Formulation of planning is essential for an organization to achieve growth and sustainability in the market for a longer period of time. It requires a basic understanding of different analytical models to identify threats and opportunities of the market and take corrective actions accordingly. Hook Norton Brewery is UK based organization that deals in manufacturing beer. You are just appointed as a Junior Manager in SME located in Thames Valley area in the UK.
- Evaluate the key elements that SMEs must consider while examining growth opportunities.
- Evaluate the options of raising funds and describing sources along with their advantages and disadvantages.
- Develop a business plan including financial terms and communicate how you move the company ahead of their rivals in the market.
- Examine the ways by which SME can exit marketplace by drawing strengths and weaknesses of each method.
Planning is a fundamental activity that help firm in attaining long term growth and achieving pre-defined objectives within specified time frame. The process begins with assessing the existing company's operation and identifying what needs to be improved operationally in the forthcoming year (Barbour and Deakin, 2012). Growth planning means a strategic process that allow business owner to track revenue and market growth which help in formulating business strategy. The chosen organization for this report is Hook Norton Brewery which is a small scaled UK based beer manufacturer. It covers key consideration require for business growth and expansion, developing business plan, various sources of funding and ways to exist business.
P1 Key considerations for measuring growth opportunities
For attaining long term business success, companies must constantly identifies new growth opportunities. However these can be determined by collective efforts of management as well as employees. Credit rating of Hook Norton Brewery is relatively good and is keen to capture large market share with massive expansion. Yet it requires proper planning and consideration of all such factors that aid firm's manager in evaluating growth opportunities. Some of its key components are discussed below:-
It is an effective tool used by Hook Norton Brewery in order to assess the impact of external forces on company's operation and activities (Barbour and Deakin, 2012) . In Strategic Planning, managers needs to consider those factors that affect functioning of business either positively or negatively. It involves:-
The industry of beer is strongly depend upon tax regulation. With globalisation and internationalization, more and more brewers are searching for new markets, government on the other hand is taking the advantage of this situation by imposing heavy taxes on beer imports and liquor. Consideration of these factors help Hook Norton Brewery in future growth and development.
Factors like currency fluctuation also affect overall sales of the company, especially relating to the U.S. Dollar. Additionally, other factors like recession results in lowering the purchasing power of consumers. As a result, people will now prefer to choose some cheaper alternative. Consideration of these factors help Hook Norton Brewery in taking effective decision related with future growth and development.
Needs and wants of customers are changing rapidly which enable manager of Hook Norton Brewery to consider these factors so as to grow business successfully. For instance: Now-a-days, not only men enjoys to drink beer but women also enjoys the taste of beer. Thus, the demand for beer is increasing tremendously.
The beer industry is heavily depend upon advance technology in order to develop and improve its distribution channels. Recent advancement in technology has opened huge markets for Hook Norton Brewery to access world population without any hindrance or barriers. In addition to this, company can gain high competitive advantage by using high end technology in its business operation.
Company's performance also gets affected by legal factors. For expanding business in other developing region, manager of Hook Norton Brewery must abide all governmental laws and policies in which company is selling or distributing its products. Furthermore, compliance with laws and regulation of each country makes easier for Hook Norton Brewery to carry out its operation smoothly.
In expansion of business organization, this factor hardly put any influence on overall activities of Hook Norton Brewery. But company must adopt such practices of operation that do not cause any harm to environment and must provide benefit to society and its members. Consideration of these variables help firm in attaining good brand image in the market.
Porter's Five Forces Analysis:
The Model was proposed by Michael Porter in 1979 for evaluating business competition (Porter’s Five Forces of Competitive Position Analysis, 2018). It identifies and analyses 5 competitive forces that shapes every organization and assist in determining its core strength and weakness.
Bargaining power of suppliers:
The suppliers of raw material to Hook Norton Brewery Company are primarily farmers. Thus, the threat for bargaining power of suppliers is high. Beer is mainly produced by hops, yeast, barley and water. These ingredients are mainly supplied by farmers. Therefore, knowing the fact they are the only source of its raw material, farmers can relatively increase the price of these ingredients (Burton, 2010).
Bargaining power of buyers:
Customers of this industry have numerous choices as there are many companies that serves beer. This will ultimately increases the buyer's choice and thus, the threat for powers of buyers is high. For example: Lots of beer brands are served to customers when they visit pub. This result in widening its choices.
Threat of new entrants:
Strong competition prevails in the beer industry. At present, many small brewers are entering into the market and making the industry much more competitive. This implies that obstacle in beer market is low and threat of potential new entrants for Hook Norton Brewery is high (Chapin, 2012).
Threat of substitutes:
Beer is a sort of beverage that contains some percentage of alcohol. However, customers can switch to other drinks in which percentage of alcohol is relatively high like wine, whisky, vodka etc. Although it's taste might not similar but it gives right to customer to choose from available variety.
Threat of rivalries:
Since the market of beer industry is growing at a faster pace which enables competitors to attain high growth targets. Hook Norton Brewery needs to enforce innovative strategies so as to gain high competitive advantage over exiting rivals.
New Product and Service:
In this competitive market, needs and preferences of end-users are changing rapidly. Thus in order to expand business operation, it is important for Hook Norton Brewery to have better understanding regarding customer's likes and dislikes. As a result, customers requirements can be fulfilled in an appropriate manner. Further, for attaining long term sustainability company can do innovation with its existing products. For example: It can launch flavoured beer.
With the help of this matrix, Hook Norton Brewery can find out growth opportunities by reviewing its product portfolio. Along with this, it also help company's manager in formulating important decisions concerning where to invest money, to develop products or to discontinue. It compromise of Four Quadrants which are discussed below:-
- Question Mark: It represents business units located in high growth industry but relatively having low market share (Christofakis and Papadaskalopoulos, 2011).
- Dogs: Companies are not able generate ample amount of cash
- Cash Cows: More ROI (Return on Investment) or cash is produced since the growth rate and market share are high in this quadrant.
- Stars: High amount of Cash can be generated because of large market share in fast growing industry.
It is a strategical tool used by Hook Norton Brewery to assess it's business portfolios and rank investments among different business units in a structured and systematic manner. This tool is primarily used in product management and brand marketing.
Product Life Cycle:
The concept of product life cycle describes the time period over which product or services can be produced, brought to market and then eventually abolish from the market. It's four stages include introduction, growth, maturity and decline. However not all items reach the final stage (Eddleston and et. al., 2013). Some grow constantly and others rise and fall. It help company in formulating effective business decision concerned with marketing. At first stage i.e. introduction Hook Norton Brewery launch its product in the market and build awareness among customer. In second stage i.e. growth, business seeks to increase its market share and competition begin to increase. At maturity stage, strong competition prevails in the market that offer similar kind of products. Although sales reached near their highest, but eventually growth rate of the product started declining. Finally at declining stage, sales of respective product begin to fall and it shows negative rate of growth and eventually product expel from the market.
Diffusion of Innovation:
The theory was introduced by Everett Rogers that states why, how and at what rate new technology and idea spread. Basically, this approach explicate how over a period of time, a product or idea can gain momentum and spread through social system or specific population.
For expanding business in a successful manner, collaboration comes out as an appropriate way for Hook Norton Brewery (Grover, Bokalo and Greenway, 2014). It leads company toward growth and development. Some of the common mode of collaboration are discussed below:-
Merger & Acquisition
It means when ownerships of companies or their operating units are consolidated or transferred with other entities.
- Easier to raise money
- Quick to execute
- Conflict may arise between integrated companies
- Creates distress among employees.
Market Entry Modes
It is an agreement that takes place between two or more organizations who have mutually decided to share its key resources and technology so as to achieve particular objective.
P2 Assess the opportunities for growth by applying Vector Matrix and Ansoff Matrix
With the help of this matrix, organization attempts to offer existing item into existing business sector yet endeavors to catch more most extreme client base (Hough and et. al., 2010). Hook Norton Brewery can build up another advertising methodology to urge more individuals to pick the item.
It can present dedication plot which help in expanding utilization by existing customers. Product improvement alludes to the presentation of new item in a current market. Promotional campaign and different pricing strategies should be used to make market attractive and drive out the competitors.
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Techniques For Identifying Opportunities For Growth: Oak Cash and Carry
Item improvement should be possible by adjusting the current item that will change its standpoint or introduction and increment the item execution and quality. This adjustment will be all the more engaging existing client and will catch more client base.
Organization can utilize distinctive mediums to sale its item, for example, on the web or direct deals that assistance Hook Norton Brewery to attract vast number of customers (Keough, 2015).
Hook Norton Brewery can get other neighbourhood organizations for enhancement that assistance them in innovative work to decide different open doors accessible in advertise.
From all above mentioned growth strategies, Product Development help to dispatch new administrations which is utilized by customers to fulfil their request. This methodology is appropriate for business since it help in increasing high focused edge and separate the items from different contenders firm. As the organization is now having solid client base, this technique help in catching the piece of the overall industry of global market too.
P3 Different sources of funds
Hook Norton Brewery is a UK-based small scaled beer manufacturer who wishes to expand its business and attain high profitability and growth over other competitors. Although credit rating of company is comparatively good but for capturing high market share it keen for massive expansion. Currently, company is having an overdraft of £2.0 million which they have raised from bank and never utilised (Li, Mobin and Keyser, 2016). For meeting future requirement of finance, there are other sources i.e. internal ans external through which firm can generate adequate amount of cash. Some of the common source are discussed below:-
Source of Funding
It is the most common form of raising loan capital for business expansion. It is an extension of credit by bank to its clients. However, bank is liable to charge certain percentage of interest on loan figure and customer is bound to pay it.
For borrowing large amount, bank require some kind of collateral security.
When loan borrowers fails to repay the amount, in such cases banks may seize their assets. Even if borrower somehow manage to make late payments, it cause negative impact on its credit score.
It means raising small amount of capital from large group of people especially via Internet. It is the fastest and most effective way to raise finance with no upfront charges or fees. As vast number of people are connected with one another through Internet, it become little easier to pitch for a particular project or