear falls under this category (Casas, 2019).
Cash Cows: This product segment is the most profitable brands and should be “milked”
to provide as much cash as possible. The cash gained from “cows” should be invested into stars
to support their further growth. In relation to this, dresses of Bonmarché pertain to this category.
Star: This product segment operates in high growth industries and maintain high market
share. Stars are both cash generators and cash users. They are the primary units in which the
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company should invest its money, because stars are expected to become cash cows and generate
positive cash flows. With regards to Bonmarché, accessories come under this category.
Question Mark: This is the product segment which requires much closer consideration.
They hold low market share in fast growing markets consuming large amount of cash and
incurring losses. It has potential to gain market share and become a star, which would later
become cash cow. In context of Bonmarché, it is recognised that winter wear falls within this
category.
General Electric / McKinsey Matrix
(Source: GE / McKinsey Matrix, 2020)
Bonmarché is a female fashion retailing company which carries out its operations within
the confines of UK. Looking upon the performance of this organisation at market place, it is
analysed that this business unit is moderately strong. Further, it is seen that the fashion industry
across the globe is highly attractive (Gosling, 2019). Thus, the integration of both the results as
per the GE Matrix reflects that Bonmarché should invest in the company and facilitate growth of
its scale as well as operations.
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Il
lustration 1: GE / McKinsey Matrix

Diffusion of Innovation
This theory was coined by EM Rogers during the year 1962. This theory was developed
with a view to provide knowledge of the manner in which, with the evolution of time, a product
or an idea initially gains momentum and then diffuses via a certain population. The consequence
of such diffusion is that individuals who are an active part of the social system, get influenced to
adopt a product or service. Hereby, adoption implies acquisition, purchase, consumption or any
new behavioural pattern witnessed in association with the product or service. Whereby the
management of Bonmarché considers to come up with a new product or service at market, it
should make use of DOI theory to gain positive results out of such launch.
Growth Options
Ansoff Matrix
The Ansoff Matrix is a management tool used by firm to identify the strategies of growth
and expansion of business. It is a marketing tool that assist in determining the product and
market growth that increase the productivity of an organization. Bonmarché is one of the popular
brands of clothing retail in UK. The manger of this firm has applied this strategy to determine
the right kind of strategy for the corporation. The concerned firm has analysed the four strategies
of Ansoff matrix as follows:
Market Penetration: This strategy emphasises on increasing sale of existing product in
the existing market. Market penetration aids the organisation in increasing its market share. If
Bonmarché adopt this strategy then it can grab the attention of large number of customers. For
this, the firm can focus on more promotional activities and decrease their prices. This will lead to
increase in sales as well as profits of Bonmarché in United Kingdom (Hatta, 2019).
Product development: This strategy focuses on introduction of new product in the
existing market. The aim is to modify the product and improve the quality of a product so as to
increase the customer base. In the context of Bonmarché, the firm can gain competitive
advantage by extending its product line in the current market to meet the needs of customers. In a
competitive era, changes are required in the organization as it results in development of new and
innovative products according to the customers' taste.
Market development: In this strategy, company enters a new market with their existing
product. This can be possible if a company has a strong brand name, and provides products at
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affordable prices. If Bonmarché applies this strategy then it can elaborate its existing market
reach and gain access to other parts of the globe to create a large customer network.
Diversification: This strategy emphasises upon new products in emerging and developed
markets. This strategy is considered as risky because there is a chance of failure while entering
the new market with unknown characteristics. This strategy is regarded as expensive for
Bonmarché as it is a SME and too much investment resulting into failure would be adverse for
the corporation. The company has to organise new marketing plans or campaign to gain the
attention of customers in new marketplace (Koreen, 2019).
The above research shows that Bonmarché can apply the market penetration strategy. In
this, the management of the firm can lower the price and can develop various promotional
strategies to provide attractive products and gain access to large number of customers within
United Kingdom.
Identifying and mitigating risk
Whereby Bonmarché seeks to make use of market penetration strategy, it would face
certain risks. One of the most crucial risks is that the firm would not be able to leverage market
opportunities in terms of expansion and growth. Yet another risk associated with this strategy is
that lack of access to new markets may restrain the respective fashion retailer from earning high
profits. To mitigate such risks, it is important for Bonmarché to ensure that it incorporates
innovation in its products to come up with unique offerings at due intervals of time.
Exploiting technologies and digital platform to expand network and generate growth
Being a customer interaction based business Bonmarché always faces the difficulties in
connecting with a wide area network of consumers. Although SMEs do not have a larger
operational field of work, it demands a much bigger network for the growth of the business to
capture the effective market share. With a view of current situation it can be justified as this is
the era of digitalisation, many small big industries participates in the E-commerce market to get
maximum coverage for their product and services. There are certain technologies which became
an integral part of big scale industries and and its necessary for the efficient SMEs like
Bonmarché to adopt such new techniques and technologies for the growth of business. For the
network expansion of trade company can leverage various digital promotion tools other than its
website such as using major social media platforms, making appearance at other E-commerce
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portals. Applying these steps can actually boost the business networks and captivity within the
market position (Malkar, 2019).
Collaboration
Growth options for small businesses
There are several growth options available for small businesses. These are discussed
below along with their advantages and drawbacks:-
Merger:
Merger is an agreement in which two companies join together to form a new corporation.
Merger of two organisations is done to increase the market share, reduce cost of operations and
also to expand in territories.
Advantages: Merger is essential for enterprises to facilitate expansion in new areas and
increase market share. It also increases the resources of a organization which help in company's
growth. This results in raising sales and profits of the business association.
Disadvantages: The biggest drawback is that due to merger, a big company is formed
which creates monopoly in the market. This leads to increase in prices of products. This hampers
the development of firm and declines the growth of a new company formed as the customers are
not willing to invest too much for purchasing the organisational offerings (Mamman, 2019).
Acquisition:
Acquisition means when a company purchases whole or more than 50% of another
company's shares. The main purpose of acquisition by a company is to expand its operations in
different parts of the country to create a solid base within the marketplace.
Advantages: The biggest merit is that the corporation can get access to latest technology
and reduce the competition. This promotes the growth and development of an organization. This
leads to reduction in cost and increment in the profits of entity.
Disadvantages: One of the drawbacks of this method of collaboration is that there can be
clashes among the culture of companies if the nature of work of both the organisations is similar.
This leads to duplication of activities that results in job cuts of employees as companies is not
likely to spend money on keeping more than one employee for same work.
Joint Venture:
Joint venture is a business entity in which two or more parties join together to accomplish
a specific task. It can be applicable to sole proprietorship, partnership or limited liability
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companies and other business entities. Many companies combine with foreign companies to
become technologically advanced and to scatter in different parts of the country.
Advantages: When one company enters into joint venture with another company, there
are wide opportunities open in market. One of the advantages of this is that the firm brings
innovative technology with new ideas at marketplace which promotes organisational growth and
success.
Disadvantages: The objectives of joint venture are not clear as different companies work
together which results in imbalance of balance sheet of companies. Also, there is lack of
communication because of different nature of companies (Manninen, 2019).
Benefits of Horizontal and Vertical Integration
Integration is the term in corporative sectors used for the acquisition of one company by
another company. It is done in majorly two aspects, which are classified as horizontal and
vertical integration.
When a company take on some other organisation which is either its competition or an
existing entity in the same market place dealing in similar products and services is referred as the
horizontal integration. There are certain benefits of this kind of integration. Hereby, revenue gets
increased as a effect of merging of two companies of same stream it gets a bigger market share.
The quality and quantity of products gets enhanced with the combination of various techniques
and and strategies of both company under the single brand name.
Vertical integration means when a parent company owns the supply chain and a level
above or below organisation to capture more of the market share. It results in involvement of two
or more businesses to strategically obtain the organisational objectives. In this structure there are
comparatively more benefits which are discussed further. It helps in the cost control of product
as the management can monitor the overall process from production to retail sale. Coordination
among different levels gets increased and the brand gets more opportunities to connect with the
market on an extensive level.
Partnerships in Value Chain
Companies in the modern era realise the significance of entering into partnership with
other strong firms to build their networking as well as to developed a stronger value chain. By
operating in a collaborative manner, organisations along with their vendors can gain an edge at
market place by creating an effective value chain. One of the best examples of this is bidding
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consortia. Bonmarché can leverage this opportunity to gain a competitive edge over rival firms
present within fashion industry and foster increment in profits (Mughal, 2019).
Potential of Franchising for expanding a business
Franchising is the systematic legal business body which is transferable by parent
company to any of the potential individuals or groups for its own interests. In case of a SME like
Bonmarché, its a huge opportunity to leverage the franchising system as it gives a vast market
scope to its products. As the company would get support from its franchisees and the trade
network, it would facilitate organizational expansion along with more wide and independent
work system. It also leads to improvement of brand image at market place.
LO2. Methods to access funding along with different types of funding
Investment Decision Making
It is important for a firm to take decisions regarding investments. For this purpose, two
options are available, pay back period and NPV. Both of these are explained with the help of
calculations as under:-
Pay Back Period Method
Calculation of Accounting Rate of Return (ARR)
Cash inflow £85,000
Cash outflow £12,500
Net cash flow
(Cash inflow – Cash outflow) £75,500
Step 1447
Year £ Net cash flows
£ Residual
value £ Depreciation
Annual
profit
1 72,500 0 38,958.33 33,541.67
2 72,500 0 38,958.33 33,541.67
3 72,500 0 38,958.33 33,541.67
4 72,500 0 38,958.33 33,541.67
5 72,500 0 38,958.33 33,541.67
6(Cash flows + residual
value –year depreciation) 72,500 41,250 38,958.33 74,791.67
Step 2
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