Growth planning is a strategic business activity that helps entrepreneurs to make plans and later track their own organic growth of their revenues. You are working as a junior manager in Southern Business Technologies, a telecommunication firm that provides networking services and facilities to its clients. You are required to prepare an accurate strategy plan for the company. For the preparation of it, you are required to include the below-mentioned questions.
- How growth opportunities are evaluated in SMEs by analysing key considerations?
- What are the various ways through which an organisation can access its funding and when can it use various funding types?
- Develop a plan for the business that also includes the financials and state how it can be scaled up?
- How the owners of small business can take the exit from the business and what are its implications?
Planning for growth is a strategic activity which is used by companies in order to generate more and more revenues in speculated period of time. Planning aspects assist firms in making appropriate plan which can be used in future business operations (Albert, 2017). If manager of a company wants to make an appropriate planning for growth than it is crucial that they have adequate information about external and internal factors which can have great impact on business operations. Company which is taken in this report is Southern Business Technologies, which is a telecommunication firm and provides networking services and facilities to its clients. Present report will focus on key considerations which SME should consider while analysing and evaluating growth opportunities in a business. In addition to this, different kinds of methods through which company can access to funds or when to use various types if funding is mentioned in this report. Other than this,business plan will be developed and communicate how a businessmen will intend this for scaling up their business operations. Lastly, different ways through which business owner can exist business along with its implications is mentioned in this assignment.
P1 Key consideration for evaluating growth opportunities
Planning for growth, is determined as a business plan through which company tend to attain their targets in speculated period of time. Thus, planning activities works as a guideline through which employees and other staff members perform their task in order to achieve the set goals and objectives (Barbour and Deakin, 2012). Business environment is a dynamic in nature and there are various kinds of factors that can have an effect on business and this can be external or internal depends upon situations and circumstances. Every company start their business with the motive of gaining maximum benefits so that they can sustain in the market for a longer period of time. Therefore, it is prime responsibility of managers to evaluate current market situation as it will help managers in formulating an effective strategies. In relation with Southern Business Technologies, evaluation of growth can be done through two methods which are explained below:
Competitive analysis: It is considered as an important part of a marketing plan as it helps company in understanding competitive environment that is present in market area. Southern Business Technologies, as it is telecommunication company so, their main focus is on enhancing networks. For this, firm is using new and latest technologies, i.e. IoT and cloud technology, for so as to provide effective services to its customers. Thus, to be in competitive nature it is crucial that mangers of this company formulate effective policies so that they can effectively compete with their rival firms. Therefore, it can be said that competitive analysis helps organisation in attaining desired goals and objectives (Beatley, 2014). Therefore, to analyse the core competence of business Porter's generic model is being used by company which is explained below:
Porter's Generic model: If company wants to know about their financial status or position whether they are in better position or not they use Porter's Generic model which is assisting company in performing in a better manner. Thus, while planning for growth, company must analyse who are their competitors and how they can hamper business operations. Therefore, in terms of Southern business technologies managers are using Porter's generic strategy for formulating strategies and further for better understanding it is explained below:
Cost leadership: In this major focus is on enhancing the level of profitability by diminishing the cost price of a commodity thus, it enables firm in providing goods at lower cost. This basically run on tow concept first: keep the cost low so that purchasing can be maximise or to expand their business in wider area so that even if they keep their price normal they can have maximum benefits. This kind of strategy is adopted by Southern Business Technologies, who have ample number of funds and can invest in logistics. Therefore, with the help of cost leadership firm can improve its internal processes and for this it is necessary that all functional departments have better interaction which will be able to deliver services at lower costs (Chen and et. al., 2014).
Differentiation leadership: Establishing business is one of the several tasks which are to be carried out by an entrepreneur so that a competent position in the market could be established. This assist firm to remain unique so that cutting edge can be accompanied. In terms Southern telecommunication company in order to make themselves different they are developing and doing modification in their applications for example: firm has incorporated CRM integration licenses as it enables enterprise in fulfilling demands and wants of targeted customers.
Cost focus: In this, main focus of company remains in offering goods at low cost and for this, firm selects a targeted market after evaluating and identifying needs and demands of customers. As per the current market scenario, if companies are good in fulfilling customer satisfaction than they can gain maximum economic benefits. Therefore, Southern Business Telecommunication, are giving better services and majorly working on improving communication facilities at lower prices (Eddleston and et. al., 2013). They are also planning to establish their networking in remote areas as well as a result it will improve their customer base.
Differentiation focus: It is considered as an important marketing strategy and different small medium enterprise use this in order to gain high profits. Differentiation focus helps company in evaluating difference which company is following as compared to other rival firms. Although it is helpful in making differentiation but problem with this strategy is to analyse whether the process is valid or not. In can be said that the main motive of this market strategy is to target a small subset of population from the market area and than manufacture goods according to their choices and preferences.
With the help of above mentioned points, Southern business technologies can adopt differentiation focus strategy as it will help company to produce new and innovative products at lower rates in order to gain high competitive advantage and maximise market share as well (Goodfellow, 2013).
External environmental analysis
This analysis is done in order to know the factors which are having a great impact on business operations and other activities. Thus, in this external environment analysis PEST is being done.
Political Factor: As per the recent times a frequent change in rules and regulations can be seen in United Kingdom because of which most of the small and medium scale industry are suffering in the form of poor economic outcomes. In relation to Southern Business Technologies, they are facing problem of network license along with taxes rates related to import and export policies.
Economic Factor: It is always a big problem for companies because sudden change in economic policies due to recession or inflation SMEs or any other firm has to suffer. During the recession period of 2008, telecommunication industries had to go with low income. Economic factor mainly includes interest rates, fluctuation in currency rates etc. which are to be considered by organisation so that better financial outcomes could be availed.
Social Factor: Customers are the one for whom company manufacture goods and products and in context of Southern Business Technologies they are offering tariff plan as per the needs and wants of consumers as a result it is assisting company in generating more and more revenues. Other than this, firms must be aware of customer's choices and preferences for attaining a better position at market (Grover, Bokalo and Greenway, 2014).
Technological Factor: Management of small and medium require to implement appropriate tools and techniques in system to utilise resources properly. It is essential that organisation deliver quality products and services in market to satisfy customers and fulfil their demands and needs of people. Southern Business Technologies provide telecom services, for which company require good network system to provide good connectivity and speed to clients which is being fulfilled with the use of technology such as IoT and cloud computing.
Environmental Factor: Organisation require to implement appropriate technologies in system to conduct business activities in such manner that there is no emission of harmful gases and chemicals in surroundings. Along this, management even require to utilise natural resources properly for protecting and safeguarding for future use. Southern Business Technologies provides telecommunication services through wires connection which produces radiations that are harmful for health of people. For this, company require to use appropriate technologies and network system to protect society from rays.
Legal Factor: Government had formulated different laws and act such as equality, discrimination, minimum wages and hours and so on to protect rights of employees. It is necessary that management of Southern Business Technologies provide fair treatment and duties to members in respect to their skills and abilities. Along this, employer even need to have skilled and competent people to provide quality services to clients (Lewis, 2013).
P2 Opportunities for growth applying Ansoff’s growth vector matrix
Business firms require to maintain and enlarge its market share and position to ensure sustainability. For this, top personnel need to asses different opportunities and chances to expand business by either increasing their number of outlets or products. This feature will help company to have large customer base to increase their sales volume and revenue.
Southern Business Technologies is having various types of growth opportunity by implementing digitalization within the business operations. Company is having an opportunity of growth by adopting new techniques and strategies within the marketplace. It involve four main areas which are product development, diversification, market development and market penetration. This will help in overall growth of business functions in different areas. This also help businessperson to achieve efficient results by using Ansoff model.
Ansoff's growth vector matrix: This concept was developed by Igor Ansoff which specifies framework that management, executive and marketers uses for strategic planning. It is appropriate tactic used by organisation for making growth and success in future time (MacLeod, 2013). These are four growth alternatives which are descried beneath:
Market penetration: This is first part of matrix which defines that firms have opportunity to increase their share in market with their current products and services primarily through reducing price. For this, management require to increase sales volume from existing buyers and attract other people by advertising information about items and services. Southern Business Technologies is small firm which have ability to use this strategy is implement appropriate technologies in system such as internet to promote data to people about telecom services. It is a SME firm which need to increase their capital by using appropriate funding sources to increase their outlets to provide adequate facilities to people.
Product development: It is another part of matrix which organisation enlarge business by increasing variety of items to enhance sales and profit. Market research is technique used by top personnel to anticipate requirements and demands of people (Mitchelmore and Rowley, 2013) . Along this, competitor's offering are also acknowledged to make changes in system to deliver creative and innovative products and services in market. Entrepreneur of Southern Business Technologies have opportunity to give variety and different range of services to increase customer base and sales. This is a SME firm which provides telecom services require to implement adequate technologies and equipments in system. It is essential that management make changes in techniques to use advanced applications and software to provide quality services and network facility to clients.
Market development: This tactic defines that companies require to expand its market reach for increasing customer base and sales. For this, geographic constraint is main consideration which management consider to enlarge business by opening new branches to provide products and services to people. This is another strategy which management of Southern Business Technologies can opt for increasing their clients by expanding business and opening new outlets in other places. This also help top personnel to compete with rival brands by having adequate customer base to enhance sales volume and revenue (Moseley, 2013).
Product diversification: It is last part of matrix which help firms to expand its market share and item portfolio. It is essential that different variety of things are delivered in market to fulfil requirements of people and enhance sales volume. Concentric and vertical are two forms of diversification which are two options that management can use to expand business. Besides this, conglomerate is another kind of diversification which specifies enlarging firm in other segment to provide different variety of products and services to people. Southern Business Technologies is SME firm which require proper utilisation of resources. It is essential that businessperson uses concentric diversification to increase their market reach and customer base which can be catered through development of smartphones to improve sales volume and profit for the company.
P3 Assess potential sources of funding for organisation
Finance comprises essential part in each and every type of organisation that is small, medium and large. It is essential that management have sufficient funds to purchase adequate material, workforce and equipments for conducting business operations effectively (Osiyevskyy and et. al., 2013). For this, top personnel responsibility is to have accurate and complete information about different sources of funding and their benefits and disadvantages. This help executive to select best techniques which are beneficial for firm. Southern Business Technologies is SME which require to have sufficient amount of funds for executing operations effectively.
INVESTMENT DECISION: Businessperson require to make appropriate judgements about selection of appropriate sources of funds to have adequate amount of capital. These are different tools that help top personnel to make adequate investment decision are as follows:
Pay back period- This tool defines time period in which initial cost of investment will get recovered. This help entrepreneur to accept or reject project in according to repayment of project cost. This method specifies that, if particular project recovery duration is shorter or equal to minimum pay back period is given green signal to be executed by company (Schetke, Haase and Kötter, 2012).
Net present value- This method is also known as discounted cash flow which is used by capital budgeting. It is essential that management consider time value of money for accepting or rejecting proposed project. NPV is computed from difference between cash inflow and outflow which defines resultant of project undertaking. This help top personnel to accept or reject project in respect to their net present value.
SOURCE OF FINANCE: It is essential that entrepreneur analyse different funding sources to choose appropriate tools which provide them adequate money, time period, interest rate and various other rules for repayment. Thus, these are different sources of funding which are described beneath:
Bank loan: This is efficient source of funding which help organisation to raise capital with help of financial institutions. Bank lends money to individuals and firms for determined time at fixed interest rate. There are three forms in which loan is granted are short (2-3 years), medium(3-5 years) and long term(5 + years).
- Benefits: This is prominent method which helps business firms to take sufficient flow of funds from bank which is best tool. Entrepreneur get advantage in tax, as interest paid to financial institution is tax deductible (Ward, 2016).
- Drawbacks: Bank loan had certain disadvantage which is fall of company value and reputation, if businessperson didn't pay money and interest within specifies time. Besides this, bank person even seized collateral assets which are kept for security. This impacts on market reputation of firm which also affects on sales volume.
Angel investors: This is another method which defines firms which are constructed by individuals for providing funds to people and firms. They are private investors which conducts work to promote SME's for enhancing conditions of country.
- Benefits: It is cheaper source of funding for firms, as management didn't require to make monthly payment. Along this, companies can easily increase funds through angel investors (Wey, 2015).
- Drawbacks: Angel investor has demerit which is loss of borrower control, as they require to design system and conduct business activities properly to gain adequate amount of profit. Along this, there might exist situation of conflict between members if management doesn't require to share their power and rights with other parties.
Crowd funding: It is another tool of funding which specifies that people come together and formulate group to collect money for investment purpose. For this, internet is appropriate technique which is used as medium for making individual to make appropriate decisions and judgements about flow of funds and various other tactics that are interest rate and so on.
- Benefits: This is fast and efficient method to raise funds for an organisation. In this experts guidance is get by management to improve their business ideas.
- Drawbacks: This method has certain demerit which is loss and steal of business ideas, if borrower didn't have taken patent and copyright from government.
Henceforth, bank loan, angle investors and crowd funding and so on are various sources of finance which help organisation to have sufficient money to execute business operations effectively. These are different methods which are appropriate for SME's that is Southern Business Technologies to arrange money for business for expanding business and growth purpose. Crowd funding and bank loan are appropriate techniques which can be used by company to increase their capital for conducting business activities effectively (Zhang and et. al., 2013) .
P4 Design a business plan for growth
Business plan is is a written document which is formulated by businessperson to define information about background of company, mission, vision, objectives, products and services, internal analysis and financial information.
Company description: Southern Business Technologies is small scale firm which is conducting business in telecommunication sector.
Vision and Mission statement: Southern Business Technologies mission and vision is to provide good connectivity and fast network system to clients.
Strategic objectives: Management of Southern Business Technologies require to formulate objectives which are specific, measurable, achievable, realistic and time bound. This help management to direct members and conduct business activities in such manner that goals are accomplished within defined time (ZHANG, ZHAO and CHEN, 2013). Thus, SMART objectives are as follows:
- To increase market share by 5% by expanding business with help of funds got from bank and crowdfunding in next 2 years time.
- To enhance profit from 30% to 70% in networking in the coming period of 3 years.
Products and services: Each and every organisation deliver items and services in market to fulfil demands and requirements of people. Southern Business Technologies is small scale firm which provide telecom services to people. It is a telecommunication firm which have good connectivity and network system to provide fast and good services to clients.
Internal analysis: Businessperson require to have accurate and complete information about market conditions and system capabilities to make it function effectively. For this, SWOT analysis is appropriate technique which is used by management of Southern Business Technologies. This help company to assess strengths to utilise opportunities which are present in market for expanding business and growth. Along this, top personnel even require to find appropriate solutions for enhancing system to overcome weaknesses and threats (Ziari and et. al., 2012).
SWOT analysis of Southern Business Technologies:
Financial information: In Southern Business Technologies, businessperson uses bank loan and crowdfunding to increase their funds to expand business and open new outlets to enhance market reach and customer base to enhance sales volume and profitability (Albert, 2017). Company have sales around 10 billion which had increased from 8.4 billion.
P5 Assess succession or exit options for small enterprise
Enlargement of business have both positive and negative results on functioning of system. If management doesn't make appropriate judgements and decisions about changes in system and strategies might result in closure of firm. Small and medium firms have shortage of resources which require to be utilised efficiently. Businessperson responsibility is to assess succession and exit options for making appropriate decisions which are beneficial for company. It is essential that top personnel implement latest technologies and software to expand business and make growth. Along this, they even require to establish competitive advantage to position firm superior than rival firms.
Various ways to exit business: These are different method which top personnel of SME's can use for exit from sector are stated beneath:
Liquidation: It is a legal process which defines that management pay all debts to maintain their position and image in market and in customer's mind. This helps top personnel to prevent firm from adverse effect on sales and profit of firm.
- Benefits: It helps the company to receive funds and hence they can manage all activities in effective manner.
- Drawbacks: There are conflicts among all members and hence this can hamper the work of the company (Barbour and Deakin, 2012).
Selling out the business: In this step company purchase existing companies. Through this they can easily increase the market share and hence they can generate more revenues.
- Advantages: It directly helps the company to generate more revenues. Thus they can maintain good relationship with all users. Management have to pay the money so that they can purchase the company.
- Disadvantage: There are different disadvantages. If acquired company do not have good reputation the this results in decreasing image of the company. Hence management faces many issues and problems. This directly results in reducing the sales and profits of company.
Ways to provide succession of business: There are various methods through which company can easily expand their operations and activities. Through this they can easily expand their activities and can maintain unique position in minds of all users. Different methods used by Southern business technology are:
Use of expertise knowledge: Company can take help from the experts and they can easily earn revenues and they can easily increase the market share. Through this they can easily maintain good image in minds of all people (Beatley, 2014). The limitation of this approach to succession is that knowledge is combined with other resources such as physical, financial and technology to effectively increase its operations in the market which is difficult to procure due to availability of lesser funds.
Internet Tools: This is another method which is used for succession is internet to identify different techniques and tools to expand market reach and customer base to enhance sales volume and profitability. The advantages in this approach is that it is cost effective and can be applied with minimum expertise. The limitation of this approach is that this approach to expansion is yet to prove its worth in the business world.
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As per above report, it can be comprehended that small and medium organisation require to make plan for growth purpose. It is essential that entrepreneur utilises resources efficiently and conduct business operations effectively. Porter's generic competitive strategies, PESTEL analysis, Ansoff's growth matrix are different tactic which are used by top personnel to asses and examine growth opportunities. SME's asses potential sources of funding to select best tools which help firm to have sufficient amount of money for executing business properly. Along this, business plan is designed by companies to construct appropriate document about company, SWOT, products and services. Apart from this, exit and succession options are acknowledged by small business to make adequate decision and judgements which are beneficial for firm.
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