Ovation System: Business Growth, Finance, and Planning Report

This report provides a detailed analysis of Ovation System, an SME in the electronic design and manufacturing sector, focusing on its growth strategies and financial planning. The report begins by identifying key considerations for evaluating growth opportunities, including management processes, financial aspects, competitive context, customer centricity, legal aspects, expansion plans, and team management. It then applies the Ansoff Matrix to evaluate growth opportunities, recommending a market development strategy. The report assesses different potential sources of finance, such as bank loans and venture capital, including their merits and demerits. It also discusses the preparation of a business plan in the context of growth, and concludes by identifying options for success and exit strategies for SMEs. The report highlights the importance of strategic planning, financial management, and market analysis for achieving sustainable growth and competitive advantage.

PLANNING FOR GROWTH

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
P1 Analysing key considerations that organization must consider while evaluating growth
opportunities................................................................................................................................3
P2 Evaluation of growth opportunities by Ansoff Vector Matrix..............................................5
P3 Assessing different potential sources of finance which are available to business with theirs
merits and demerits.....................................................................................................................7
P4 Preparing business plan in context of growth......................................................................10
P5 Identifying options for success and exit in perspective of SMEs........................................15
CONCLUSION..............................................................................................................................18
REFERENCES..............................................................................................................................19

INTRODUCTION
In the present era, small business units are contributing in very effective manner in
country's economy. The present report will be giving brief description about ways that how SME
are move towards development and growth. There is presence of various applicability of
different techniques which identifies opportunities for growth, appraise options for
accomplishing growth which includes via collaboration. In the present report, Ovation system as
SME has been selected for understanding various concepts of operations of SME. Further it has
included different options which are undertaken by growth for optimizing it in different
analytical framework for achieving competitive advantage. It has also evaluated all possible risks
which are directly associated by selected growth strategy. In the same series it has assessed
different potential sources of finance which are applicable to Ovation system for growth and
along with these recommendations have been provided. Further the report has discussed about
business plan which is well structured and preferred for option for growth along with its strategic
objectives, methods and all essential components of business plan. In the last part it has
elaborated about different exit strategy and succession options in context of Ovation system
which has been evaluated by merits and demerits with its repercussions.
P1 Analysing key considerations that organization must consider while evaluating growth
opportunities
Ovation system is a private organisation which has approximate 23 employees as it is
based on electronic design and manufacturing. Usually, it manufactures and supplies scrambling
systems, rugged digital video recorders, encryption and video surveillance equipments. It has
maintained its status in this specific industry; but for innovation and growth capabilities it had
ensured about different market demands and competitive dynamics for defending and

maintaining their competitive position. Ovation system must give special focus on these
dimensions for evaluating gaps and more plans for improvement (Forshey and Levitas, 2016).
 Management processes and metrics: There are different growth minded organizations
as they lean towards simple place, straightforward, and very well crafted processes for
articulating, identifying, executing and evaluating growth opportunities as it consist of
core processes such as strong management focus on portfolio of growth, tracing
performance with scorecards and metrics and custom stage gate process for adapting
culture and operations.
 Financial aspects: The main objective of any organization is to invest some amount of
money with context of different potential opportunities to get more returns. So Ovation
system must be able to conduct financial evaluation before making investment for
identifying that proposed investment will be giving suitable return or not. The results of
cash flow analysis and investment appraisal should be tracked in mind. Ovation system
must be able to start business by assessing various monetary aspects.
 Competitive context: Organizations do not operate in vacuum as there is presence of
understanding various competitive threats and opportunities which are emerging in
market place. The main motive of organization is to build and sustain competitive
advantage over other firms. It must have capability for evaluating offerings of its
competitor and even position. Innovation and productivity are main factors by which an
organization can accomplish success.
 Customer centric: It is one of the most obvious factors which every organization must
be able to perform as they exist for delivering real value by fulfilling requirements and
needs of their target consumers. The organization who is customer centred must be able
to trace and understand dynamics of every customer (Rostamkalaei and Freel, 2016).
 Legal aspects: For carrying operations of business in very smooth manner, Ovation
system must be complying with legislation and laws. If the legal framework is not
complied in essential manner then it will directly affect brand image of organization. For
manufacturing electrical products, it has major requirement of license to fulfil other legal
formalities. The growth option must be given as priority for evaluating legal agreement.
 Expansion plans: The growth of firm is directly associated by merger, acquisition and
franchise agreement as it expands operations of business and serves customers in huge

volume. In this context, Ovation system must provide special emphasis on performing
cost benefit analysis which will be indicating fair view of growth aspect. The
organization must chose appropriate option which is directly linked to opportunities
which is higher than cost.
 Team management practices: The base of competitive advantages is termed as presence
of effectiveness in managing teams. In the present era, growth can be sustained by
depending on ability of organization for coordinating critical information and resources
which are spread in various locations.
P2 Evaluation of growth opportunities by Ansoff Vector Matrix
Ansoff matrix is determined as planning model of marketing helps business for
identifying growth strategies of market and products as well. It gives recommendations to
business for growing and it must be directly linked towards new markets or products that already
exist or in new markets. The outcome of this strategy gives four elements such as market
penetration, product development, diversification and market development. The organisation is
able to generate strategies for future growth and success at distinct level (Chang, Fernández and
Gulan, 2017).
(Source: Growth decisions, 2018 )
The brief explanation about four elements is mentioned below:
Market Penetration
 It helps in maintaining and increasing
market of existing products by various
Product Development
 The main objective of business is to
introduce new products in existing

competitive pricing strategies, sales
promotion and advertising.
 The main motive is to give different
products and services to consumers at
low prices.
market. It must be having need for
developing new competencies and for
developing modified products of
existing market.
 Special focus should be given to R&D
and innovation department, first mover
advantage of market and providing
detail insights about customer
requirement.
Market Development
 Under this strategy, business must be
able to sell existing products in new
market.
 For approaching this strategy, Ovation
system can widen its reach by entering
new geographical market, new
dimensions of product, various policies
of pricing and distribution channels
which will attract its different
customers and it will tend towards
creating new market segments.
Diversification
 In this strategy organisation enters in
new market by introducing new
products as it is more risky due to
migration of business in markets where
it does not have experience.
There is presence of all these four options but in context of Ovation system, market
development strategy has been chosen by its owner. In this modern area, manager has taken
decision in context of offering its existing services and products by ensuring the highest possible
product quality and reliability. They are planning for their process of design and production to
get certificated by ISO 9001 which is quality management standards. The main objective behind
this certification is that as all PCBs are framed for highest standards and usually most products
are housed in rugged and they want to create competitive advantage. Ovation's main motive is to
create quality and all sub assemblies should tested in proper manner. In this strategy of market
development it will be enabling opportunity of organization for targetting the huge number of

people and to accomplish huge margin via giving convenience factor. They give special focus on
supplying products which are of the best quality and full support to their customers. In UK, trend
of sales is either directly given to end user or it might be through different number of systems for
integrating partners (Ng, Macbeth and Yip, 2017).
As per Ansoff matrix and stating current position of Ovation system, it has been
recommended that selling and offering products which are existing in new market. Applying this
strategy will tend towards focussing and serving on both new and existing customers. In context
of market development strategy it will be giving various advantages to Ovation system such as:
 The reach of its products and services in appropriate geographical region.
 Level of productivity and profitability has been increased.
While focussing on supply at best level will be able to enable Ovation system to target
more new people along with existing market. By offering support to its customers and best
product by direct sales to end user will be increasing level of profitability at very distinct level. It
is considered as most effective tool which will lead to develop the market and to explore more
operations in context of business (Wu, 2015).
Ovation system can also lay emphasis on market penetration strategy for attaining goals
and objectives. The organization can give importance to selling its existing product in present
market at low price as compared to its competitors. While evaluating it has been assessed that
after recession consumers have become very price conscious. In the present era, products are
been purchased by consumers to those retailers who provides discount at their product. By
applicability of these strategies, it will be enhancing level of profitability and profitability in very
efficient manner.
P3 Assessing different potential sources of finance which are available to business with theirs
merits and demerits.
The most essential aspect which every organization requires is termed as finance as it
helps in process decision making in aspect of expanding operations and functions in context of
business. Ovations system is framing plans for developing its market by giving excellent
technical support and backup for whole range. In this context, there are various sources of funds
by which Ovation system can attain its all financial requirement like:
Bank loan: The business unit can be raised by this source of fund as it is considered as
one of the major source which provides fund to various financial institutions. As it is an

manufacturer of electrical products so it can have bank loan on context of collateral security and
then it might create ability for executing plan in very efficient manner. While undertaking bank
loan, Ovation system must consider its various merits and demerits:
Merits
 It is recognized as most flexible source of fund as it gives convenience to organisation in
terms of instalment payment.
 Ovation system could get benefits of tax by applying bank loan as it will directly reflect
in financials in terms of profit margin.
Demerits
 In terms of monetary institution there is presence of payments of high interest which is
periodic which has imposed fixed obligation.
 Many times whole amount has been not sanctioned by bank which has been applied by
business entity.
Venture capital: it is termed as one of the type of private fund or equity which has been
provided by investor to all organizations which are emerging and has presence of very high and
potential growth. The business plan can be presented to venture capitalists owner of Ovation
system which creates ability for generating fund. It will be having capability for executing
expansion plan. Ovation system must consider merits and demerits of this stated source of fund:
Merits
 Financial assistance has been provided by venture capitalists and along with this it
provides guidance for both financial and non financial matters. Ovation system can take
decision in context of financial and human resource management.
 It fosters growth and helps in achieving great success to business by giving guidance in
context of tax, personal and legal matters as well.
Demerits
 The business owner loses control if venture capital gains more than 50% stake. It will
directly impact business operations and functions as well.
Debt Financing: It can be referred as medium for borrowing money from various
institutional or retail investors. The funds can be raised via issuing bonds, securities or bill
consideration for payment of interest and coupon. There are various requirements by
organization for specific working capital or for incurring capital expenditure. Its metrics are cost

of debt, Debt equity ratio and Interest coverage ratio (Debt Financing, 2018.). Ovation system
can use debt financing for raising fund but it must consider its advantages and disadvantages as
well:
Merits
 Control has been retained, when debt financing has been agreed for managing the
organization. It helps in process of decision making.
 The interest payment reduce net obligation as it is termed as tax deductible.
 It is used for framing budget and financial plans as in advance principle and interest
amount is known.
Demerits
 There is huge requirement of qualification and best credit rating for receiving finance.
 There is also need of financial discipline for repayments on time. Business which id
dependent on debt is termed as riskier by various potential investors.
 Collateral has been agreed to lender by putting some assets for potential risk.
 It may lead to high rates even after identifying discounting interest rate by deducting tax.
Retained earnings: It can be termed as amount which has been retained within business
will be giving direct reflection on dividend. The profits which are earned are re-invested in terms
of retained earning as they are paid as dividend. The main perspective of application of retained
earning is to finance for new investments instead of paying more dividend and to increases
equity for specified investments. It is major belief of Ovation system that it does not cost any
single thing but in simple words it can be elaborated as a source of finance which does not tend
towards cash payment. The main application of retained earning is to oppose new shares and
debentures which ignores the issuance cost (Keough, 2015).
Merits
 It does not involve any cost for acquisition. Ovation system does not have any obligation
for paying anything related to retained earning so it is termed as one of cheaper source of
financing.
 The financial position can be strengthen of business as it provides financial stability.
 It is one of advantage to shareholders of organization in context of dividend as
organization earns profit or not they get stable dividend.

 While strengthening financial position of organization it increases capital which helps in
increment of market value of shares.
Demerits
 If the objective is not stated properly then it might tend towards careless spending of
finance.
 The dividend policy which is conservative tends for accumulating retained earning is
huge aspect which leads to over capitalization.
 It is also and disadvantage to shareholders as it does not allow them to enjoy actual
earnings of organization. Generally it creates dissatisfaction in them but it affects market
value of shares.
Government grants: It can be used as source of finance for SMEs when any project or
initiative has been awarded for funding of government for financial support. Any grants in
context of business does not have any requirement for repaying or accruing interest for having
some specific guidelines for application. It is directly interlinked with efforts like job creation,
economy development and for empowerment (Grover, Bokalo and Greenway, 2014).
Merits
 It decreases the pressure on business owner.
 Money has been given for encouraging SMEs by providing free money with attractive
business plan.
 It increases the visibility and credibility of organization.
Demerits
 Before writing grant there is requirement of extensive research which is time consuming.
 There is need for very talented person along with best experience who is familiar to
Ovation system.
 There is presence of fierce competition so it impacts success rate in very low manner.
 These are usually short term, so they must be able to convert and invest it as soon as
possible by giving margin.
P4 Preparing business plan in context of growth
Overview
The present market is stating the trend of digitisation, Ovation system is planning to enter
in world of Artificial Intelligence. It will be manufacturing products for virtual products such as

censor as it had already manufactured the rugged digital video recorders, encryption and video
surveillance equipments. In the present era, everybody is moving forward along with trend of
Virtual reality. Now by considering this aspect, Ovation system is giving convenience and
satisfaction to their consumers by planning to contribute in AI by manufacturing censor for
virtual reality. By manufacturing censor it will provide various applications to its customer, out
of which they can choose appropriate which is more useful according to requirements. Along
with perspective of small manufacturing business has objective of maximising sales and to built
brand image in this specific industry. There is presence of detailed plan which can be applicable
for attaining this specific objective:
Goals
 To gain huge market share in its manufacturing industry.
 To create brand image and competitive advantage in context of Artificial intelligence.
 To generate sales and increase profit margin by 30%.
SWOT Analysis
Strength
 Its product portfolio is very broad as it
manufactures encryption of video
scrambling, Media card archiving,
Video stabilization.
 Its global presence is in many countries
such as Turkish, France, Italy and many
more (Tian, 2016).
 Its employee base is very strong in
context of to SME.
 It caters customer base in huge aspect.
 It is considered as one of the most
reputed SME in electronic company.
Opportunity
 Inorganic growth can be highly focused
via outsourcing some skills.
 There can be various tie ups for
distribution which will help for
penetrating in new areas.
 Ovation system has given flashback-2
Digital recording system which will be
deploying Royal National Lifeboat
institution in very successful manner
for making video recordings in very
dramatic view.
 Artificial Intelligence in context of
virtual reality.
Weakness Threat

 It relies on outsourcing and demands of
its services and products which have
been originated from industry of
semiconductor.
 Its sales are cyclical which are
replicated as period which is marked in
boom and slump.
 There is presence of very intense
competition in context of franchises,
availability of product and prices.
 Majority of revenue has been generated
from international business so this
replicate threat of global fluctuations
will directly impact the organization.
Pestle Analysis
Political Factors
 Political stability and its significance of
wholesale sector of electronics in
economy of country.
 Presence of risk of military invasion.
 Enforcement of contract in legal
framework.
 Government interference and
bureaucracy
 Requirement of product labelling
 Protection of Intellectual property
(Colantoni and et. al., 2016).
 Anti- Trust laws in context of
electronic industry
 Corruption level usually in service
sector.
Economic factors
 Exchange rate and level of stability of
currency of host country.
 Skill level of staff of electronic industry
 Interest rates
 Economic growth rate
 Quality of infrastructure
 Economic growth rate
 Efficiency in financial markets
 Unemployment rate
 Productivity and labour cost in
economy.
 Inflation rate
 Stages of business cycle
Social Factors
 Demographics and level of skill of
population
 Leisure interests
Technological Factors
 Technological development such as
entering artificial intelligence
 Product offering due to impact of