Prufrock Coffee: Strategies for Expansion, Funding, and Future Growth

This report examines the growth planning strategies for Prufrock Coffee, a small coffee house in London. It begins with an analysis of growth opportunities using Porter's generic strategies and a PEST analysis, considering factors like cost leadership, differentiation, political, economic, social, and technological influences within the coffee industry. The report then applies the Ansoff Matrix to evaluate market penetration, market development, product development, and diversification strategies. Furthermore, it identifies potential funding sources for the business, discussing their advantages, disadvantages, and suitability. A business plan is designed to scale up the business, and the report concludes with an examination of exit strategies for small businesses. The report provides a comprehensive overview of strategic planning, market analysis, and financial considerations for the sustainable growth of a small coffee business.

PLANNING FOR
GROWTH

Table of Contents
INTRODUCTION...........................................................................................................................1
LO 1.................................................................................................................................................1
P1 Key consideration for evaluating growth opportunities.........................................................1
P 2 Ansoff Matrix Analysis of Prufrock......................................................................................4
P 3 Potential sources of Funding ................................................................................................7
P 4 Business Plan ........................................................................................................................9
P 5 Exit Strategy For Small Business .......................................................................................14
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Growth planning is essential for the growth of business unit, it is considered as strategic
business activities that aids in generating revenues in the firm (Olesen and Carter, 2018). It helps
companies in utilising resources appropriately and make necessary changes at workplace
according to the need or market. Present study is based on Prufrock coffee café, it is the small
size coffee house which operates in central London. It delivers quality coffee material to the
consumers and also offer various tasty seasonal food to buyers. It serves friendly services to the
customers so that they become loyal towards the brand. Study will evaluate growth opportunities
available for the Prufrock coffee café. It will justify these growth opportunities. In addition,
report will explain various sources of funding that can be used by business to run its business
successfully and to meet its financial need. Advantage and disadvantage of these sources and
their suitability will be explained in this assignment. Furthermore, report will design business
plan to scale up the business. Ansoff matrix model will be applied to the business in order to
evaluate opportunities for growth.
LO 1
P1 Key consideration for evaluating growth opportunities
Porters' generic strategies are used by business to evaluate growth opportunities for
companies. Small companies need to analyse or evaluate each opportunity in appropriate manner
so that it can meet its organizational goal otherwise firm may face difficulties in managing the
operations in the external market.
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Figure 1Porter's generic strategy
(Source: Porter's generic strategies, 2019)
Cost leadership
One of the best tactic that can be used by Prufrock coffee café, by being low cost
producer firm can gain success. This is the key consideration element that must be considered by
SME. If it becomes the low cost producer, then it will be able to attract more customers towards
the brand which will help business in gaining competitive advantage in market. It is traditional
method in which enterprise produces large number of goods in order to minimize production
cost. By this way resources are being utilized properly and it also minimizes wastage as well. By
this way Prufrock coffee café can be able to enjoy high profit and can run operations successfully
in the market.
Cost focus
This is another strategy in which company can concentrate on one particular market
segment in order to generate lower profit. Being a SME there is need to concentrate on risk and
capital investment as well. Hence, Prufrock coffee café has to ensure that it focuses on small are
and to get lower cost advantage first (Ćwiek-Kupczyńska and et.al., 2016).
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Differentiation focus
In this kind of growth opportunity enterprise can offer unique products to the wide range
of consumers. People like to buy items that have some unique features, by this way business will
be able to gain competitive advantage and to make money as well. But there is need to have
knowledge about current market so that needs of customers can be analysed properly. That
would help in communicating the unique feature of product of organization.
Differentiation leadership
In this tactic firm always concentrates on large market in order to get more profit. It tries
to become the market leader. Prufrock coffee café will have to develop its market position by
meeting needs of potential buyers. In this, firm may charge higher prices for the services provide
by it. But firm has to maintain the quality and will have to develop brand loyalty (Šljivo and
et.al., 2018).
PEST analysis
Rather Porter's generic strategy, PEST analysis also helps an organization or Prufrock
coffee café to analyse all external environmental factors that can impact on its performance in
both positive and in a negative manner (Aristizábal, Bustillo and Arthurs, 2016). Coffee industry
is the one who has higher intensity of competition as there are several cafe and restaurants which
offers the best quality of coffee and food products. Some factors are shown below:
Political: Government attitude and trade relationships between coffee producing country
and stability of politics of UK are some factors which can affect to the great level to performance
of the company. It is stated that due to high anti-American sentiment of some countries, it can
face some problems in operating business.
Economic: The main element and factor in this context which is affecting coffee
companies and the whole industry is the spending power of customers of a particular area in
which the company operates. For increasing sales, it is important to operates in more spending
power ability of customers. Exchange rates of other countries in high and it can decrease sales of
the company as import of raw material for manufacturing coffee can become expensive.
Social: It is stated that people of the UK are becoming more health conscious, and they
know that consumption of coffee can be injurious for their health as it contains of caffeine. Due
to high level of caffeine, it can lead to sleep disorders, irregular heartbeats and migraine as well.
These changes and health consciousness can decrease productivity and profit of this Prufrock
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coffee café. So, it is important to use high quality of coffee beans that consists of low % of
caffeine. On the other hand, caffeine is known as metabolism booster which helps people in
loosing weight. So, there are different impacts of it which needs to be considered by this
company (Lu, 2018).
Technological: Better brewing techniques can make production of coffee more effective
and also can allow manufacturer to realize and get better profit. With the help of using an
effective techniques, this cafe can develop newer as well as better varieties which can help it out
in taking competitive advantages and become the market leader. On the other hand, advanced
technology is increasing competition to the great extent which can lower profits margin.
Investment in technology can also increase operational cost of the company.
So, from the above discussed both Porter's generic and PEST analysis, it can be said that
Prufrock coffee café can expand its business and make an effective position in the market by
analysing all factors in detailed manner.
P 2 Ansoff Matrix Analysis of Prufrock
Due to market competition beguines organization needs to formulate effective business
strategies to increase potential growth of organization and compete in market effectively. Ansoff
matrix analysis is adopted by Prufrock to analyse the available resources to facilitate the growth
of company and provide better results. This analysis helps Prufrock to determine all the factors
which can increase market share and satisfy customers to increase customers base of the
company. Strategies will also identify the risk associated with it which will help the company to
decrease the risk and increase profitability in the market and achieve competitive advantage.
Marketing is very essential to capture the market and increase sales which will also help
organization to promote effective expansion in the market with customers satisfaction.
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Market Penetration
This strategy will focus on existing resources and products which will help business to
grow in the existing market with effective strategies to increase customers market and formulate
effective marketing strategies. Prufrock cafe also need to analyse the market competition and
conduct an effective research to identify the customer behaviour to increase efficiency of their
products and services which will also attract more customers. Cafe also need to analyse the tastes
and preferences to identify the changes which can be done in the quality of products and
services. It will also help cafe to make effective changes in prices by decreasing cost of operation
and also increasing efficiency of employees to work more effectively. Advertising cafe and the
products will help Prufrock to increase sales and provide effective customer base. This will
strategy will also help to maintain the distribution channel to minimize cost and increase
productivity of employees. Cafe can also penetrate in the market with purchasing of competitor's
business which have goodwill in market which also increases the capital of cafe but also
integrates all customers for one business. Cafe have evaluated to focus more of moderate priced
products as they are highest sold to customers and this will also increase profit margins. Prufrock
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have also analysed market penetration strategy is having low risk for growing business in the
market and increasing efficiency of it.
Market Development
Another business growth strategy is market development in which new market is selected
to sell existing products and services. This growth strategy will also limit investment and
increase customers base and profitability in market. This will help cafe to expand its business in
different geographical locations which will provide effective information for business to improve
products and services. This will cafe to develop new market segments to penetrate in the market
and it will also decrease the increase the risk as new market will not have any knowledge about
the products and services (Hunt and DeVries, 2019). This will also help cafe to increase
knowledge about customers behaviours to increase the efficiency of coffee and other products
according to preferences and tastes. With adaptation of technology in new market Prufrock will
also increase customers base and provide better facilities to customers by decreasing the waiting
lone and online delivery of coffee and food which will help customers to increase their
satisfaction level. Prufrock have the efficiency top maintain the quality of employees as they
have opportunities to decrease the cost of labour by entering in high unemployed labours. This
will also help company to focus on higher social class of society to attract more customers and
set brand image in market which will help the cafe to establish effectively.
Product development
This strategy provided business to develop new products and services in the existing
market to increase customer base and also target maximum customers of all segments which
were not covered before, this will also help company to increase sales. Prufrock needs to analyse
internal and external factors of business environment to determine available resources by which
new products can be developed and it can also increase customer satisfaction to support café's
growth. Cafe will also determine new raw materials which will change the tastes of coffee and
also develop some new flavours which can also attract new customers, like caramel, cappuccino.
This will help cafe also to develop food which is not provided before and help customers to
increase number of options for them. This will help customers to increase satisfaction level and
become loyal to Prufrock coffee cafe. Product Development strategy is much more risky than
market penetrations as it involves lot of investment.
Diversification
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It is very risky strategy but also got much higher returns if it successful. In this strategy
business organization develops new products in new market to grow the business and this will
also help business to increase customers and sales. Prufrock coffee cafe also need to develop new
products like cold coffee, shakes, fruit juice crush, and different types of coffee depending on the
region. This will also help cafe to provide better offers to customers and help them to increase
their knowledge abut the products to attract them. Diversification strategy also have to compete
with existing competitors in market and also develop effective product which is compatible with
beliefs, culture and values of new market customers.
P 3 Potential sources of Funding
Funding is very essential factor to grow any business as it is the financial support to
operate all the activities in business organization (Kim and et.al., 2018). It is types of financial
money which help the business to grow by covering in the operation which is lacking efficiency
and have potential to grow. This is also helped nation to grow its economic activity and growth
which in return help the population of nation to increase their standard of living and providing
potential to improve the level of income level. This will also help business to develop more
effective strategies by improving the employees potential by higher funding. The success of
business is also dependent on financial capacity and it will also help the products to increase its
efficiency to increase satisfaction level of customers.
Credit Trade
Credit funding is the type of borrowed money which is based on trust and not on legal
consideration. Credit arises when the one business fails to pay the considerations which was
promised on the particular date and is liable to pay in future in exchange on goods or services
which they have already taken.
Advantages
 This helps to reduce the use of capital to minimum and operates the business on trust.
 Credit funding also provides offers which may help to provide discounts for instant
payments and promote the sales of company with higher margins.
Disadvantage
 The interest rates can be stressful and it can also increase the cost of products and
services which Prufrock cafe needs to offer their customers.
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 It is not possible without trust to any history of transactions between the company.
Angel Investors
Prufrock need to analyse the market growth and also assess the required funds. As angel
investors are always available to private with funds, and they are help the private sector to
provide funds. This is an individual or group of individual help small start-ups and businesses
which are in need with their financial support as they in return take that ratio of shares fro the
business.
Advantages
 This does not require any security for providing funds to business organization.
 Motivate business due to capital invested by others.
 This funds also relives owners from interests on the funds.
Disadvantage
 This is difficult to find in the market to in vest in the business and in case of emergency it
is not effective. This funding also reduces the shares from the business and reduces the ownership
percentage.
Venture Capitalists
This is the private investment which is made to business to increase their potential as
venture capitalists are investment which have free funds and always looking for the business
which have the potential ideas to grow and also increase their profitability (Mazza, 2017). They
invest in business in exchange for shares and also decreases the ownership of entrepreneurs.
Advantages
 It also helps business to grow by providing expert solutions and also support the
operations of the business.
 Venture capitalists can also integrate all the business they own and make more profits.
 It also help to grow the business effectively and make the products and services more
efficient.
Disadvantage
 This will decrease the control of business as Venture capitalist are also the part of
ownership of business.
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 This can also loose the culture value of business due to interference of venture capitalist
in decisions of business.
Debt Financing
Debt financing is the process of taking loans from the financial institutions in exchange
for interests. This requires a promise which is legal in nature to repay the principal amount with
interest at the future fixed date. This funding also help the start up and small and large scale
business with capital to support their business and increase efficiency of their products and
services attract customers.
Advantages
 It helps to protect the ownership of the business firm with providing them loan against
interest on principal amount at particular rate of interest.
 This will reduce the gross revenues to escape from paying extra taxes and increase cost of
business (Dierwechter, 2017).
 Owners have potential to make decisions of their own and also innovate the products and
services.
Disadvantages
 Business have to pay interests which decrease the part of their profit margins and
decrease the efficiency of business.
 It will also impact the goodwill and creditability. It is also a big issue for the business
which have low credit scores in the market.
 This also creates risk on assets in case of failure of repayment of debt.
P 4 Business Plan
Prufrock have to analyse the business plan in order to increase efficiency to compete in
market and achieve competitive advantages.
Mission
Mission of Prufrock Coffee cafe is to provide quality coffee with high value of satisfaction at
very low prices.
Objective
 To Develop new products in new market to expand business operations.
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 To increase quality of products and services to satisfy customers at lower price range.
 To assess all the challenges faced in growth of business in new market.
Situation Analysis
SWOT Analysis
It is internal analysis of business factors to assess growth of business to formulate
effective strategies.(Swan and et.al., 2018)
Strengths  High quality Foods and Coffee.
 Focus on customer satisfaction.
 Produces their own raw materials.
 High efficiency of employees which provide better facilities to
achieve customer loyalty.
Weaknesses  Poor interiors which decreases the satisfaction level of customers.
 High prices as compared to quality of coffee.
 Lack of adequate funds from the market.
Opportunities  Technological advancements to decrease the waiting line of
customers.
 Online stores for fresh delivering of coffee.
 To construct interiors according to customer’s behaviors and
beliefs, cultures and values.
 To expand business to different countries which are still
developing.
Threats  High Competition in market.
 Change of substitute products prices which will impact the sales
of company.
PEST Analysis
Prufrock need to analyse the external factors which will impact positively and negatively
in new market. This analysis will help business to formulate effective strategic plan to increase
the growth and increase customers satisfaction of new market customers.
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