Analyzing Growth Opportunities for New Car Dealerships

Desklib provides solved assignments and past papers to help students succeed.

PLANNING FOR GROWTH
NEW CAR DEALS

Contents
Introduction...................................................................................................................................2
LO1 Analyse the key considerations SMEs should consider when evaluating growth
opportunities................................................................................................................................. 3
Growth opportunities available for New Cars Deals..................................................................3
Opportunities for growth applying Ansoff’s growth vector matrix............................................4
LO2 Assess the various methods through which organizations access funding and when to use
different types of funding..............................................................................................................8
Sources of funding available to businesses................................................................................8
Justification for the adoption of an appropriate source of funding for New Car Deals...........11
LO3 Develop a business plan (including financials) and communicate how you intend scaling up
a business.................................................................................................................................... 13
Business plan for the growth of New Car Deals.......................................................................13
LO4 Assess the various ways a small business owner can exit the business and the implications
of each option..............................................................................................................................17
Succession options for a small business explaining the benefits and drawbacks of each option
................................................................................................................................................. 17
Conclusion................................................................................................................................... 20
References................................................................................................................................... 21
Appendix...................................................................................................................................... 23

Introduction
In today's business scenario companies have to face an increased level of competition.
Companies that can plan their business growth activities will be able to succeed. Business
growth can be very exciting as it brings changes within the company strategy. Planning is very
important for the growth of the business. The main aim of the development of this report is to
understand the importance of planning for growth. In the first part of the report growth options
available for a car dealership business will be accessed, for any business access to capital and
funding is very crucial for growth. Therefore in the second part of report discussion about types
of funding option available for small business will be presented. After this, a comprehensive
business plan is developed and finally, the report includes an exit strategy for a car dealership
business (Soininen et al., 2012).

LO1 Analyse the key considerations SMEs should consider when
evaluating growth opportunities.
Growth opportunities available for New Cars Deals
Due to an increase in competition in the automotive industry auto dealership that wants to succeed
and thrive in this modern business environment must adapt very aggressive growth strategies. Most
people are having access to modern technological tools, therefore, they are expecting digitally
advance and seamless buying experiences. Continuing use of old strategies for doing business will
not help car dealers to achieve the desired sales and profits.
It has become very important for car dealership business to pursue new business growth strategy
and adopt technologically advance innovative measures to continue their growth in the coming
future. Following are the main strategies that car dealership can adopt for gaining significant
business growth;
Adoption of digital technology:
In this digital era, consumers are expecting a greater online experience. Organizations are using
the website, apps for buying things. Car buying is no exception when it comes to online retail.
New Car Deals should make sure that the overall digital presence is consistent with New Car Deals. The
organization can present complete information which can include a detailed catalog of vehicles, service
provided by New Car Deals. The car dealer should provide a facility for interacting with their customers.
The company can also use a mobile-friendly website for keeping touch with consumers (Yang et al.,
2014).
Improving the service department:
For a car dealership, it is very important to offer a friendly and compelling service department
experience. Most of today’s dealership businesses are not providing effective service
department experience due to which customers are not satisfied. The service engineers must
be capable of providing the best technical solution for a problem in the vehicle. Lack of training
can lead to ineffective management of customer concerns. Training of the service team to
deliver great customer service will result in finding a new path for growth (Sharifi et al., 2013).

Online selling of automotive parts:
Nowadays due to advancement in digital technology implementation of an online e-commerce
website for selling things online have become very easy. New Car Deals can use this strategy for
selling automotive parts. Selling online is an effective method for growing geographical reach.
Mastering online sales will help the company in the long run. New Car Deals must use internet
technology to become internet retailers or else the company will have to face strong
competition from online car sales (Rafiq et al., 2013).
Investment in online Advertising:
In this digital era, most of the car dealers are still working with a focus on marketing strategies
that use the traditional methods of advertisements such as print and radio. Now, most
organizations are utilizing digital methods for the promotion of their services. New Car Deals
must allocate sufficient budgets for digital advertising such as Social media, PPC, Search engine
optimization and search engine marketing. New car deals will be able to gain efficiency and
develop new competencies in online advertising (Milkman et al., 2010).
Build an effective team:
The development of an effective team is very crucial for the growth of New Car Deals. Providing
training and development opportunities, investing in employee retention and happiness is very
crucial for the future growth of New Car Deals. In this competitive business environment,
companies should understand the importance of treating their employees with respect. Most of
the dealers think that employees can easily be replaced. The motivated and positive team is an
important asset for building a competitive advantage in the future.
The strategies mentioned above are an important strategy for the planning and growth of New
Car Deals (Rydin, 2013). Due to technological advancement automotive and retail industry is
constantly changing, therefore, New Car Deals must be proactive in seeing the future growth
opportunity and implement the strategies to meet the current and future market demand.
Opportunities for growth applying Ansoff’s growth vector matrix

Ansoff’s Matrix also known as Product/Market expansion Grid is an effective tool to analyze and
plan strategies for growth. Ansoff’s matrix involves four strategies that can be used by New Car
Deals to grow and also access the risk associated with strategies. The matrix was developed by
H. Igor Ansoff an applied mathematician and Business Manager. The model developed by
Ansoff’s was able to help many leaders and marketers to analyze and understand the risk
associated with the growth of New Car Deals.
The four factors associated with Ansoff’s Matrix are;
Figure: Ansoff's Growth Vector Matrix
Source: Corporate Finance Institute
Market Penetration: market penetration is referred to increasing sales of existing products in
an existing market.

Product Development: the product development is referred to the process of introducing a
new range of product in an existing market.
Market Development: is referred to the process of entering a new market with existing
products.
Diversification: The diversification strategy is referred to as the process of entering a new
market by introducing new products.
Out of four strategies discussed above the market, penetration is easiest of all strategies but
diversification strategy is the riskiest (Davidsson, 2010).
Applying Ansoff’s Growth Vector Matrix
The car dealership businesses have become very competitive. Not only they have to compete
with other dealers but they also have to face an active challenge from private car sellers.
Market Penetration:
Now companies are using modern tools for promoting their business. In this technologically
advanced time, the most important task of New Car Deals is to increase lead volume and
conversion. New Car Deals dealership business needs to implement measures to increase traffic
to the website. New Cars Deals should use the following strategies to increase their market
penetration:
Use of social media to connect with Consumers: The organizations that do not use social media
for promotion of their business then they are leaving the great opportunity of making profits.
Recent research shows those about more than 78% of all UK adults are using social media and
about 71% of them can be reached through Facebook advertisement (McKeever, 2016).
Connect with customers and build a relationship: social media apps can be used to build a
relationship with customers. New Cars Deals can use this strategy to attract potential
customers. They can answer their queries and engage with them regularly (LSEUK, 2017).

Reach new prospects with social media: Promotion of content to prospect clients can increase
the chance for conversion. By doing this New Car Deals can increase the website traffic to a
great extent.
Email marketing: The second strategy for improving market penetration is by promoting the
use of email marketing. According to Mailgen, about 89% of marketers use email marketing.
Email marketing can help in building a relationship with marketers.
Use Facebook advertisement: New Cars Deals can use local awareness advertisement to easily
find new customers in your local area. Local awareness ads are special types of ads that can be
used for targeting people close to New Cars Deals (Hulbert et al., 2013).
Products Development:
Product development is referred to as an act of developing and selling new products. New Car
Deals want to expand its product line by selling the van and specialized commercial vehicles.
The company is planning to introduce the online selling of automotive parts.
Market Development:
Market development is referred to as the process of selling existing products in a new market.
This will make sure that the company can attract new customers. The company is also planning
to launch its store in new locations.
Diversification:
New Car Deals businesses have been depended on the task of attracting new customers to buy
cars. If New Car Deals wants to grow its business in the future then looking for generating
alternate revenue stream is need of the hour. The organizations that would be most successful
will be those who will be able to broaden their revenue streams. New Car Deals can invest in
part delivery service. The profit margin in parts selling the business is vast and New Car Deals
must utilize this opportunity. The innovative and technologically advanced ways adopted by car

makers have resulted in the development of cars that are more reliable and do not require
servicing.
LO2 Assess the various methods through which organizations access
funding and when to use different types of funding
Sources of funding available to businesses
For any business access to financial capital is very important. Without money, organizations
cannot grow at the same pace as compared with organizations with financial capital. The major
sources of financing for business are equity, debt, debenture, loans, term loans, and venture
capital funding. These sources of funding are used in different situations. Different types of
funding are classified based on time, ownership and source of capital (Baños Caballero, 2010).‐
Following are the main source of funding available to business with their advantages and
disadvantages.
Banks: Banking organizations are a great source of funding available to businesses. Companies
that want to access capital have to present an effective business plan. A business plan helps in
accessing the future growth potential of the organization. While allocating loans to companies
banking organization provides information about the number of installment that has to be paid
to return the loan amount. Every bank loan attracts a certain amount of interest rate which
must be paid by the company (Fabbro and Hack, 2011).
Advantages:
 There is no need to provide any equity share to banks
 Getting a loan is one of the easiest methods to secure funds
 A quicker way of securing funding

 Banks do not require any ownership in the business
 Owners do not own any obligation after payment of bank loans
Disadvantages:
 For getting bank loan organizations must present a detailed business plan which will be
used for assessment of future growth potential of a company (Blackwell, 2011).
 A bank loan might attract high-interest rates
 It is necessary to repay a bank loan amount. Not doing this can attract legal penalties
 Chances of seizure of personal asset when the loan amount is not paid off
 It cannot provide sufficient funding to meet current business needs
Family and Friends: Friends and family members can provide funding for small businesses.
While accessing funding from friends and family members, companies can get it in the form of
loans or the company can offer a certain percentage of stake in its business
Advantages:
 Getting funding from family and friends is the easiest method to access funding
 Companies can negotiate for low-interest rate
Disadvantages:
 There is an increased chance of conflicts when a friend or family member express a
desire to take control of the business
 The company owner might get in a position in which they can lose their own business.
 Getting funding from a family member may result in damage to the relationship
Venture capitals:
Venture capital is referred to as an investor with access to a huge amount of money. They can
invest money ranging from 1Million to 5Million. The main aim of VC investment is to get equity
in a business and later sell the business to gain profits.
Advantages:

 VC are people interested in investing a large amount of money
 Access to huge capital can help the company in expansion or investing in the latest tools
and technology
 VC brings the experience of managing large organizations with access to huge
development funds
 This opportunity must be utilized by organizations seeking funds. They can provide a
clear direction for business growth
Disadvantages:
 Company seeking funding from the VC have to offer share and equity to investors
 A VC can get back profits form investment only when business is sold and shares get
exhausted on the share market
 There is a greater chance that the founder may lose control of the company
 VC generally focuses on big companies. They do not invest in smaller companies
Angel Investors: these are the people similar to VC but they invest less amount of money as
compared with VC. They generally invest in the range of £20K to £1Million. Like VC they also
seek equity and share in the business. Angel investors are experienced in guiding companies
(Drover et al., 2017).
Advantages:
 An angel investor can have knowledge and skill for managing and expansion of
businesses
 Initially, they invest a small amount of money into any business and see if the company
can grow or not.
 They can help an organization in developing a new strategy for development products
Disadvantages:
 Demand equity and share in the business
 Getting angel investors is difficult as a lot of business compete to get funding's

 A comprehensive business plan is needed to get angel investment
 Owners and founder can lose control of the business
Government Grants:
A government grant is provided by a federal government. Generally, a government grant is
provided for the promotion of entrepreneurship activities in a local area. A government grant
may not be repaid.
Advantages:
 A government grant may not be needed to be repaid
 Can help in reducing pressure which can help in focusing on other aspects of business
 Nowadays government grant is provided form many categories such as science,
education, and commerce. Companies working in these fields can easily seek
government grants
Disadvantages:
 A detailed business plan is needed to get a government grant.
 Great convincing power is required for getting a government grant
 The government can have very strict rules which can create hindrance in getting grants
Justification for the adoption of an appropriate source of funding for New Car
Deals
There are situations in which the car dealership business can feel like they do not have
sufficient funding for operating. There are situations where New Car Deals have to invest in new
parts but customer full payment is not received until the full project is done. The new parts are
so expensive that that company will not be able to cover payroll and other daily activities.