Business Growth Strategies for SMEs: A Case Study of Hichrom

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PLANNING FOR GROWTH

Table of Contents
Introduction................................................................................................................................3
LO1............................................................................................................................................3
P1 Analyzing key considerations for evaluating growth opportunities and justify these
considerations within an organizational context....................................................................3
P2. Evaluation of Growth Opportunities through Ansoff’s Growth Vector Matrix..............4
M1. Options for Growth through Analytical Framework to demonstrate Competitive
Advantage within an Organization.........................................................................................5
D1. Evaluation of specific pathways for growth and mitigation of risk of those options......5
LO2............................................................................................................................................6
P3. Assess the potential sources of funding available to businesses and discuss the benefits
and drawbacks of each source................................................................................................6
M2. Evaluate potential sources of funding and justification for the adoption of an
appropriate source of funding for a given organizational context..........................................7
D2. Critically evaluate potential sources of funding with the justified argument for the
adoption of a particular source or combination of sources, based on organizational needs...8
LO3............................................................................................................................................8
P4 Design a business plan for growth that includes financial information and strategic
objectives for scaling up a business........................................................................................8
M3 Develop an appropriate and detailed business plan for growth and securing investment,
setting out strategic objectives, strategies and appropriate frameworks for achieving
objectives..............................................................................................................................10
D3 Present a coherent and detailed business plan that demonstrates knowledge and
understanding of how to formulate, apply and achieve business objectives successfully. . .11
LO4..........................................................................................................................................11
P5. Assess exit or succession options for a small business explaining the benefits and
drawbacks of each option.....................................................................................................11
M4. Evaluate exit or succession options for a small business comparing and contrasting the
options and making valid recommendations........................................................................12
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D4.Evaluation of exit and succession of small business and justification...........................13
Conclusion................................................................................................................................13
Reference list............................................................................................................................15
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Introduction
The way small and medium enterprises (SMEs) grow and develop considering several
opportunities are the focus of this study. Opportunities for growth are identified and their
applying techniques are being studied in this assignment. Ways of how SME attract investors
and their source of investments will also be discussed here. These will be helpful for SME to
understand rewards involved with growth vs. potential risks.
LO1
P1 Analyzing key considerations for evaluating growth opportunities and justify these
considerations within an organizational context
Evaluation of growth opportunities of a company helps in determining profits and valuable
customer base. For Hichrom, Competitive advantages, generic strategies, and pestle analysis
are mainly the three factors that will be considered as their main growth opportunities in an
organizational context.
Competitive advantages: If sustainable profits of an industry exceed the average of that
industry, the organization will be considered as they gained competitive advantages. In this
case, study, to gain competitive advantages, Hichrom should focus on their resources and
abilities. An organization should have more superior resources and capabilities than its
competitors. Without these advantages, the firm will get copied by its competitors and
advantages gained from this completion will soon fade away due to the replication. Resources
are very valuable to create costs that can be acquired very easily. Lee and Cowling (2016)
stated that other major kinds of resources that are most effective are parents and trademarks,
customer base that is installed as well as reputation of firm. Capabilities by which a firm can
utilize its resources effectively are important. A firm's resources and capabilities together
cause competition. For growing firms like Hichrom, competition enables effectiveness,
innovations, quality, and responsiveness of customer. All these competencies have created
advantage in differentiation of costs.
Porter’s generic strategies: A firm like Hichrom positions itself by leveraging its strength.
A firm’s strength depends upon two main factors and that is differentiation and cost
advantage. This is the strategy of the firm. Hichrom strength is applied in mainly narrow or
broad scope to obtain three kinds of result such as cost leadership, differentiation, and focus.
Cost leadership is the level and quality of cost given. Company sells its products at low cost
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to compete with its rivals hence gaining more profits. In differentiation strategy, company
needs to produce products that have unique attributes that attract more customers. These add
values to the company. The value added to make the product unique helps the company to
charge a premium, so the organization makes up for the cost regarding the adding of
uniqueness. Cost advantage or differentiation is achieved by focus strategy.
Pestle analysis: A framework to analyze and monitor the factors of environment impacting
the performance of the industry. Political, economic, social, technological, environmental and
legal factors are the abbreviated as Pestle analysis. Here, for Hichrom, pestle analysis of UK
is analyzed. UK has a generally fair and proactive government. With high GDP and diversity
in economy, UK grows steadily (Foroudi, 2017). UK has well IT and scientific skills, helping
Hichrom to access qualitative skills and expert employees in UK firm. Their better access to
technological fields is helpful for them to produce expertise innovations. UK is socially
stable, so Hichrom gets positive results from this. As for environmental factors, Hichrom
needs to produce products that environment-friendly and also needs to avoid waste materials
being produced. Hichrom needs to produce their workplace to be free from any sorts of
danger or accidents to gain trust and loyalty from their employees and customer base.
P2. Evaluation of Growth Opportunities through Ansoff’s Growth Vector Matrix
Ansoff’s matrix refers to the market or product grid matrix having 4 main points for growing
and matching up new innovations with new markets plotted on matrix. This matrix is helpful
in highlighting the risks in a specific growth strategy during moving to a new section of the
matrix (Lyee and Cowling, 2015). This matrix includes market penetration, product
development, market development, and diversification. Best strategy to increase sales is is the
objective of this matrix. Customer feedback is taken, so as to make products available to
them according to their choice and to satisfy them. Changes have been made to improve the
products as per their choice.
Market penetration: Selling of the same products to existing market. Hichrom sells their
existing products to the UK market to improve their customer loyalty and good customer
base. Hichrom needs to find new ways and ideas to increase its customer and employee
loyalty. Increase in its value is needed to grab their customer lifetime value. Order process
can be improved so that the customers find it easier to connect. Business hours can be
increased and adjustment and improvements can be done to the products.
Market development: Exciting products can be introduced by Hichrom to increase its
market value. Customers other than the old customers and existing market in UK can be
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attracted by new and exciting innovations. New customers can refer to customers from new
geographic location such as other countries. Hichrom can introduce products excellent in
business market that can attract business users from around the world if that product is
exciting and unique enough. They can introduce new product that is really helpful in
education system and can attract students from across the world. However, they have to
understand that whether they can support and afford this business.
Product development: To produce or manufacture new products or to improve the existing
products or introducing new varieties and variations of the existing products to the already
existing customers. Hichrom can hold onto their old customer base by showing their
innovations and by making them excited about their products by exciting costs.
Diversification: Considered to be strategy having the highest risk. Selling of new and
innovative products is unique among new customers. Hichrom can produce unique and
innovative products to foreign markets to attract huge customers to increase its market base
outside UK.
Therefore, Ansoff matrix can be considered as a tool to improve strategies to increase sales
and Hichrom can be profited by this.
M1. Options for Growth through Analytical Framework to demonstrate Competitive
Advantage within an Organization
In this case, if a company have good resources and excellent capabilities, then SME like
Hichrom can give competition very easily which can result in competitive advantage in their
respective industry. As competitive advantages help organizations to have better
opportunities than their competitor in increasing their customer base and maintaining their
customers for their industry to grow, it is best if they consider their analytical framework to
demonstrate their industry competence. An effective and popular framework for this purpose
is pestle analysis. Mawson and Brown (2017) recommended that organization evaluating the
future of their surroundings gets best idea from Pestle analysis. It also helps to get a better
idea as to how to grow effectively in their near future. Porter’s generic strategies can also
show Hichrom how to strategize effectively for their future. Porter's strategies can introduce
some great ideas and strategies to reach company objectives. It is also a great strategy for
their competitive advantages among the industry rivals.
D1. Evaluation of specific pathways for growth and mitigation of risk of those options
Mitigation of risk is a major concern for SMEs like Hichrom as it enterprises with sensitive
business risk. Competitions are exposed to risks every time. Daily operations of these
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organizations can be directly affected by risks, resulting in increased expenses and decreased
profits. Risk mitigation that is traditional focuses on risks occurring from physical causes and
legal causes. These include accidents, natural disasters, fire, lawsuits as well as death. It is an
action regarding security of future. With the help of pestle analysis, porters five generic
analysis and resources and capabilities within the industry, risks can be ensured for SMEs
like Hichrom in the upcoming future. Adverse effects can be reduced by planning
strategically for the company’s growth.
LO2
P3. Assess the potential sources of funding available to businesses and discuss the
benefits and drawbacks of each source
The business growth of SME business is based on raising funds through means that will not
exert excessive pressure on for loans installment repayment on a monthly basis. Hichrom is a
manufacturing company that is full of potential and is now in need of funds to put their ideas
for massive expansion.
Bank loans
Bank loans are competitive in nature as there are many debtors of big and small businesses to
applying for loans but do facilitate loans to businesses that meet their loan criteria.
● Benefit: The foremost benefits of bank loans are they are cost-effective in terms of
interest rates which will be beneficial for a small business like Hichrom. Cowling
(2016) stated the flexibility of bank installments is benefits in payment of installments
monthly or in total when the bank demands through overdrafts. Loans through banks
let the Hichrom retain profits. The crucial benefits of bank loans are they have tax
benefits.
● Drawback: The drawbacks of bank loans are the strict requirements for applying
loans which includes filing various forms about the existing business and its assets.
Hichrom without the required assets criteria for loans will face difficulties in
approving their loans.
Crowd-funding: Crowd-funding had a blooming exposure in recent years. There are
multiple websites aiding SME businesses like Hichrom for funding by the setting of a target
fund for a specific period of time.
● Benefit: Crowd-funding is a fast way of raising fund without any added fees.
Hichrom can attain marketing benefits by proposing its project through online
platforms along with expert’s opinions and guidance for the improvement. Hichrom
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could evaluate the public’s views, acquiring investors and track the progress of the
project.
● Drawback: It may not be easier to raise funds through crowd funding in comparison
to traditional ways of loans. Hichrom may not be able to achieve its funding target or
acquire prospective investors. Forkuoh et al. (2016) opinioned that the reputation of
the business is on the stake with the continuous threats of someone stealing the
business idea or the projects in lack of needed patents.
Angel investors
Angel investors invest in business start-up and expansion with strong and structural business
proposals. They are basically people with some spare money available seeking higher interest
rates than traditional funding options.
● Benefit: The foremost benefit is the non-fixed amount of funds Hichrom could
borrow from Angel Investors. Hichrom can acquire information about the investor's
knowledge of strategic planning for a company. Being investors with adequate
knowledge could immensely help in planning and growth as they usually wish to have
a say in the decision-making process. Angel investors require profits share as loan
repayment instead of monthly payments of installments.
● Drawback: The angel investors may exert excessive control on the business planning
process which could lead to dissatisfaction between the investors and Hichrom. As
compared to traditional funding methods, there is a lack of required transparency.
Angel investors are difficult to access and to collect suitable information.
M2. Evaluate potential sources of funding and justification for the adoption of an
appropriate source of funding for a given organizational context
Hichrom is listed among the 100 successful SMEs in the region of Thames Valley SME 100.
There are numbers of investors both within and outside the UK interested in providing loans
to Hichrom for its good rating. They recently had an overdraft of £2.0 million for their
facility arrangement that was never been utilized. Bank loans in comparison to crowd-
funding and angel investors are preferable funding options for Hichrom as they had
previously applied and used funds from the bank in the development of their business. The
necessary criteria required for applying and sanctioning of loans are obviously met. With the
overdraft of the loan it transparent that Hichrom assets debt are higher than the amount
needed for the growth of the business. Hichrom being in the 100 successful SMEs proves
their potential as an established developing business.
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D2. Critically evaluate potential sources of funding with the justified argument for the
adoption of a particular source or combination of sources, based on organizational
needs
The company's head of Strategic Planning Department, Mr. Nagovin shared his view with the
Junior Manager of Hichrom for construction of a plan for the massive expansion of the
company.
Mr. Nagovin wishes to devote two months to develop a well-articulated strategy for the
company. In the case of crowd-funding, there are risks the strategy being copied by others. In
the question of marketing advantage, Hichrom mentions the prestigious list had provided it
with favorable marketing and attention of prospective investors. Angel investors could
provide unlimited funding but they usually exercise excessive controls on the company's
decision-making process. Banks in this scenario is able to provide loans for their well-
articulated strategy through proper documentation and lesser interference in the working of
Hichrom. The plans sanctioned have a high chance of successful completion with the bank
loans paid back on time.
LO3
P4 Design a business plan for growth that includes financial information and strategic
objectives for scaling up a business
This plan of the business is designed to focus on the growth regarding the whole business at a
given point of time. The bond of interdependency and the effect can be justified throughout
this evaluation. The SME that is taken into consideration is Hichrom for being in a post of a
Junior Manager of Hichrom, the plan of the business growth needs proper financial
information and desirable planning of objectives of strategies (Hichrom.com, 2019). The
planned financial standings in regards to business growth are given in a table for the next two
months.
Financial Particulars Financial
Standings
(31st july, 2019)
Planned Financial Standings
(31st july, 2019)
Sales (of printing product) £ 400,000.000 £ 500,000.00
Expense of company £ 300,000.00 £300,000.00
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Cash In Flow/ Income £ 350,000.00 £ 700,000.00
Profit Projections £ 70,000.00 £ 56,500.00
Assets £ 400,000.00 £ 800,000.00
Liabilities £ 300,000.00 £ 400,000.00
The strategic objectives of Business and financial information:
1. Increase in the asset by 17.6%
2. Increase In the profit by 13.6%
3. Low rate of increase in expense by 12%
4. Increase in the sale by 40.7%
5. Use of credit standings by 55.6%
The expanse of the company
The current expenses of the company need not bend down. In order to minimize the rate of
expense, it is to be considered that the salary of the employees need not be subject to change.
The approach of the incentive for rewarding the employees need not be increased at a rate of
1.5 %. This would help in the creation of interest in work. According to Berisha Qehaja et al.
(2017), there are a number of fresh candidates who need to be employed at the company's
cost only. It is noticeable that the interest on the outstanding of the company need not be
exceeded by 0.50% since the new creditors there are chances of increase in the rate of interest
(Hichrom.com, 2019).
Assets and liabilities
The overdraft of £ 500,000 needs to be liquidated from the bank in order to increase the trust
of the present creditors and to provide the new creditors with keen interest. Out of the
liabilities that are present of the worth of £ 500,000 are in need to be paid to the existing
creditors (Hichrom.com, 2019). The increase of the goodwill of the credit would likely to
help both in the short run and in the long run.
Note of the planning
It can be considered that the planned actions are needed to be away from the simulations from
the unwanted business. The rate of change of the indexes of the price considered to rise or fall
at a considerable rate. In case of an emergency, the meeting of the situation through the
emergency fund can be taken into consideration.
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Planning outcome
The business organization will be able to earn more sales and hence profit maximization can
likely to be achieved. A large number of products that will help in reducing per unit cost of
the product resulting in a reduction in aggregate cost. The availability of the products among
the existing customers will ensure them to gain the loyalty of the brand as they need not have
to wait for the stocks. More expansion of business attracts more creditors in its way.
M3 Develop an appropriate and detailed business plan for growth and securing
investment, setting out strategic objectives, strategies and appropriate frameworks for
achieving objectives
Growth and securing the investment: The growth of the investment in the business market
is likely to be acquired through the acquisition of goodwill of the Hichrom’s Creditors. As
opined by Huang et al. (2015), the creditors of the Hichrom are subjected to be given out
through the payment of the outstanding with an immediate basis. This payment can be carried
out by the funds that are available from the bank. With the help of the credit, the financial
outstanding remains the same and the goodwill of the company can have its rise to a level of
maximum capacity.
Objectives of the strategies that are needed to be taken
The objectives of the strategy of Hichrom are to increase the maximum sale level. This
enables the company to rich the availability of the fund which is not the issue to outstanding.
This fund will help to meet the expenses of the company and the portion of profit in the
clearance of the outstanding. This can be regarded as the best option for making in a rapid
expansion of the business (Huggins and Izushi, 2015).
The framework of the Objectives of the Strategy
The installation of new machinery for efficient production of the prints is very necessary for
Hichrom for its internal framework revolves around the staffs and the machines that are in
use. The cost of the Hichrom need not be exceeded for upholding the employees
(Hichrom.com, 2019).
D3 Present a coherent and detailed business plan that demonstrates knowledge and
understanding of how to formulate, apply and achieve business objectives successfully
The business plan formulation that has been stated above can be suggested to be carried out
from the 3rd of July 2019. The installation of the new machinery is required because it
involves the employees both present and their future prospect. The notice of installation the
machines need to be provided to existing employees. The required procedure of the
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successful formulation is expected to be carried out by the 17th of June 2019. The application
that is needed for the external recruitment notice needs to be disseminated with urgency
among all possible sources by the organization. As stated by Nnamseh and Akpan (2015), the
finance department in this regard needs to be entitled to daily monitoring of the standings in
the financial aspects and to look at the financial drawback of the plan for the growth of
Hichrom. The managerial teams who are entitled to the assessment of achievement or failure
of the company also need to assess properly all over functioning of the business.
LO4
P5. Assess exit or succession options for a small business explaining the benefits and
drawbacks of each option
An SME business could opt for exit or succession options when it is incurring losses or is
unable to access prospective investors or clients.
The exit of small business
The exit of the business takes place when the cost of production is equal to the revenue
generated. Without any means to generate capitals for recovering losses, the small business
will be forced to withdraw from the market. The outstanding loss amount is met through the
selling of the assets by the proprietor. The employees of the company are given compensation
amount that will sustain them for a few months. The compensation amount is distributed after
the settlement of the outstanding amount of the losses the proprietor had encountered.
 Benefit: The proprietor after exiting could focus on establishing a new business.
The employees could look for new means of employment for better job
opportunities. Thompson and Zang (2015) optioned that the proprietor had cleared
all the outstanding debts and is free from it. In case the proprietor decides to open
his business anew, the goodwill secured by settling all the liabilities and debts will
be an asset.
 Drawback: The foremost drawback of the industry is unemployment. The
goodwill of the proprietor might be ruined. The amount estimated to be generated
after selling of the business could not be raised. For the settlement of the
outstanding debts, the proprietor can be left penniless and the liabilities have
chances of being unsolved.
The succession of Small Business Firm
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