Kaffeine: A Comprehensive Planning for Growth Report, Unit 42

This report provides a comprehensive analysis of Kaffeine, a local coffee shop, and its potential for growth. It begins with an introduction to planning as a crucial function for organizational success. The report then evaluates growth opportunities, considering key factors and applying the PESTEL analysis and Porter's Generic model. It also utilizes Ansoff's growth vector matrix to analyze market penetration, product development, market development, and diversification strategies, ultimately recommending diversification as the most suitable option for Kaffeine. The report further explores potential funding sources, their merits and demerits, and evaluates the most appropriate funding options for Kaffeine's context. A detailed business plan, including financial information, is developed to outline Kaffeine's growth objectives and effective controlling and monitoring measures. Finally, the report assesses exit or succession options for the small business, providing recommendations for the most appropriate course of action. The conclusion summarizes the key findings and recommendations for Kaffeine's sustainable growth and success.

Planning For Growth

Table of Contents
INTRODUCTION...........................................................................................................................1
LO1..................................................................................................................................................1
P1) Key considerations for evaluating growth opportunities together with justification.......1

M1) Understanding of competitive advantage within an organisational context...................3
P2) Analysis of Opportunities for growth applying Ansoff's growth vector matrix..............3
D1) Evaluation of specific option and pathway for growth...................................................5
LO 2.................................................................................................................................................6
P3) Potential sources of finance together with its merits and demerits of sources................6
M2) Evaluation of potential sources of funding for a given organisational context..............7
D2) Critically evaluation of potential sources of funding with justification for adoption of a
particular source or combination of sources...........................................................................8
LO 3.................................................................................................................................................8
P4) Business plan including financial information................................................................8
M3) Business plan with appropriate framework to achieve objectives................................10
D3) Business plan to achieve business objectives successfully...........................................11
The business plan made by Kaffeine to achieve its business objective successfully includes
use of effective controlling and monitoring measures a description of which is provided
below:...................................................................................................................................11
LO 4...............................................................................................................................................12
P5) Assessment of exit or succession options for a small business along with the merits and
demerits of every option.......................................................................................................12
M4) Evaluation of exit or succession option........................................................................13
D4) Recommendations to adopt an appropriate course of action.........................................13
Conclusion.....................................................................................................................................13
REFERENCES..............................................................................................................................15

INTRODUCTION
Planning is considered as one of the most vital function of an organisation that is
necessary in order to conduct business activities in more effective way to achieve organisational
goal on time. Planning for growth is a crucial strategic business activity that makes a business
capable to have better plans and strategies to track growth and success for their organisation
through optimum and effective use of its business resources to remain competitive and keep a
balance with changing business environment (Abolhasani and et. al., 2016). This assignment is
based on Kaffeine which is a local coffee shop in UK situated in two locations of London. It is
consider as one of the best coffee-bar food in London incredibly popular in local people which
mostly consist young office workers and offering a variety of coffee, salads, sandwiches and
other food items (Kaffeine, 2017).
This assignment includes a description about key consideration for evaluating growth
opportunity together with application of Ansoff growth matrix. Further various methods that can
be adopted by organisation to access funding are also included. Along with this, a business plan
for growth together with financial information is also there. At last, this report also consists a
description about exist or succession options for a small business.
LO1
P1) Key considerations for evaluating growth opportunities together with justification
Every organisation either big or small intend at having better growth and expansion in
order to maximize its profit margin and avail other benefits (Ahmed and Bramley, 2015). The
key considerations for growth include the competencies and strengths of organisations that make
it capable to garb business opportunities. Kaffeine is a small coffee house situated in London that
is having following key advantages to grab business opportunities and expands its operation:
Resource: The recourses of Kaffeine include its skilled manpower together with its
excellent physical, technological and financial aspects. All these contributes in achieving the
desired goal and objective of Kaffeine.
Capability: Kaffeine is capable of offering a wide range of hot drinks and tasty food
items and snacks that enhance its competencies and makes it able to meet the demands and desire
of its customers at an affordable price.
1

Core competency: The core competency of Kaffeine includes its marketing strategy and
beautiful and attractive outlets together with quality services and a comfortable place to enjoy the
coffee and other food snacks offered by this coffee shop.
In order to evaluate the various opportunities present in the business environment of
Kaffeine use of PESTEL analysis is made a description of which is provided below:
PESTEL analysis
Use of this framework is made by Kaffeine to evaluate the possible opportunities and
threats in business environment so that better strategies and planning can be made for expansion
and growth (Beatley, 2014). A disruption about various factors of PESTEL analysis is provided
below in context of Kaffeine:
Political- This factor is associated with level of stability and intervention of government and
other political parties in business activity. The political environment and policies of UK are
stable and flexible that offer many expansion opportunity for Kaffeine to enhance its business
operation in other parts of UK like Wales and other location of London.
Economical- It includes economical factors like inflation, deflation rate, bank rate, interest rate,
disposable income of customers, etc that directly affects profitability of an organisation (Beer
and Clower, 2019). UK is considered as an economically strong region of world with stable GDP
and growth rate that offer a positive business environment for Kaffeine that support its growth
and success.
Social- It is associated with latest trends, culture and lifestyle of society. The social cultural and
behaviour of UK is in support of Kaffeine as customers likes variety of fid items, snacks and
coffee drink offered by Kaffeine at affordable rate thus, create opportunity for its growth and
expansion.
Technological- UK is considered as fast growing and technically advance region of world that
has created opportunity for Kaffeine to make use of more efficient and latest technology to have
more efficiency and betterment in its business operation to attract a wider number of customers
for its growth and expansion.
Environment- This element is associated with prevention of environment that has made it
compulsory for Kaffeine to adopt and fulfil its CSR responsibility that has created an opportunity
for this organisation through enhancing its corporate image and goodwill among its customers.
2

Legal- This factor comprises of various laws and acts related with health and safety of
employees and customers compliance of which has created a positive workplace environment
Kaffeine thus, enhance its performance and reduce chances of legal consequences in future.
M1) Understanding of competitive advantage within an organisational context
To have better understanding of various options that facilitates competitive advantage for
an organisation use of Porter’s Generic model is made by Kaffeine a description of which is
provided below:
 Cost leadership- It is related with lowering the overall cost of business operation thus,
provides better competitive advantage to Kaffeine through offering its product at most
affordable price (Capello and Nijkamp, 2019).
 Differentiation- Under this strategy efforts are made by an organisation to create a
different and better image in minds of customers trough offering a new and more
innovative product or services thus, offer more competitive advantage to Kaffeine.
 Cost Focus- Under this strategy main focus of organisation is at niche market and efforts
are made to attract large number of local customer’s through fulfilling demands at low
prices.
 Differentiation focus- It is related with creation of an atmosphere of creativity and
uniqueness within an organisation thus, provide a better way for Kaffeine to enhance its
creativity and innovation to earn better business position and competitive strength.
Out of the above mentioned strategy, cost leadership is most suitable for Kaffeine as it
enhance its competitive strength through providing and offering products and services at lower
price as compared to other entity thus, attract larger number of customers and lead to
improvement in its productivity and long term success.
P2) Analysis of Opportunities for growth applying Ansoff's growth vector matrix
Ansoff matrix is a commonly used strategic tool used by an organisation to enhance its
planning and understanding to have better analysis of opportunities to grow and expand their
business in a quick and more effective manner (Daryono, Wahyudi and Suharnomo, 2019).
Ansoff growth matrix is one of the most influential framework that is used to evaluate and
analysis a range of strategies that are helpful in enhancing and developing better sustainability
and growth opportunity for them in marketplace. In context of Kaffeine, use of Ansoff matrix is
made to analysis the best growth strategy that can be adopted by this organisation to have better
3

expansion and success at market place. Application of Ansoff matrix in context of Kaffeine is
provided below:
Market penetration- This is one of the simplest and easiest growth strategy that involves
offering an existing product in the same marketplace thus, involve limited amount of risk. In
order to make use of market penetration growth strategy, Kaffeine needs to make use of more
effective marketing and promotion strategy in order to attract and garb attention of untouched
and potential customers of its existing marketplace that enhance the overall consumer base and
lea to expansion in its business operation (Eyvindson and Kangas, 2015). The risk associated
with this marketing strategy with respect of Kaffeine includes higher cost and expenses made on
marketing and other promotion strategy.
Product development- It is also a key strategy in order to have better growth and
expansion in its business operation through creating or producing some new product or
developing some better features in existing product. Thus, growth strategy of product
development includes offering new product in an existing market thus, adequate amount of risk
in involved in this strategy related with failure and success of new product. Use of product
development growth strategy can be made by Kaffeine through adding some new food items and
drinks in its menu that is helpful in attracting larger number of customers. But in order to cope
with the risk of product failure, proper market analysis must be conducted by Kaffeine to
develop better understanding about taste and preferences of customers (Fabos, 2019). Thus, use
of product development strategy ensures an effective way for Kaffeine to expand its productivity
and business operations through coming up with some new and more better services, food items
and drink that would enhance its profit margin and customer base.
Market development- This growth strategy is associated with expansion of market share
through entering in a new target market with existing product and services. Thus, a significant
level of risk is involved in market development strategy as entering a new market and gaining
success in that is quite difficult and risky as every market has its own characteristics that offer
many opportunities and threats for business organisation. In context of Kaffeine, use of market
development strategy ensures wider target market and lager number of customers to enhance its
growth and expansion at diversified area. But in order to reduce the risk of entering new market
proper research and survey must by conducted by Kaffeine to have better understanding about
4

the characteristics and features of target market so that better strategies can be made to grab the
opportunity and encounter the threat.
Diversification- It is the most risk growth strategy among all the four strategies provided
by Ansoff matrix as it includes launching a completely new product in a new market thus,
involve higher amount of finance and risk of failure (Huang and Zhang, 2014). Use of
diversification strategy ensures maximum level of growth and expansion for Kaffeine through
providing a new target market together with new product thus, ensures a better opportunity to
attract larger number of customers. But adequate amount of finance and together with proper
knowledge about target market is required to ensure success and mitigate the expected risk.
D1) Evaluation of specific option and pathway for growth
The various growth options provided by Ansoff growth matrix includes market
penetration, product development, market development and diversification that provide
significant growth opportunity to an organisation associated with some risk. Use of market
penetration by Kaffeine can enhance its customer base but does not provide reach to new market.
Product development is also a effective strategy to attract new customers but it also restrict
business operation in existing market (Hunt and DeVries, 2019). Further, market development
strategy provide access to new market but with existing product thus, makes it quite difficult for
Kaffeine to attract wider section of customers.
Therefore, the most suitable growth strategy for Kaffeine to expand its business operation
is diversification growth strategy as it provides expansion in market share through entering a
new business environment together with launch of some new product to attract larger number of
customers. In order to mitigate risk and threats associated with diversification strategy, Kaffeine
should gather an adequate amount of funds from some reliable financial sources together with
effective market analysis and survey to get better understanding about present circumstances. It
facilitates an effective way to Kaffeine to come up with some better new items that suits the
desires of customers together with identifying a suitable and most profitable target market to
enhance its growth opportunity and success rate.
5

LO 2
P3) Potential sources of finance together with its merits and demerits of sources
Finance is considered as backbone and most vital of every organisation as it is necessary to
meet day to day expenses and also required to meet growth expenses (Janssen and et.al., 2014).
Kaffeine is looking for better expansion and growth opportunity to enhance its viability and
success. Thus, the various sources of finance available for Kaffeine are described below with
their merits and demerits so that a better decision regarding suitable source of finance can be
made by Kaffeine:
Retained earnings
It basically represents that part of profit that is not distributed as dividend among
shareholders while retained or plough back in organisation to fulfil some future needs. It is
considered one of most important sources of internal financing that enhance fixed as well as
working capital of Kaffeine. Following are the merits and demerits of financing through retained
earnings in context of Kaffeine:
 Merits- It is most cost effective and flexible source of financing available for Kaffeine
and avoids all kinds of additional costs and expenses in form interest (Kuklinski, 2019).
Further, it also not creates any kind of dilution in control or ownership of Kaffeine.
 Demerits- Use of high level of retained earnings lower the rate of dividend for
shareholders of Kaffeine that can facilitates dissatisfaction and lack of commitment in
them. Beside this, issues of over captialisation are also lead by high level of retained
earnings and its amount is not sufficient to meet long term investment or higher growth
plans of Kaffeine.
Venture financing
It represent the investors and private equity that is provided to new business start-ups and
small business in order to promote their innovation and business expansion plan with a belief of
having long term growth potential and success (Leigh and Blakely, 2016). Venture financing
mainly includes the well- off investors, experts, financial institution and other parties that
provide financial support and aids to small business. The expected merits and demerits of
venture financing for Kaffeine are as follows:
 Merits- Use of venture financing provides better opportunity and growth options for
expansion of a small business like Kaffeine through facilitating better guidance and
6

expertise in business operation. Beside this, venture capitalist are easy to locate and also
helpful for Kaffeine in building better network and connection in business environment.
 Demerit- Use of venture capital to collect large sum of money can lead to dilution in
control and ownership of Kaffeine and also effects in day to day decision making and
business operation.
Bank loan and overdrafts
It is one of the most common forms of external financing for an organisation that
includes procurement of loan or overdraft facility from the bank (Li, Liu and Su, 2019). Use of
bank loan is made to fulfil long term financial needs while overdraft is mainly used for short
span of time. Following are the merits and demerits of bank loan and overdraft in case Kaffeine:
 Merits- It provides most authentic and reliable source of financing as all the terms and
conditions associated with procurement and repayment of loan are properly stated in a
written agreement. Beside this, bank also charge lower rate of interest on loan as
compared to other financial institution thus, provide more cost effective way of financing
for Kaffeine.
 Demerits- The drawback of bank loan for Kaffeine is that in order to procure larger sum
of money from banks some assets are to be kept as collateral or security that create a
pressure for timely repayment of loan and its instalments otherwise ownership of assets
get transferred to bank that can hamper business operation of Kaffeine (Liu and et.al.,
2014). Beside this, large and complex paper work and documentation are also involved in
getting loan from bank.
M2) Evaluation of potential sources of funding for a given organisational context.
On the basis of above discussion it can be evaluated that use of retained earnings by
Kaffeine facilities a cost effective way of financing but it lead to creation of dissatisfaction in
among shareholders and also not provide adequate amount of finance to meet growth expenses.
Further, use of Venture financing is suitable for Kaffeine as it facilitates better availability of
resources for small business together with expert advices. But use of venture financing creates a
risk of dilution in control for Kaffeine. Beside this, use of bank loan as sources of financing can
be made by Kaffeine as it provide loan on lower interest rate but it involves large paper work and
documentation that can be difficult for Kaffeine.
7

D2) Critically evaluation of potential sources of funding with justification for adoption of a
particular source or combination of sources
On the basis of above evaluation, use of a combination of retained earnings and venture
financing is justifiable and suitable for Kaffeine as retain earnings provides a cost effective way
of financing can be used by Kaffeine to meets its day to day expenses in form of short amount to
eliminate the issue of dissatisfaction in shareholders. Further, use of venture financing is suitable
to meet long term expenses and also provide expert guidance to Kaffeine to have better growth
and expansion opportunity.
LO 3
P4) Business plan including financial information
It is a written document that formulates information and planning about various aspects of
an organisation to achieve its strategic objectives and desired growth strategies in an effective
way (Miguez, Rezende and Veról, 2014). Following business plan are prepared by Kaffeine in
order to achieve its strategic objective of better expansion and growth a description of which is
provided below:
Overview of company
Kaffeine is a well known small sized coffee shop and restaurant of UK situated in
London. At present it is having two main branches in London offering a wide range of Coffee
and other drinks tighter with food items like sandwiches and other snacks (Kaffeine, 2017). In
order to face the competition level prevailed in coffee house and hospitality sector and in order to
have getter growth and expansion, Kaffeine planning to expand its business operation in Wales
together with launching some new items in its menu at affordable prices to attract wider number
of customers.
Vision
The vision statement of Kaffeine is, “ To become a leading coffee house of UK through
guiding and adopting principles of integrity, quality, services and relationship to grab wider
market share.”
Mission
8

The mission statement of Kaffeine is, “ To serving people with pride and passion
through delivering an uncompromising level of integrity, quality and services to its customers
together with passion for coffee and services.”
Situational market analysis
This analysis is made by Kaffeine to have better understanding about existing business
opportunities and internal strengths so that effective steps can be taken to have better expansion
and growth (Moran, 2019).
Strength
Following are the strength of Kaffeine that makes it capable to expand its business
operation in Wales together with launch of new items in menu:
 Skilled and competent workforce.
 Availability of significant amount of finance from adequate and authentic sources of
finance.
 Reach and access to effective technology and marketing strategy.
Opportunities
Following are the prevailing opportunity in the business environment of Kaffeine that
encourages and facilitates its expansion:
 Stable political environment in UK that ensures easy expansion of its business operation
in Wales.
 Demand of affordable food items and drink in society especially in worker class that
enhance chance of success for Kaffeine.
Strategic objective
The main objective of Kaffeine behind expansion of its business operation in Wales and
launching new items in menu are as follows:
 To have increase in its market share by 20% in coming one year.
 To have enhancement in its sales and profitability by 15% in next 9 months.
Growth strategy
The growth strategy adopted by Kaffeine is diversification strategy to have expansion in
a new market together with new range of items in its menu (Pothukuchi, 2015). Beside this, use
of most effective marketing strategy is also made together with strategies that ensure better
command over operational costs in order to achieve strategic objective in best possible way.
9