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Introduction - Planning For Growth Assignment
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While operating in a business environment it is important for the company to plan for the growth and success of the company. There are a large number of SMEs which are offering high quality products and services to their customers. Such SMEs are having a great opportunity to expand their business and lead the company towards growth and development. This report would focus on explaining the different factors which are required to be taken into concern while planning for growth (Bock and George, 2017). The SMEs are having a major role to play in the economy of the nation due to this it is important for them to grow.
This study would provide the information related to the development, growth, sources of investment and several other factors which are required to be taken in concern while planning for growth. This report would include two separate parts. In the first part the knowledge related to growth opportunities and business plan. In the second part the report will discuss the exit strategy for the company. For explaining all these concepts in an appropriate manner a case company would be considered. For explaining this the report would be focusing on considering Verdant Leisure which is an SME operating in UK. This is a small scale holiday park which is offering different holiday options to their customers.
INVESTING IN THE FUTURE (PART 1)
Growth Opportunities for the SME
The SMEs are adding value to the economy, generating employment and leading the nation toward growth and development. Due to this reason it is important for the nation to support the SMEs in growing. In the UK there are a large number of SMEs which are generating 60% of the jobs due to which the government supports them. The choice company Verdant leisure is offering the holiday operations to the different areas of the UK. They are offering high quality, affordable and convenient services to their customers which have helped them in developing an effective market image. The company was established in 2010 with an investment of around £6 million. Since 2010 the company has been growing and generating higher profit as well.
Now the company is looking forward to growing the businesses but while growing the company needs to have an effective plan for it. There are different methods and models which can be used by the businesses for identifying the core competencies and strength of the company. On the basis of the analysis only the company should select the best opportunity for growing the business (Matalamäki et. al. 2017). The different methods which are required to be used are porter generic model, pestle analysis, SWOT analysis and ansoff matrix. All these models are applied on the case company and are mentioned below such as:
This is an effective method which is widely used for analysing the extent of the environment of the company while focusing on growing the company. The different factors of the external business environment can create both opportunity and challenges for the company to grow thus it is important to perform this analysis (Perera, 2017). This model focuses on six different factors of the external business environment which are explained below in the context of verdant leisure such as:
Political: The stable political environment of the UK would be a supportive factor which would support the case company in leading the firm towards success. The UK government supports tourism and SMEs both due to this reason it is clear that the case company can get better support from the government which would affect them positively.
Economic: The growing economy of the UK supports all the SMEs operating in the nations due to this reason this is an advantage for the case company. Better economic conditions promote less unemployment which create opportunities for the company to generate higher profit as the customers would spend more on holidays. The tourism market of the UK is growing which would also have a positive influence on the nation.
Social: The society of the UK invests on holidays and this is an advantage for Verdant leisure. If the company would work as per the market trends then it can help the company in generating higher profit.
Legal: While expanding the company needs to be concerned for all the legal rules and regulations otherwise they can create issues for the company.
Technological: The technological advancement of the UK gives great opportunities for businesses to grow and generate high profits.
Environmental: Tourism is affecting the environment negatively due to this reason the case company needs to operate in a more sustainable manner. The company needs to invest in saving the environment then only they would be able to expand their business effectively (Shtal et. al. 2018).
Porter Generic model
This is an effective method which is being used by the businesses for identifying the core competencies of the company. This analysis tool helps the company in identifying the factors that can provide competitive advantage to the company over others. The company is offering better services to their customers and having a good base of satisfied customers. Along with this the company is focusing on leading the company toward growth. In this situation there are different factors on which the case company can focus for gaining competitive advantage over others (Arianty, 2017). According to the porter generic model there are four different strategies that can be used by the companies for gaining competitive advantage over others. The four different strategies are mentioned below such as:
Cost leadership: in this strategy the company focuses on keeping their price low from their competitors for generating high profit from the company.
Differentiation leadership: in this strategy the company focuses on differentiating their products and services with that of their competitors as it would help them in gaining competitive advantage over others (Aggarwal and Padhan, 2017).
Differentiation focus: in this strategy the firm needs to focus on offering a differentiated product to the niche market.
Cost focus: in this strategy the company focuses on the niche market and offers low cost to products and services for generating higher profit. This strategy is similar to the cost leadership strategy.
As per the market condition of the Verdant leisure the cost leadership would be an effective strategy for the company. For applying this strategy the case company needs to focus on offering better and high quality service to their customers (Hales and Mclarney, 2017). Along with this the company also needs to keep their cost of holiday stay less so that they can get competitive advantage over others.
Ansoff’s Growth vector Matrix
Ansoff matrix is one of the effective models which is being used by the company during finding the best growth strategy (Loredana, 2017). This analysis would help Verdant leisure in planning their strategies for growth. There are four different strategies that can be used by the companies while focusing on the growth. All the four strategies are mentioned below such as:
Market Penetration: in this strategy the company focuses on increasing the sales of the company in the existing products in the existing market or the same market in which they operate.
Product development: in this strategy the company focuses on offering new product to their customers in the existing market.
Market development: in this strategy the company focuses on entering into new market for selling their existing products and services.
Diversification: this is also an effective strategy in which the company focuses on entering into new market with a new product or service for leading the firm towards growth.
On the basis of the position of the company in the existing market and effective brand value it can be suggested that market penetration and product development would be the effective strategies for the company. If the company would use product development then it would help them in attracting the customers in an effective manner with their new holiday homes and other services. Along with this market penetration would also be effective for them. For applying market penetration the company needs to focus on doing effective marketing and promotion which would help them in increasing their sales and profitability.
Analytical Frameworks for identifying competitive advantage
For analysing the impact of the competitive forces on the company it is important for the firm to use effective methods. Porter five forces model and Swot analysis are the effective models which would help the case company in identifying their core competencies and their impact of different competitive forces on the firm.
Porter Five Forces
This model focuses on five different competitive forces which are being explained for Verdant leisure such as:
Competition in the industry: the case company is operating in the hospitality service offering industry which is highly competitive so the influence of this factor is high for verdant leisure.
Potential of new entrance: the potential of new entrance is low for the hospitality industry as one need to focus on having higher capital and several other resources for entering into the new market (Bruijl, 2018).
Power of Suppliers: in this industry the power of suppliers is moderate due to better availability of the suppliers.
Power of Buyers: the power of buyers is higher as there are several companies which are offering similar services to that of the case company.
Threat of substituting the products: the threat of substituting the product is moderate for the case company.
SWOT analysis is an effective model which is being used by the businesses for identifying the strength, weakness, opportunity and threats of the company (GURL, 2017). This analysis would help Verdant leisure in selecting the best strategy for growth. The SWOT analysis of verdant leisure is mentioned below such as:
Strengths: the effective market position of the company is an important strength. Along with this the client base and high level of customer satisfaction are the important strengths of the case company.
Weaknesses: limited number of holiday stays in the popular tourist place is the weakness for the company.
Opportunity: Verdant leisure is having great opportunity to expand their business, offer new products and enter into new markets for doing business in an effective manner.
Threats: competition from the others firms operating in the same industry and offering similar services is the threat for the company.
Pathway for growth with risks
The decisions made by the company needs to be based on the different analysis which are being conducted by the organisation. Before using any of the strategy for growth it is significant to understand the difference risks associated with those strategies. For an instance the company is doing well in their existing market. Along with this the company is having better customer base which is an strength of the company. So it can be said that Verdant leisure needs to focus on product development. While using this strategy the company needs to focus on the social factors of the external business environment of UK which can affect the company. On the basis of these factors only the company needs to focus on developing new product for their customers. But in case if the company uses diversification strategy then it creates different types of risks for the company as the company enters into completely new market with new product (Tsatsoula, 2018). For this strategy it is important for the company to focus on analysing the different factors of potential markets then only they should enter into new market. In contrast to this if the company focuses on market development then they need to focus on using effective pricing strategy and marketing strategies. These strategies can help the case company in entering into the new market in an effective manner.
Methods of Funding
When the company is focusing on growing their business or expanding then there are different resources which are being required by the company. Financial capital is the most important resource required to lead the company towards growth and success. The company needs to focus on different types of funding methods which can be used by the company for identifying the best source of funding (Kwasnicka et. al. 2021). According to the size of the company and the market value of the firm the organisation is having different funding sources. Different types of funding sources which are available for the SME are mentioned below such as:
Bank loans: bank loans are one of the easiest and most popular methods of funding. Both the large scale companies and the SMEs make use of this funding source. In this method the SMEs can take a loan from the bank in return to which the company had to pay the fixed interest along with the capital. The benefit of using this method is that it is an easy to use and quick method of funding which can help the company in getting the required amount of money for funding. The disadvantage of this funding is that sometimes the rate of interest is high which takes away the profit of the company.
Crowd funding: this is an effective funding method which is being used by the firms. In this method the company can use different crowd funding platforms and thousands of people make a small contribution in the total money required by the company. Using this type of funding is not an easy task as the company needs to get involved in different practices. Along with this if the company fails then it would affect the overall market value of the firm in the market and affect the company negatively in the long run (Adair and Berguiga, 2020).
Friends and family: in this method the investment is being made by the friends or the family members for an SME. This is an easy to use method but sometimes the company can not get the expected funds so the SME should try to avoid this type of funding source.
Venture capital funding: in this funding the venture capitalists make investment in the company for getting the interest of the investment made by them. If the venture capitalists think that the new project of the company is having higher potential to grow then only they invest in the firm and provide them funding. This is one of the most common and beneficial funding methods which is widely used by the SMEs across the globe.
Angel investors: in this funding method the rich or the wealthy people make the investment in the firm and provide funds to the company to grow their business. This type of funding is less risky as in this funding the angel investor is holding an equity in the firm.
Government funding: in this method the government offers funding to the SMEs to grow as they are adding value to the economy by generating employment and adding value to the economic growth of the nation. In this method the government offers loans, property, food commodities or other assistance which are required by the company. But it is not easy for the SMEs to get approved or eligible for this type of funding method (Belleflamme et. al. 2014).
Peer to peer lending: this method of funding is similar to the bank loans but in this method the investors are offering money to the company. One of the benefits of using this method is that it has a lower rate of interest as compared to the bank loans. Along with this such funding practices are fast and easy to use by the company.
Selecting the best source of Funding
When the company is looking forward to growing the business then it is important for them to focus on using an appropriate source of funding. There are different methods of funding available for the company but it is important to select the most appropriate once. Taking a bank loan can be an effective funding method for the case company. Verdant leisure is managing better sales and is having an effective market image as well. This is helping them in generating higher profit and if the company would expand their business then also they would be able to attract the customers easily. From this it can be said that it would be easier for the company to pay back the loan.
Thus it can be said that a bank loan would be an appropriate method. But the company needs to focus on taking the loan from the bank which can provide them a loan at low rates otherwise it would affect the overall profitability of the company. Apart from this angel investors are also an effective method of Verdant leisure for getting the funds for the company. Due to better growth opportunities and sales of the company the investors can easily make an investment in the firm. This would help the company in sharing the profit and losses properly with their investors. Thus it can be said that both the angel investor and the bank loans are the appropriate methods of funding for the case company. The SME should opt for a method which is easy to use.
A Business Plan
Executive Summary: This is a business plan for verdant leisure which is an holiday home services offering company. The aims and objectives, marketing strategies, pricing strategy, market segmentation strategy and several other important factors are being discussed in this report.
The company is having effective market position due to which the company is focusing on growing the company for generating high profit. The company focuses on keeping their price low and offers high quality services for attracting the customers in an effective manner. The mission of Verdant leisure is to led the company towards growth and success. The company aims at increasing their market share and customer base for leading the firm towards success and development. The different objectives of the company are mentioned below such as:
To increase the sales of the company by 20% in the upcoming year.
To setup 4 new holiday parks in the new locations within the UK and the high demanding areas in the next year.
To increase the customer satisfaction and customer base by 20% in the next one year.
Company Summary: Verdant leisure Ltd. Is an SME which is operating in UK since 2010. They are offering different hospitality services to their customers. Due to high quality service the company is having effective brand value and market position in the holiday park and hospitality industry of UK.
Company History: Verdant leisure was established in 2010. From the beginning case company is investing better capital in the development of the company. They have established different types of Holiday parks in different regions across the UK.
Products/Services: Verdant leisure is offering hospitality services to their customers across the UK. They are offering Holiday parks, self-catering lodging and caravan holidays. The company is focusing on offering comfortable and luxurious services to their customers.
Market segmentation is very important for using best strategies for attracting a particular group of customer. The company is operating in one of the highly competitive industry due to which it is important for them to do market segmentation in an appropriate manner. Two effective market segmentation strategies which would be used by the company for meeting the objectives are mentioned below such as:
Psychological segmentation: in this segmentation strategy the case company would be focusing on personal traits, values, beliefs and lifestyle of the customer while offering different types of hospitality services to them.
Demographic segmentation: this is the most common segmentation which is being used by the companies operating in hospitality industry. In this segmentation the case company would be focusing on income, age, gender and level of education while offering the different services to the customers.
The company is focusing on market penetration and in this situation the case company would be offering different types of promotional offers and discounts to the customers for increasing the sales of the company. Along with this the company would also focus on using market penetration pricing strategy for attracting the customers and increasing the overall sales of the company.
The case company is facing high level of competition from the local competitors which are offering similar services to the UK customers. The major competitors of the case company include Warmwell Holiday Park, Lower Hyde Holiday Park, Bideford Bay and many more.
Projected Profit and loss:
After implementing the new plan for growth the overalls revenue of the company is estimated to be increased by £10 million from that of the last year. Along with this the overall profit of the company would also be increased by around 20% in the upcoming year. The below mentioned link can also be used for estimating the profit and loss for the company with the help of different examples such as: https://www.bplans.com/amusement-park-business-plan/financial-plan/
DEVELOPING AN EXIT PLAN (PART 2)
Different methods for exiting small business
If the owner of the company is not getting the expected benefits from the company there are chances to close the businesses. In this situation the owner needs to have an exit strategy. Other than this there can be different factors of the external business environment which can create issues for the company to close the company. The risks are uncertain and there can be situations where the owner needs to sell or close the company for this an effective exit strategy is important (Pisoni and Onetti, 2018). If the company is having an exit strategy in advance then it would help them in reducing the losses which are likely to be faced by the company during closure. In general terms the exit strategy is being referred to as the strategy which is being created by the entrepreneur for selling the company to another company or investor or closing the firm. For limiting the losses it is important for the investor or the owner of the company to select the best exit strategy. There are different exit strategies which can be used by the company are mentioned below such as:
Merger and acquisition: this is an effective exit strategy which is being used by the businesses. In this exit strategy if the investor wants to exit then it can sell the company to another investor or can also merge with the firm. There are different types of pros and cons associated with each strategy. One of the benefits of using this exit strategy is that it helps the owne to transfer the terms, price and all the resources to the new company which is merging or acquiring the firm (Miskiewicz, 2017). Along with this the strategy helps the entrepreneur in having a complete break from the company as he is no longer a part of the firm. On the other hand the disadvantage of using this strategy is that it is a long procedure which takes more time. Along with this it is not an easy method as it requires different rules and regulations to be followed by the entrepreneur.
Selling business: In this exit strategy the owner sells the business entity to another party. This strategy is being used if the company is doing effective business and generating better profit. Usually when the company is being sold then the buyers are the managers z investors, similar businesses or the employees of the company. It becomes an open market where anybody can purchase the company. There are no certain rules and regulations related to this. In case if the company is being sold to the employee or the manager only in this case the owner can also hold an equity or become an shareholder in the firm which would help them in generating profit. This type of exit strategy is having an ability to offer the highest return to the owner of the company and this can generate higher profit for the owner. In contrast to this if the new owner is not effective in managing the company then it would have a negative impact on the brand image of the company. Sometimes there are chances that the owner has to sell the business at a low price which would affect them negatively.
Voluntary winding up: in this exit strategy the company focuses on selling all the assets and liabilities of the company for making the money out of it. In this strategy the company becomes insolvent and is unable to discharge the liabilities. One of the advantages of using this strategy is that it would help the company in following a systematic process for winding up the business. This helps the company in getting the maximum price of their assets and paying off the credits. The disadvantage of this strategy is that in this method all the employees and suppliers lose their jobs (Horváth, 2020).
Compulsory winding: in this method the company sells its assets because it is made mandatory by the court to sell the asserts. If the company is having higher debts and are unable to pay them then in this situation the court may ask them to sell their assets and close the company. This is an effective strategy as it reduces the creditors pressure on the company. Along with this it is a systematic approach which helps the company in winding up the business in an appropriate manner. If the company exists in this method then it would affect the market image of the company.
Recommendations for the SME while exiting the company
Selecting the appropriate strategy for exiting is important so that it would not affect the entrepreneur negatively. All the different factors related to the market conditions and the market value of the company are required to be taken into consideration while selecting an appropriate exit strategy for the company. Verdant leisure is having an effective market position in the market and is expanding their business too. After this if the owner of the company wants to sell the business or is excited then it is important to focus on selecting the best strategy. As per the market condition of the company it the case company can use merger or acquisition as the exit strategy. Instead of closing the company the owner should merge with another firm or let the other company acquire this company. This strategy would help them in exiting the business effectively without facing the reputational and financial loss. Along with this the new company would also be able to use the effective market position and brand value of the company which would help them in generating higher profit as well. Thus, it can be said that this is an effective strategy of the case company to exit.
In the above mentioned report the researcher had explained the detailed plan for growth of the SME. Different theories and models such as pestle analysis, porter five forces, porter's generic model, SWOT analysis and Ansoff matrix is being applied on the case company for identifying the best growth opportunity for the company. On the basis of the report is can be concluded that it is important for the company to focus on analysis all the different factors related to internal and external business environment while selecting the best growth opportunity. Along with this the factors related to competitive advantage also required to be taken in concern by the company while selecting the best opportunity. Also the company needs to make better decisions for funding and exit strategy. It can be recommended that all the things should be done in advance so it should help them in managing the firm effectively and leading it towards success.