Gekko Partners Growth Strategy: A Comprehensive Report

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PLANNING FOR GROWTH
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Contents
INTRODUCTION............................................................................................................................. 3
LO1 ANALYZE THE KEY CONSIDERATIONS SMES SHOULD CONSIDER WHEN EVALUATING
GROWTH OPPORTUNITIES.............................................................................................................3
LO2 ASSESS THE VARIOUS METHODS THROUGH WHICH ORGANIZATIONS ACCESS FUNDING
AND WHEN TO USE DIFFERENT TYPES OF FUNDING.....................................................................9
LO3 DEVELOP A BUSINESS PLAN (INCLUDING FINANCIALS) AND COMMUNICATE HOW YOU
INTEND SCALING UP A BUSINESS.................................................................................................13
LO4 ASSESS THE VARIOUS WAYS A SMALL BUSINESS OWNER CAN EXIT THE BUSINESS AND THE
IMPLICATIONS OF EACH OPTION.................................................................................................16
CONCLUSION............................................................................................................................... 18
REFERENCES.................................................................................................................................20
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INTRODUCTION
Planning is an essential element of business throughout its life. Every business continuously
monitors its business plan for ensuring that it must meet all its needs. To make any business
successful it is very important for the entrepreneur to monitor its current performance and
determine the strategies that would be adopted for its growth. Once the strategies for the
growth are identified, then it can be used as a roadmap for planning the next stages of the
business (Pugalis et al., 2015). Planning for growth is one of the strategic activity of the business
which allows the owner to decide and track natural growth in their profitability. The head of the
strategic planning department of Gekko Partners is looking for strategies to expand the
business. Gekko Partners Ltd. is a management consulting firm offering marketing services to
different companies. The company's researcher uses more than 30,000 sources which also
includes a team who collects the primary data for updating the data with more than 5 million
times in a day.
LO1 ANALYZE THE KEY CONSIDERATIONS SMES SHOULD CONSIDER
WHEN EVALUATING GROWTH OPPORTUNITIES
The competitive advantage of using Porter's Generic Strategy Model
Porter's generic model is generally used to gain a sustainable competitive advantage over its
competitors in the industry. Or it can be said that it is used to evaluate the relative position of
the company in the industry. Gekko Partners will only able to gain a competitive advantage
over its competitors by giving more customer value to its clients. This can be achieved by
delivering quality services justifying higher prices or offering the services at lower prices
(Salavou, 2015). The categories of this model are as follows:
1. Cost leadership strategy
In this strategy, the company used to cost as a tool to gain competitive advantage. The
company is known as a low-cost producer and adopts cost advantage practice to capture
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comparatively larger market share. The company achieves low cost by having easy accessibility
of raw material, proprietary technology, economies of scale and other different factors (Liew,
2018).
2. Differentiation strategy
The main aim of this strategy is to make differentiated products and services in the industry
which are unique and attract more customers as compared to its competitors. The company
decides more than one attributes for differentiation so that buyers can easily perceive the
product as important and unique. The company gets an extra reward for building a brand
image in the industry (Bell et al., 2017).
3. Focus strategy
With the focus strategy, the company particularly selects a niche market of the industry. They
provide customized products and services matching the needs of the individual market. These
companies either create unique products or low-cost products or services for its customers
(Cavaleri and Shabana, 2018).
Figure 1: Porter's Generic Strategic Model
[Source: Lard Bucket, 2019]
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According to the resources and capabilities of the Gekko Partners, they should select a
differentiation strategy for their business to gain a competitive advantage in the industry. This is
because the company is having sufficient resources and capabilities to satisfy the needs of the
whole industry with its differentiated and customized services.
PESTLE analysis
PESTLE analysis is used to identify the opportunities and threats present in the external
environment of Gekko Partners. PESTLE analysis helps in identifying the opportunities and how
it can be used to gain a competitive advantage in the industry. The PESTLE analysis of Gekko
Partners is as follows:
Political factors
Political factors force the company to change its business operation, products, services and also
overall perception of the brand according to the political view of the country. Political factors
act as a threat to Gekko Partners because the company has to consider the political climate of
the company before providing any services of marketing (Ellis, 2018).
Economic factors
The economic factor of the country includes interest rates, rate of inflation, etc. which affects
the economic view of the company. When the Gekko Partners provide any marketing services
to other companies, it must make sure that these services must be matched with the economic
conditions of the country.
Social factors
By understanding different needs and beliefs of the society is comparatively easier for the
company because they can identify these factors by communicating with the clients. Therefore,
deep analysis of sociological factors can be act as a tool to gain competitive advantage.
Technological factors
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In the current scenario, all the marketing activities are performed by using technologies. The
company can gain competitive advantage by investing the right amount in the right technology
and providing up to date services to its clients (Ferreira, 2015).
Environmental factors
The environmental factors are a growing concern in marketing activities. The activities of
marketing such as packaging and another great affect the business operation. So, Gekko
Partners must provide its consultancy services after investigating different environmental
practices adopted by the countries.
Legal factors
Legal factors are the most important factors and it affects the brand image and perception of
the company. Gekko partners must follow the rules and regulations of their native country as
well as the country in which it has its operations (Zhang, 2019).
Justification of growth options
The growth option used for Gekko Partners will be a differentiation strategy because of the
social, technological and environmental factors. With the help of these factors, the company
can easily expand its market by satisfying the needs of the clients. All these factors allow the
company to adopt a differentiation strategy or gaining a sustainable competitive advantage.
Link each pathway to the company
The differentiation strategy can be the best way to achieve the competitive advantage for the
Gekko Partners because they have sufficient financial resources and an overdraft facility from
the bank to meet the financial requirement of producing the goods and services.
Ansoff's growth matrix
Ansoff’s growth matrix is used to find the alternative method for growth opportunities available
for the business. This model helps the companies to identify the current position of its products
and growth strategy of the market. According to this model, the growth of the business
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depends on either introducing a new product or entering into a new market. Following are the
growth strategies in the Ansoff’s growth matrix are as follows:
1. Market penetration
The first strategy for the Ansoff’s Growth Matrix is market penetration which means
expanding the business with exiting services and existing market. The main aim of this
strategy is to increase the sales by different ways such as decreasing the price of the
services to attract new customers or through increase the funds in promoting the
services of the company (Gurcaylilar-Yenidogan and Aksoy, 2018).
2. Product development
Product development can be said as introducing a new product in the existing market. It
is suitable for that company who captures a large market share and a large customer
base in the industry and requires introducing a product for expanding the business.
3. Market development
Under this strategy, the company uses an existing product at the time of entering a new
market. This is suitable when the other market is highly profitable or the nature and
behavior of the customers are not different from the existing market (Murdock, 2017).
4. Diversification
This strategy is applicable when the company introduces new products in the new
market. The risk in this strategy is very high because the company is entering into a new
market with a new market having no experience (Verhoeven and Johnson, 2017).
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Figure 2: Ansoff Growth Matrix
[Source: Smart Draw, 2019]
The best method for Gekko Partners will be market penetration and product development. This
is because the risks in these strategies are comparatively low as compared to the other two
methods. The company can expand its market share by satisfying the needs of the local client
and they can build a long term relationship with these clients by continuously offering them
new products.
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LO2 ASSESS THE VARIOUS METHODS THROUGH WHICH ORGANIZATIONS
ACCESS FUNDING AND WHEN TO USE DIFFERENT TYPES OF FUNDING
A different source of funding and its benefits and drawbacks
Gekko Partners requires funds to operate its business smoothly. These sources are required for
different situation and also for different activities. It is very difficult for the entrepreneur to
decide the source of raising the funds and it is compulsory to analyze the benefits and
drawbacks of each source of funding. There are various options available for the company to
raise the funds for business operations which are as follows:
1. Bank loan
The bank loan is the most common and frequently used source of finance, the companies can
borrow the money from a single bank or a group of banks to meet the requirement of finance.
A bank loan can be defined as money borrowed by any individual or institution for a specified
period and with a pre-decided repayment plan (Lehner et al., 2015).
Benefits
A bank loan is considered as the most relevant source of finance and the majority of the small
and medium enterprise borrow the money through a bank loan. Banks usually charge low-
interest rates and gains the trust and enjoys the constant reputation of banks. In addition to
this, the companies also get the advantage at the time of paying the tax because the interest
paid on the loan is deducted from the tax bill.
Drawbacks
Raising the funds through banks is a difficult process and its process also continuously keeps
changing. It is also a time-consuming process because it requires a large number of formalities
and documentation. It is essential that the owner must have complete knowledge about the
different loans otherwise it may result in an unfavorable deal with pitiable reimbursement
terms.
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2. Overdraft
Overdraft facilities are also given by the bank for a short duration to allow the businesses to
make their payments more than the cash available with them in their current account. The
amount of money is decided after negotiating with the bank. The bank demands some
securities in terms of tangible assets or through any personal guarantee by the top
management.
Benefits
The interest on the funds is calculated on the amount used by the companies and not on the
limit of the money. The main benefit of this method is that it is a flexible method and the
companies can demand the overdraft facility as per their requirement.
Drawbacks
The withdrawal limit of the funds is continuously changing which requires continuous
monitoring of the limit. The change in the limit is due to the change in the financial capacities of
the business. It may sometimes require security such as shares, debenture or life insurance
policies, etc. against the loan (Alarcón and Arias, 2018).
3. Crowdfunding
Crowdfunding means raising the funds by asking the large population to contribute a small
number of funds. The entrepreneur gets easy accessibility of funds through their social network
or their crowdfunding websites.
Benefits
This major benefit of this method is that the owner is not distributed with other members
sharing the funds. It is also a fast way of raising finance with no additional cost or fees. The
business also gets some suggestions or feedback from the investor for improving the business
operations.
Drawbacks
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It is not suitable for that company which has the limited network and the failure in any business
operation may affect the reputation and goodwill of the company and it becomes difficult for
the owner to return their money (Hornuf and Schwienbacher, 2018).
4. Peer to Peer lending
Peer to peer lending is a direct connection between people who want to invest their money and
those who want to lend money without involving any financial institutions. This lending is
generally done by using the online platform which made is much simple and quick.
Benefits
This is the most accessible and convenient source of finance as compared to other conventional
sources of finance and also the borrower has to pay low-interest rates to the investor because
of the large number of lenders and borrowers.
Drawbacks
The credit risk in this loan is very high because the government or any other financial
institutions are no involved in case of any default. It is also a lengthy process because the firm
has to go through a stage of credit check for checking the creditworthiness of the business
(Dorfleitner et al., 2016).
5. Angel investors
Angel investors are the individuals who provide financial assistance to small and medium
enterprise for starting or expanding the business. These individuals have a large amount of cash
available with them and expect to get a high return from their investments.
Benefits
The main benefit of this method of financing is that is less risky and the angel investor considers
this as a personal opportunity and also as a long term investment. The business owner does not
have to keep any security under angel investors.
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Drawbacks
The biggest drawback of this method is that angle investor demand a large share in profits and
demands all the information of the business to ensure that their money is safe with the
business.
6. Venture Finance
Venture finance is a long term investment by the equity holders in small and medium
enterprises. Venture finance is generally required at the early age of the venture and this is for
a longer period and having maximum risk (Sun, 2018).
Benefits
This method is only for the startups and the investors expect that the company should grow at
a fast rate after employing these funds. The investors of venture capital also participate at the
time of taking high-level decisions related to their investment. Therefore, they get expert
advice from experienced and knowledgeable people.
Drawbacks
This method is very expensive and also includes negotiation. The small companies have to hire
an attorney for negotiating with the investors on behalf of small companies. Therefore the cost
of adopting this method is very high.
Justification of appropriate source of funding
From the above methods of the source of financing, the best method for Gekko Partners can be
overdraft and crowdfunding. This is because the bank will provide them the facility of the
overdraft due to good credit ratings and they also have a positive image within and outside the
UK. The leaders are ready to invest their funds in the growth of the Gekko Partners. They easily
get the funds with minimum risk without paying additional fees or interest on the investment.
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