Analyzing Growth Opportunities at Pacific Computers: A Business Report

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PLANNING FOR GROWTH

Table of Contents
INTRODUCTION............................................................................................................................. 3
LO1.................................................................................................................................................4
P1 KEY CONSIDERATIONS FOR EVALUATING GROWTH OPPORTUNITIES AND JUSTIFICATION
OF CONSIDERATIONS.................................................................................................................4
P2 OPPORTUNITIES FOR GROWTH BY APPLYING ANSOFF’S GROWTH VECTOR MATRIX...........8
LO2............................................................................................................................................... 10
P3 POTENTIAL SOURCES OF FUNDING AVAILABLE TO BUSINESS AND DISCUSS BENEFITS AND
DRAWBACKS OF EACH SOURCE...............................................................................................10
LO3............................................................................................................................................... 13
P4 BUSINESS PLAN FOR PASIFIC COMPUTERS.........................................................................13
LO4............................................................................................................................................... 16
P5 EXIT AND SUCCESSION OPTIONS FOR PACIFIC COMPUTERS ALONG WITH BENEFITS AND
DRAWBACKS OF EACH OPTION................................................................................................16
CONCLUSION............................................................................................................................... 19
REFERENCES.................................................................................................................................20
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INTRODUCTION
Most of the large business units in the UK started as a small and medium enterprise (SME) and
slowly scaled the business. This report will discuss the growth trajectory of one such SME-
Pacific computers. It is an IT services providing company and the report will highlight the
process of the development and growth of the company. The report will discuss a number of
opportunities available for small companies to achieve growth these opportunities include
collaboration, merger, and acquisitions. A detailed business plan is also prepared in the report
which will discuss the mission and vision of Pacific Computers and the strength and weakness of
the company in the market, the marketing plan of the company, target customers and its
financial plan. The business plan will also assess a variety of risks faced by the company. In the
final portion of the report, different options available to make an exit are discussed along with
the pros and cons of each approach.
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LO1
P1 KEY CONSIDERATIONS FOR EVALUATING GROWTH OPPORTUNITIES AND
JUSTIFICATION OF CONSIDERATIONS
COMPETITIVE ADVANTAGE
The competitive advantage of the company lies in the capability of the company to understand
the digital marketing scenario. By carefully analyzing the needs of the customers, the company
suggests the best marketing channels which can be used by the client to enhance its brand
appearance. The company has a team of qualified individuals who are ready to explore
different possibilities to make the client satisfied (Larner and Laurie, 2010). Having a
competitive advantage is the result of delivering a solution to the problems of the clients on a
regular basis. This consistency in delivering results provides word-of-mouth publicity to the
company and the customer base keeps expanding.
PORTER GENERIC STRATEGIES
To grab maximum market share companies employ different strategies. Michael Porter
explained three such strategies which can be used by the companies to create a competitive
edge. The three strategies are explained below:
The Cost Leadership Strategy
In this strategy, the focuses are on offering the lowest possible prices in the market and hence
create a competitive advantage (Barkham, et al. 2012). When the company offers the lowest
prices it is able to grab a large market share. Low frills airlines are using this strategy to attract
the maximum number of customers.
The Differentiation Strategy
In this strategy, the focus is on creating a unique identity of the product of services by adding
some additional features. The innovative capability of the company plays an important role in
making a differentiation. On account of this uniqueness in the approach, the company can
demand higher prices for the products. By developing some additional features, the company
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also makes it pretty easy for the customers to choose its products over the products of rival
companies.
The Focus Strategy
This strategy stresses focusing on a niche market and creates specialized services for targeted
customers. The focus can be of two types which are cost focus and differentiation focus
(Hulbert, et al. 2013). In cost focus, the company ensures that the cost of the products remain
as low as possible and in differentiation focus, the effort is to create a degree of uniqueness in
the products and services which comes up as a source for a competitive edge.
Out of the four growth strategies discussed above, the strategy of differentiation is most
suitable for Pacific computers. By creating a differentiation in the service offering the company
can benefit in two ways. First, differentiation in the products and services will help in providing
better value to the customers and in the process, the customer base of the company will
expand. Innovative efforts of the company can also help in strengthening the brand image
(Sharifi, et al. 2013). The second benefit from the differentiation strategy is the competitive
edge provided in the business which will set apart a different class for the services of the
company. Using this strategy is beneficial for the company to make a strong identity in the
market and plan its future growth.
PESTEL ANALYSIS FOR PACIFIC COMPUTERS
Political: The political situation of the country has a strong impact on every kind of business.
Some governments impose extra duties on the import of computer-related hardware which
increases the prices of raw material. To assess growth opportunities in new markets, it is
necessary to first analyze the political situation and the rules and regulations of the country.
Economic: The economic situation of the country where the company is planning to expand
also needs to be studied carefully so that the company can utilize the available resources
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effectively. Situations like recession and low-interest rate can severy impact the profit-making
capability of the firm (Blackburn, et al. 2013).
Social: social factors also influence the business strongly. The use of computers and digital
technologies has increased manifold and demand for IT services is also escalating fast. The
company should explore some new areas where the services of the company can be expanded.
The increasing number of IT companies also creates demand for computer hardware and
software solution companies.
Technological: New technology related to computers is surfacing every day and Pacific
computers need to update with all these technologies. The innovative capabilities of the
company will help it stay ahead of the competitors and create better value for its clients
(Gunasekaran, et al. 2011). The use of new technology ensures that the delivery of services
becomes fast and it is necessary or the company to include all the latest technology in the
business.
Environmental: Industrial activities create an extra burden on the natural environment and
cause the problem of pollution and environmental degradation. The customers prefer those
vendors who are sensitive to environmental degradation and are taking steps to make their
work practices less harming to the environment.
Legal: The legal factors in the business are associated with better work condition for the
employees where they are treated in an equal manner and are given opportunities to get
promoted and achieve professional excellence (Zeng, et al. 2010). Regulations related to the
work time regulation and holidays also need to be followed at the organization so that
employees can have better coordination between their personal and professional life.
Based on the PESTEL Analysis for Pacific computers, the identified expansion opportunity is
available in improving the present technology so that increasing demand for IT services in the
organization can be fulfilled. The company should focus on the research and development
activities and create better technologies for the companies. In addition, the maintenance
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service is also an important part of the IT services providing companies (Irwin and Scott, 2010).
The effort should be to carefully assess the queries and companies of the clients and take
timely action to resolve the grievances, better customer services will provide word of mouth
publicity to the company and the create a better brand position with respect to the competitors
in the business.
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P2 OPPORTUNITIES FOR GROWTH BY APPLYING ANSOFF’S GROWTH VECTOR
MATRIX
THE ANSOFF MATRIX
This tool was developed by H. Igor Ansoff with a vision to create a well-planned strategy for
growth. This tool also helps in assessing the risks of going with a particular strategy and
suggests new ways of earning profits. Below discussed are the four strategies suggested in the
model:
Market penetration:
In this strategy, the firm tries to increase the sales of the company in the existing market. This
can be achieved by aggressive marketing campaigns or by focusing on personal selling efforts.
By this strategy, the firms try to secure their dominance in the existing markets (Hulbert, et al.
2013). By introducing loyalty schemes the customer base of the company can be increased. The
move is less risky for the firm as existing resources are used by the company to achieve growth.
Product/service development:
In this strategy, the firm sells its existing products in newer markets. It may also include
changing the packaging of the products or offering different pricing so that new market
segments can be explored (Zeng, et al. 2010). The company can also decide to sell its products
in a new country. As new markets need to be targeted, the strategy is riskier as compared to
the market penetration strategy.
Market development:
The market development can be achieved when the company is already successfully operating
in a market and plans to introduce new products so that better profits can be gained in the
existing market. To present a new product in the market it is necessary to study the market
situation and the current expectations of the customers (Sharifi, et al. 2013). Being the first
mover is always a beneficial situation for the company. Research and development also need to
be focused strongly so that new products can satisfy the needs of the customers.
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Diversification:
In this growth strategy, the firm launches new products in a completely new market. Such a
strategy is highly risky but success can be highly rewarding. Before going with this strategy it is
important to carefully assess the risk factors. The social-cultural aspect of the new market also
needs to be assessed carefully to take a good start in the new market.
Pacific computers should go with the ‘Market development strategy’ in which the offering of
the company is improved in the existing market. This can be achieved by improving the basic
design of the services and make it more compatible according to the needs of the customers
(Mason, et al. 2011). The strategy of market development is also helpful to keep a lead over
the competitors and create a differentiation in the offering. The organization also needs to
focus on innovation so that better products and services can be offered. When the company
focuses on improving its offering in the existing market, the marketing efforts of the company
should also be focused on so that the potential clients can be connected easily. Social media
platform such as Linked-in can also be used to interact with clients on a regular basis.
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LO2
P3 POTENTIAL SOURCES OF FUNDING AVAILABLE TO BUSINESS AND DISCUSS
BENEFITS AND DRAWBACKS OF EACH SOURCE
To scale up the business or to develop a new product, funding is always required. Pacific
computers can choose from a variety of options to manage to fund. The benefits and the
drawbacks of each of these funding methods are given below:
BANK LOANS
This is the most common source of funding for both small as well as big businesses. The
managers at Pacific computers need to carefully analyze the interest rates charged by different
banks and select the bank with the most suitable rates (Wright, et al. 2015).
Pros: Banks usually do not pay much attention to how the money is going to be used as long as
the loan repayments are given on time. In addition, when compared to another medium of
raising capital such as overdraft, the interest rates of the loans are much lower.
Cons: The process of getting approval from the banks is tedious and a lot of paperwork is
required to complete the documents. In the absence of adequate knowledge, poor payment
terms can harm the business (Pickernell, et al. 2011).
CROWDFUNDING
It is the process of raising fund from a large number of people. These small funds sum up into a
large amount as a pool of investors is created (Stam, 2010). The vast network of people from
social media platforms is used as a source for crowdfunding.
Pros: Crowdfunding is a fast way of raising money and can also be used to assess the response
of the public regarding a new product or an idea. Firms can also get valuable feedback from the
real users which can be used to improve the design of the product.
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Cons: significant efforts, money, and resources may be required to build up the interest of
potential investors. Failed projects may negatively impact the reputation of the firm and can
also put the money of the customers at risk (Love and Roper, 2015).
PEER TO PEER LENDING
Through this lending route, money can be raised from individuals directly without using
traditional routes such as banks. If the company has good credit, the interest rates can be
surprisingly low (Mason, et al. 201). Individuals use online sources to lend money to eligible
businesses.
Pros: The interest rate applicable in such fundraising is quite easy as compared to the banks.
The process of approving loans is straightforward and the status of the fund approval can be
known in a short duration as compared to the traditional loans.
Cons: If the credit score is low, the business may not be able to get the fund. The very large
amount of funds cannot be raised through this type of lending. In case, payment is missed it can
negatively impact the credit score (Wright, et al. 2015).
ANGEL INVESTORS
An angel investor is an individual who provides capital to new businesses. These individuals
usually expect a higher rate of interest. The businesses that do not have sufficient cash flow use
this kind of fundraising (Bamiatzi and Kirchmaier, 2014).
Pros: The angel investors do not require any guarantee or collateral and hence it is an easy way
of arranging finance for a company. Sector knowledge and the contacts of the angel investor
can prove as a boon for the new company.
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Cons: To find a suitable angel investor may take too much time. The angel investors also have a
share in the profits of the company and the constant intervention by the angel investor can
become a source of annoyance.
VENTURE FINANCE
It is a method of financing to firms with high growth potential. Investments banks or other
financial institutions offer such fundraising opportunity to the firms which have a unique idea
for growth and development. It is a kind of private equity which typically provides services to a
new or growing business (Leitner and Güldenberg, 2010).
Pros: Along with the required capital this type of financing also provides guidance in finance or
human resource management. Faster growth can be achieved by getting expert advice on the
most crucial areas.
Cons: As a large amount of capital is investments in the business, it is likely that the venture
capital partners will be actively involved in decision making (Irwin and Scott, 2010). A business
can also feel the loss of control if the investors gain a larger share in the company.
Out of all the above-discussed methods of raising funds, financing from angel investors will be
the best option for Pacific computers. This kind of financing may help the company get
adequate finance and get professional advice from industry experts. The fund-raising from the
angel investors is also very convenient and the money can be obtained in minimum possible
time. Therefore, the company should go with angel investors to manage to fund for growth.
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