CafePod Coffee Co: Expansion Plan and Financial Analysis Report

This report provides a comprehensive analysis of CafePod Coffee Co's expansion strategy, focusing on its potential entry into the Liverpool market. The report begins by analyzing key considerations for evaluating growth opportunities, including Porter's generic strategies, competitive advantages, and a PESTLE analysis. It then applies Ansoff's growth matrix to identify suitable market penetration, development, product development, and diversification strategies. The report further assesses various funding sources, including internal and external options like bank loans and crowdfunding, along with their associated advantages and disadvantages. A business plan is formulated, complete with financial information and strategic objectives for scaling the business. Finally, the report examines succession and exit strategies for the small business, considering both advantages and disadvantages. The report aims to provide a detailed roadmap for CafePod's expansion, considering market dynamics, financial planning, and strategic decision-making.

Planning for Growth

Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1: Analysis and justification of key considerations for evaluating growth opportunities.........1
P2: Evaluation of growth opportunities using Ansoff's growth matrix.......................................3
TASK 2............................................................................................................................................4
P3: Assessment of sources of funding along with advantages and disadvantages......................4
TASK 3............................................................................................................................................5
P4: Business plan for growth including financial information and strategic objectives for
scaling up a business....................................................................................................................5
TASK 4............................................................................................................................................8
P5. Succession and exit plan for small business with its advantage and disadvantage...............8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Expansion of business is always a dream of every business owners of small sized
organisation. For this, they always tried to formulate an effective planning and strategies to
achieve growth and success in new market. These planning can be possible through analysing the
market by conducting a research. The present assignment is based on CafePod Coffee Co which
is small sized coffee shop operated in London, UK. The business owners decided to enter their
business in Liverpool market with an objective of increasing their customer base and revenue.
The report discusses the growth opportunities available for CafePod Coffee Co by using Ansoff
growth matrix strategy. In addition with this, business plan has been formulated, options of
raising funds are undertaken and exit or succession ways are determined if not getting success in
new market.
TASK 1
P1: Analysis and justification of key considerations for evaluating growth opportunities
This is related to that situation which is related to growth term of a business whether you
are trying to start a new business or expanding current business. For achieving the growth in the
market a business needs to decide and evaluates the actions and activities to be performed to
achieve its business goals. In context of Cafe Pod Coffee Co, it is a small business enterprise
which is established in London, UK and it is now want of expand their business in cities of UK.
Porter's generic strategy:
Porter's generic strategy used to described the strategies of the organisation. In this
strategy porter's considered that an organisation must adopt those strategies which helps them to
beat their competitors in the marketplace. There are four strategies that can be used by Cafe Pod
Coffee Co in order to compete their competitors (Barnett, 2017).
 Cost leadership: This strategy assist the firm that they should offer their products and
services at a lower price from their competitors to achieve a great market share. By using
cost leadership strategy CafePod Coffee Co can cover a vast area in the market place as
their products and services cost are lessor than their rivals.
 Differentiation: In this strategy porter's advised the organisations to produce that
products and offer that services which has some unique features. This strategy require
great research and development and innovation which enable them to deliver high
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quality. With help of this strategy CafePod Coffee Co able to produce exclusive products
which makes it more attractive rather than their rivals products.
 Cost Focus: In this strategy a company targets on niche market and offering products at
lower price. It is possible to produce uniquely low cost products for the companies only
when they have proper knowledge about the dynamics to the market and the needs of the
customers. Under this strategy CafePod Coffee Co is able to provide various products at
low price to the large number of people which help them to cover a vast market area
Chapin, 2012).
 Differentiation focus: Under this strategy company offer products to niche market
having some unique features. Differentiation focus strategy requires brand loyalty of
customer so that firm can remain competitive in market. By using this strategy CafePod
Coffee C. can offer unique product within new marketplace which help them to increase
their profitability and also help them to stay ahead in the market from their competitors.
Competitive advantage-
The Cafepod has various extra resources better than their competitor which allows them
to achieve competitive advantage. As the Cafepod offer high quality products in low cost which
is a benefit for the company. The Cafepod has made a core strategy for their coffee house they
will provide reading area as well so this will attract the attention of the consumer. The Cafepod is
installing more resources so that they can add value in their services so that they can achieve the
competitive advantage in the company.
PESTLE analysis:-
A Pestle analysis is a structure or tool which is used to analyse the environmental factors
which includes political, economic, social, technological, legal, and environmental factors.
Before taking the decision of expanding their business, CafePod Coffee Co must analysis all
these above factors which can impact on their operational activities. These factors are described
below:
 Political:- These factors includes legislative policies, government interventions and
political stability of a country. CafePod Coffee Co is thinking about expand their business
then they should consider other countries legal structure and government policies which
might impact on their operational activities (Chen and et.al.., 2014).
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 Economical:- There are various factors which are related to the economic like exchange
rates, interest rate and many others. CafePod Coffee Co should keep their eyes upon other
countries growth opportunities then they should expand their business in other countries.
 Social: These factors are those which involves customers belief, socio-culture and their
changing preferences. Before expanding their business CafePod Coffee Co should
consider others counties residents choice, preference, trends and many others which can
effect their business.
 Technological: It involves the rate of technological innovation and developments that
could affect a market and industry. In this case CafePod Coffee Co, if they want to enter
and survive in the new market then they should produce their products according to the
latest technology in order to remain competitive and sustain in the market (Fahlvik,
Elfving and Wikström, 2014).
 Legal: These factors are related to the discrimination laws, minimum wages laws,
consumer protection laws etc. If the company want to expand their business without any
legal compliances and penalties then they should consider all the laws while their
products which may affect their operations and goodwill of company.
 Environmental: These factors are related to the surroundings of the environment.
CafePod Coffee Co should follow other countries rules and regulation related to the
environmental protection.
New product and service-
The Cafepod is planning to use innovative idea to grow their coffee house as they are
opening a reading section within their coffee house and they are using various approaches to
promote their new idea and this will add more value in their existing product.
P2: Evaluation of growth opportunities using Ansoff's growth matrix
This model is important for strategic marketing planning. It can be beneficial for CafePod
Coffee Co to find good opportunities in the market to grow by developing new product and
services. So this model is also known “product-market mix”. It is a tool which facilitate CafePod
Coffee Co to analyse and plan their company strategies for growth. This matrix includes four
strategies that are:
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 Market penetration
 Market development
 Product development
 Diversification
Cafe Pod Coffee Co uses Ansoff model to see the growth strategies for their company. It
assist them to make suitable decisions which help them in gaining competitive edge in rivalry
market. Apart from this, it has disadvantage that using these strategies involves more risk and
cost thus failure of strategy may damage the financial stability of Cafe Pod Coffee Co which is
small sized coffee shop so they can examine all below strategies and adopt according to their
suitability:
Market penetration:-Market penetration is increasing of maintaining market share of
existing product by using new marketing strategies. Cafe Pod Coffee Co uses this strategy to
attract customers by offering them good quality products and special discount during special
occasion. The firm may also lower prices of its products and services to increase sales (Grover,
Bokalo and Greenway, 2014).
Market development:-Market development means sell existing product in to new
market. It is also a growth strategy applied by Cafe Pod Coffee Co because its expanding its
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business world wide. The company may decided to adopt social media marketing to aware
people of new market about their entrance into their market
Product development:- Product development means introduce new product into existing
market. The firm has develop or launch new product in existing market to gain market share.
Cafe Pod Coffee Co uses this strategy as a main growth strategy, this company develops new
products according to the taste and preference of the customers.
Diversification:- In diversification means launch new product for new market so that
company spread their business in different market. The Cafe Pod Coffee Co make new products
according to the taste and preference of the customer to launch into market.
TASK 2
P3: Assessment of sources of funding along with advantages and disadvantages
Funding refers to the arrangement of capital and money which is required for the every
stage of production. This need arise when a company have insufficient capital to run their
business smoothly. On the other hand, sourcing of funding means raising needed funds from
different options who provide them loans or mortgage at reasonable rate of interest. It facilitate
SME to enlarge their business operations by investing amount in establishing their new business
or new products into different locations. There are number of sources present from where the
company can raise fund, these sources are further divided into two parts:
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Internal sources:- It is related to those resources which can be generated within the
organisation. It this category various internal sources are included like sale of assets, retain
earning, and reduction of working capital (Haaland and van den Bosch, 2015)
Equity capital- The Cafe-pod can generate more fund through providing ownership and in
return taking huge amount of capital to grow the business.
 Advantage- This increases the amount of capital and fund can be generated without any
problem of returning it.
 Disadvantage- This reduces the right of ownership.
Sale of Coffee- The main revenue of the company is the another internal source which
company can use to grow.
 Advantage- This helps in generation of fund easily without any formalities.
 Disadvantage- This reduces the flow of cash in the cafepod.
External sources:- It is related to those sources which are present outside the
organisation. It includes equity share capital, debentures, leasing, hire purchase, bank overdraft
and many others.
There are several sources which can be used by CafePod Coffee Co for raising the fund
which are described below:-
Bank loans:- The amount of capital borrowed from bank and is repayable in future along
with interest which is fixed by bank. It is the most commonly used source of fund used for
financing the business operation. Bank loans are available for both long term as well as short
term, hence it is very beneficial for CafePod Coffee Co as they get fund at fixed interest rate.
 Advantage:- One of the benefit provided by bank loan is that loan is not repayable on
demand but while taking the load receiver is well-known when they have to repay their
loan.
 Disadvantage:- Getting the loan from bank also have some advantages that is loans are
given against some security or asset that may be seized if the receiver fails to make
payment.
Overdraft:- It is a most common form of business capital funding, an overdraft refers to
that condition when money can withdrawn by bank from the saving or current account, even if
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the account balance is zero. In this case bank give extra limit to give that amount and that
amount considered as overdrawn (MacLeod, 2013).
 Advantage:- It is the most flexible method of fulfilling the capital requirements as one
can withdraw the money in extra to their balance anytime.
 Disadvantage:- for extending the overdraft company has to pay arrangement fee to their
banks.
Crowdfunding:- It is a method of financing a project by inviting the small fund from a
range of people instead of search larger capital from small number of individuals. Crowdfunding
is generally done by using social media platform for pulling fund from vast network of people.
 Advantage:- Arranging the fund from this source is very beneficial in this case CafePod
Coffee Co no need to pay upfront fees and it is a fast way to raise finance.
 Disadvantage:- A major disadvantage of choosing this option is that a company has to
generate the interest of public within their project in order to pool money (Mason, 2015).
From the above options, Bank loan will be the best option to adopt in order to raise funds as
bank charges low rate of interest as compared with other options. Along with this, the interest on
business bank loans is tax-deductible which positively impacts their profitability. In addition,
especially with fixed-rate loans, in which the interest rate does not change during the course of a
loan, loan servicing payments remain the same throughout the life of the loan.
Investment decision making- The proper procedure has to be followed regarding taking
decisions about investments. The process involved two consideration which are
 Pay back period- This is a method which shows that if Cafepod invest then in what time the
return of investment will come.
 Net present value- This invoolves the calculation of the net current value of investment and
this methos is applied with the use of Pv factor.
The cafepod can consider after using these techniques which provide an estimation that which is
less riskier.
TASK 3
P4: Business plan for growth including financial information and strategic objectives for scaling
up a business.
Business plan is defined as the proposal document of an organisation in which various
strategies and policies are mentioned with the aim of achieving the desired goal and target of
the organisation in effectively and efficient manner. Its also provide the necessary related
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information related to process and the activity of the organisation. It is most essential for
CafePod Coffee Co to make the appropriate business plan in which the information is related
with mission, vision, objectives and financial stats must be provided. For the CafePod Coffee Co,
business plan work very effectively in term of performing the activities and operations in the
proper and efficient manner (Moseley, 2013).
This business plan also play an essential in term of taking the right decision properly and
quickly for the betterment of the company. This business plan also work effectively in term of
apply the future policies and the strategies which are related to the investment and the activities.
The main reason of making the business plan in the organisation is to increase and attract the
large number of investors towards the organisation. This investors provide the huge profit and
money to the CafePod Coffee Co in the future. CafePod Coffee Co is small sized coffee shop
now decided to expand its business into new market. For this, Business plan has been formed
which are mentioned as under;
Executive summary: CafePod Coffee Co is UK based small sized coffee shop offering
wide range of coffee products to the customers. The owners decided to expand its business to
new market which is Liverpool where the demand of coffee products are very high.
Mission : in this the mission of this firm is to provide best quality of product to its
customer which are healthy, hygienic and also economically affordable to them.
Vision : in this the vision of this company is to meet the rising demand of product and
also promote the brand image in the market.
Objectives: the strategic objective of CafePod Coffee Co is expand its business in the market
by provide them various kind of healthy product to its customer in UK. The expansion of firm in
the predetermine time period which is July 2020.
In this for achieving its set goals CafePod Coffee Co follow the SMART objective
strategy. With help of this strategy organisation can achieve its objective within the specific time
period. By applying this strategy company is achieved is set goals and objectives successfully.
CafePod Coffee Co introducing its new “chocochips coffee shake” product which hygienic and
good for the health. The target customer of this product will be Children and the youth. By
introducing this new product they want to enhance in the growth and success in food sector of
UK (Valler, Phelps and Wood, 2012).
Financial information:- Availability of funds motivates the management to think
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something big for the betterment of an organisation. Thus, expansion of business by management
of CafePod Coffee Co requires huge amount of funds which further be invested in expansion
activities such as advertisement, training, promotional activities, technological installation,
transportation etc. For this, the management should first prepare budget which are give as under
so that allocation of funds to individual activities can be done in an effective and efficient
manner:
Total forecasted budget
Particular 31/12/15 (£) 31/12/16 (£) 31/12/17 (£)
Implementing
technology cost
15000 - -
Promotional expense 9000 8000 6000
Advertisement
expense
6000 5600 5800
Catalogues 2000 4000 3000
Training charges 6500 8000 8500
Total Cost 38500 25600 23300
From the above budget, manager of CafePod Coffee Co get an idea related to the
expenses that are incurred by company while expansion within Liverpool.
Above cash flow shows that company has enough capital which is required to pay off all the debt
and liability incurred. CafePod Coffee Co has to pay taxes which may varies year to year. The
cash in hand for year 2015, 2016 and 2017 are £ 102203, £ 200354, £ 238503 respectively and
average income estimated is £ 72001 for three years.
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TASK 4
P5. Succession and exit plan for small business with its advantage and disadvantage
CafePod Coffee Co need to grow its business inside the new market so it is exceptionally
basic for an organization to set up a progression and leave plan so as to manage possibilities that
may influence the working of organization. It helps the association in managing the future
vulnerability by choosing ahead of time future strategy (Whelpton, Campbell and Patterson,
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2015). Be that as it may, before setting up these plans the managers must consider different
factors, for example, mission, goal and vision of the organization.
Reasons for business failure- There are several reasons which can cause failure in the business
and they are classified into two-
External sources- When company do not consider the changes occurring in the external
environment then competitor might attract their business.
Internal source- When the people working are not able to handle the business properly it
results in failure of the business.
Way of exiting market or succeed business for future are given as under:
Exit plan:-
Winding up:- Using this option, the owner of CafePod Coffee Co should exit market by
ending up their business through selling of its all assets in order to pay all debts and liabilities to
their creditors. If company wants to wind up the business then company has to properly asess the
value of the company and then the price will be quoted. The remaining amount will be
distributed to the shareholders in their invested ratios.
 Advantage:- The owners will be free from all debts and liabilities which makes easy for
them to restart their new business without any government interventions.
 Disadvantage:- Ending up their business by the owners of CafePod Coffee Co looses
their skilled and knowledgeable employees. Another drawback is that liquidating
business takes more time in complete legal procedures.
Selling in open market:- Using this option, the owners of CafePod Coffee Co sells its
business in open market where the other businessman are present to buy at their fixed prices.
This means that business will be continued with the current efficient employees.
 Advantage:- The major advantage of using this option is that the goodwill of the
company remain exist along with the efficient employees. Disadvantage:- . It increases the possibilities of getting lower amount from the actual cost
of business. This may bring losses to the owners in financial terms.
Succession plan:-
Merger & acquisition:- Merger defined as the way toward consolidating two distinctive
organization of same size and area so as to accomplish upper hand and higher development in
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market world On the other side, acquisition refers to the procedure when a little organization
offer itself to another bigger association.
 Advantage:- It help in developing the complimentary skill which reduces the future
competition from the marketplace (Business Exit and Succession Planning, 2018).
 Disadvantage:- major drawback of this strategy is that there is a chance of duplication of
work.
From the above options, succession plans, merger is most preferable option to adopt by
CafePod Coffee Co as it help them in acquiring knowledge about the new market by taking help
of other local business. It increases the possibilities of achieving growth and success in new
market within shorter time period. Contracting with local business in expanded nations help
company to identify the actual needs and preferences of local people due to which huge
sustainability can be attained for longer period of time.
Collaboration-
The cafepod is planning to collaborate with a library as they are opening a reading
section so they are thinking instead of opening at their own they can collaborate with the
established library.
There are various options which cafepod can consider-
 Merger- Merger is a situation when two company willingly join each other and become a
one company to achieve a specified objective.
 Acquisition- This is a situation when a large company acquire a small company which is
not in a good position.
 Joint venture- This is a condition when two companies join and take responsibilities of
each other.
The Cafepod can consider various above options through which they can open a reading
section.
CONCLUSION
It has been summarised from the above discussed information that an organisation always
tried to expand its business in new market with a hope of achieve growth and success. For this,
managers plays several roles and responsibilities such as formulation of planning, preparation of
budget, using of theories for growth such as Ans-off strategies and many more. Thus, it is
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important for the management to have a sufficient Knowledge and skills so that growth of
business into new market can be possible within shorter time period.
RECOMMENDATION
It has been recommended from the above report that CafePod Coffee Co need to analyse
complexities of market environment through conducting PESTLE Analysis along with using
Ansoff strategies which enable their management to make an effective and relevant decisions for
the betterment of an organisation. It also been recommended that Bank loan will be the most
suitable option to adopt due to charging less interest rate. Expansion of business is not easy task
thus if failure of getting success may bring huge loss to the business owner. Therefore, it is
recommended to the business owner to choose merger option at the time of expansion but in
failure selling business in open market will be the best one to adopt.
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Online
Business Exit and Succession Planning. 2018. [Online] Available through
<https://www.ldb.com.au/our-services/business-exit-succession-planning/>.
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