Planning for Growth: Strategies for Guildford Tyre Company's Growth

This report analyzes the growth strategies for Guildford Tyre Company, a UK-based SME in the automotive industry. It explores growth options, the Ansoff matrix, and investment appraisal techniques like payback period and NPV, along with internal and external funding sources. The report details a business plan, including an executive summary, company overview, mission and vision, and strategic objectives. It covers financial summaries, industry and market analysis, marketing and sales strategies, operational plans, and management teams. The report also addresses scaling plans and exit and succession strategies, concluding with a comprehensive overview of the company's potential for expansion and development. The report emphasizes the importance of financial planning, strategic decision-making, and market analysis for achieving sustainable growth.

Planning for growth

Contents
INTRODUCTION...........................................................................................................................3
Before expansion, growth option that need to be considered.................................................3
Growth’s model- Ansoff’s matrix..........................................................................................4
Investment appraisal and sources of funding.........................................................................5
Business plan along with Scaling plans..................................................................................7
Exit strategies and succession plan.......................................................................................13
CONCLUSION..............................................................................................................................15
REFERENCE.................................................................................................................................17

INTRODUCTION
Small and medium business are this unit which operates their business solely, independent
which employer fewer than a given number of employees. Financial assets of such type of
business unit are also limited. To use all limited resources in optimized manner it is important to
formulate business plan and to gain growth, such unit have opportunity to enlarge their business.
The primary objective of this assignment is to understand about significance of planning for
growth (Sell and et.al., 2018). For this, an organisation is selected, namely, Guildford Tyre
company, founded in 1976 headquartered in UK. They serve different type of product such as
Vehicle Diagnostics, Fixation of brakes, batteries repairing engine failures. Further, it covers
growth option for expansion, Ansoff matrix, and investment appraisal with funding sources.
Lastly a business plan is formulated with exit and succession plan.
Before expansion, growth option that need to be considered.
To determine the growth opportunities is vital as it assist business to formulate effective
decision and strategies. Competitive advantage refers to benefits that is gain by business unit
from the rivalries of market. There are number of competitive advantage like resources,
capabilities and core competencies that can be gain by respective company to use strategies
effectively:
VRIO model: This framework is used by management team with the aim of assessment of
internal capabilities effectively (Thorpe, 2017). With relevance to chosen company, they use
their model to assess the opportunities and that are as follow:
Resources Valuable Rare Imitable Organised Impact
Financial
resources
Yes No No Yes High
Employee Yes Yes Yes Yes High
Supply chain Yes No Yes Yes Medium
Valuable- Valuable resources are those which adds value in company for improving
productivity and profitability. In context of chosen organisation its valuable resources are
financial resources, employees and the supply chain that assist company to gain all competitive
advantage and become successful.

Rare- These are those resources and competencies which are rare for organisation and
these add high values in market. Employees of selected company are considered as the rare as
they are skilled with advanced knowledge.
Imitable- This tends to intensity that is hold up by resources of company, also not being
imitate by others. For example financial resources of respective organisation are inimitable
whereas the employees and supply chain are imitable.
Organised- In business it is vital to organised all resources effectively and well manner for
gaining positive outcome. With relevance to selected company they organised their all resources
appropriately as they are able to work effectively (Fahed-Sreih and El-Kassar, 2019).
New product/ services- Guildford tyre delivers/ supply services or product that are related
with the automotive industry such as tyres of bus, car, with some other services like vehicle
diagnostic, fixation, batteries repairing engines failure, modifies exhaust and so on. With the help
of all these they are gaining huge growth and success at marketplace.
Growth’s model- Ansoff’s matrix.
To identify the growth opportunities is vital as it help business unit to grow their business
successfully while expansion. Explanation of growth model in context of chosen company are as
follow:
Ansoff’s Matrix- Number of organisation use this model with the aim of determination of
growth opportunities for expansion of business operation. As it is a time consuming process but
give relevant information that are needed for taking advantages of opportunities. It includes
basically four strategies and that are as follow:
Market penetration: This is the growth strategies that relies on existing product within
current market. This is considered as most appropriate strategies due to low risk association. In
context of Guildford Tyre they can use this strategies for their business.
Product development: This is associate with existing market but with a new product.
With the help of this growth strategies, respective company can assess new opportunity for
enlarging their business by enhancing product portfolio. This could help them to grasp more new
consumer and gain success in growth (Wang, 2019).
Market development: This growth strategy is related with the introduction of new
market with existing product. With the help of such type of business growth strategies,

organisation can enter into new market but the chose company is small and that would not be the
viable for them
Diversification- This emphasise on new product with new market and considered as one
of the most risky strategy. This is helpful for the large business organisation and the selected
firm is small and that is not feasible for them.
For Guildford Tyre, the best and appropriate strategies for enlarging their business would
be the product development for the development and growth of business as with the help of this,
they can serve services as per consumer requirements.
Investment appraisal and sources of funding
Investment appraisal
Payback period- It can be defined as amount of time that are required to recover the cost
of an investment. Shorter payback is considered as the most acceptable.
Merits- It is simple to use and gives quick solution as well as useful in case of
uncertainty.
Demerits- It is not considered the time value of money and not include all cash outflow
also ignore the return on investment of project (Bradley, Burnett and Sparling, 2017).
NPV- It is the difference in between present value of cash flow and the present value of
cash outflow over a period of time. This can be utilized in capital budgeting & investment
planning for assessing the profitability of project or its investment.
Merits- It is decision making process and a time value money.
Demerits- It is not useful as comparison cannot be possible of different size also includes
hidden cost.
NPV = [Cn/(1+r)^n], where n={0-N}
Sources of finance for business-

Within business organisation, it is crucial to have awareness about finance to execute all
plan and strategies effectively. There are various finance sources available for business unit to
collect money for operating business. Some are as follow:
Internal sources of funds
These are such type of fund sources which are collected by business owner internally
from their firms such as owner’s capital, retained profit and selling assets.
Owner’s capital: In this the amount that is investment by owners comes from personal
saving or debit card. Personal saving refers to that amount that is being saved by an entrepreneur.
This is one of the most common mode of fund generation (Mai and Smith, 2018).
Merit- In such type of souse of funding there is no requirements of repayments as there is
no interest charges applied. Also it hold low risk as a business unit which uses more equity than
debt has low risk of bankruptcy.
Demerit- It requires lots of time to do saving, also to use that continuously, again saving
is required which is not easy for owner. Therefore, such type of funding is not easy to do only for
the purpose of investing it in business.
Retained Profit- When business unit makes profit then some amount can be utilized by
them in business again for expansion. It doesn’t incur any interest charge or requires payment of
dividends due to which it can be desirable source of funding.
Merit- In this sources of funding there is no requirement of lenders of shareholders in
case of urgency of funds. Also it reduces the cost of issuing the external equity and remove the
loss incurred on under-pricing (Hu, 2020).
Demerit- the amount raise by retain earning could be limited as tends to highly variable
because of stable policy divided. Also some companies are not giving much importance to
opportunity cost of these earning and invest into sub- marginal projects and that may have
negative NPV.
External sources of funds:
These are those funds that are generated by external sources such as by Bank, loans,
money lenders and so on. Some are described below:
Bank loan- Bank are viewed as a financial institution which help individual to grant
money for so many reasons and it is reflected as most common external sources of funding that

are used by business unit. Bank grants money with some interest rate along with some specific
time limit.
Merit- In an emergency case, business unit can take loan from bank easily and bank loan
are the major drivers of growth for both public and private companies.
Demerit- It require various paper work/ formalities while taking loan and if the amount is
high then interest charge will also bigger and that is not be feasible for small business unit in
case of huge amount requirements.
Venture capital- This is another type of sources funding that are used by business unit. In
this number of individual or group of parties are involve for investing money into new business
or in growing organisation (Schatz, 2017).
Merit- Such type of funding sources are easily accessible and it provides an advantage to
business unit related to procurement of money in emergency situation, when organisation faces
scarcity of money.
Demerit- Security level is not that much string in this type funding sources as compare to
other. In relevance to chosen organisation, they need to stay away from such type of problems
and risk.
Therefore, from above discussed methods of sources it has been seen that the best and
suitable sources of funding for respective organisation would be the bank loan as it safe and
secure for both the parties due to some documentation. Also they only requires small amount not
a large. There should use the bank funds that can help to get better fund for limited period
without getting any issues which is related with different source of fund that can be there for
small business.
Business plan along with Scaling plans.
Business plan refers to a documentary comprehension that provides guidance to
management for accomplishing all organisational goal effectively as it limits the boundaries. It
basically shows path to followers and it is important as it helps in formulating effective strategies
for starting the new business and provides insights on steps to be taken, determine the needs of
resources for attaining business objective significantly (Dierwechter, 2017) (Marais and de
Lange, 2021). SME companies have to updates their business plane annually as they are way to
gaining growth and development in new markets.

Executive summary: Guildford tyre delivers supply services or product that are associated
with the automotive industry such as tyres of bus, car, with some other services like vehicle
diagnostic, fixation, batteries repairing engines failure, modifies exhaust and so on. They mainly
targets automotive industry and set process as per competitors and cost leadership strategy. The
company is sufficient to make good reputation at marketplace. Also they require, 25 thousand
american dollar amount to scale to scale up their business.
Overview of company: The selected organisation is Guildford Tyre which is a SME
automation company of UK. It deals with number of product such as tyres of car, buses, truck
and bikes. Along with this, provides other services also like vehicle diagnostics, fixation of
brakes etc. They have a logo “we know tyre and we understand people”. Apart from this,
respective firm updates its products continuously to compete with other players of market.
Mission & vision: The main motive of Guildford tyre is to expand its business at
international level by serving good qualities to consumer, through this market share of company
will raised. Whereas vision of this firm is to target potential consumer for improving sales and
profitability.
Strategic objective: The primary objective of respective organisation is to open two more
outlets in other areas of UK within next two years for enhancing revenue by 15 %.
Financial summary (Start-up cost)
Assets- 60000000rs
Advertisement- 500000rs
Salary- 45000rs
Insurance- 3000rs
Rent- 1000000rs
Raw material- 25000000rs
Industry and market analysis –
Industry outlook- It has been determine that the automation sector has gained phenomenal
growth in last few years as well as the revenue generation is too good. That makes industry a
leading within country. Thus, for small and start up business there is a huge scope in such
industry (Di Tommaso and et.al., 2019). There is need to get better analysis that can help to get
better understanding.

SWOT- To determine the strength, weakness, threat and opportunity, respective
company use SWOT analysis. Underneath are some strength, weakness, threat and opportunity
in context of Guildford tyre:
Strength Weakness
 Biggest strength of Guildford tyre is its
product portfolio. Through this, they
are becoming the eye catching
company for their potential consumer.
 For improving business structure, they
do not have adequate amount of capital
and resources.
 Lack of promotional activity.
Opportunity Threat
 Product development is another
opportunity for them to grasp more
consumer by opting cost effective/
leadership strategy.
 Less promotional activities sets of
board of directors of selected firm.
 Entrance of other competitors along
with substitution.
PEST- This is a framework that is used by business units with the aim of analysing the external
factors that can influence business operation.
 Political- It comprises political stability of country and with relevance to UK, it hold
good and that is beneficial for respective company.
 Economical- It includes ways, supply and demands of product/ services. Guild ford tyre
need to address all these in effective way for smooth running of operation.
 Social- To enhance more consumers, it is vital to supply product as per consumer’s
requirements as this is related with the changing trends, attitude and behaviour of
customers (Baschat, 2018).
 Technical- Advancement in technology become important to opt by all companies as it
give them opportunity to compete with other player of market and maintain sustainability
for long time.
Evaluating marketing segmentation
Segmentation – The whole market is divided into small units as per some characteristics
such as geographic, behavioural, demographic etc. Guildford tyre segments its whole market
according to demographic. In this, they are serving and selling their product to other business
unit in relation to get better business.

Targeting- They mainly targets the manufacture of vehicle for improving their sales and
profitability.
Positioning- It reflects towards creation of position at marketplace and in context of
Guildford tyre company they have well known & positive image at marketplace.
Competitors- It is important for all types of companies to analyse their competitors
while enlarging business as with this they will able to analyse risk associated with business due
to competitors. In context of chosen company the market stability is flexible in nature and that
can influence business operation. Therefore, Guildford tyre needs to analyse competition
effectively and with the help of porter’s five forces it can be easily assessed:
 Threat of new entry: New entry bring innovation and that put pressure on Guildford tyre
to low their pricing strategy, reduce costs and add values preposition to consumer. They
have to manage all challenges by innovating new services/ product that bring new
consumers to fold but also give old consumer to buy their products.
 Threat of substitution: To deal with this factor respective company need to be service
oriented instead of just product oriented, also need to understand the preferences of
consumer.
 Competitive rivalry: Competition in automation industry is to high
 Supplier’s power: The number of suppliers within automation industry is so many, due
to this, supplier’s power is low and it is possible by creating effective supply chain with
them (Bagheri and et.al., 2018).
 Bargaining power: There are number of option available for buyer for switching.
Therefore bargaining power is high. By creating large consumers base with the help of
launching new innovative product they can reduce the bargaining power of consumers.
There is need to get better evaluation in which there are many of competitors need
to focus on business that can provide better business.
Promotion- The promotional strategy that is used by Guildford tyre is social media
platform and advertisement mode as both of these are less costly as compare to other
promotional strategies.
Marketing strategy with pricing strategy- They mainly use digital and social
marketing strategies in order to create awareness about their product and with the help of cost

leadership pricing strategies they can gain success in expansion. Also they have to set the price
of product according to their competitors for beating them.
Strategy and implementation way- All marketing and other strategies that are devised
with the aim of gaining success is implemented as one time investment as it is a SME business,
and they will not able to tolerate any kind of large loss. Also they will make effective policies
and norms in order to implement that effectively. There is need to use the Ansoff matrix in which
there is focus on the market development in which there is introduction of new product in
existing market. Diversification in which there is new product in the new market. Market
penetration where existing product is there in the existing market. Product development is the
one which is there is existing market get introduced by new product.
Personnel and management –
- Ownership (sole trader/partnership/limited liability etc.) – The managerial structure that
is followed by Guildford Tyre Company is hierarchy and operated by sole proprietor and have
CEO, COO, head of management with 10 team leaders and 200 employees. In order to open new
two more outlet they require 50 more employee and that cost within 3 years become 3 times
more than existing.
Financial plan-
Assumption- The total budget that is required to scale up the business is about $2 million
also the whole plan that are devised below will be executed under this budget effectively.
Cash Budget
Particulars January February March April May June
Receipts:
Cash fees 18000 27000 45000 54000 50000 70000
Credit fees 36000 36000 54000 90000 65000 55000
Sale of asset 20000
Total receipt 54000 63000 99000 164000 115000 125000
Payment:
Salary 26250 26250 26250 26250 26250 26250

Bonus 6300 12600 1900
Expenses 9000 13500 22500 27000 25000 30000
Fixed overhead 4300 4300 4300 4300 4300 4300
Taxation - - - 95800
Interest - 3000 6000
Total payments 39550 44050 62350 165950 61550 62450
Net cash flow 14450 18950 36650 -1950 53450 62550
Opening balance -40000 -25550 -6600 -30050 -35000 22000
Closing balance -25550 -6600 -30050 -28100 -38500 18000
Payback Period
Year Cash inflow in £ (000) Cumulative cash inflow
(000)
1 28 28
2 32 60
3 35 95
4 55 150
5 78 228
Formula of payback period: = Base year + primary outlay - collective cash inflow of base
year / future year cash inflow
3 + 100000 – 95000 / 55000 = 3.09 year
Break even analysis
Breakeven point:-
Fixed costs / Contribution per unit = (80000 + 60000)/ 640 218.75
Project profit and loss account

Profit and loss account for the year ended
30th Nov 2019
Particulars Amount
Sales 130900
Less: Return inward 550 130350
Purchases 92100
Less: Return outward 307
Add opening stock 23910
115703
Less closing stock 27475
Cost of sales 88228
Carriage inwards 215
Gross profit 41907
Less: Expenses
Sundry expenses 284
Office expenses 1377
Insurance 492
Carriage outwards 309
Motor expenses 1630
Rent 2970
Telephone 405
Salaries 12810
Totals 20,277
............ 21,630
Scaling option-
Future plan to expand business-
Risk analysis- While operating any business, it hold number of risk and in that some are
predictable and some are not. Like associated with covid-19 was unpredictable but the loss of
liabilities is expected and that may affect business operation. Therefore company need to take
care of all risk and that hamper their business.
Backup plan- If the respective company will not able to promote about their services
effectively with the help of social media, then they have to opt door-to door for gaining success.
Exit strategy- Winding up of business would be the best exit option for them as well as if
they gain success, then merger and acquisition would be viable for them in case of scaling up of
business. As it will allow them to capture more market and gain huge knowledge to improve
their business.

Exit strategies and succession plan
Reason why SME fail- There are so many reason of business failure and some are as
follow:
Internal-
 Financial reasons, due to poor accounting and poor financial management, lack of
rewarding a business can fail.
 Poor marketing strategy or aspects related with marketing mix like incorrect pricing, poor
distribution leads to business failure.
 Deprived quality of services leads to quickly exposed of product s/services.
 If there is lack of effective communication and coordination among staff of company
then also business tends to failure (Bradley, Burnett and Sparling, 2017).
External-
 If the competition in market is high and the start-up business will not able to beat them,
then they faces some failure.
 Government regulation is anther cause of business failure as it is important for all
business to obey all rules and legislation that are moped by government.
 Recession is another cause of business failure, as some units are prone to recessionary
impact, especially those that face income elastic demand for their products.
 Floating exchange rate refers to changes in exchange rate and that puts adverse effect on
operation of business unit.
Exist strategy when business fail-
Due to above discussed caused company need to exit its business and there are number of
ways by which they can exit its business, some are as follow:
Winding up- This is related with the completely closing of business unit. All assets of
business are sold by the owner to other individual who buy them at lower prices compare to
initial rate. This is the most effective mode of business exiting. Respective organisation,
Guildford tyre can use such type of exist option if they get fail in gaining success in expansion.
Benefits- No debt is remaining when such type of exist option are used by business units,
also it provides another chances to use their resources efficiently and effectively when all these
assets were not sale (Sell and et.al., 2018).

Demerits- Main limitation of such exit option is that owner would not have any right on
their assets after selling.
Sell business to managers or employees: Business owner can sell its business to their
employees or manger whoever have interest to buy business with some exchange either amount
or share.
Advantage- It permits to keep a share of business and sty connect to business as an
advisory.
Disadvantage- Sometimes employee are not that much qualified to take over all business.
Also the client may not want new management in direction of company.
Growth of small business and issues in success planning-
To achieve future growth, succession option are beneficial as it provides assistance to
business for opting some strategies that aid them to gain growth in business. It is a movement of
new roles and responsibilities. Number of succession option are available and some are as
follow:
Merger- This is the process by which a business unit is merges with other companies to
enlarge business, it will be beneficial as it help in development of business.
Advantage- Such type of option help to increase network connection in corporate world
and leads to growth. In context of Guildford Tyre they can merge their business with other
business which have well image at market and help them to formulate effective marketing
strategies.
Disadvantage- Sometime it left negative impacts on employees as they have to obey the
rules and decision of other partner too and that become complex for them.
Acquisition- It is related with the acquiring of new and old business/ commodity for
enlarging the business at marketplace. Therefore, with relevance to chosen organisation they can
also opt this option for growth.
Benefits- By acquiring such new business, it will be easy for the operator to gain more
knowledge and learn more about new technologies.
Limitations- Level of compatibility is the primary limitation of such option when it
doesn’t not match in effective way and leads to cause of issue.
Problem related with succession planning:

Cultural issues- When company is merge with some new business unit, then it foster
diversity and which may be the cause of cultural issues as number of people involves from
different background and culture. That may effects the consistency and effective working
environment of company.
Procrastination: If something happen with significant business and other person and there is
not plan remain, that could leads to crumble the business very quickly. This is the manner that
buoy up the business and make it stronger.
CONCLUSION
From above discussed report it has been analysed that planning for growth will become
essential for gaining success and development. For this, there is requirement of effective
business plan with some strong policies and strategies for helps them to attain all goal
successfully. Also it require fund to enlarge their business, and number of option are available
such as bank loan, owners capital etc. further, if any SME business get fail then winding up of
business is best to exit.

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