Unit 42: Planning for Growth Analysis - Millbay Hotel Limited

This report provides a comprehensive analysis of Millbay Hotel Limited's growth strategies, focusing on various aspects of business expansion. It begins with an analysis of external factors using the PESTLE framework to assess the political, economic, social, technological, legal, and environmental influences on the hotel industry, particularly in the UK. The report then applies Ansoff's growth vector matrix to evaluate different growth opportunities such as market penetration, product development, market development, and diversification, assessing their associated risks and benefits. Furthermore, it explores various sources of funding, including bank loans, internal sources, crowdfunding, and peer-to-peer lending, detailing their advantages and drawbacks. The report culminates in the design of a business plan for growth, incorporating financial information and strategic objectives for scaling the business, along with an assessment of succession and exit options for the company. The report emphasizes the importance of strategic planning, financial management, and adaptability in achieving sustainable growth within the competitive hotel industry.

UNIT 42 Planning for Growth

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
P1 Analysing considerations for evaluating opportunities of growth with appropriate
justification..................................................................................................................................1
P2 Evaluating growth opportunities with application of Ansoff's growth vector matrix...........3
P3 Assessing available sources of funding with its drawbacks and advantages.........................5
P4 Designing business plan for growth comprises financial information and strategic
objectives for scaling business....................................................................................................7
P5 Assessing succession and exit option with its drawbacks and limitations...........................10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
The opportunities of growth are mandatory for every business whether it is SME or not.
The present study will discuss about different key consideration for evaluating growth
opportunities with context of Millbay Hotel Limited with its expansion. It will also reflect
Ansoff's growth vector matrix along with assessment of potential sources of funds with it
benefits and limitations. This report will reflect business plan for growth which comprises
internal and external market analysis and financials as well. Further, it will reflect various
succession and exit options for small business with their merits and demerits.
MAIN BODY
P1 Analysing considerations for evaluating opportunities of growth with appropriate justification
In the present scenario, it is very important for evaluating growth opportunities which
could be elaborated for sound business ideas on basis of making various investment decision
about Millbay Hotel Limited. There are various factors which must be considered for evaluating
viable business opportunities are analysed through PESTLE analysis. The hotel industry in
United Kingdom is referred as very competitive along with various hotel organizations such as
Imperial hotel, Tune hotel and Millbay hotel limited.
Political factors
 Act of digital economy: In this act, parliament was considered with topographic point for
diminishing aggregate of sharing illegal file and copyrights of violations which are taken
in present digital society. Millbay hotel Limited is providing free Wi-Fi cyberspace as to
utilize hotel's connexion it is responsible for facing possibility of holding and to disable
service supplier (Olesen and Carter, 2018).
 New policies of immigration: These policies from alliances authorities which have
impacted UK's hotel industry. The issues regarding accomplishments had been
predetermined for UK's reception sector. Apart from its operational roles like saloon staff
and chefs, it has highlighted deficit in its accomplishments regarding direction.
Economic factors
 Crowded market: In the present era, there is too much competition for Millbay Hotel
Limited in UK. The hotels such as Imperial hotel, EasyHotel and Tune hotel provides
similar service but at competitive price.
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 Increment in UK tourist disbursement: The visitors in UK after recession and autumn in
value of sterling against dollar and Euro had discouraged Britishers from doing trips in
abroad. With this consequence, tourers disbursements had hit a record of 10.5 billion in
metropolis which is referred as great intelligence in this industry.
Social factors
 In this hotel industry, location is considered as very important. Hotels in UK has
requirement to be near to attractive forces, transport links along with various comforts to
extract healthy number of customers. This is possible for perspective of Millbay Hotel
Limited with proposed UK enlargement along with trouble in happening from proper
sites.
Technological factors
 It is considered as major variable which gives direct impact on its operations as it has less
involvement of technology whose special focus is on availability of different electrical
appliances and IT services for customer's comfort zone.
 Its application of the latest development of IT for maintaining smooth level of function
for hotel chains as it helps in developing centralized management system of supply chain.
 The main competitive advantage gained through Millbay hotel Limited by influencing
promotion and marketing of products. The mode of communication is altered through
web based techniques. This hotel has maintained innovative look and interactive website
in this context with availability of online reservation facilitation services.
Legal factors
 UK's minimum wage rate has raised by government which had given impact by
increasing its operation cost of budget hotels. It would indirectly raise cost of production
by hampering policy to providing competitive prices to its consumers.
 For maintaining high standard and to avoid legal issues there is development of
responsible sourcing policy.
 The policy of Commitment to work with its suppliers has been set for supporting its
implementation (Bagheri and et.al., 2018).
Environmental factors
 The environment and social responsibility is referred as appropriate centre stage of
expectations and preferences of customer. In this present scenario, customer are vigilant
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and favourable to such companies which are caring for environment and provides due
diligence for adopting operations of business by reducing proper waste disposals and
pollution.
 The Millbay hotel Limited had given strong emphasis on CSR with main objective of
decreasing operational carbon mission.
Conclusion: From the above PESTLE analysis, it had extracted numerous opportunities
about strategic tie ups and to invest in digital technology. Further, it has articulated that
organization must adopt CSR because of vigilance of customer along with responsible sourcing
policy. This expansion plan would be using technological factor as essential opportunity.
P2 Evaluating growth opportunities with application of Ansoff's growth vector matrix
There is presence of various growth opportunities which is strategic planning tool gives
framework for helping its executives, marketers and senior managers for devising strategies for
growth of future. It provides four various other growth strategies such as:
 Market penetration
 Product Development
 Market development
 Diversification
Illustration 1: Strategies of Ansoff Matrix
(Source: PESTLE Analysis, 2011)
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Market penetration: This strategy is referred as least risky as various existing
capabilities and resources are leveraged. Its main objective is to raise its market share with its
existing industries by providing more product to its established customer or to extract new
customer in these markets (Rudolf, Kienast and Hersperger, 2018). It could be performed by
promoting element of Marketing mix. The hotel has optimised this strategy on yearly basis but it
has limits with single approach of saturation for pursuing another strategy with continuing its
growth. Generally, it is performed with existing products and markets.
Product development: It is very proper with strength of Millbay hotel limited related to
its potential customers instead of specific product. The strengths are leveraged by appropriate
development of new product and targeting its existing consumers. The new product development
consists of high risk as compared to increment in market share.
Market development: This option consist of various pursuit of other geographical
regions and additional market segments. In this context, its competencies are highly related to its
particular product as compared for experiencing with market segment which is considered as
good strategy. Hotels are referred as highly demanding place, as tourism is growing with huge
proportion in this present era . In simple words, new group of buyers would be entailed through
this strategy for an existing product.
Related Diversification: It is referred as very risky among four growth strategies as it
has requirement of both market and product development and might be present outside of core
competencies of Millbay hotel Limited. It could be replicated as reasonable choice with
compensation on probability of high rate of return. The other benefit of diversification consist of
potential to extract foothold in attractive industry along with decrement in overall business
portfolio risk.
Recommendation: It has been cleared with Ansoff Matrix along with risk increment
provided by these strategies such as increment in cost along with every step beyond uncertainty
and market penetration of operating new industry and market as well. The Millbay Hotel Limited
is laying special emphasis on market development and penetration which recommends relative
risk averse organization as compared to firm such as Tune hotel. It has been stated that, market
development and penetration provides various benefits to organization in different circumstances
(Grooms and Frimpong Boamah, 2018).
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The budget hotel industry has attained high growth around world and main market is
replicated as UK. The purchasing power is decreased on continuation aspect especially in
recession era from its customers. The pattern of spending is changing as cheaper products with
high quality is in demand as ample opportunity had been given for expansion. The vision has
been attained through leading budget hotel retail chain. Further, it should adopt strategy of
Market development along with laying special emphasis on expanding its chain in other EU
countries.
P3 Assessing available sources of funding with its drawbacks and advantages
Funding is considered as act of giving its financial resources with form of money and
various other values like effort, time and especially through specific company or organization It
is referred as combination of equity and debt. Debt financing consist of promissory notes, bank
loan and credit purchase. Equity funding incurs when shares are sold through business from its
ownership with context of outside resources. Rather than borrowing via bankers and investors,
every business has option of using its money for funding its operations. It consists of funds
inside business which are readily available as it consists of mode through which Millbay hotel
Limited could generate money from inside business.
The business has 20000 of its savings and rest 17000 it will be taking bank loan.
There are different sources of funding such as:
Bank loans: It is the easiest sources for extracting finance as it is an extension of credit
via bank to its customer or business which must be paid with its interest.
Merits
 It could be easily procured.
 There is presence of tax deductible expenditure as interest paid on bank loan.
 It could be used for both medium and short term financing.
Demerits
 There are various bank loans which carries penalty of prepayment.
 The cash flow could be decreased by borrowing too much as particular bank loan.
 In majority cases, whole amount of applied loan is not disbursed through bank as it pays
less cash as compared to demanded loan.
Internal sources of finance:
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Crowdfunding: It is referred as method for increasing its equity by considering
numerous people for small proportion of money. It might be gained trough internet as it is a
different opportunity for consumers to benefiting from direct growth.
Merits
 Absence of upfront fees as it is fast way of increasing its finance.
 The progress could be tracked by investors and helps for promoting brand via networks.
 It could be valuable marketing form, as business or project could be pitched via online
platform and outcome in media attention.
 The responses of public could be tested in appropriate format to innovative idea about
product.
 It is stated as alternative option of traditional funding and bank loan (Peters and
Kallmuenzer, 2018).
Demerits
 Its process is not easy as compared to traditional method for increasing finance.
 There is requirement of significant resources for building interest before launch of
project.
 In case funding target has not attained, then any fund which is pledged will be returned to
its investors.
 The business idea is not protected with patent or copyright, then this concept could be
stolen from crowd funding site.
.
Peer to peer lending: This platform helps in allowing for establishing business along
with forecast earnings and credit history for stating its need for funding.
Merits
 It is fastest and easiest online application process.
 Credit score are not impacted for checking rate of interest.
 Less interest rate as compared to traditional financing institutions and credit cards.
 Fixed monthly payments and interest rate with absence of hidden fees.
 Unsecured loans, so collateral is not necessary.
 Absence of prepayment penalty for paying loan before due date.
Demerits
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 Application of high interest rate.
 Credit scores which are below cut-offs are not approved (Kumar, 2018).
Hence, it had been concluded that bank loan would be taken of 15000 and its alternative
option will be crowdfunding and peer to peer landing.
P4 Designing business plan for growth comprises financial information and strategic objectives
for scaling business
Overview
The Millbay hotel is located in United Kingdom which had attained success with
application of various business strategies. This business plan is formed for expansion in
European country such as Spain. It would be analysing its strength and weakness for extracting
opportunities along with its financials.
Objectives
 To be considered as best hospitality brand with special emphasis on customers with
appropriate level of satisfaction.
 To increase sales by 10% in end of financial year.
Mission and Vision
The main mission and vision is to create the best hospitality brand in efficient aspect and
to lay focus on each consumer and providing according to their needs.
SWOT Analysis
Strength
 It is an open sector which creates various opportunities related to jobs for young
generation.
 It is referred as non-substitutable as people will not stop travelling. This sector has high
dependency on tourist which is great strength.
 It has advertised itself in huge aspect.
 It is located near tourist attractions and presence of less cost of labour which would give
better profit for its owner of hotel and high potential growth (Peters, Kallmuenzer and
Buhalis, 2018).
Weakness
 There is presence of high competition along with various substitutes.
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 Absence of global presence as compared to international hotel chain.
Opportunities
 Brand value could be build via customer experience.
 Strategic tie ups
 Investment in digital marketing
Threats
 Terrorism and political unrest
 Lack of sufficient skilled personnel along with its quality.
 Presence of backpackers hostels
PESTLE Analysis
Political factors
 Act of digital economy
 New policies of immigration
Economic factors
 Crowded market
 Increment in UK tourist disbursement
Social factors
 Location
Technological factors
 Availability of different electrical
appliances and IT services
 Web based techniques
Legal factors
 UK's minimum wage rate
 Responsible sourcing policy
Environmental factors
 Strong emphasis on CSR
 Due diligence for business operations
Marketing Mix
 Product: The Millbay Hotel Limited has deluxe restaurants, bars and rooms. It also serves
one end solution to travellers for meetings about business and events. They consider both
business guests and travellers or tourists in their premises or campus. This hotel is placed
around UK as perfect stop for conducting business events and meetings. It rooms are
designed with modern diligence and amenities are advanced. The exotic drinks and food
on its menu are considered as best hospitality delight on basis of its consumers. Exclusive
membership discounts are provided to its members along with various other facilities
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such as room option, Wi-Fi etc. The main feature is presence of request on arrival room
services for unique facilities and décor of room.
 Price: In the present scenario, everybody's need is to get high quality in low price which
is referred as budgeted hotel as price penetration startegy. This hotel will select its
reputation with each class especially, middle level along with the best quality amenities
are adopted with pricing policies for up-scaling its services (Baum, 2018).
 Place: This hotel is fully involved in providing deluxe experience, as it is located near to
attraction of city of UK. There is establishment of various vacation spots near to airport
and traveller destination which is an advantage to travellers and business people as well.
The unique aspect is that it fulfils customised needs of its customers. In the similar
aspect, its attractions includes peace, beach-sides and calmness along with desirable
option of its surroundings. Its expansion plan is going to be implements in European
country as Spain.
 Promotion: In this present scenario, hospitality is growing with high growth rate. The
Millibay hotel Limited has chosen its promotional activities to attain competitive
advantage in its industry. It gives exclusive membership to people and has tie up with
tours and travel company. Its well dedicated staff and team has laid emphasis on its
innovative marketing strategies for keeping record of its outcome and feedback along
with promotional strategies.
Financial Analysis
Budgeted Cash Flow
Particulars 2018 2019E 2020E 2021E 2022E 2023E
Cash inflows
Opening cash inflow 20000 15700 13350 11727 10916 11012
Sales revenue from guest
service 10000 11000 12100 13310 14641 16105.1
Other income 4000 4000 4000 4000 4000 4000
Total cash inflows 34000 30700 29450 29037 29557 31117
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Cash outflows
Direct material 2800 1650 1815 1997 2196 2416
Wages 2500 2500 2500 2500 2500 2500
Other expenses 1000 1040 1082 1125 1170 1217
Electricity expenses 4000 4160 4326 4499 4679 4867
Administration expenses 8000 8000 8000 8000 8000 8000
Total cash outflows 18300 17350 17723 18121 18545 18999
Cash deficit / surplus or
closing cash balance 15700 13350 11727 10916 11012 12118
P5 Assessing succession and exit option with its drawbacks and limitations
Asset Sale / Liquidation
Liquidation is referred as very useful method for wrapping any business entity which is
not longer capable for trading because of its debts. If in case organization is solvent or could be
restructure or saved then it must be not used. Generally, if business fails to pay its debts then
liquidation is performed (Hughes, 2018).
Advantages
 If business is facing pressure through its creditors, then it could be solved and each will
be dealing with insolvency practitioner which is appointed.
 The responsibility from directors and owners of business are removed.
 All matters are brought to end for struggling insolvent business for coping up in
organised and legal manner.
Disadvantages
 Employees might lose their jobs who might not wish to work for any director.
 Business will lose capability to trade and restrictions from using similar name of
company in the future.
 Accumulated losses for tax aspect would be lost and would be not able to recover
(Liquidation, 2018).
Merger and Acquisition
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Merger is referred as engagement of total absorption from target firm through acquirer.
Acquisition is replicated as one entity buying particular portion of other firm.
Advantages
 It would be creating synergy by merging two companies whose outcome is to enhance
financial gains, business performance and valuation of shareholders in long term
perspective.
 Purchasing power would be improved as it will negotiate bulk orders which will directly
lead to cost efficiency (Sourvinou and Filimonau, 2018).
Disadvantages
 It might lead to job loss, acquiring organization might shut down various under
performing segments.
 If organization is merged and lead to maximum size might create dis-economies of scale.
 Competition is reduced through merger as high pricing power might be gained through
new business entity.
Employee Stock options and ownership
It is a tax attempt which signifies huge retain of capital for company's growth and
operation. It's exiting owner could cash out on basis of adoption.
Advantages
 It is ready made market and buyer for owner's stock and business respectively.
 Provides retirement benefit to its employees.
 It ignores integration plans and linked cost on basis of restructure operations, decrement
in staff.
Disadvantages
 It is complex and has presence of compliance requirements with need of huge
administrative cost on yearly basis (Penela, Morais and Gregory, 2018).
CONCLUSION
From the above study it had been concluded that, growth opportunities must be evaluated
as major aspect. Furthermore, growth could be attained by appropriate planning for fruitful
future and present. It had been articulated from this report that Millbay Hotel Limited is getting
huge impact through technological factors along with numerous political, social and economic
factors as well. It has shown that to attain growth and objectives, organization would be focusing
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on market development strategy which is concluded from Ansoff growth vector matrix. In the
similar aspect by assessing sources of finance, bank loans are very important for making
availability of funding its sources and to get efficient outcome. It is shown that every
organization, especial SME both internal and external sources are important for funding. The
business plan for Millbay Limited for increasing sales by 10% which has been performed with
both external and internal analysis. It can be summarised by assessing exit or succession option
where liquidation, merger and acquisition are important for business.
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REFERENCES
Books and Journals
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