Business Planning for Growth: PruFrock Cafe Report, London

This report analyzes the growth strategies for PruFrock Cafe, a London-based SME cafe. It begins with an introduction outlining the company's background and the report's objectives. The main body of the report covers four key tasks. Task 1 analyzes growth opportunities using the VRIO model, Porter's generic strategies (cost leadership, differentiation, and focus), and the BCG matrix, evaluating the company's competitive advantages and market positioning. Task 2 assesses potential funding sources, including their benefits and drawbacks, and justifies the selection of an appropriate funding source. Task 3 focuses on designing a business plan, including financial and strategic information, and outlines future expansion plans. Finally, Task 4 examines exit or succession options for the small business, evaluating the benefits, limitations, and making valid recommendations. The report concludes with a summary of the findings and a list of references.

Planning for growth
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Table of content
INTRODUCTION...........................................................................................................................3
MAIN BODY ..................................................................................................................................3
TASK 1............................................................................................................................................3
Analyse key concept evaluating growth opportunities within an organisation......................3
Evaluate opportunities for growth of business by applying Ansoff's growth vector matrix. 6
TASK 2............................................................................................................................................8
Assess potential source of findings to business & explain its benefits and drawbacks. .......8
Justification for adaptation of an appropriate source of funding. ........................................11
Critically evaluate potential source of funding ..................................................................11
TASK 3..........................................................................................................................................12
Designed business plan that indicates financial information and strategic information. ...12
Future plans to expand business ...................................................................................................17
TASK 4..........................................................................................................................................17
Explain the benefits and limitations of assess exit or succession options for small business. 17
Evaluate exit or succession options for small business and making valid recommendation. 19
CONCLUSION ............................................................................................................................19
REFERENCES..............................................................................................................................21
Books & journals .................................................................................................................21
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INTRODUCTION
Planning for growth is a strategic business activity that helps company to plan for the
growth of organisation. SME refers to a small and medium size enterprise which include less
than 250 employees for operating their business activities. Planning for growth helps SME to
easily identify their market and earn revenue. It assists SME in develop strategies and take
advantage of weakness of competitors. It generates revenue for business by introducing different
strategies. This report is in the context of PruFrock Cafe established in 2009. It is a SME
business deals in coffee and food sector. Jeremy Challender and Gwilym Davies both start their
business with one stall on streets of Landon and now it is one of the renowned cafe in London.
This report includes different strategies for growth of business such as Porter generic strategies
which helps business to achieve competitive advantage in marker and expand their market
segment. Other than this BCG matrix and Ansoff growth vector matrix is included in this report
which helps in the long term growth of business. Various sources of finance is evaluated in this
report which helps business in successfully operating its business activities. In last it includes a
brief business plan and various exist and success options for a SME business.
MAIN BODY
TASK 1
Analyse key concept evaluating growth opportunities within an organisation.
In context of company, Jeremy Challender & Gwilym Davies both analysing different
strategies and make a plan which assist high level of growth opportunities. These strategies are
discussing below:
VRIO MODEL- It refers to a business framework that forms a part of company large
strategic scheme. VIRO is stands for value, rarity, inimitable and organised. In context of
selected firm, it helps in analysing company resources and competitive advantage. In
relevance of selected firm, VRIO model is discuss below:
Value Rarity Inimitable Organised
Technology Yes No No No
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Intellectual
property
Yes Yes No No
Brand image Yes Yes Yes No
Human
resource
Yes Yes Yes Yes
Valuable- In context of selected company, its technology, intellectual property rights,
brand image and human resource are valuable for company. Their technology helps them in
producing effective products. Its unique brand image and human resource are the core
competence of company. Intellectual properties includes its copy rights, patents which are
valuable for company.
Rarity- In context of selected firm, its intellectual properties, brand image, human
resource are rare for company. Its copy rights and patents are help them to being cope by other
competitors. While its good brand image and efficient human resource is rare for company which
help them in achieving competitive advantage in market.
Inimitable- In context of selected firm, its brand image and human resources are
inimitable. Its competitors cannot copy its brand image and they use efficient human resource.
Organised- In context of selected firm its human resource are properly organised. Which
will increased their efficiency and productivity and help organisation in achieving their goal.
Porters Generic strategy- This strategy assist business in achieving competitive
advantages and enhancing profitability in an effective way within its segment market. Porters
divide this theory into three important generic strategies which are lower cost, differentiated and
focus. In context of selected company this model is discuss below:
Cost leadership- In context of company, by applying this strategy in business they will
achieve competitive advantage in market. Cost leadership is an effective strategy for business
which enhancing profitability by offering products & services at low price as compare to its
competitors. Selected company efficiently utilize its all human and material resources which
reduces cost of their products (Agyemang, 2019).
Business use this strategy for increasing market value of shares by reducing its product cost. For
successfully achieving benefits of cost leadership style company needs to find its unique ways
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for reducing every cost. Selected firm can use new technology & low cost base human resource
that will bring cost down.
Differentiated- It means producing a product or services different & more attractive as
compare to its competitors. In context of company, for successfully applying this strategy they
innovate new taste of coffee by using different ingredients. For attracting customers towards
their cafe they provide high quality food & coffee. For differentiating their products from its
competitors it deeply analyses changing needs & wants of customers. In context of selected firm,
its core competence factor helps them to differentiate their product form competitor products
which helps in achieving competitive advantage in market.
Focus- It refers to a strategy which is used by company for focusing on a particular
market segment or niche market (Silva, 2019). Focus strategies is mainly focus on marketing and
selling product to a particular type of consumer within a targeted geographical area. Focus
strategy is based on two aspects which are discuss below:
Cost focus- In context of company, it can use this strategy for attracting its target
customers in niche market by using cost. Their core competence pricing strategy helps them in
attracting more and more customers towards their product.
Differentiation focus- This strategy helps business in enhancing sales in niche market by
providing different product as compare to its competitors. In context of selected firm, their
capability of innovating new taste in coffee and foods helps them to differentiate their products
from its competitors. Which will attract more and more customers towards their product and
increase revenue for company.
Evaluation: From above discussion on porter generic strategies it can be analysis that PruFrock
Cafe must adopt cost leadership style of Porter generic strategy. It will bring new opportunities
for business which increase revenue for company. By providing good quality products at a low
cost selected company attract more and more customers towards their product. By providing best
products as compare to its competitors selected business achieve competitive advantage in
market.
BCG Matrix
BCG matrix is stands for Boston Consulting group's product portfolio matrix. It is also
known as growth matrix (Bhattacharya,2020). In context of business this strategy helps in
designing long term planning by considering available opportunities and budget of business. Its
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plan define business where to invest and how to develop its product. This matrix is divided into
four parts which are discuss below:
Dogs: It refers to those products with low growth and low market share. For increasing
market shares and growth of product it involves timely research and innovation. In context of
company its Koppi coffee is includes in this category.
Question marks or problem child: It refers to a product with high growth and low
market share. This stage includes product portfolio which defined those products which lose their
market shares in market. For enhancing market shares business need to invest more.
Stars- It refers to a stage where product & market shares both are high (Momaya,2020).
In context of PruFrock Cafe its coffee and food service are comes under this category which help
business to earn more profit. For growth of business and enhancing market segment this stage
require more investment.
Cash cows: It refers to a stage where products are in low growth market & having high
market shares. According to this if a business wants to invest money than it should invest in cash
cows stage. In context of company its food service is come under this category where they try to
introduce new taste for satisfying needs of their customers.
Evaluation: From above discussion on BCG matrix it is evaluated that, selected company use
their product portfolio for understanding which product provide high growth opportunities and
require more investment. Selected company invest in their star products which brings new
opportunities and growth of business.
Evaluate opportunities for growth of business by applying Ansoff's growth vector matrix.
Ansoff matrix is also known as product expansion. In context of selected firm this matrix
assist business in planning strategies for development and growth of business. According to this
matrix it says that marketing strategies related to a product is classified into four parts. Which are
discuss below:
Market penetration- In context of company, it uses this concept for attracting more customers
towards its product. In this strategies company introduce its existing products at a low price in its
already exist market for increasing its market share value. For effectively implementation of this
strategy business use different promotional activities. Selected company, efficiently utilized its
resources which helps them in reducing cost of their products. It will make company to provide it
existing products at low price in an existing market.
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Benefits- It helps company to attract more and more customers towards their product
and services which will increase their sales and profit.
Limitation- Its quite difficult for company to reduce its cost of product.
Market development- According to this strategy business introduce its existing products &
services in a new market. In context of company main reason behind using this strategy is
earning more profit by expand its market segment (Iyer,2020).
Benefits- In context of selected firm, it helps company to increase its market area which
will increase its product awareness to large range of customers.
Limitation- It quite difficult for company to select new market for its product where their
product get successful.
Product development- In terms of this strategy selected business develop new products or
offerings for attracting customers of market segment. PruFrock Cafe always try to develop new
taste of coffee for their customers. It innovates new product by proper testing and research on
different ingredients. It provides competitive advantage to business. In context of selected firm,
their capabilities of innovating new things helps them to develop new products in market.
Benefits- In context of selected company, by innovating and developing new products
helps company to achieve competitive advantage in market.
Limitation- New product development require a huge amount of cost of company.
Diversification- In context of selected business, this strategy is most important because it always
introduce new taste, and try to offer something new that increase its market share. If company
adopt this strategy for introducing its new product in new market segment than it requires huge
investment.
Benefits- In context of selected cafe, most important benefit of diversification is that it
increase product line and market segment for company.
Limitation- For developing new product and introducing in new market require a large
amount of investment and need proper research which take a lot of time and cost of company.
Evaluation: From above discussion on Ansoff matrix it can be analysed that selected firm
implement this strategy for expanding its business & earn higher profit. Selected company use
market development strategy which helps in expand their market segment and bring new
opportunities for business. Increase in market area also increase revenue and future growth for
company. For selected company market development strategy is best form all of other strategies
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of ans-off matrix because it increase the market are of company which will increase its market
share and profitability. Its difficult for company to select a proper market for their product but
with the help of research they can effectively develop their product in new market.
TASK 2
Assess potential source of findings to business & explain its benefits and drawbacks.
Payback period refers to a specific period of time which is require to recover cost of
investment. In context of selected company, shorter payback means their investment is more
attractive and beneficial for company.
Merits of Payback period-
In context of company, payback period is very easy to understand and calculate.
Payback period consume less time which helps selected company to make decisions
quickly.
It incurs very low cost of firm at the time of evaluating company projects.
Demerits of Payback period-
Major drawback of payback period method is that it does not consider the cash inflows
after payback period.
Another drawback of using payback period is that it does not give any importance to time
value of money.
Payback period and NPV (Net present value)
Payback Period
Year Cash inflow in (000) Cumulative cash inflow (000)
1 28 28
2 32 60
3 35 95
4 55 150
5 78 228
Formula:
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Payback period = Base year + primary outlay – collective cash inflow of base year or
cash inflow of future year
3 + 100000 – 95000 / 55000 = 3.09 years
NPV (Net present value)
Net present value refers to the difference between present value of cash inflow in
company and present value of cash outflow at a specific period of time. In context of selected
business, NPV helps in analysing profitability of their investment in a particular project.
Merits of NPV-
In context of selected company, net present value method increases the wealth of
shareholders.
This method considers all cash flow in business, risk related to cash flow in future and
time value of money.
Demerits of NPV-
In relevance od selected firm, net present value method does not provide a proper
guideline for calculating require rate of return.
This method requires a hidden cost from business.
Net present value = [Cn/(1+r) ^n], where n = {0 -N}
Year Value of cash inflow Discount rate factor
11%
Present value of net
cash flow
1 28000 0.9 25228
2 32000 0.81 25984
3 35000 0.73 25585
4 55000 0.66 36245
5 78000 0.59 46254
159296
Formula:
NPV = Current value of money inflow – current value of original cost
= 159296 – 100000 = 59296
Source of finance
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For successfully formulation of business activities and operations business require
money. Source of finance means from where a business get money for running a business (Chiu
and Lin 2019). Without money it’s impossible for perform its business activities and earn profit.
There are different types of sources of finance available for company, such as equity, debt,
retained earnings, bank loan etc. In context of PruFrock Cafe it uses both internal and external
sources of finance which helps organisation in achieving its goal which are discuss below:
Internal sources of finance:
Internal source of finance refers to money which generates inside the business. In context
of selected firm it uses different types of internal source of finance which helps organisation in
smooth functioning of business activities. These are discussing below:
Owner Capital- It refers to money which is invested by the owner of a business (Claussen and
Krahe-Steinke 2019). In context of selected firm, its owner Jeremy Challender use his personal
savings for starting business. This source of internal finance save interest cost for business. This
source of finance has some benefits and drawbacks which are discuss below.
Benefits- This source of finance has no legal obligations. Which means its owner
personal money is invested and don't need to pay anyone. It helps in enhancing business
reputation & brand image of selected company.
Drawbacks- This source of finance is not useful for long- term projects. When selected
business use internal source of finance for its business operations that it reduces growth of
business.
Retained earnings- It refers to the money which is left and keep by business from its profit after
distribution of dividend and interest to its shareholders & debenture holders. In context of
selected firm, it saves a fixed percent of profit as retain earning which helps in development of
business in future. Its benefits & drawbacks are discussing below:
Benefits- Retained earnings is a cheaper source of finance which does not involve any
interest cost. This type of finance help business in maintaining its financial stability which
increases market value of its shares.
Drawbacks- Retain earning creates disputes between company and shareholders because
it reduces rate of dividend to shareholders. Which negatively affect organisation growth & on its
share value in market.
External sources of finance:
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It refers to a money which comes from outside the business (Dackweiler and et. al. 2019).
There are different available methods from where a business get money such as, bank loan, new
partners, share issue, leasing etc. In context of company it uses different methods for borrowing
money for growth of business. These are discussing below:
Bank loan- It refers to money borrowed by a business from bank for running its operational
activities and expansion of business. Banks only provide loans to those business which have a
good brand image and a long track record.
Benefits- Bank loans are not permanent for business, once the borrowed amount of loan
is return bank has no control over business. In context of selected firm bank loan provides tax
benefit to business. Another benefit of bank loan is that a business needs to pay a fixed rate of
interest which helps in preparing its budget.
Drawbacks- Bank charge high interest rate for small business loans. For taking loan
from banks a business needs to follow terms and conditions. Banks only pay loan to those
businesses which have a sound track record & from where they cover their losses in case of any
default. Small businesses are not sufficient in meeting their requirements.
Overdrafts- This type of financed is used when a business need funds for short period of time
and for small business. Bank overdrafts refers to a facility provided by bank to their clients to
withdraw excess money as compare to their account balance. Its benefits and drawbacks are
discussing below:
Benefits- Bank overdrafts is flexible in nature. It provides a facility to withdraw extra
amount as compare to its available account balance. This source of finance provides short term
loan even for one or two days (Desai 2019).
Drawbacks- Bank charge high interest rate on overdraft facilities from businesses. Cost
of interest is usually higher than other external sources of funds.
Justification for adaptation of an appropriate source of funding.
From above discussion it can be analysed that PruFrock cafe uses bank loan for
successfully operating its business activities. Bank loan provides tax benefits on interest charged
by bank. Bank loan is a secured external source of finance as compared to other sources. In
context of selected company, they prefer bank loan for operating its business activities. Bank
loan is kind of secure source of finance which is fixed for a specific period of time. This benefit
of bank loan reduces the stress level for company as compare to creditors.
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Critically evaluate potential source of funding
From above discussion on source of funds it can be analysed that bank loan is the best
sources of finance for selected company. Interest rate on bank loan is fixed that helps business in
preparing its budget. Interest on small business loan is also deductible from tax. Which helps in
long term growth of business and efficiently run its business operations.
TASK 3
Designed business plan that indicates financial information and strategic information.
Executive summary- PurForck café introduce new taste of pumpkin spice in their coffee.
Their different flavoured coffee helps in attracting customers and by offering something new to
customers they can achieve competitive advantage in market. The complete plan related to their
innovative taste in coffee is describe below.
Company overview- PruFrock Cafe is one of the top SME business established in
London. Jeremy Challender & Gwilym Davies start their business with one stall on streets of
London. Now it become most famous speciality coffee bar deals in coffee and provides delicious
food.
Vision- The vision of PruFrock Cafe is to become a leading coffee roaster and provides a
good quality food service to their customers.
Mission- The mission of selected firm is continually experimenting with new ideas and
ingredients. And serve coffee and food that makes company and its customers happy.
Strategic objectives- In context of selected firm it uses different marketing strategies for
expanding its business more. It retains 10 % of annual profit of business as retained earning
which is used by the business for introducing new varieties in coffee and food. For managing its
marketing activities and financial activities they timely prepare business plans and strategy
Friedmann 2020).
Opportunities for growth- For identifying available opportunities for business, selected
firm used product development strategy of Ansoff matrix. Product development strategy focus
on introducing new products in an existing market. Taste & preferences of customers are
changing quickly so for successfully meet their demand business introduce new products in
market. Product development strategies helps business in attracting new more customers and
retaining old customers. Investing in research and development for developing new products
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