BTEC HND Business Unit 42: Planning for Growth - Ella's Kitchen Report

This report provides a detailed analysis of growth strategies for Ella's Kitchen, a small-scale organic baby food company. It applies various frameworks, including the Boston Consulting Group (BCG) matrix, McKinsey 7S model, and Ansoff's growth vector matrix, to evaluate growth opportunities. The report analyzes key considerations for evaluating growth, assesses potential sources of funding, and discusses their benefits and drawbacks. Furthermore, it includes the design of a business plan for growth, incorporating financial information and strategic objectives for scaling up the business. The report also assesses exit or succession options for a small business, explaining the benefits and drawbacks of each option, providing a comprehensive overview of growth planning and strategic decision-making for small and medium-sized enterprises (SMEs).

Planning for growth

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
P.1 Analyse key considerations for evaluating growth opportunities and justify these
considerations within an organisational context.........................................................................1
P.2 Evaluate the opportunities for growth applying Ansoff’s growth vector matrix..................4
M1. Analytical framework of growth.........................................................................................5
D1 Critically evaluate specific options and pathways for growth, taking into account the risks
of each option and how they can be mitigated............................................................................6
P.3 Assess the potential sources of funding available to businesses and discuss benefits and
drawbacks of each source............................................................................................................6
M2 Evaluate potential sources of funding and justification for the adoption of an appropriate
source of funding for a given organisational context..................................................................9
D2 Critically evaluate potential sources of funding with justified argument for the adoption of
a particular source or combination of sources, based on organisational needs...........................9
P4/D3. Design a business plan for growth that includes financial information and strategic
objectives for scaling up a business..........................................................................................10
M3. Develop an appropriate and detailed business plan for growth and securing investment,
setting out strategic objectives, strategies and appropriate frameworks for achieving objectives
...................................................................................................................................................12
P5 Assess exit or succession options for a small business explaining the benefits and
drawbacks of each option..........................................................................................................12
M4 Evaluate exit or succession options for a small business comparing and contrasting the
options and making valid recommendations.............................................................................13
D4 Provide critical evaluation of the exit or succession options for a small business and
decide an appropriate course of action with justified recommendations to support
implementation..........................................................................................................................14

CONCLUSION..............................................................................................................................14
References:.....................................................................................................................................15

INTRODUCTION
Growth planning is considered as planning for expansion of business which is helpful to
earn more profit and to create more reputation for business (Cheah, Amran and Yahya, 2019).
Every business aims and work for growth. Planning for growth is also essential for allocating
resources equally at workplace and to focus on productive activities rather than unproductive
activities. Ella's Kitchen is a company which make organic baby and toddler food and in
supermarkets internationally in many countries. The company was founded in 2006 by Paul
Lindley. It is headquartered in Henley-on-Thames, UK. It is an small scaled business with 94
employees. The following report covers BCG matrix, McKinsey 7S model, Ansoff matrix
analysis in context of Ella's Kitchen, funding sources of companies and their benefits and
disadvantages, business plan for growth that includes financial information and strategic
objectives for scaling up a business and exit or succession options for a small business and their
benefits and drawbacks.
MAIN BODY
P.1 Analyse key considerations for evaluating growth opportunities and justify these
considerations within an organisational context
Boston Consultancy Group Matrix- This model is used to determine that where to invest
in product which help to achieve future growth(Yahya, Khatami and Al Khansa, 2020). BCG
matrix of Ella's Kitchen is explained below-
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Star- This category of products consist of high market share with high market growth.
This category consist of high competition and require high investment to compete in the market.
Ella's Kitchen is a small scaled company which did not have huge investment which means they
are not going to apply this strategy. It is suggested to adopt this strategy only in case where
company is sure that their new and unique product will help them to lead the market.
Question mark- It consist of low market share in high market growth(Chirico and et. al.,
2020). Less investment is require in this strategy where company grow at high speed. Good
analysis of market is needed in this category. It is suggested to Ella's Kitchen that firstly analyse
marketing requirements then apply this strategy.
Cash cow- This strategy generates cash in excess to operate business. They are having
low market growth with high market share. Generally the products fall in this category generate
returns that are much higher than market growth rate.
Dog- this category has low market growth in low market share. This is the situation
where company faces losses. There is no scope of growth. Investors start de investing their
investment from this type of products. Hence, it is good to shut down the business in this case.
McKinsey 7S Matrix- This model is useful to analyse internal environment of a company
(Shaqrah, 2018). McKinsey model of Ella's Kitchen are explained below-
Strategy- These are the plans which is made to compete in competitive industry.
Strategies are made to achieve organisational goal after considering all factors. In context of
Ella's Kitchen, they adopt the method of ECRM which stands for electronic customer
relationship management, which means company maintain good relationship with their
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customers through internet. They adopt online services like online order, online payment,
complaints of customers received online and many others. Hence, this element of McKinsey
model is managed properly by Ella's Kitchen
Structure- This element describe that how the organisation is structure and in which way
that defines who must report to whom in organisation for smooth functioning (Cotei and Farhat,
2018). Ella's Kitchen follow horizontal organisational structure which consist of fewer number of
management team. This structure is followed by company because there are only 94 employees
in this company which does not need many supervisors or senior authority in the organisation.
Larger the number of employees need more supervisors and more departments and on the other
hand less number of employees need less supervision. That's why they follow horizontal
structure in their organisation as their employees are less in numbers.
Systems-These are daily activities or task which is done by employees to get the job done
on time. In context of Ella's Kitchen, they receive order through online as well as through offline.
This orders are received by their HR manager, then they passes the information to their staff
members about all the requirements of customers and according to that they manufacture the
product, then at the final stage superior power check the food products and packed it and
transport it to their customers.
Staff- This element consist of number of employees and their capabilities(de Souza
Gutierres and et. al., 2020). There are total 94 employees in Ella's Kitchen and their capabilities
are high because they are hired on the basis of their good skills and talents. They are self
motivated and can work in any condition whether the order is high or low. Hence, Ella's Kitchen
managed their staff perfectly.
Style- It consist of the style of leadership adopted in the organisation. In context of Ella's
they follow participative leadership style as they have few superior powers who control all
employees and in taking any decision like change in packaging, introducing new product and
many other decisions, they take suggestions from their workforce. They have less number of
employees which work together like a family. Hence, their leadership style help them to achieve
appropriate profit.
Skills- The actual skills and talents of employees comes under this component of
McKinsey model (Dubey and et. al., 2020). Ella's Kitchen hire only skilled employees who has
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good skill of analysing marketing conditions and demand of customers. They also focus on skills
related to maintaining good relationship with customers.
Shared Values- These are the core values of company, general work ethics and etc. In
Ella's Kitchen, they always make sure that their culture must be perfect for making good working
environment at workplace. Their management take workers decisions before taking any decision
which create well-being in company.
P.2 Evaluate the opportunities for growth applying Ansoff’s growth vector matrix
Ansoff matrix is also called market expansion grid, this tool is helpful in analysing and
making strategies for growth of business (Fan, Huang and Chen, 2019). The Ansoff Matrix of
Ella's Kitchen is explained below-
Market Penetration- this strategy focuses on increasing sale of already existing product in
existing market. This strategy is basically applied to gain more customers in already known or
working country. In context of Ella's Kitchen, they sell their product in many countries but their
main aim is to gain maximum customer from UK which is their home country. They are
investing more on promotional criteria for their products. Hence, they are recently working on
market penetration strategy. It is suggested for the company to adopt many ways together for
market development like – providing good services, sell products at lower cost to their home
country and etc.
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Product Development-It considered to focus on introducing new product in existing
market(Fatima and Bilal, 2019). This strategy is an another way to gain more customers by
targeting different segment of market. In context of Ella's Kitchen, they deals in baby food
products. They did not introduce any new product from longer period of time. Their strategy is to
gain growth with existing product. Hence, this strategy is not adopted by Ella's Kitchen but they
can grow well in case of adopting this strategy. It is suggested for the company to made many
other products with baby food products like baby cloths, baby foot wears and many others. This
strategy is helpful in gaining more customers from UK.
Market Development- This strategy focuses on using existed product in new market. This
strategy is applied to expand business in other countries. The most important factor in this
strategy is to proper analyse of external environment of business(Globocnik, Faullant and
Parastuty, 2020). In context of Ella's Kitchen, they are not a large scale company who is having
enough funds, they have limited funds and limited employees in which they are not supposed to
grow their business and start manufacturing products in another countries. It has been suggested
to Ella's Kitchen that this strategy is best to gain more customers and to grow internationally
with high reputation. They can apply this strategy by introducing their existed product in new
market by starting from small level like a small company or a small manufacturing area.
Diversification- It consist of introducing new product in new market. This strategy is considered
as most risky strategy. This strategy contain huge amount of fund in new but unknown area. So,
there is no guarantee whether the company gain profit or not in a new area. Ella's Kitchen did not
focus on this strategy. To make this strategy useful they must have good amount of funds and
secondly they must know the demand and needs of customers presented in another country.
M1. Analytical framework of growth
From the above information, it is critically evaluated that BCG matrix analyse the future
growth and Ella's Kitchen fall in question mark strategy where they have high market growth in
low market share which means they grow at a high speed but their market share is not as high as
needed by the company. Hence to convert the company into star from cash cow they have to
invest more in their product by analysing market requirement and by expanding their business as
soon as possible with their efficient operations. Secondly, McKinsey 7S model is used to
determine internal factors which impact upon company like no. of employees, leadership style
and many others(Gumel, 2019). It is evaluated that all factors of this model is favourable for
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mentioned company. But it is further suggested that, company must divide their work in
departments and they also require more employees as this company is at the stage of fast growth
in market. Hence to handle all situations, they need more employees. It is seen that Ella's Kitchen
is working upon market penetration strategy which means they are focusing on growth of their
existing product in existing market. They are also focusing on market development by selling
their products internationally. They are required to focus on product development by lunching
new products like kid's toys.
D1 Critically evaluate specific options and pathways for growth, taking into account the risks of
each option and how they can be mitigated
There are many types of ways in which company can grow in the market(Inch, 2018).
Some of them are explained below-
Increasing the prices of products- By increasing the prices of products, a company can
earn more profit and achieve its objectives. But there is a high risk of applying this strategy as
when the prices of any product goes up, customers switches to other brand, hence it cause
decline in number of customers. To mitigate with this problem company must consider on
providing high quality of products with minimum cost in manufacturing them because for higher
quality, most of the customers are willing to pay high prices. Secondly, they are required to
launch a unique product which has totally new features. Hence, customer is willing to pay more
for the excitement of using new and unique product.
Expand the business by entering new countries- Every business aims to expand world
wide. This pathway of growth help the company to gain more customers and to earn more
reputation(Iskandar and Tirtayasa, 2019). There are many risk which is considered under this
pathway of growth like political risk of other countries, customer behaviour, customer demand
and many others. To mitigate with this issue company must analyse external environment of
those countries in which they are planning to expand their business. PESTLE analysis is an good
option to overcome the risk of international growth of business.
P.3 Assess the potential sources of funding available to businesses and discuss benefits and
drawbacks of each source
Funding is very important in every business, without funding no business can survive.
Some sources of funding are mentioned below-
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Personal investment- Personal investment is the funding investment which is done by
the owner of company(Leyva Carreras, Cavazos Arroyo and Espejel Blanco, 2018). Generally
small scaled businesses use this type of funding but when business grow they switch to other
funding sources.
Benefits of Personal Investment- There are many benefits of using personal investment in
business and some are explained below-
 Self Financing/ Personal investment in business provide much more control on business
than any other financing options(Linovski, 2019). It helps in retaining full ownership on
business. Self Financing also helps to control and reduce unwanted expenses in business because
when owner invest their own money in business they carefully operate business and tries
their best to utilize each amount of money in increasing productivity of business.
Demerits of Personal Investment- There are some disadvantages of using personal investment in
business and some are explained below-
 Personal investment cause unlimited liability situation which means the investor has to
pay from their personal property in case of excess loss and to pay debt(Pinnegar,
Randolph and Troy, 2020).
 In personal investment a owner have to develop their own contracts and monitor whole
business alone which further cause inefficiency in managing operations of business.
Venture capital- Venture capital involves in providing some ownership or equity in
business to third party. This third party is an individual, a group of individual, small company or
a large company. Venture capitalist are person who invested in the business, they got high
returns on their investment.
Benefits of Venture Capital-
 There is no liability on owner in Venture Capital. The Venture Capitalist is ready to take
all risk. Owner is not liable for any loss in company. Venture capital provide ownership to other party which is experienced in their field
which means company enjoy the valuable guidance and full experience in their
operational activities(Ponikvar, Kejžar and Peljhan, 2018).
Demerits of Venture Capital-
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 Dilution of ownership and control is an biggest disadvantage of venture capital. The
companies using venture capital have to share their ownership which also results in
sharing in decision making process.
 Venture capital consist of long and time consuming process because when a company is
asked to invest in their company with other party, that party requires business plan first
because no one is willing to invest in those companies whose future scope is not defines.
Hence, in finding venture capitalist and encouraging them to invest in business and then
giving all required documents to investors. Hence, it consume long time.
Angels- Angels are generally those individuals or those retired company executives who
invest in small business(Ruan and et. al., 2018). Their knowledge and experience help them to
tell which company is going to grow higher in future and because of this only they invest in
small businesses. For investing in company, Angels asks to have supervision on companies
operations.
Benefits of Angel investing in business-
 A highly experienced individual who have full knowledge of corporate world has taken
supervision power from company which help the company to work efficiently under a
experienced supervisor. Contracts and customers of Angel investors are shared to company and they help to make
those strategies which is useful to gain more customers.
Demerits of Angel investment-
 Loss of control over business is one major disadvantage of Angel investors as they invest
in business so they ask to have control on business which creates conflict between owner
of business and Angel investor in taking any decisions if their point of views are not
matched(Shaqrah, 2018).
 Angel investor interfere in each and every activity related to company which further
distract workers to work according to themselves as These Angel investors think that
company has to work fully as expected by them. Hence, their interference in every part of
business distracts business to perform well.
Bank loans- These are the funding ways of a business where banks provide loan to
businessman to operate business without funding obstacles. For a bank loan company must
represent their business plan to their bankers and if they think that business will attain a good
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growth in future then they allow them to take loans from bank. This is most adopted way of
funding source by small and medium scale business because the interest rates are quite less than
other sources.
Advantages of Bank loans-
 The owner of business is not required to share its control or ownership to any other party
in case of having funding facilities from banks (Snider and Davies, 2018).
 Low interest rate of banks help the owner to attain more profit to themselves.
Disadvantages of Bank Loans-
 Bankers need collateral for providing loans to any businessman which means owners of
business must kept some mortgage with bankers. It include their personal properties.
 Long process of taking bank loans make it little bit advantageous. Banks ask for business
plan, then they study whole plan, then there are many formalities like checking the
actualization of mortgage properties, signing many documents and etc. contain long
process.
M2 Evaluate potential sources of funding and justification for the adoption of an appropriate
source of funding for a given organisational context
From the above information it has been evaluated that Bank loan is an potential source of
funding for Ella's Kitchen because in bank loans they are not supposed to share their ownership
to any third party and they have to pay less interest rates which help them to attain more profit
sharing ratio with themselves. Another potential source of funding for Ella's Kitchen is Angel
because the Angel investor is experienced and have full knowledge about the similar business.
Hence, giving ownership to an experienced Angel investor help them to grow faster with good
strategies and decisions made by them.
D2 Critically evaluate potential sources of funding with justified argument for the adoption of a
particular source or combination of sources, based on organisational needs
From the above information it has been critically observed that many sources of funding
have many advantages as well as many disadvantages(Tan and Sousa, 2019). Few sources are
beneficial for Ella's Kitchen and few are not. Some of them which are useful are Angels and
Bank loans. Angels are useful because it's investor are experienced and have much knowledge of
business world and due to this they have ownership in business and are considered as good for
making beneficial strategies for company. On the other hand bank loans are good because there
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