Growth Strategies and Funding for New London Cafe, UK Restaurant

This report provides a comprehensive analysis of growth strategies and funding options for New London Cafe, a small UK-based restaurant. It begins by evaluating key growth opportunities, including the introduction of a new product (Apricot Smoothie), and utilizes frameworks such as Porter's generic strategies and PESTLE analysis to assess both internal and external factors impacting the business. The report then applies Ansoff's growth matrix to identify suitable growth strategies, recommending product development as the most viable option. Furthermore, it discusses various funding sources, such as bank loans, crowdfunding, overdrafts, and peer-to-peer lending, outlining the advantages and disadvantages of each. Finally, the report culminates in the creation of a business plan for growth, incorporating strategic targets, objectives, and relevant financial data to facilitate business scale-up and expansion.

PLANNING FOR
GROWTH

INTRODUCTION
Planning for growth is essential for each organisation so that they can increase their
business and achieve high revenues and profits in an advantageous manner. Management of a
company is needed to do appropriate planning to gain advantage over rivals (Alsos, Carter and
Ljunggren, 2011). This assignment is based on New London Cafe, a small restaurant operating in
London, UK. At present, this SME company is operating at local level only but company is
planning activities to increase their growth considerably. This assignment is going to discuss
about different strategies so that high growth can be achieved. Also, Ansoff's growth matrix will
be discussed to increase growth. Information about different sources to access fund and
business plan will be shared. At last, different option to succeed and exit business will be
mentioned in brief context.
TASK 1
P1 Evaluate key considerations for growth opportunities and give justifications for them in
context with selected organisation
New London Cafe is small cafe in UK which performs their work in local area only. To
gain advantage in business, company is needed to consider different growth and success
opportunities. New London Cafe is operating at small scale, therefore it is important for manager
to analyse certain external as well as internal factors. Company is planning to introduce Apricot
Smoothie to their menu. Due to high health benefits, this drink will help the company in gaining
business growth. In this context company can use Porter's generic strategies and PESTLE
analysis. Information on these frameworks is shared below:
Porter's generic strategies
This is a strategic tool to understand market decline and growth, business position, and
direction for the business operations. Different elements of this framework are discussed below:
 Cost leadership: In this strategy, a company tries to offer their products to customers in
minimum price so that maximised sale can be earned. This strategy is useful for those
companies which produce their goods in bulk (Chen and et.al.., 2014).
 Differentiation: Under this kind of growth strategy, a firm provide unique service or
product to their customer so that their attention can be gained. By this, customers will not
get influenced by the products and services of other business firm.
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 Focus: This is third kind of strategy in which entire focus in either on differentiation or
cost leadership. A firm can adopt any of the strategy they like to expand their business.
For New London Café, manager of café can adopt differentiation so that customers can
be given diversified products and high revenues can be earned.
PESTLE analysis
PESTLE analysis is important for company to exploit its growth opportunities and be
prepared for the threats arising out of certain external factors. This analysis will benefits the
concerned firm in analysing external factor which can impact their working either positively or
negatively. Political Factors: Political factors relates to governmental procedures, political stability
and trade restrictions (Denton, Forsyth and MacLennan, 2017). New London Cafe is
operating in the environment in which political factors are not harmful because of
geographical diversification. But, due to Brexit. Political stability is reduced which can
impact organisation negatively. Economic Factors: This factor is concerned with purchasing power and income level of
people along with growth rate of country in which company is operating. UK GDP has
grown by 0.3% which states that UK's income is high and also they had a good standard
of living which automatically increases the sales for the company. Company will
generate employment opportunities for local market also. Quick changes in the inflation
rate can lead the New London Cafe products to be more expensive than compared to
other local cafes. This will influence working of company in negative way. Social Factors: This relates to the opinion and choice of people that are residing between
geographical boundaries. New London Cafe products are highly influenced by the
lifestyle preferences of the customers which helps them to earn higher profits. New
London Cafe had reoriented itself in each market perfectly. Changing demand of people
can impact organisation in negative manner. Technological Factors: This aspect is based on technology update by the company to
gain high advantage over their rivals and competitors. New London Cafe is successful in
overcoming the competitive pressure by introducing new production machines. New
London Cafe had direct competition with local companies so there arise a need to
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reconsider its designs and comes up with innovative product designs to gain advantage
over rivals. Legal Factors: It is related to the laws which are related with customers, employees and
business organisations. New London Cafe can sustain in the market for long as they
follow all the laws of UK in appropriate manner. But company has risks of leakage of
innovative ideas due to employees halt to other competitive rivalry. The New London
Cafe Company can face lawsuit if they copy strategies of rivals. This can caused a bad
image to the New London Cafe Brand (Dixit and Kumar Pandey, 2011).
 Environmental Factors: New London Cafe carry out the activities to address the safety
and health issues which helps them to hold a longest disaster free record and also been
recognized as a safest place to work. While taking into consideration all the
environmental responsibilities, the New London Cafe had faced employee turnover on a
large scale.
P2 Determine potential opportunities to apply Ansoff's growth matrix in a proper manner
Ansoff Matrix model is given by H. Igor Ansoff and named earlier as "Strategies for
Diversification". Ansoff's Matrix clusters the growth strategies into four major quadrants based
on the product line and consumer market. This growth matrix has given the marketers and
business leaders an easier way to think about the strategies and associated risks of growth. It is
often called as the Product/Market Expansion Grid. Ansoff Matrix for considering growth
opportunities in London New Cafe is discussed below:
 Scenario I: When the company is promoting its existing products in the existing market:
Ansoff recommends using Market penetration as the key growth strategy for the
company, as the company already has presence in the market, it will be easier to capture
the market share through its loyalty programmes, price drop offers etc. New London Cafe
can use the same to attract new customers as well as win back its lost customers to
increase it market command (Wynn, 2017).
 Scenario II: When company promotes new products in its existing Market: Ansoff
vouches for use of its product development strategies when company wishes to expand
through its products. New London Cafe could invest in its Research and Development,
focus on acquiring firms that deal within the same market or create strategic partnerships
or alliances to grow.
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 Scenario III: When company leverages its existing products in a new market: Such a
case recommends the company to use its market development strategies. New London
Cafe will benefit from this strategy as it already has penetrated most of its markets and
can go to capture more as it has enough funds to allocate for expansion (Gatukui and
Katuse, 2014).
 Scenario IV: When the company switches to altogether different product line in a
completely different market: Ansoff recommends for use of its diversification strategies.
This could be related or unrelated diversification. For New London Cafe, we do not
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Illustration 1: Ansoff Matrix

recommend diversification strategies as it is a SME and failing of this strategy will leads
to business failure in considerable manner.
From the above analysis, we can conclude that New London Cafe should go for Product
Development Strategies as it will be benefited most from it. New London Cafe already has
good presence UK as a result of its extensively researched products and marketing strategies.
Thus introducing new product i.e. Apricot Smoothie will help cafe in achieving high growth.
TASK 2
P3 Discuss different funding sources available for selected company and mention the advantages
and disadvantages for each of the source
To operate activities of company, funds are required in terms of money or other values.
There are numerous sources that exist for smooth functioning of an organization. In the context
of New London Cafe, they assess on potential sources of funds and examine the merits and
demerits of each source properly.
Bank loan:- Bank loan are considered to be one of the easiest and most suitable part of
their financial structure. It is an amount of money which is borrowed for a fixed period of time
with the assurance of returning it next few years including the principal amount as well as
interest. In the context of New London Cafe, mostly loans are considered as secured and
unsecured (Huang and Zhang, 2014).
The benefits of bank loan are that in terms of interest rates, bank loan is a cheapest
method because the rates of loans are fixed. Thus, it benefits in acknowledging the level of
repayments. Whereas, the main drawback of bank loan is the lack of repayment flexibility. A
company can take a loan of $5,00,000 but finds it only needs $3,00,000. That will denote that
interest is being paid on $2,00,000 of excess finance.
Crowdfunding:- This method of raising capital through by efforts of friends, family, or
other individuals. In the context of New London Cafe, the company suggested that crowdfunding
is based on the trust and safety of its customer.
The benefit of crowdfunding is customers feedback. It gives an opportunity to engage
with customers and know their ideas, complaints, and feedback to improve it. Whereas,
crowdfunding have drawback also like ideas are publicly display so the chances of copying by
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others are increase. Although, a businesses need the time and money to publish their project and
bring investors before money is raised.
Overdraft:- Overdraft is a financial instrument in which a money can still be withdrawn
from account, even if the account balance goes below zero. It is granted on the basis of
customer's account value, credit score, repayment history etc. In the context of New London
Cafe, the overdraft is used as a source of finance for generating credit (Mahmoudi and et. al.,
2013).
The benefit of this source is to available cash for emergency, whenever a person need
money in emergency situation then they can easily access with this source as well as the interest
rate is low as compared to credit card. Drawback of overdraft facility is it encourages
overspending because it may allow to spend what a person don't have and it is expensive also
because of their application fees.
Peer to peer lending:- This is a form of direct lending of money without an involvement
of financial institution. It is generally done through the online platform that helps in matching
lenders with the potential borrowers. In the context of New London Cafe, the peer to peer
lending company maintains online platform and charges from both borrowers and investors for
provided service.
The main benefits of peer to peer lending are:- it usually comes with low interest rates
and highly profitable for the investors as compared to other investment. Although, this source of
generating fund is more accessible for borrower. Moreover, it has drawbacks also that are:- high
credit risk and there is no government protection and insurance for covering the credit risk of
lender.
In the context New London Cafe, after analysing all the sources the company found that
the bank loan is the best source of fund and potential for businesses. Bank loan have fixed
interest rates so customers are easily forecast the future payments and managed the all activities
in an effective and efficient manner.
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TASK 3
P4 Prepare business plan of growth involving strategical target and objectives along with
financial data for business scale up
Business plan is a tactics so that a company can properly decide the right manner to expand
their business or introduce a new product in market (Mbogo, 2011). To grow their business by
introducing Apricot Smoothie, a business plan is discussed below:
Organisational overview: New London Café is a UK based small café which is operating
successfully in local area. To achieve growth, company is introducing new product in market
which is Apricot Smoothie. This drink is very beneficial for the skin and health of customers.
Product and services: Mainly, New London Café provide beverages and meals to their
customers. This helps the company in earning decent revenues.
Mission: To became most popular café in London.
Vision: To provide quality meals and drinks to customers to retain them for maximum time.
Objective:
 To increase their sales by 30% within 6 months by introducing Apricot Smoothie.
 To enhance their total revenues by 40% in upcoming 1 year.
Strategy: Main strategy of company is to tell customers about the benefits of Apricot Smoothie
on health and skin. As people are becoming health conscious, product of company will be highly
appreciated by customers.
Financial information: It can be stated that every company want source of finance for their
smooth functioning of activities. Businesses go for those source which is potential and more
beneficial for a company. In this context, New London Café can take bank loan which is
most secured way of managing fund.
Total forecasted budget
Particular 31/12/17 ($) 31/12/18($) 31/12/19($)
Technology
implementation cost
14000 - -
Promotion costs 8000 7000 5000
Advertising expense 7000 6600 4000
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Catalogues 5000 3000 2000
Training charges 7500 7000 7000
Total Cost 41500 23600 18000
Cash flow budget:
This total forecast and cash flow budget state that in initial years, company is required to
invest high amount but in next years, this amount will be reduced. Increasing sales of company
will assure high profits for New London Café.
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Cash Flow budget
Particulars Jan Feb Mar
Cash inflows
Investment 10000
Credit sales 3000 4000 4000
Total inflows 13000 5000 6000
Cash outflows
Fixed : Equipment’s 3000 2000 2200
Variable : Direct material 500 200 500
Total outflows 3500 2200 2700
Net cash flow 9500 2800 3300
Opening balance 0 8000 10000
closing balance 8000 10000 13300

TASK 4
P5 Describe succession and exit option for a small business along with discussing their
drawbacks and benefits in organisational context
As New London Cafe need to extend its business in UK, it is vital for them to select an
appropriate exit and succession plan. By this they will be able to manage future situations that
will impact the working pattern of company (Unit, 2015). In this context, the manager in New
London cafe must consider varied factors of the company like their objectives, targets etc.
Beneath are mentioned various kinds of Succession and exit plan:
Exit plan
Winding up:- This is a procedure in which selling of organisational assets takes place to take
care of debts and obligations. Also, after the complete paying back of liabilities remaining sum is
shared among the investors of company as their personal capital.
 Advantage:- Major advantage of the this alternative is that the executives of company
get liberated from debts, obligations and lawful procedures.
 Disadvantage:- By this method café will lose their skilled employees. Another
disadvantage is that this procedure needs a few lawful methods and takes large time to
accomplish.
Selling in open market:- This is basically an ongoing procedure which comprises the selling of
business shares within open market and these shares are obtained by the outsider individual. This
alternative is useful as it doesn't hurt the brand picture of the company, just the business owner is
changed (Vargo and Seville, 2011).
 Advantage:- Major advantage of selecting this choice is that the outsider buy an ongoing
business thus it doesn't influence the working pattern of business.
 Disadvantage:- By adoption of this choice, firm loose their expert and gifted working
staff that may influence the productivity and growth of company and business.
Succession plan
Merger and acquisition:- Merger is process of uniting two diverse firms of same industry to
accomplish targets and achieve higher development in marketplace. But, acquisition alludes to
the procedure where a SME organisation offer itself to another big company to save them from
market uncertainties.
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 Advantage:- These methods benefits in formulation of complimentary ability that
diminishes the future challenge from market.
 Disadvantage:- Downside of this technique is that duplication of work can take place if a
firm merge or acquire by other company as privacy of firms will not be confidential.
From the above explained information, merger and acquisition is reasonable choice for
succession that can be pick by New London Café to remain aggressive in market. For exit,
company can use selling of shares in open market. It helps company in achieving benefits which
in turn will helps in eliminating future rivalries and assists in delivering right service to
customers (Whelpton, Campbell and Patterson, 2015).
CONCLUSION
As per this report, it has been comprehended that appropriate plan for growth is needed if a
business wishes to gain high success and advantage. The best way to identify growth strategies is
through porter’s generic strategies and Ansoff’s growth matrix. Also, there are different
mediums like bank loan, peer to peer lending etc. by which funds or a business can be managed.
A business plan benefits in introducing new product in a proper manner. With the help of right
succession and exit option, a business can perform securely in marketplace.
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