Strategic Growth Plan: Ansoff, Funding, & Exit Options for SMEs in UK

This report provides a comprehensive analysis of growth opportunities for Trading Scents, a UK-based SME specializing in perfumes and cosmetics. It evaluates key considerations for growth, applying Ansoff’s Growth Vector Matrix to identify potential avenues such as market penetration, market development, product development, and diversification. The report also assesses various funding sources available to businesses, discussing their benefits and drawbacks, including proprietor savings and loans. Furthermore, it designs a business plan for growth, incorporating financial information and strategic objectives for scaling up the business. Finally, the report examines exit and succession options for small businesses, explaining the advantages and disadvantages of each option, providing a holistic view of business growth and sustainability.

PLANNING AND GROWTH

TABLE OF CONTENTS
Introduction................................................................................................................................1
LO1............................................................................................................................................2
P1 analyze key considerations for evaluating growth opportunities and justify these
considerations within an organizational context....................................................................2
P2 evaluate the opportunities for growth applying Ansoff’s growth vector matrix..............4
LO2............................................................................................................................................7
P3 Assess the potential sources of funding available to businesses and discuss benefits and
drawbacks of each source.......................................................................................................7
LO3..........................................................................................................................................11
P4 design a business plan for growth that includes financial information and strategic
objectives for scaling up a business.....................................................................................11
LO 4.........................................................................................................................................15
P5 Assess exit or succession options for a small business explaining the benefits and
drawbacks of each option.....................................................................................................15
Conclusion................................................................................................................................18
References................................................................................................................................19

LIST OF TABLES
Table 1: SWOT Analysis of Trading scents............................................................................12

LIST OF FIGURES
Figure 1: Factors affecting growth.............................................................................................4
Figure 2: Ansoff's Matrix...........................................................................................................5
Figure 3: Main sources of funding.............................................................................................7
Figure 4: Products at trading scents.........................................................................................11
Figure 5: Exit strategy..............................................................................................................15
Figure 6: Succession Plan........................................................................................................17

Introduction
The report will discuss about Trading scent, an SME dealing in perfumes, scents, cosmetic
and other beauty products based in UK. The various growth opportunities that must be
considered for expansion by trading scents will be discussed. Also, opportunities will be
identified using Ansoff’s Growth Matrix. Finance which is the most essential resource of an
organization will also be discussed. The various sources of funding will be identified with the
advantages and drawbacks associated to it. Ansoff’s matrix will also be discussed in the
report to evaluate the various growth opportunities. The various methods of Succession and
exit will also be discussed if an organization wants to leave in the long run due to the effect
of some future uncertain event.
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LO1
P1 analyze key considerations for evaluating growth opportunities and justify these
considerations within an organizational context.
Trading scents is a leading organization providing cosmetics, perfumes, and skin products.
The managers of the enterprise need to formulate a systematic growth plan that helps in
expansion of Trading Scents. It is essential to utilize resources for the achievement of goals
and objectives of the organization. The employees and stakeholders of the organization need
to set up goals that help in competing with other enterprise and making research so that
innovation can be done in these products. There are various flavors that have emerged
recently and are being adopted by enterprises (Bryman and Bell, 2015). Trading scents need
to adopt the new flavors available in the market so as to increase customer base.
Business environment comprises of external and internal factors like political, social,
economical and legal that affects the working of business. The managers need to plan
strategies during the time of change in business environment so that quick decision making
can be done and negative impact of such changes be removed efficiently. Business
environment must be carefully researched so as to find out the opportunities within the
business environment. The factors that can be considered for evaluating growth opportunities
are as follows:
Competition:
These days there has been a tremendous increase in the level of competition and only the best
running SME survives. Increase in the level of competitors has pressurized the managers to
adopt methods and skills that help in making strategies during critical situation. The
organization is responsible to take tactical decisions leading to innovation, creativity and new
methods of production so as to stand out of crowd. The new flavors have changed customer
mind and demand for new scents have increased. There has been a significant increase in
population with different skin types and hence there has been change in the demand pattern
which has put the research department of trading scents under the pressure of opting new
flavors and methods to launch in the market so that customers do not shift to other traders
(Crane and Mattern, 2016).
Collaborations:
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Increase in competition has made the survival of small enterprises difficult. Hence most of
the enterprises are choosing to go for mergers, demergers, alliances and acquisitions. These
methods of collaborations provide an opportunity to small enterprises to increase operations
and collect funds for further investment. All the various types of collaborations have different
advantages and disadvantages attached to it. The managers of trading scents need to research
and identify the various benefits and drawbacks of each type before implementing them to the
business. Collaborations are one of the pickiest decisions that have to be taken because this
might lead to reduction of power in the hands of some and continuous interference by the
members of collaborating organization (Creswell, 2017).
Technology:
Increase in technology and globalization has increased the use of technology for making new
mixtures that best suit the demand of customers. The managers need to well train the
employees so that they use technology in their working. The low level workers generally do
not prefer adopting new methods as it makes work slower initially. Hence it is the duty of
managers and other employees to train and motivate employees to work better with the use of
technology. In the long run, use of new techniques makes work faster and serves with
innovative ways of production. New products and flavors attracts large customer base thus
increasing profits and leading to growth and expansion (Bhattacharya et.al, 2015).
Pricing strategy:
The trading scents manager need to adopt the best pricing strategy out the various strategies
like price penetrating, economic, skimming etc. this is an essential decision which involves
deciding profit margin and covering up cost before selling the product. Various marketing
strategy are also adopted by the mangers that help in increasing customer base. Trading
scents must use the method of price penetrating in which initially low prices are offered so as
to attract large number of customers while in future the prices are increased to earn higher
profits.
Customer service development:
Customers are the most essential resources of the organization, it is the duty of the
organizations to provide effective service to the customers so as to reduce complaints and
satisfy them with the products. There must be proper customer grievances redressed system
to look after the complaints of the customer. This will create a good image of the
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organization in the minds of customer and induce them to choose trading scents rather than
other organizations.
Internal and External factor:
There are various factors of business environment that affect the decision making of the
industry. For example, change in the economic policy might decrease or increase the demand
for cosmetics. People tend to buy cosmetic products during sales (Love and Roper, 2015).
Figure 1: Factors affecting growth
(Source: recoverycontextinventory.com, 2018)
P2 evaluate the opportunities for growth applying Ansoff’s growth vector matrix.
Ansoff’s matrix is a technical tool that helps in taking strategic marketing decision. When
this matrix is used efficiently, it helps in achieving the goals and objectives of the
organization in the most effective manner. it is a grid that show four options that help in
minimizing risk and shifting to a new product. It enables matching of exiting product to new
market and new products to existing market (Chiang et.al, 2016).
This matrix is made up of four grids in the name of penetration, market development, product
development and diversification. This analysis helps in finding opportunities that help in
diversifying and expanding. All the four factors are put on the matrix and analysed to find the
potential of a new product.
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Figure 2: Ansoff's Matrix
(Source: tutor2u.net, 2018)
Market penetration:
This process does not involve new customers for increasing sales. The major focus is on
finding methods for selling the original product to the same customers. This involves high
amount of customer satisfaction. The managers of trading scents need to find out ways that
will help in developing customer loyalty and increasing customer satisfaction. The main
reason of not including new customers is to avoid the risk of competition and losing the
existing customers. The existing customers are not interested in buying new products (Yin,
2016).
Market development:
In this grid new customers are induced to buy the existing product. New customers are
attracted by implementing various promotional activities and advertising campaign. The
customers are divided according to various geographic locations and target market so that
advertisement becomes easy. The focus is not on developing new product but selling the
existing product to new customer. Technological advanced methods are used to initiate
campaigns and promotions. The new customers must be provided effective services without
affecting the existing ones.
Product development:
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This part of matrix focuses on development of new product with the help of using
technology. Trading scents need to use methods that increase the number of customers and
maintain long term relationship with them. Research needs to be done for innovation and
development of new products that attract customers. This method also involves customer
feedback collection so that any changes can be bought (Navarra and Scaini, 2016). In trading
scents, the managers can use new technology that will provide new flavours in cosmetics as
per the new trend.
Diversification:
This is one of the most risky and costly strategy that requires the recruitment of consultants
and strategic managers who will help in infrastructure development and marketing strategies
development. New customers are induced to buy new products. Customer base needs to be
increased with effective promotional and advertisement strategies. Trade scents need high
customer contact and supply chain that will attract new customers. Product diversification is
essential with effective transportation facility so that the supply is not disrupted.
Ansoff’s matrix is a strategic tool that helps in effective of strategies for growth and
expansion. There are various business factors that need to be analyzed before implementing
various strategies. A skilled professional need to be appointed for performing this task, there
are various factors such as infrastructure, resources, position and budget.
There are various contingencies that affect the marketing process, the business factors need to
be analyzed and the impacts so that effective decisions can be considered for putting the
resources to best use. PESTEL analysis helps in achieving decision making and finding
opportunities that leads to growth and expansion. Business environment is an essential factor
in determining success of organization.
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LO2
P3 assess the potential sources of funding available to businesses and discuss benefits and
drawbacks of each source.
Figure 3: Main sources of funding
(Sources: indiamicrofinance.com, 2018)
Any business activity that is just start-up and aims at expansion requires rising of fund. Fund
raising is an essential component in running a business. These two components have high
potential in raising the growth potential of business. Any start-up such as trade scents needs
fundraising to reach its objectives. The funds need to be properly invested so that the profits
can be increased. There are various sources of funds that are present in the market. Each
source has advantages and disadvantages associated with it. There are various factors that
need to be kept in mind before selecting the source of finance such as net present value,
Payback period, and interest on investment (Sekaran and Bougie, 2016). These factors also
differ in terms of long term and short term funds. The various factors are as follows:
Savings of Proprietor:
The personal savings that proprietor has kept for future since long time can be used for
investment in start up to ensure initial funding needs. Trading scents and similar SME’s use
private funds because of the benefits associated with it.
Advantages:
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 There is no acquisition cost or commitment cost that has to be paid on the savings of
proprietor. Hence, there is no risk associated to it.
 Any type of outsider loan requires the payment of interest to the third party while
outsider’s loan has no such problem (Eriksson and Kovalainen, 2015).
 Start up has problem of sometimes not being so successful. in such cases of loss there
is no burden of repayment of principal or interest.
Drawbacks:
 Personal asset of the proprietor is fund that has been saved by the owner for future
use, investment of total asset in case of loss might end up leaving nothing for the
personal use of proprietor.
 These savings acts as a support system for after retirement days. Investing all the
personal assets might not leave anything at the disposal of the proprietor for future.
 Retirement benefits, EPF’s and other such funds are tax resistant. They are beneficial
to the owner as no additional tax has to be paid on them. Hence investing these funds
might lead to negative impact on the business.
Bank loans:
Banks provide an option to the SME’s for funding the business activities. Both long term and
short term needs are looked after by the banks when there is no other potential investor
available for funding (Burns, 2016). The bank loan is provided only to organizations with
good credit rating and proper paper work. Some assets need to be leveraged in order to get
loan.
Advantages:
 There are various types of loans available depending on the business needs.
 The personal assets of the proprietor can be saved for personal needs in future.
 In case of insolvency the additional funds such as retirement benefits and EPF’s can
be saved from court charges and used for personal benefits and survival.
Drawbacks:
 The main drawback is that some asset needs to be leveraged to get loan which
obstructs its use until the whole payment is cleared.
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