Business Growth Strategies: Trading Scents Ltd Expansion Plan

This report examines growth strategies for small and medium enterprises (SMEs), using Trading Scents Ltd as a case study. It begins with an evaluation of growth opportunities by analyzing key elements and conducting a PESTEL analysis to assess the external environment. The report applies Ansoff's Growth Vector Model, focusing on market and product development strategies. It then identifies and evaluates various sources of finance available to the organization, highlighting their advantages and disadvantages. Furthermore, the report develops a business plan for expansion, incorporating financial data and strategic objectives. Finally, it determines exit and succession strategies for small businesses, outlining their benefits and drawbacks. The report provides a comprehensive analysis of growth, financial planning, and strategic management for SMEs.

PLANNING FOR
GROWTH

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK1 ............................................................................................................................................1
P1 Evaluate growth opportunities and justify for organisation by analysing key elements.......1
P2 Apply Ansoff's Growth Vector Model for evaluating opportunities for growth Product
development................................................................................................................................3
TASK2 ............................................................................................................................................5
P3 Identify sources of finance available for organisation highlighting its advantages and
disadvantages..............................................................................................................................5
TASK3.............................................................................................................................................8
P4 Develop Business Plan for expansion with the help of financial information and strategic
objectives.....................................................................................................................................8
TASK4...........................................................................................................................................11
P5 Determine exit and succession strategies for small business along with its benefits and
drawbacks..................................................................................................................................11
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Small medium enterprises are those organisations which maintains assets, employees and
revenues below certain edge. These types of businesses are important for the growth of country's
economy as they contributes in various aspects to local people. Government offers subsidies,
incentives, loans so that it can innovate efficiently. Trading Scents Ltd is small enterprises
founded in 2011, employing 20 staff and deals in whole-selling perfumes and cosmetics situated
at West Byfleet, Surrey, UK. In this report growth opportunities for SMEs will be identifies by
analysing key elements. Such opportunities are then evaluated through Ansoff's Growth Matrix
in context of organisation. Sources of finance available for organisation will be identified and its
advantages and disadvantages will be evaluated. In this report, business plan will be developed
that highlights financial data and strategic objectives for enterprise. Exit and succession plans are
also taken into consideration with benefits and drawbacks of each.
TASK1
P1 Evaluate growth opportunities and justify for organisation by analysing key elements
Small and medium enterprises are start-ups by entrepreneur to fill the gap between
customer demands and products offered. They see this as opportunities and come up with
innovate ides to meet customer satisfaction. It contribute to economy as they provides
employment to local people and provide products to compete in global markets.
Trading Scents Ltd is presently offering its services in UK and now wants to expand its
market in Jena, Germany (Alauddin and Chowdhury, 2015). It will now wholesale its range of
perfumes and cosmetics in this country as plan for growth. For this company will do PESTEL
Analysis and develop Porter Generic Strategy to find out opportunities and threats in macro
environment of country.
PESTEL Analysis: This tool helps company to find out opportunities and threats presents in
external macro environment in which business operates. These factors directly or indirectly
effects company and its operation in positive and negative manner. Below classification of all
those factors which are affecting environment of Germany and Trading Scents Ltd.
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Political Factors: Germany is democratic country with political stability, government
comprises of legislature, judiciary and executives. The constitution laid fundamental structure of
government which provides value system for nation. This shows that state interference is there in
business and its operations which creates hurdle in independent working of Trading Scents Ltd.
On the other hand interference brings transparency and there are less chances of fraud activities.
Economic Factors: Germany have less raw materials and imports most of resources from
other countries. Country is strong in metals, automobiles, chemical goods and machinery and
proud nation for brands like BMW, Audi and Mercedes Benz (Armitage, Webb and Glynn,
2016). This shows that this environment is favourable for businesses which shows positive
indications for Trading Scents Ltd.
Social Factors: This country is multicultural society with varieties of lifestyle adopted by
population of Germany. Family factor is still refer to as most important by young generations as
they maintains good relationships with their parents. This will helps Trading Scents Ltd to
advertise it product emphasising on social factor of the country and target its potential customer.
Technological Factors: Country is supporting many research and development programs
which helps in national science and technological advancement in many ways. There are scholar
society which supports medicines, agriculture, zoology and botany specialisation. This indicates
positives signals for Trading Scents Ltd as company is dealing in perfumes and cosmetics which
demands constant research and improvements to gain competitive advantage in industry.
Environmental factors: Although Germany is one of best tourist places in world it is also
affected by environmental challenges like other countries. Global warming, acid rain, carbon
emission from industries, air and water pollution. German government is taking major steps to
reduce environmental issues in nation and make country to maintain its prosperity. Trading
Scents Ltd will face issues in establishing manufacturing unit to produce perfumes and cosmetics
in country to expand its business.
Legal Factors: The last element of PESTEL analysis is legal factor which refers to legal
framework of Germany. German government supports and promotes business and investments in
country. There are written employment contract which lay down each and every key aspects
related to employment. This will provide Trading Scents Ltd clear understanding before
employing candidates and bide company to follow rules properly (Bruhn, 2018).
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Porter Generic Strategy: This model define that how organisation can have competitive
advantage in an industry. This includes all those strategies which allows firms to achieve
advantage over competition through cost leadership, focus and differentiation strategy. Trading
Scents Ltd. will use this model to attain competitive advantages focusing on one or more aspects
of this model.
Cost Leadership: In this strategy, firms becomes lowest cost producer in industry to gain
competitive advantage. This can be achieved by economies of scale, manufacturing in bulk or
employing upgraded technology to produce at low cost. Trading Scents Ltd. for this have to
exploit sources so that it can produce at lower cost and have competitive advantage. The
technology that company uses to become cost effective can be imitated by competitors and it can
be major risk (Gathenya, 2015).
Differentiation: This strategy imply uses of differential features that distinguish its
products from competitors. It can be one or more quality that consumer perceives important and
helps in gaining advantage in competition aspects. Trading Scents Ltd. deals in perfumes which
needs to focus on this strategy to gain competitive advantage. Only risk associated with this
strategy is that company needs to be always on toe to sustain additional feature in product from
competitor.
Focus: This generic strategy focuses on group of segment and then decide whether to
choose be cost or differentiation focus. This helps company to exploit either cost differences or
identify special needs of customer. Trading Scents Ltd need to analyse segment and then identify
which strategy is applicable. This can be ineffective because it will engage promotional activities
to advertise features in small segments.
P2 Apply Ansoff's Growth Vector Model for evaluating opportunities for growth Product
development
Successful business can not stick to same or usual strategy to run businesses there is need
to find new and innovative ideas to target customer and earn higher profits. Ansoff's growth
matrix model helps management to analyse and identify which strategy need to be adopted in
order to expand business with competitive advantage (Hyder and Lussier, 2016). Trading Scents
Ltd will examine every matrix to find out best suitable growth strategy to survive and sustain in
Jena, Germany market with gaining competitive advantage.
3

Market Development: This matrix of growth includes strategies that focuses on targeting
new segment of market with existing product line. This is done when businesses expands its
operations in different geographical area from where it is currently operating. Trading Scents Ltd
will adopt this strategy by expanding its business in Jena, Germany with same range of perfumes
and cosmetics.
(Source: Ansoff Matrix, 2019)
Diversification: This is when business tries to expand in new markets by developing
innovative product by identifying needs of that segments to earn higher profits. Trading Scents
Ltd if wants to grow by using this strategy have to develop new product by analysing needs and
opportunities of that new segments to have competitive advantage.
Market Penetration: This quadrant shows strategies which helps businesses to grow in
existing market with the help of existing product line (Lande, Shrivastava and Seth, 2016). This
can be achieve by Trading Scents Ltd through employing promotional campaigns to increase
advertising, discounts and sales offer to attract more customer. On the other hand the company
will face the voracious level of challenges in adoption of this technique as it tends to have the
resultants for unmet product cost along with missed level of opportunities. The company have
lowered that industry process which tends to have lack in result and saturated market.
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Illustration 1: Ansoff Matrix

Product Development: In this growth strategy, business will develop new product for
same existing segment of market to gain advantage over competitors. This can be achieve by
analysing need of customer and products currently offered by companies. The gap between these
two can be seen as opportunity for growth. Trading Scents Ltd while dealing in UK market
introduce new product or range will achieve product development. The company tends to ave
risk in major level of delaying and economic costs due to belief that high utilization of resources
improves performance. With respect to that company has to face increasing cost and risk in
losing the opportunities in order to have stickiness to the respective single development program.
Trading Scents Ltd will adopt Market development strategy in Germany as through
PESTEL analysis company have complete understanding that country is advance in terms of
technology and social factor. It also emphasizes on research and development by promoting
business that proves that Jena, Germany is peaceful city for conducting business operations. As
company deals in perfumes and cosmetic there is need for developing constant features which
will distinguish its products from that of competitors (Lee and Wong, 2015). Competitive
advantage in simple terms can be stated as having edge over competitors in industry to increase
market share, earn higher revenues and boosts profits. In context of this, Trading Scents Ltd will
adopt differentiation strategy to develop its markets in Germany to have competitive advantage.
In this company will employ promotional tools to advertise its products different feature in new
markets of Jena, Germany to attract customers.
On the other hand company have the various risk associated with have level of capital
investment in expansion. On the next hand the company tends to have responsibility in order to
build and expand the efforts of marketing into the new territory, the company have the risk if the
new investment doesn't pay off, the company have the major risk in wastage of capital resources
as the can be invested in different strategies.
Each strategies have risks and opportunities that company has to analyse appropriately
before applying them in growth objectives. Market development model of Ansoff's Growth
Matrix is associated with risk that it needs capital investment to expand business in new territory.
If growth strategy fails to generate revenue it create impact on overall functioning of Trading
Scents Ltd as it will affects capital and resources invested. This risk can be mitigated by efforts
of research and development activities by analysing macro environment through PESTEL
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analysis. This will identify all possible threats and opportunities present in external environment
of new market. Adopting Differentiation policy to achieve competitive advantage in market
development will require consistency in adding features to products of Trading Scents Ltd to
attract customer. There is need of identifying needs or preferences of customer to deliver what
they want in market to beat competition in industry (Lekkakos and Serrano, 2016).
The company can be mitigated the level of risk which is risk associate with market development
with implementation of Day’s Risk Matrix. This matrix has matrix have the perspective two
dimension that is newness of customer market and newness of product. The company can pay
focus to be different by moving towards the vertical axis It’s critical to build a growth strategy
around the notion of competitive differences. On the other hand by moving towards the
horizontal axis the company can deeply pay focus on the way of understanding the values of
customers. The company have the significant level of research as risks of poor research get
dramatically higher when dealing with unfamiliar customer segments or geographic markets.
TASK2
P3 Identify sources of finance available for organisation highlighting its advantages and
disadvantages
Finance is major backbone for any organisation to carry out day-to-day activities along
with implementing growth strategy for business. Sources of Finance provides adequate funds to
balance operations efficiently and effectively. Trading Scents Ltd will identify sources of funds
available with business to finance its capital investment for market development. There are
basically two types of sources that are internal and external which are further classified into sub-
categories.
Internal Source: This source of finance is present within the business or can be
generated from operational activities. This can provide lesser amount to capital investment as
compared to external sources. Trading Scents Ltd will identify sources internally to fund its
growth strategies, different types of internal sources present for company are as follows:
Owner's Investment: This source of funds is invested by owner in form of additional
capital for growth or expansion. This is long-term source of finance which comes from owner
savings. Trading Scents Ltd's owner can invest capital so that company that grow in new market.
Advantages Disadvantage
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There is no need of payment of interest for
such source of finance (Love and Roper,
2015).
Trading Scents Ltd does not need to repay it.
This source of finance is inadequate if business
is planning for growth or expansion.
Limited investment can be made by owner.
Debt Collection: Debtor is that individual or group of individual that owes amount from
business. In order to raise funds internally this can serve as source by collecting money from
debtors. Trading Scents Ltd can take this as short-term source of finance and generate capital for
growth.
Advantages Disadvantage
As it is part of business regular activities,
raising funds from this source requires no
additional cost.
There is possibility that debtors of Trading
Scents Ltd goes into bad debts accounts and
does not repay the amount.
External Source: These are the sources of finance which are available outside
organisation (Memili and et. al., 2015). There are number of financial institutions which give
short or long term loans to businesses. Trading Scents Ltd can choose combination from these
sources and invest capital for growth in Jena, Germany.
Bank Overdraft: Bank allows businesses to draw money from their account even if there
is not enough amount to meet the transactions. This is short term loan provided by bank which is
sometime have to repay in 24 hours. Trading Scents Ltd can even draw cheques of more amount
than amount present in its account because of this facility provided by bank.
Advantages Disadvantage
This maintains cash glow in business for day-
to-day activities.
It is less expensive than loans provided by
bank (Nallusamy, 2016).
If amount is not repaid for longer period of
time it can prove expensive.
Bank charges interest on amount overdrawn by
Trading Scents Ltd.
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Angel Finance: This capital investment is done individuals from outside businesses who
have high net worth. They provides financial help to entrepreneur and start-ups. Angel investors
will provide finance to Trading Scents Ltd as one time investment for assisting in early stages of
business.
Advantages Disadvantage
There is no need of collateral security in
raising finance from this source.
Trading Scents Ltd need not to repay or pay
interest on amount invested.
This is longer process to find suitable investors
who is interested to invest in business risky
early stages.
There is sharing of ownership in this source of
finance.
Venture Capital Funding: Venture Capital investors are those companies owned by
investment institutions to invest in start-ups and its growth. This is long-term funding in
exchange of ownership or shares for equity (Rakićević, Omerbegović-Bijelović and Lečić-
Cvetković, 2016).
Advantages Disadvantage
If Trading Scents Ltd is in need of huge capital
investment this source can be helpful.
These investors provides experience team to
avoid failure and issues in start-ups.
Ownership of founder is diluted by control and
decision making power in this case of finance.
It is long process to find investors and arrange
funds for growth purpose.
Trading Scents Ltd will raise capital from combination of bank overdraft and venture
capital finance. As company has facility of overdraft of £2.0 million which it never utilised, now
business wants to grow it needs investment. Venture capital finance is also good source to raise
capital as goodwill in credit rating of company is good. Investors will be easily available within
and outside UK to raise capital and provide assistance in growth strategy.
These sources will have different implications on businesses and on its operations.
Financial impact is that in venture capital, Trading Scents Ltd will raise adequate amount of
investment to fund its growth strategy of market development in Jena, Germany. Legal aspects
will be covered in venture capital finance as there is contract between investors and entrepreneur
8

about ownership and policies (Rice and et. al., 2015). Ownership will be diluted in case of
venture capital finance as investors lend funds with conditions of sharing equity shares in
Trading Scents Ltd. Control will be in hands of investors about growth policies and decision
making to solve issues in path of market development for growth.
TASK3
P4 Develop Business Plan for expansion with the help of financial information and strategic
objectives
Business Plan: It is detailed written document which contains growth plans and related
strategies to achieve growth objectives. It includes company overview and respective financial
information to show effectiveness to invest in growth strategy. It is prepared for investors to have
knowledge about business and make investment in growth strategies.
Executive Summary: Trading Scents Ltd will prepare business plan to attract investors
for investing in growth purpose. This document will analyse market conditions to identify
opportunities present in German market. Currently, company is into whole-selling of perfumes
and cosmetics in UK and as plan for growth it is planning to expand its business operations in
Jena, Germany.
Business Description: This section will cover complete Trading Scents Ltd information
related to business and key aspects to understand its operations.
 People: Currently there are approximately 30 employees in organisations which includes
1 Company Director, 1 Director and 2 secretary in management. Small enterprise like
Trading Scents Ltd is owned and controlled by small workforce.
 Product: Company deals in whole-selling of perfumes and cosmetics in UK market in
which includes men and female product range for different brands.
 Objectives, Mission and Vision: Objective is to increase market share by 10% through
growth strategies in a year and to have competitive advantage in industry with increasing
sales by 20% in one year. Mission is to innovate planning for timely supply of products
to retailers. Vision statement is to become global leader in industry by developing
innovative technology (Seethamraju, 2015).
 SWOT Analysis:
Strengths Weaknesses
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Higher satisfaction of retailers due to timely
delivery of products by Trading Scents Ltd.
Biggest strength is skilled employees who
provides competitive advantage in industry.
Company lacks in proper financial planning
which affects cash flow in business.
Trading Scents Ltd does not have adequate
funds for growth (Storey, 2016).
Opportunities Threats
Lower shipping prices has decrease cost of
transportation which will increase profitability.
Up-gradation in technology will provide
opportunity to Trading Scents Ltd by great
service.
New technology of competitors have decrease
their cost of operations.
Development in online shopping trend has
decreased demand from retailers for products
of Trading Scents Ltd.
Market Analysis: This shows that how company have research about its market in which
it is about to start its operations.
 Target Market: Company will grow in Jena city of Germany which is less populated than
other cities and peaceful region. Trading Scents Ltd will target men and women between
18-30 age group.
 Market Trends: Market is growing in this area as demand for perfumes and cosmetics is
increasing by both male and female population.
 Profiles of Competitors: There are few distributors as compared to demand in market by
retailers. Present number of wholesellers are not able to fulfil the current supply. Competitive Advantage: Retailers in order to meet demand wants timely and adequate
supply of products, there is gap in this demand and supply equilibrium. This opportunity
is identified by Trading Scents Ltd to have competitive advantage in industry.
Marketing/ Sales Strategy: These includes strategies framed after analysing market for
growth by Trading Scents Ltd.
 Marketing Strategy: Present Retailers will be used as contacts and personnel will directly
contact retailers so that there is no miscommunication and introductory offers can be
understood by shop owners (Turner and Endres, 2017).
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