Norsk European Wholesale Growth Plan: Switzerland Market Entry

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Planning for Growth
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Table of Contents
Introduction................................................................................................................. 3
Key considerations for Growth options (LO1).............................................................4
Sources of Funds and their Implications to the Business (LO2)................................10
Business Plan (LO3).................................................................................................13
Exiting Strategy (LO4)...............................................................................................17
Conclusion................................................................................................................ 20
Reference List...........................................................................................................21
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Introduction
Growth is important to remain in a business and become successful for long run. It
can make a company attractive for analysts and investors. The motives for growth
can be profit, risk, cost, and others. The study on planning for growth will be
performed by taking example from Norsk European Wholesale. It is located in
Camden Street, London, United Kingdom. It was incorporated in August 1993. The
company provides delivery solutions to all types of businesses such as wholesale
export, warehousing, customisation, integration, labelling, sorting and others
(Beta.companieshouse.gov.uk, 2019). Its mission is to give clients wide range of
quality led import and export services consistently. The report will include major
considerations for growth options available to Norsk, sources of funds, business plan
for proposed option and existing strategy.
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Key considerations for Growth options (LO1)
P1 Analyse key considerations for evaluating growth opportunities and justify
these considerations within an organisational context.
In this study, several vital factors will be taken into consideration to ascertain the
risks and growth opportunities for Norsk European Wholesale. Here, two external
analytical frameworks will be utilized to evaluate the external business nature of
Switzerland. The frameworks that will be used are PESTLE and Porter's five forces
analysis.
Particulars Explanation
Political  Switzerland is of the highest player in the World Bank’s
indicators of global governance; within it ranks around 91
and 99.5 in all parameters (Merry et al., 2015).
Economical  It holds its place as being one of the world’s most
competitive economies as it possesses a lucrative tourism
industry. Its real GDP is about $300 billion (Costanza et al.,
2014).
Social  There is a high level of wage-gap within the country. Owing
to this, there are a considerable number of poor workers.
These workers fall under the line of poverty (Blau and Kahn,
2017). It is estimated that around 3.5% of the people living
in Switzerland lived on less than $2 per day.
Technological  The amount of domestic gross expenditure in Research and
Development is around $11.8 Billion, this high funding helps
the small, medium and private company to promote
innovations endeavours.
Legal  Switzerland ranks eighth out of all the 183 countries on the
Transparency International's Corruption Perceptions Index.
This implies that corruption and crime is near nonexistent in
the country (Gardiner, 2017.).
Environmenta
l
 With the increase in phenomena such as global warming,
green house effect, and others there is more harm in the
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environment. It is estimated that around 43.8 million tons of
carbon dioxide emissions have been released in the year
2010 (Alacra.com, 2019)
Table 1: PESTLE Analysis
(Source: Created by the learner)
The positive and negative aspects of this PESTLE analysis have been enumerated
here down below:
Positive (Opportunities)
 It a politically high-ranking country and this will help increase the brand image
of the organisation on a global market.
 The high GDP of the country implies that the large segment of the country
has a high purchasing power
Negative (Risks)
 The cost of living is very high in the country and it is difficult for employees to
sustain themselves them with low income on a long-term basis.
 Companies have corporate social responsibility (CSR) causes through which
there would be lower carbon dioxide. This implies that to implement CSR
activities there would be more costs from the reserves of the companies that
are present in the company (Tai and Chuang, 2014).
The following are the ways through which the above risks can be mitigated:
1. Norsk European Wholesale can increase the amount of salary/compensation,
which they will provide. This would remedy at least a small percentage of the
population’s problem of trying to sustain their cost of living.
2. To lower CSR costs, the company can ask for voluntary helpers from the
society who would make it easier for new companies like Norsk European
Wholesale to retain more of its reserves by not hiring more employees.
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Porter's five forces analysis is a framework to analyze the completive nature,
which is present in Switzerland. These five aspects have been elaborated here down
below:
 Buyer Power (low) – Even though there are amount of consumers that are
present within Switzerland, they have a lot degree of power within the state.
This reason for this is the constant change customers that are present, that
there so many tourists come in a go out of the country and businessperson
remain constant (E. Dobbs, 2014).
 Supplier Power (high) - Since there are so many tourists that come into the
nation, there are several businesses that are present within Switzerland such
Kerry Logistics, FedEx Station, B2C Europe Switzerland and others. These
companies have set prices, which are non-negotiable. Therefore, consumers
have no choice but to accept them.
 Threat of Substitution (high) – There are several delivery companies that
are present within Switzerland, because of this, the substitution rate is high.
Adding to this, other companies are similar in nature and do not have product
provided any differentiable product through which companies can stand out.
 Threat of New Entry (low) - With the logistics industry being so tight within
the Switzerland market, there is limited scope of new entry within the market.
The companies that are present within Switzerland are trying to sustain
themselves on a long-term basis. Adding to this, there is a high amount of
cost, which goes into establishing a delivery company as multiple channels
distribution have to be created (Dälken, 2014).
 Competitive Rivalry (high) – There is a high rate of competition that is
present within the delivery market of Switzerland, this is because of the high
rate of tourists that come into the nation. There are always sellers who are
trying to provide products and services at a cheaper rate.
The positive and negative aspects of this Porter's five forces analysis has been
enumerated here down below:
Positive (Opportunities)
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 Companies can set higher price brackets for their products and
services as consumers have low power of the price. Premiums for
products and services can be set.
 Organisations do not have to fear about the new enterprises entering
the market, as there is high investment costs involved, leading to more
focus on business decision making.
Negative (Risks)
 Since existing logistic companies already have set prices in the
Switzerland market, new companies have no choice but to implement
lower pricing strategies to create an impact.
 New companies have to implement high marketing strategies, utilizing
methods such as social media, billboard posting, television
advertisement and other techniques through which the enterprise can
become more notable in the market.
The following are the ways through which the above risks can be mitigated:
1. To save Norsk European Wholesale from being forced into a place where
they have no choice but to implement low costs. The company must focus on
their on their quality so that they can increase their product and services’
worth. This would lead the consumers to pay a premium for the superior
goods, which they are getting.
2. To lower marketing cost the business must focus on indirect marketing more
than direct marketing. The best form of indirect marketing which Norsk
European Wholesale can implement is through word-of-mouth, which would
lead to the company attaining a higher position in the industry without
overspending on the marketing efforts (Kotler et al., 2015).
P2 Evaluate the opportunities for growth applying Ansoff’s growth vector
matrix.
Ansoff’s growth vector matrix has been performed here down below to assess which
direction the company should take when adopting a strategic path. There are four
strategies from through, which Norsk European Wholesale can choose from, all of
which have been elaborated here down below:
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 Market Development - Market development is the strategy through which,
companies establish and expand into new markets. For this strategy to be
successful, a high research approach must be implemented (Hill et al., 2014).
 Market Penetration – Through this strategy, a business tries to deeper into
the existing market of the target audience. Here the product, which is being,
used pre existing as well.
 Product Development – By implementing this strategy, the business
researches and tries to create a new product and release it into market
through which there would be a new target audience, which is created.
 Diversification – This is riskiest of all the strategies, in this strategy, a new
product is developed for a new market. There is an increase in the number of
uncertainties that present is high (Ansoff et al., 2019).
Strategic option and rationale
For the purpose of Norsk European Wholesale, a Market Development strategy is
going to be implemented. Since the company is primarily in delivering the product, it
cannot create much difference in its product except change the price and time frame
within which it is being delivered. Furthermore, it is more convenient for Norsk
European Wholesale to implement this strategy, as it would help increase the
distribution channel more easily on to other countries.
Implementation
This strategy can be implemented through hiring new employees, buying land,
setting up operations in Switzerland and performing other business related tasks
when expanding on to another country like Switzerland.
Market entry approach
Norsk European Wholesale can enter the logistics and transportation industry by
implementing a low price strategy through which it can draw in the high number of
new consumers. This will also allow it to increase its brand name and increase its
sells.
Contingency plan
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If the market development strategy fails, Norsk European Wholesale can implement
a market penetration strategy as well. Through which it can grow the number of
consumers that are present within its present reach of United Kingdom.
Budget
To implement this form of market development strategy, an estimated budget of
€3000 will be considered.
Monitoring and control
The supervisors or managerial heads of Norsk European Wholesale will look over
the succession rate of this project and overview of how successful it can be in the
market. They will look into how much the profit the present strategy the enterprise
has been able to make and in accordance with that further business decisions will be
made.
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Sources of Funds and their Implications to the Business (LO2)
P3 Assess the potential sources of funding available to businesses and
discuss the benefits and drawbacks of each source.
Companies like Norsk face problems while obtaining finance for their business
growth. They have less access to finance as compared to larger ones. Some
investors feel riskier to lend money to small and medium companies. As Norsk plans
for expanding its business in Switzerland, it may require some funds for its growth
activities. The sources of fund available for Norsk European Wholesale are as
follows.
Long-term source
The source fulfils the requirements of business for a duration of more than five years.
It may include various sub-sources such as debentures, shares, loans, and other
long-term borrowings (Bhattacharya and Londhe, 2014). If the organisation has
access to long-term finance, it can maintain stability in its business operation. It may
not require short-term finances after getting access to long-term sources. Norsk can
enjoy tax savings on the interest posed on long-term debt. Long-term sources can
give a better idea for long-term processing capital. As debt has fixed maturity dates,
the organisation must pay the principal along with interest at a specific period. Non-
payment of the principal, as well as interest amount, may lead Norsk into bankruptcy.
Some debentures include restrictive covenants that may limit Norsk’s operating
flexibility.
Medium-term source
This type of fund is required for business activities for less than five years but more
than one year. The sources may include public deposits, borrowing from commercial
banks and financial institutions and lease financing. The advantage of the medium-
term source is that the organisation may not pay more for its financial load. It can
complete its loan in a short period and take another loan in case of requirements for
the growth. As competitive interest rates are available for medium-term loan, Norsk
can have an option to save more. However, some bankers charge higher interest in
providing finance to organisations for medium-term (Carbo‐Valverde et al., 2016).
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There is a risk for bankruptcy if the organisation fails to pay within the given period.
Additionally, Norsk cannot get any tax kind of tax benefits for availing the medium-
term loan.
Short-term source
The organisation may take finance from short-term sources for its business
requirements not more than one year. Commercial bank loans, trade credit and
others are some modes of finance under short-term source. The biggest advantage
of the short-term source is that Norsk can get fund within one week of the
application. It can help in meeting cash requirements immediately. If it wants to make
immediate payment to outstanding bills, it can go for short-term sources. The
organisation can have the flexibility of repayments for a minimum period of three to
six months (Lee et al., 2015). The biggest limitation of short-term sources is that
higher interest rates and associated service rates.
The other sources from which Norsk European Wholesale can raise its finance for
the growth are as follows.
Crowd-funding
It is a new method for financing business activities. In this method, the organisation
can raise its funds by getting access to a small amount of capital from a large group
of individuals. This type of funding is done for specific projects undertaken by an
organisation. It is one of the faster ways to raise finance, as it is not associated with
any upfront fees. Crowd-funding can help in guidance from and feedback from
experts regarding business expansion. If conventional investors do not like the
business expansion idea, the company can get its finance easily from a large
number of people. Investors can track business progress through their network,
which can be a competitive advantage for Norsk European Wholesale. Such
investors can become loyal customers through the process of financing. If the
business is struggling for getting traditional funding and bank loans, Crowd-funding
can be the best alternative for business growth. However, no projects can get the
platform for obtaining funds through crowd-funding process (nibusinessinfo.co.uk,
2019). If the organisation does not reach its funding target, the pledged finance may
be returned to the investors.
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Bank Loan
Bank loans are an important source of finance for Norsk European Wholesale. Many
banks have their policies for financing small or medium businesses. They charge a
certain amount of interest upon companies. If Norsk European Wholesale applies for
a loan, it may have to make the repayment after a certain period as decided during
the negotiation. While paying the principal loan amount, the company does not have
to give a certain amount of its profit portion to the bank. However, a large amount of
loans have covenants or terms and conditions that the organisation needs to adhere
to. If cash flow problems arise, the organisation may face challenges during
repayment (nibusinessinfo.co.uk, 2019). Additionally, it is mandatory for the
organisation to repay the amount within the prescribed period.
Overdraft arrangement
Overdraft arrangement is a facility given by banks to companies to withdraw finance
from their business accounts more than existing balance. Banks may charge certain
interest or fee on the excess amount. It means Norsk European Wholesale can
withdraw money in case of zero balance in the account. The arrangement is suitable
for businesses having significant movement of cash flows. It needs less paperwork
as compared to long-term bank loans. It provides the advantages of flexibility, as the
organisation can take any amount at any period (Fraser et al., 2015). However, the
risk of seizing is high if the organisation fails to repay. The arrangement comes at a
high interest rate.
Recommendation
Norsk European Wholesale can go for a bank loan for its growth plan. The fund
comes at a fixed interest rate, and banks cannot change in the course of the loan.
The interest paid on loans is tax-deductible, which can provide the company with
finance and tax planning advantages. Additionally, Norsk European Wholesale has a
good credit rating, and it has the capability to repay the principal and interest amount
to banks.
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