Growth Opportunities for SMEs in the UK: A Business Development Report

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GROWTH OPPORTUNITIES FOR SME IN THE UK
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GROWTH OPPORTUNITIES FOR SME IN THE UK
Table of Contents
Introduction......................................................................................................................................3
LO1: Analyzing key considerations SME’s should consider when evaluating growth
opportunities....................................................................................................................................3
P1: Analyzing and justification of key considerations in organisational context........................3
P2: Evaluating opportunities for growth using Ansoff’s growth vector matrix..........................5
LO2: Assessing various methods through which organisations access funding and when to use
those funding...................................................................................................................................7
P3: Assessing potential sources available to business and discussing benefits and drawbacks of
such source...................................................................................................................................7
LO3: Developing business plan and communicating how to intend business.................................8
P4: Designing business plan, which includes financial and strategic objectives for business
scaling..........................................................................................................................................8
LO4 Assessing ways of how a business owners exits business and implication of such option...13
P5: Assessing exit options for small businesses analyzing benefits and drawbacks.................15
Conclusion.....................................................................................................................................17
References......................................................................................................................................19
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Introduction
In the modern business environment, the small and medium sized enterprises (SME) are known
as one of the most important components of the business industry due to their immense growth
opportunities. This study will highlight the various aspects of management of Southern Business
Technologies, a SME in the UK. The various opportunities of growth of SMEs in the UK market
will be discussed, the funding strategies will be evaluated, a sound business plan for developing
an SME will be designed, and various strategies of exiting from a SME will be assessed.
LO1: Analyzing key considerations SME’s should consider when evaluating growth
opportunities
The most important factors that an SME have to consider while evaluating opportunities for
growth are competitive advantage and Porter’s generic model for growth and should also link
competitive advantage with growth opportunities. In case of new services and products that are
to be introduced or already there in the market, development and innovation of such products
should be done by continuous monitoring on the product life cycle and on portfolio strategies.
The main routes to growth should be analyzed using Ansoff matrix and risk should be mitigated
using it, otherwise it will pose a problem for survival of the company. Mergers, acquisitions,
joint ventures and the concept of franchising also contribute to the growth factors of an SME
(Taylor and Murphy, 2017).
P1: Analyzing and justification of key considerations in organisational context
Southern Business Technologies, which offers communication facilities connecting all party of
the country ranges from office telephones to business mobiles and even the household segments.
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It considers competitive advantage and Porter’s generic model as an important strategy for
growth. By using competitive advantage, the company outperforms its competitors by using low
cost in manufacture of communication services, using advanced technology and use of highly
skilled labours (Herrera, 2015). It uses the cost advantage process in which it provides the same
products and services as offered by its competitors in the market but at a relatively lower cost
which helps it gain more profit and increase sales opportunity than others. Also it follows the
differentiation strategy, using which it provides better products and services than its competitors
thereby increasing opportunities for the consumers to choose them over others. The company
uses the cost advantage and differentiation strategies to focus on the target market of the country
(Namada, 2018). While evaluating growth opportunities, the company uses PESTEL analysis for
marketing its products and analyzing and monitoring of the macro environmental factors. Such
factors are very crucial in determining the sustainability of a product in the market. This also
helps the company to identify the weaknesses in the field of growth. The political, economic,
social, political, legal and environmental factors are analyzed by the company as they affect the
growth of any new product or service introduced by the company in the market. For bringing any
new product in the market, this analysis is important as it helps it to know about the current
demand of the consumers in the present marketing scenario (Aithal, 2017).
For introducing any new product or service into the market, it is important for any company to
analyze the life cycle of the new product to be launched into the market (Uggla, 2015). Southern
Business Technologies is a telecommunication company providing communication service and
linking different parts of the world. Influenced by the revolutions taking place in the present
scenario, the company should make a detailed analysis of each and every product it is planning
to launch in the market. Previously, it has introduced VOIP, PBX and business phone lines, now
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business data cables, wifi, home and business internet facilities are also provided by the
company. Now-a-days, many business units are no longer ready to rely on the old fashioned
intercoms and telephones for business communications. Therefore, Southern Business
Technologies is planning for using the portfolio strategy by taking back the old fashioned
communications from the business units and processing and remodeling of such old
telecommunications systems for production of advanced communication lines. They are reusing
up their assets for production of innovated and developed products which is in turn, is saving up
their cost of production and contributing for opportunities for growth of the company (Stark,
2015).
The board members and the owners of Southern Business Technologies are planning to merge
with other telecommunication companies existing in UK so that it can expand its business on a
large scale which is contributing to a large extent for the growth of the company. The owners are
also planning to provide franchise services to others not only in the country but also outside in
order to get a worldwide fame and status. The company can in turn earn royalty from such
individuals or associations, taking franchise of Southern Business Technologies, which the
company will utilize for developing its products and providing better services to its users (Brimer
et al., 2015).
P2: Evaluating opportunities for growth using Ansoff’s growth vector matrix
Growth opportunities for the company are dependent on the Ansoff Matrix. In market
penetration strategy, its products are used by the firms in the existing market for increasing its
market share (Geissdoerfer et al., 2018). Southern Business Technologies is decreasing prices of
its products presently offered in the market and attracting not only existing but also new
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customers. It is also offering introductory prices and increasing their promotional and
distribution efforts to capture existing as well as new consumers by penetrating into the market.
In product development strategy, a new product is developed by the firm using extensive
research and development and expanding its new product range to target customers. Southern
Business Technologies are taking back the old fashioned telephone communications provided in
the business units or homes and remodeling those using research and development strategies into
a completely new product. This is helping them for the growth and development of products
introduced into the market or to be introduced later (Hussain et al., 2018).
In market development phase, the firm enters a completely new market with its existing products
which involves exploring new geographical boundaries and new customers (Rizwan, 2018).
Southern Business Technologies is analyzing the new market tthat is entering into the market and
analyzing, whether on entering into the market the customers will be benefited or not. The
company is planning to expand its market even outside the country by merger and acquisitions
and by the system of franchising.
In case of diversification strategy, a firm enters a new market with a new product which is the
most riskful strategy for exploring growth opportunities (Roberts and Berry, 2017). Southern
Business Technologies are experts in providing communication facilities to household and
business organisations. Following this strategy, they have come up with new products like
business CCTV and on hold music audio mixer which is completely a diversified product from
their own production. They are aiming to target their existing and new customers with such
products as many people who are loyal to such company for more than 17years are showing
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attention and interest towards their diversified products, henceforth contributing for the
company’s growth.
LO2: Assessing various methods through which organisations access funding and when to
use those funding
An organisation needs funding while taking investment decisions, for this analysis of payback
period and calculations of net present value are important. The main sources of an organisation
are bank loans, crowd funding or peer to peer lending, angel and venture finances. Such money
can be used by the company in situations of loss, liquidation and insolvency conditions.
P3: Assessing potential sources available to business and discussing benefits and drawbacks
of such source
Southern Business Technologies have various potential sources available such as bank loan,
crowd funding, peer to peer lending and venture finances. For research and development for its
existing products as well as developing new products, the company needs huge amount of
finance. Such finance is provided by the local or foreign bank existing within the country which
eases the work of the company, but the main drawback of such lending is the payback period of
such loan amount given is very short in nature. This is provoking the company to take more
loans in order to pay for this loan (Roda and Macchi, 2016).
Southern Business Technologies is opting for crowd funding as the source of finance which is
the latest technology for funding used now-a-days. In case of such funding, small funds are
collected from numerous people using online payment system, which is benefitting the company
in their small ventures. This lending involves direct connection of the investor with the providers
thereby removing the chance of confusion among them (Belleflamme et al., 2015). Inspite of
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that, the main drawback is the problem of IP issue or plagiarism and the exhaustion in the
number of donors willing to lend money, which acts as a barrier for the growth of the company.
Southern Business Technologies is using angel and venture finance as a method of financing for
the company (Bertoni et al., 2015). The main benefit of using such financing method is capital is
being provided by the individuals to businesses start ups or even running business in exchange of
ownership equity funds or convertible debentures. It supports the companies at the initial
moments or in times of crisis when the company is unable to pay back the money or where there
is high risk. The constraint faced by the company is as it involves huge amount of investing in
exchange of capital, the venture capitalists are always not willing to provide such fund to the
businesses.
LO3: Developing business plan and communicating how to intend business
P4: Designing business plan, which includes financial and strategic objectives for business
scaling
It can be observed that with new growth opportunities, the mission and vision of the company is
changing which is ultimately helping Southern Business Technologies to develop their business
in other markets too (Watson, McGowan and Cooper, 2016).
New aim
The new aim is developed to increase the growth of the company and to capture new markets.
This defines that Southern Business Technologies is focusing to reduce the price of the products
to attract new customers. Further, they are remodeling their products by using the various traits
of technology and introduce new products in the market. In addition to this, they are also aiming
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to increase the market share by entering new markets like London, Manchester and various other
markets where they will find new customers availing their products. Customer benefit and
meeting their needs is the main thing, which Southern Business Technologies are aiming for.
Southern Business Technologies are also planning to expand on global platforms though merger
and acquisition process. Lastly, the aim is to diversify the products by introducing new products
for the customer who stayed loyal with the company for more than 17 years.
New objective
In accordance with the new mission, below are certain objectives, which will help the firm to
grow and expand their business:
- To remodel the pricing strategy by implementing introductory pricing strategy for
increasing the efforts of promotion and distribution of products
- To offer new products by using the traits of technology so as to introduce new products in
the market
- To explore new markets such as London, Manchester, and other areas and to increase
their global presence through merger and acquisition
- Lastly, diversifying the products by introducing new products and offering them to the
loyal customers who have stayed with the company for over 17 years
- To increase sales by £ 40,000 by the end of 2019
- To increase profit by 40% by the end of 2019
- To review options for growth by utilizing the available resources
Operational information
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It is quite visible that with whenever, any company wants to expand their business, they tend to
increase their operational efficiency for supporting that growth (Scarborough, 2016). Southern
Business Technologies is no exception to it and they have listed the below strategies to increase
their operational efficiencies. These are:
Customer offerings
It can be seen that successful telecom companies not only provide connectivity but provides
other things too. Southern Business Technologies is also planning to do the same by offering
new range of products and adapting to new business models. This will help them to leverage the
customers and help in building customer focused operations for the betterment of the business.
For this, development in the AI is given more importance for supporting the customer interaction
level.
Implementing new technologies
Southern Business Technologies is investing in new technologies to increase the customer
experience and to enter new markets. This will also help Southern Business Technologies to
increase their revenue, as new technologies will bring in new things, which will increase the cost
(Dale, 2019). For this, Southern Business Technologies is planning to use various traits of IOT
and making the telephones wireless and introduce new products i.e. CCTV. Thus, use of IOT
will help in reducing waste of resources and increase the level of efficient use of network for
good connectivity. Therefore, Southern Business Technologies will generate a good amount of
profit by increasing their bandwidth and connectivity. This will place them in higher positions
within the years to come
Going vertical
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Southern Business Technologies is focusing to expand their markets on international markets by
undertaking introductory pricing policy and merging with big players (Bursik, Jackson and Cyr,
2017). For this, Southern Business Technologies are investing heavily on improving the
infrastructures and improving the security. Thus, it will give them the much-needed
technological advantages across the market.
Financial information
Below are certain financial things that Southern Business Technologies will include in their
business plan. The strategy is described below:
- Increasing the cash infusion so that the shortfall can be easily overcome
- Determining the cash position and the requirement for each quarter so that the need can
be felt easily
- Purchasing assets so that the company is able to meet the financial requirements by
mortgaging the assets during the time of need
- Increasing the efficiency to meet the future projections which will be based upon planned
growth targets
- Increasing the revenue by £ 40,000 so that profit rate of 40% is achieved by the end of
2019
- Reducing the cost of training and licensing for the purpose of using the telecom services
by 20%
- Lastly, to increase the revenue by increasing the gross margin from 30% to 40%
The financial targets are:
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- Increasing the profit margin by the end of 2019 and increasing the quarterly revenue by
20%
- Reducing the overall cost by 30% for each quarter
- Increasing the revenue by 20% for each quarter by increasing the overall sales for each
quarter
- Purchasing more assets and decreasing the liabilities
- Lastly, to increase the cash flow by 10% on daily basis
The projected balance sheet (in terms of %):
Liabilities Amount
(in %)
Asset Amount
(%)
Paid up capital 10% Current asset 20%
Current liabilities 11% Long term
assts
15%
Long term
liabilities
18% Goodwill and
patents
30%
Table 1: Balance sheet
Source: Learner
The above tale is the projected balance sheet that Southern Business Technologies will be eyeing
to improve. This will help in their growth and expand the existing business.
Communicating the business plan
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