This assessment will cover the following questions:
- Ocean Crest is a medium sized business based on UK. Analyse the opportunities for growth applying Ansoff’s growth vector matrix for the Ocean Crest.
- Identify exit or succession options for the available for the Ocean Crest.
- Explain various methods of funding.
Planning for growth refers to a process that supports organisation in identifying current competencies and enables management to make relevant changes in order to enhance business operations. The growth and success of business are very much depend on the management who reviewing the business growth and continue to make suitable changes in their strategic plans so as to meet market needs and requirements. The present assignment is based on new business named as Ocean Crest which is engaged in beauty and skin care industry offering wide range of cosmetic products. The project includes the various growth opportunities that assist firm to achieve growth by making contract with Primary care Provider Development and Resilience in London. Sources of funds, exit and succession of business are also briefly explained under this report.
P1: Key considerations for evaluation the growth opportunities
Ocean Crest is a medium sized business based on UK which deals in offering wide range of cosmetic and skin care products. Due to engaging in cosmetic industry, the chance of achieving growth and expansion of business are more by developing brand portfolio through bring innovation in existing products. Nowadays, the people are more conscious about their skin health due to which they start to prevent usage of beauty products which contains harmful chemical products. This will increases the chances of shifting customers towards organic or skin friendly products. This will encourage Ocean Crest to provide something innovative for meeting the needs of targeted people which indirectly support them in achieving growth (Barbour and Deakin, 2012).
By observing and analysing the customers’ needs and preferences, the firm called as Ocean Crest is decided to provide a range of beauty and skin care products which contains biota-protective actives which promotes skin’s own defence mechanisms and support biodiversity and homeostasis and biogenetic technologies. In the UK, cosmetic industry is worther of 11.2 million pound and saturated with any rivals brands. In addition with this, colour cosmetics constitute over 16% and facial make up captures 42% in cosmetic and skin care sector. Therefore, the company’s offerings supports to achieve brand name as well as the huge profits that will make easy for company to meet the demands of contractor as well as customers. But before deciding to enter into market with skin care products, Ocean Crest should analyse the internal as well as external environment which can affect their pre-determined plans and strategies either in negative or positive manner. For this, the management is held responsible to analyse such influencing factors with the help of adoption different models which are determined as under:
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Porter Generic Model
This model will guide Ocean Crest to make relevant changes in their operating process according to the competitive strategies of its rivals present in market. Such model involves three interrelated concepts among which the company can choose any one according to their reliability and objectives (Barnett, 2017).Cost leadership: This is the strategy which directs Ocean Crest to maintain their cost while selling its quality products and services. It makes easy for company to attract maximum number of customers due to providing quality products at relative lower than their rivals in market. It can be possible due to cutting down the production cost, labour cost etc.
Differentiation: Using such strategy assist company to achieve its own identity in terms of its products than their rivals in market which can be possible through introducing something innovative in their products. It brings their products far ahead than their rivals substitute products. For this, Ocean Crest should conduct market research in order to identify which innovative things they can add in their products which can easily attracts buying behaviour of targeted people (Christofakis and Papadaskalopoulos, 2011).
Focus Strategy: This kind of strategy mainly focuses on narrowing scope of rivalry within the selected industry through market segmentation. It is useful to identify and analyse niche market targeted people for company’s offerings. It is classified into two parts:
Cost focus: The main motive of this strategy is to achieve cost advantage by analyse and differences in cost behaviours in its niche targeted people. In this, the company put their efforts in offering quality products at reasonable price to focused market.
Differentiation focus: Under this, the products have been differentiated by providing innovative and unique products and services than their rivals’ offerings.
Ocean Crest which is going to start its new venture through entering into new contract with Primary Care Provider Development and Resilience in London which support them for better functioning. Due to this differentiation strategy is most suitable one for the company to adopt and follow. As it is engaged in cosmetic industry where the possibilities of introducing innovation in products are high which enable company to provide its products different identity than their rivals among the targeted people (Denton,Forsyth and MacLennan, 2017).
PESTLE of Ocean Crest
PESTLE Analysis is more useful to conduct by the management of Ocean Crest in order to analyse external factors which can largely affect the business operations either in negative or positive way. Here is the PESTLE Analysis of Ocean Crest:
Political: It includes factors consisting of government rules and regulations, political fluctuations etc. that affect the business operations of company. For example, After Bruit skin and cosmetic products is expected to suffer a slow down until 2019 with an increment of growth of 1.2% in this year (Gatukui and Katuse, 2014).
Economical: It includes factors consisting inflation situations, taxation policy, import-export policy etc. which affect the profitability and sustainability of company. In the ethnic countries such as India where the usage of cosmetic products are more, Ocean Crest should export its products to such nation in order to increases its sales which can be possible through having favourable import-export policy in UK.
Social: It includes factors consisting of interest and buying behaviour of an individual and society as a whole. Ocean Crest is engaging in skin care and cosmetic products which is skin friendly that help in rejuvening its customers skin by activating body’s skin defence system. It is beneficial for health conscious people which attract the buying behaviour of people.
Technological: It includes factors consisting of implementation of advanced technology which increases quality of products as well as reduces manual efforts. For example, using social media platform help Ocean Crest increases its reach to targeted market. Therefore, it is necessarily required to invest funds in adoption of advanced technology so as to increase their brand name and customer strength.
Environmental: It includes factors consisting of environment related laws which must comply by Ocean Crest in order to exist in new market. Ocean Crest uses all ingredients which contains good yeast that is profitable for health and healthy skin.
Legal: It includes factors consisting legal laws and legislation framed by the UK government. For example, Ocean Crest must comply with EU Cosmetics regulations in order to sell its products more effectively. According to the law, the company binds to provide true and accurate information about the ingredients used in their cosmetic products (Huang and Zhang, 2014).
P2 Evaluation of growth opportunities by applying Ansoff's growth matrix
Ansoff growth matrix is considered as more effective technique which must to adopt by company to determine the market opportunities and accordingly make suitable strategies to capture the attention of targeted people. Further, it will help company to understand the activities which should be implemented and undertaken under contract with Primary Care Provider Development and Resilience in London. Ansoff growth matrix for company is given as under:
Market Penetration: It is the most secure methodology among the all the four. It accentuate on offering organization's current items in its current target market for extending its market share. Applying this technique firm sell its items at moderately bring down cost to adapt up to high market rivalry and to catch substantial offer of market). It is less hazardous and centres on upgrading its business volumes as firm is having concentrated learning about the interest and purchasing conduct of its group of targeted people (Li, Mobin and Keyser, 2016).
- Product Development:This methodology centres after presenting new item in existing business sector situation by presenting certain adjustment in company's business activities, for example, R&D work, process and so forth. It is concerned about working up organization's inward capacities and capabilities that can drives advancement in company's items.
- Market Development:Under this system organization centres on offering its present item or administration in a whole new market with monstrous development and improvement potential. Executing this methodology includes association's to add on new channel of conveyance, put centres around geographical market place, product dimension and detailing of new division by receiving differential valuing approaches.
- Diversification:This is the most risky of all the previously mentioned techniques as it focuses about propelling a whole new item in another market. For a firm to pick up benefits and accomplishment by applying this system it is imperative to have magnificence in both operational and advertising capacities that is liable to enormous capital necessities.
Ocean Crest any use diversification strategy among four as the company decide to introduce innovative cosmetic product which can help in protecting skin of people from sun skin damages. Using of probiotic ingredients and skin micro biota-protective actives help health conscious people to maintain their healthy skin. In addition with this, entering into contract with Primary Care Provider Development and Resilience in London allows them to diversify its business outside of UK with an aim of capturing huge market share (Mason, 2015).
P3 Potential sources of funding and their advantages and disadvantages
Funding is an essential need of every organisation which supports them in executing desired business activities without facing any interruptions. Ocean Crest is decided to enter into market with innovative and healthy cosmetic products due to which they required to enter into contract in which the maximum bid is £300,000. The company at present is only having £20000 due to which the remaining £280000 will be raised from various sources. The management of Ocean Crest have different options to raise funds which are given as under:
Internal sources: It includes the number of options of raising funds within an organisation that is used to utilise in business expansion. Such includes sale of asset, reduction of working capital and retained earnings.
External sources: It includes the options of raising funds from outside of an organisation. Such includes equity share capital, leasing, venture capital, debenture etc.
Following are the sources that can be helpful for an organisation to get financially support:
Bank loan: It is considered as the simplest way of raising funds to meet company’s requirements. It may be defined as the amount which has been taken from the bank for certain period of time in exchange of paying them fixed rate of interest on timey basis (Mitchelmore and Rowley, 2013). It becomes profitable for an Ocean Crest to choose such option to raise funds as raising capital from bank is tax deductible which makes positive impact on their profitability.
- The greatest advantage related with bank credit is that customer is simply should be standard in making auspicious instalment of premium. This source of funds is having significant favourable position over bank overdraft facility where in borrower is essential to make full instalment as and when bank requests regardless to think about their ability to pay or not.
- Another noteworthy advantage of bank loan is that with digitalization it has turned out to be amazingly simple to apply and take advance loan. It is due to using of bank applications and online banking requires less paper work and documentation. Additionally, with increment rivalry in this industry too bank is giving different appealing plans and advance offers to persuade individuals to apply for credit.
- Bank loan expects borrower to lend some insurance security as a home loan against advance connected by them. Without satisfying this provision bank does not endorse credit sum
- Also, customers are required to pay standard enthusiasm on time. Any deferral in this regard or non - instalment of credit sum make bank lawfully approved to seize borrowers resources (Todes, 2012).
Overdraft: - Overdrafts alludes to an assention between financial institution and its client in which bank provides an opportunity to lender to withdraw funding amount more than the expected.
- Advantage:-it is the most adaptable technique for satisfying the money related need as one can pull back the funds in abundance to their parity whenever.
- Disadvantage: -for stretching out the overdraft organization needs to pay arrangement fees to their banks (Wu, 2015).
Crowd funding: - It is a technique for financing an undertaking by welcoming the small amount of fund from expansive number of individuals as opposed to looking for bigger capital from modest number of people. Crowd funding is generally focuses on social media platform for pulling fund from huge network of individuals.
- Advantage: -Crowd financing utilizes online stage which thus will help organization in creating brand awareness and picking up the media attention.
- Disadvantage: -significant disadvantage of picking this alternative is that an organization needs to bring interest among public to invest in their business ideas.
Angel financing:- It is an another technique for financing business functions in which speculators put resources into organizations for accomplishing value position inside the association. Angel investors additionally bolster organizations by giving them rules and recommendations.
- Advantage:- the real advantage of using such funding option is that organization gain adequate knowledge and information about the lenders along with their lending amount.
- Disadvantage: -The downside of Angel financing is that organization needs to surrender their shares to speculators.
These all are options which can be utilized by Ocean Crest Limited for raising capital for grow its business. Ocean Crest ought to receive bank loan for raising their reserve as it safe and gives loan at ostensible financing cost (Grover, Bokalo and Greenway, 2014)..
P4 Designing business plan for growth of organisation
Business Plan is a formal documentation which contains various information related with aims, objectives, vision etc. of company thus prepared by every company engaged in any sector. It is essential to prepare in order to guide and direct management and employees to perform better. It includes financial statements which help company in identifying their actual financial capability to perform future business functions.
Vision: To fulfil needs and requirements of all women and men all over the world and achieve strong brand image as qualitative and innovative.
Mission: To offer cosmetic and skin care products with healthy ingredients to achieve customer loyalty.
Strategic Objectives: To expand its business operations to other market outside of UK through bringing wide range of cosmetic and skin care products with probiotic ingredients and skin micro biota protective actives within December 2019. For this, Ocean Crest uses SMART tool which specified that objective must be specific, measurable, achievable, and realistic and time bound. The time period of achieving desired objective within time period 1 year and 4 months. The targeted customers are women above 30 years of age who help them in maintaining their skin even after young age.
To enter into new market with new and innovative products. Ocean Crest requires having adequate amount of funds to invest in different business functions such as marketing, production, HR etc. For this, the management are required to prepare an effective budget in advance which are give as under:
Total forecasted budget
Cost of adopting new technology
P5: Succession and exit plan for small business with its advantage and disadvantage
As Ocean Crest is going to enter into market with the purpose of expanding business operation within shorter period of time due to which it is important for the management to prepare succession as well as exit pan along with the proper understanding of their advantages and disadvantages so that an effective decisions can be made for the betterment of business. Due having various changes in business environment, the business can either be supported to succeed or forces to exit the market which requires proper course of action in advance. Therefore, understanding of success and exit plan with their benefits and drawbacks makes easy for management of Ocean Crest to make effective decisions.
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Ways to exit plan:
Winding up: It is the process of exiting market by selling all the assets of company in order to repay all debts and liabilities and the remaining amount left with company will further be distributes to the shareholders.
- The owners of business get free from all liability of paying all debts of company which provides them an opportunity to engage in something new business without facing any legal problems from their creditors.
- Company will loose the skilled and experienced employees which become the main drawback for company.
- The process of winding up business involves several legal procedures which took more time to complete that may bring difficulties towards the owner as well.
Selling in open market: It is the option available towards the owner to sell its business to some other entrepreneur in exchange of certain amount or price so that the debts of owner will be paid easily as well as their business will be continuing in market without exiting the market. It is more beneficial option to the owner as it gives them an opportunity to start a new business with the amount they received in exchange of their business.
- It takes more time to complete the documentation procedure of selling business.
- It does not affect the goodwill and functioning of business due to which the business continuing to generate huge sales in future as well.
- Amount received b y owner in exchange of their business may be less than the actual market value of company at present time.
- It may bring various difficulties for existing skilled workforce to cooperate with new owner due to following new policies and plans formulated by them.
Ways of Succession:
Merger and acquisition: It is considered as an effective decision made by owner for the business in terms of increasing brand value and product portfolio in market. In this, two business merge together to achieve common objectives and goals with an expectation of getting maximum response from the market (Business Exit and Succession Planning, 2018).
- It gives an opportunity to company to provide diverse products in market with better quality which help in achieving huge customer base.
- Merging of two businesses merging of two creative minds that will help business in aching growth and success within shorter period of time.
- Conflicts may arise due to having different opinions and strategies of owners for particular business activities.
- Performance of employees gets affected due to facing problems while coordination with new workforce.
It has been concluded from the above project report that every organisation which is going to enter into market should have an appropriate plan to achieve growth and success within shorter period of time. For this, the management play an important role in making suitable decisions and plans regarding raising of funds from different sources, application of analytical tools such as Porter generic strategies, PESTLE, Development of Business Plan, Determination of succession and exit plan along with its merits and demerits.
Books and Journals
Barbour, E. and Deakin, E. A., 2012. Smart growth planning for climate protection: Evaluating California's Senate Bill 375. Journal of the American Planning Association. 78(1). pp.70-86.
Barnett, J., 2017.Redesigning cities: Principles, practice, implementation. Routledge.
Christofakis, M. and Papadaskalopoulos, A., 2011. The Growth Poles Strategy in regional planning: The recent experience of Greece. Theoretical and Empirical Researches in Urban Management. 6(2). pp.5-20.
Denton, G., Forsyth, M. and MacLennan, M., 2017.Economic planning and policies in Britain, France and Germany. Routledge.
Gatukui, P. K. and Katuse, P., 2014. A review of SMEs strategic planning for growth and sustainability in Kenya: issues and challenges.