New Car Deals: Analysis of Growth Opportunities and Funding Options

This report analyzes the growth opportunities for New Car Deals, a small family-run business in the UK. It examines the application of Porter's generic strategies (cost leadership, differentiation, cost focus, and differentiation focus) and PESTLE analysis (political, economic, social, technological, legal, and environmental factors) to evaluate the external market environment. The report also applies Ansoff's matrix (market penetration, market development, product development, and diversification) to identify growth strategies. Furthermore, it assesses potential funding sources available to the business, including bank loans and funding from family and friends, outlining the advantages and disadvantages of each. The report aims to provide strategic recommendations for the business's expansion and financial planning.

Planning for Growth

Table of contents

INTRODUCTION
Planning for growth plays necessary function for both small and medium enterprises for
expansion of business for increasing the profitability ratio. It is important for the top level
management to conduct effective market research for finding out the information related to
different marketing opportunities. The present report is concerned with New Car Deals which is
family business based in Horbury. This company offers efficient, friendly and professional
services to their customers and take care of the customer's after and before the sale. This report is
based on important considerations which are related to porters generic model, PESTLE analysis
and Ans-off matrix for evaluating growth opportunities (Allmendinger and Haughton,2012).
Further, for expansion of business various funding sources are need to be analysed as executives
of SME's are having shortage of capital. Along with this, various succession and exit options for
small business organisation are need to be analysed by the business associates which are
discussed in the report.
TASK 1
P1 Analyse key considerations for evaluating growth opportunities
New car deals is a UK based small family run business which is based in Horbury.
Company is situated close to the city of Wakefield, West Yorkshire, UK. As company is
operating at small scale, it is not exposed to wide market but company is known for its
efficient, professional and friendly services to its clients. New car deals not only consider
the preference and expectations of customers before and during sales, but company also
give their sincere efforts after sales also. This helps them in sustaining a positive image
within market place. At present, company is dealing in only van businesses but due to its
success and popularity, owner of company is planning to introduce specialised commercial
vehicles. To work in a systematic manner, company has developed a new website and
plans to shift to a large office (Berger and Berger, 2011). Other than that company is
planning to open new small shops so that customers can easily assess their services. In
order to evaluate growth opportunities in a desired manner, business owner of New car
deals can take help of porter generic model and for analysing external environment of
market, PESTLE analysis can be used.
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Porter's generic strategy
This strategy depicts the manner in which different organisations can attain competitive
advantage over rival companies within marketplace. As per the opinion of porter, there are
four type of strategies which can be used by an organisation in order to gain an
advantageous situation that will assists them in achieving required growth and expansion.
These strategies are mentioned below: Cost leadership: According to this strategy, business owner of a firm is required to offer
high quality of services and products to its user in less price (Blackburn and
Wainwright,2013). This will helps them in gaining competitive advantage over rival
companies in a profitable manner. With the help of this strategy, new car deals can
enhance their sales and market shares as they will offer car services to their customers in
less price than the rival companies dealing in same field. Differentiation: This strategy implies that a firm is required to offer innovative and
unique services to its customers which are not offered by other companies dealing in
same work. Due to new and innovative services, customers will shift their preference
towards the services which are offered by New car deals. This will benefits the company
in enhancing their market shares. New car deals can use this strategy to attain their
mission of enhanced sales and revenues by offering unique and differentiated services to
the clients. Cost focus: In this strategy, the company emphasize on the present industry and prefer to
sell their products in lower prices so that financial advantage can be enjoyed by company
in a desired manner. For instance, New car deals can adopt this strategy to gain attention
of customers by offering car and other commercial vehicle services in less price.
 Differentiation focus: This kind of strategy is based on providing unique products so that
customers can easily differentiate their products form other companies. This will benefit
New car deal in gaining high market shares and profitability (Crow,2011). This will
enhances the brand loyalty of company in the eyes of customers.
In case of New car deal, company is going to use cost leadership in which services will
be offered by company in less prices than the rival companies. This will results in
enhanced sales and revenues.
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PESTLE analysis
This analysis is used by companies to examine the external market environment in a
detailed manner so that those decisions can be taken which are advantageous for the
company.
 Political factor: UK is a constitutional monarchy which is managed and run under
parliamentary systems. United kingdom is a stable, fair and open society which have
plenty of opportunities for small businesses as government is supporting them by cutting
their taxation rates and interests (Denton, Forsyth and MacLennan, 2017). Due to
stability, growth and expansion chances are more for New car deals.
 Economic factor: These aspects are related with fluctuation in currency, interest rates
and inflation rates. UK economy was stable but due to Brexit, nation has faced economic
instability for some time. To overcome this situation, different measures are adopted by
government in which small business are given preferences. As people in UK have high
disposable income, there are huge opportunities for New car deals while expanding their
business. Due to these opportunities and advantages, market share of New car deals can
expands considerably.
 Social factor: People in UK are highly educated and prefer to use good facilities and
luxuries to show off their high standard. Due to this, it will be beneficial for New car
deals to expand their business into commercial vehicles as customers will readily
purchase them.
 Technological factor: In order to gain wide attention from customers, New car deals is
required to invest more in technology and need to upgrade its machines with new and
advanced tools so that customers can shift their preference towards the products and
services offered by them. If company will not invest in technology, then this will reduce
their efficient and time required to perform a work will also increase.
 Legal factor: In order to sustain a positive image within marketplace, it is essential for
business owner of New car deal to follow all legal procedures and compliances so that
organisational and customer welfare will not get harmed in any way. In case of company
will not follow legal laws, they may have to pay heavy fine.
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 Environmental factor: New car deals is going to offer car and other commercial vehicle
services to their customers. If company wants to maintain a loyal customer base, they
have to follow those norms which will not harm environment by any means (Galland,
2012). If policies of company will harm environment, then customer will not prefer
them. This is because every individual wants use those services which will not harm
environment.
P2 Apply Ansoff's matrix to evaluate opportunities for growth
Business executives should have necessary information regarding the growth opportunities so,
that accordingly allocation of resources is made and competencies are identified (Ansoff Matrix.
2018). For this purpose Ansoff's matrix is appropriate model which can be utilised by the
executives of New car dealers for examining the growth opportunities
Ansoff's growth vector matrix: this matrix is concerned with strategic planning tool
which can be used by executives for achieving growth stage in the future . This concept was
propounded by Igor Ans-off which shows the tactics that small businesses can adopt for the
purpose of expansion of business operations. So, for increasing the sales and revenue New Car
Dealers can adopt these four tactics defined below :- Market penetration: It is first quadrant of matrix which is adopted by firms for
expansion of their business operations with help of present items in already captured
market. This is effective tool for business executives of New car dealers to increase
profitability ratios by utilisation of various promotional and advertisement tools. This
leads to grab attention of consumers in other parts of UK to purchase product from them. Market development: This is another plan of action which is put-upon by company to
target new market to increase their customer base. For this, business executives increase,
expand and set up outlet in other countries to enhance sales volume and revenue.
Executive of new car dealers exercise this tactic with help of social media platforms to
inform potential and existing consumers about products. This assist them to utilise funds
and enhance number of buyers by building relation with customers with use of digital
technology. Product development: It is the set of actions which are adopted by firms to capture
powerful market share in existing one. Business executives of New Car Dealers conduct
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survey to make alterations in system, thereby render imaginative and innovative products
and services to people (Goodfellow, 2013). This aid them to make firm differentiated
from competitors to attract large number of customers to purchase vehicles from New
Car Dealers
 Diversification: This is the fourth quadrant of ans-off matrix which is adopted by
executives for expansion and diversification of business operations into the new market
share which will help to increase the number of buyers. Along with this, innovative and
unique products are provided as per the customer expectations and needs of them. For
this, modification in system that is execution of advanced technologies and equipments.
Business person of New Car Dealers can adopt diversification strategy by setting up
manufacturing business. This leads to offer vehicles at reasonable prices by reducing
expenses of production of vehicles.
TASK 2
P3 Assess potential sources funding available to business
Every business requires financial support in order to enhance their profitability. In
context to present business case, it has been analysed that New Car Deals will require financial
support from good source of funding in order to expand their business effective. Therefore,
management team of this company have planned to identify best source of funding by evaluating
sources of funding which are available for small scale companies. In this regard, some of the
feasible sources of funding are defined as below which could be adopted by owner of New Car
deals for their expansion (Biddle and Taylor, 2018). These different sources of funding along
with their advantages and disadvantages are elaborated below:
Bank Loans: It is one of the popular source of funding which provide long as well as
short term term loans. In this, rate of interest is fixed on the basis of loan amount and period of
time for which it is been taken. There are different types of bank loans which are offered to
customers according to their requirements. These types includes education, personal, car and
home loans.
Advantages: The main advantage of this source is that it supports new ventures and start
ups. Along with this, interest rate of bank are quite nominal and fixed as compared to other
sources of funding.
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Disadvantage: This source of funding requires documentation verification which is a
time consuming process. It also needed security in terms of property paper or other valuable
things in order to reduce risk level of future uncertainty.
Family and friends: It is also a popular type of source of funding that is much famous
and better option for small scale businesses (Stein, 2018). This source of funding does not
requires any documentation as it is completely based on relationship. Along with this, rate of
interest of this source is not fixed.
Advantages: The main benefit of this source is that documentation is not required for
taking loan. In addition to this, process of loan is very short as family does not take to time to
release funds.
Disadvantage: The main drawback of this funding source is that it might affect
relationship of individual that is between family and business person. This could happen due to
delay in loan return.
As per the above specified different sources of funding, it can be said that Bank loan will
going to be best option for New Car deals in order to generate amount of their business
expansion. This is because, it interest rate of bank are fixed and nominal for business owner.
Overdraft: This is source of fund in which bank or financial institution allows an
expansion of credit when amount in account reaches to zero. This method of finance gives
permission for withdrawing funds even there is no money to cover the amount. Overdraft more
suitable for covering short falls. It is not good for covering long term debts.
Advantages:
 Bank overdraft is best suited for business who has great movement of cash flows as it
helps in handling mismatch flow of fund.
 Another advantage of bank overdraft is it calculate only amount which is used. By using
this method of finance, it allows more saving in interest cost as compared to bank loan
that has fixed interest rate.
 One of the major benefit of this is, it has flexibility. Company can take money at any
time. It is not rigid in nature as firm can take amount as and when needed.
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Disadvantage:
 Bank overdraft facility given to company against inventory and collateral such as life
insurance policies, shares etc. There is more risk as company not able to repay the
amount than their assets are being seized.
 Limitation of overdraft is interest rate of overdraft are flexible in nature so it become very
difficult to forecast and prepare budget accurately.
 Overdraft has another drawback that it is more expensive in long run.
Crowdfunding: It is method of source of fund that used for raising funds in small
amounts from large number of people using social media and internet (Bridge and Dodds, 2018).
Advantages:
 Benefit of crowdfunding is the fastest method of raising funds with no upfront fees.
 Another important advantage of this method is company get a marketing platform for
their new project that results in media attention.
 Investor may become company's loyal customer in financing process.
Disadvantage
 It is complex process as compared to other sources of fund as it is not a platform for all
types of projects.
 When company failed in project than there is more risk of degrade in reputation of
company.
 Another drawback of this it is very time consuming process.
Peer to peer lending: This is method of raising funds that enables individual to lend and
borrow money with the use of banks or any financial institution. Peer to peer lending eliminates
the middleman from process but it is more risky and time consuming as compared to other
sources of fund.
Advantages:
 One of the major benefit of peer to peer lending is, there is access to higher returns as it
has lower interest rate.
 There is fixed interest rate and monthly payment are available with no upfront or hidden
fees.
 Another advantage of this method is there is no prepayment penalty.
Disadvantage:
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 The major drawback of this method is money not be lend as and when required.
 Another disadvantage of peer to peer lending method is the amount of interest is not tax
free.
Angel financing: It is type of equity financing in which investor supplies funds in
exchange of getting the equity position in company. This method is more suitable for non-
established businesses that not have enough collaterals and cash flows that secure business loan
from financial institutes.
Advantages:
 The major advantage of this source of fund as it is less risky than debt financing.
 It is more suitable for long term and angel investor has personal opportunity as well as
investment
Disadvantage:
 Using angel financing as a source of fund has a disadvantage that it takes long time to
find a suitable investor.
From the above discussion, it is concluded that potential sources of funding is important
for business to fulfil their growth aim. Fulfilling such requires funds for business expansion or
launching the new products. Banks are the most suitable for generating funds, as it allows
company to perform well for paying interest rates every month for giving loan pay back.
TASK 3
P4 Design a business plan for growth
Business plan is tool that is used by organisations for effective functioning and how to
achieve the goals and objectives in given time. It is very necessary for company to have business
plan which helps in expansion and growth of an organisation.
Overview of the company: New cars company is a UK based firm. New Car Deals is
family business based in Horbury. This company offers efficient, friendly and professional
services to their customers and take care of the customer's after and before the sale.
Products & services: New car deals has product portfolio of car service, products and
gadgets. There products and services are very popular in Horbury .
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Vision: Their vision is to become one of leading company in car sector and satisfy
demand of customer by offering different type of car services to clients or customers.
Mission: Mission of New car company is “to provide excellent service to clients”.
Strategic objective: The main objective of New car company is to satisfy their customers
and their aim is to increase their profit from 10% to 30% in next 3 years. These objectives are
achieved with the help of SMART goals that means objectives are specific, measurable,
achievable, realistic and time bound.
Entrepreneurial strategies: Strategies for New car company consists of targeting the
niche market, which will target the audience with common choice & budget looking (Planning
Commission, 2011). They are focused towards the development of their business and providing
good service to customers. The targeted audience will be adults, teenagers and businessman.
Investors: For this product development, Banks are chosen for generating the required
funds/money. This has been initiated to get the money to run business.
Financial information-
Finance is required for performing business objectives in efficient and effective manner.
There are various kind of sources to raise fund, so it is very necessary to select a method which is
suitable for business. Financial image of company must be strong, it helps in borrowing the fund
from different sources. There are various cost associated in proper functioning of company such
as training, advertisement, transportation, raw material, etc.
Total forecasted budget
Particular 31/12/15 ($) 31/12/16 ($) 31/12/17 ($)
Implementing
technology cost
15000 -There are various
companies in business
environment. Firm
which are successful,
wants to expand more
than they must
formulate better
succession plan. There
is possibility that New
car company does not
-
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