Unit 42: Planning for Growth

Unit 42: Planning for Growth

Executive Summary

Organisations need to plan for different contexts before taking growth strategies. Market penetration strategy can be illustrated as one of the most common market growth strategies that can be considered by recent organisations. There are different sources of funding available for recent marketers. Strengths and weaknesses of the funding options have to be assessed by the business leaders and managers. From all of the available exit strategies, selling and merger and acquisition are the best available option for Ethiqana Limited. The main objective of this report is to shed light about the growth options and the planning procedures carried out for growth within an organisation. Ethiqana Limited is the chosen organisation from which real instances will be taken for in-depth actual analysis.

Introduction

Planning for growth is a strategic business activity that assists a business organisation and its owners to plan out things and keep a track upon organic growth. When planning for growth all the risks that come in the way must be embraced if positive outcomes are wanted (Picciotti, 2017). Here in this report, the concept of planning for growth will be highlighted upon with ETHIQANA LIMITED as the chosen company which is a great platform for all the ethically procured and sourced goods that offer a sustainable life to the artisans and also promotes eco-friendliness (Ethiqana, 2021).

Task 1

P1 Analyse key considerations for evaluating growth opportunities

When evaluating and working towards capturing the growth opportunities there are quite a few important considerations that assist in better decision making and analysis. In the case of Ethiqana limited if the company focuses upon the different growth strategies it will highly assist the company is growing into a better entity. Growth is all about using types of equipment in a business with necessary tools that are required for a sustainable life within the market (Jenner, 2016).

Considering the Pestle analysis it can also offer various growth options to the company. Politically the company is getting great support and assistance from the government, as the company’s objective is to offer support to the artisans by offering them a sustainable livelihood. Since the aim is entirely focused towards betterment of the workers and the planet it has great opportunities to grow (Ethiqana, 2021). Economically, it has more than 70 thousand social enterprises within Britain that solve environmental and social issues.

This factor offers great growth options to the company as the environment and its issues are a great concern lately. Socially the company offers great products such as jewellery, toys and games, face masks, greeting cards and so much more and with such a wide product portfolio it has a great opportunity to move ahead of its competitors and have a great customer base. Technologically the company has its online website which enables the people to shop online and make use of its eco-friendly products. Legally the company greatly focuses upon the protection of human rights and taking actions towards human abuse especially female torture (Ethiqana, 2021). The issue of abuse and harassment is a major topic of highlight and since the company is focusing upon such issues it can embrace opportunities of a great social enterprise that is so ethical and meaningful. Lastly, the company aims that the least amount of wastes end up in the landfills and it has a special section where it offers earth-friendly crafts which is thoughtful and wise towards the environment (Picciotti, 2017). All these factors are positively contributing to the bright future of the company with many growth opportunities (Ethiqana, 2021).

Then talking about innovation, considering the BCG matrix the company has many products and services in its portfolio that can offer few growth opportunities. Firstly the star products currently are its face masks which are of great use in this pandemic condition. Then the cash cows are the handmade wooden toys and the eco-friendly board games which have a low growth rate but are widely seen in the market. The third which is dogs are the jewellery. Many other brands are offering good quality stylish jewellery thus people are not attracted to its jewellery. Lastly, the problem child is tech accessories. Technical accessories have a great growth rate in the market but in the case of Ethiqana limited the products have a low share in the market. Thus the company can focus upon its star products at the moment as the pandemic has made the face masks a necessity for each person (Ethiqana, 2021).

P2 Evaluate the opportunities for growth applying Ansoff’s growth matrix

An organisation like Ethiqana Limited can have ranges of available growth options. Applying the Ansoff’s growth matrix is very useful for evaluating the available growth options for the company.

Ansoff Growth Matrix

Figure 1: Ansoff’s growth matrix

(Source: Tsatsoula, 2018)

Market Penetration

Small-scale organisations that want to expand their market or organisations who are trying to remodel their strategic directions can use the market penetration strategy. Market penetration can easily be highlighted as one of the most obvious strategic direction available for most of the recent organisation, as the strategy can be utilised using the existing product range and on the existing market scenario. Since the strategy is specifically built on the existing resources and market condition of an organisation, risk factors in the growth strategy are not as much as in other growth strategies. However, different organisations have to keep in mind there are some small-scale risks. List of such risks are classified below:

• Getting incremented market share while focusing on the market penetration level may increase internal rivalry level within an existing industry. High competitive situations may create unwanted problems for small or even medium scale organisations.

• Sometimes, it may not be beneficial to focus on the entire marketing effort on market penetration. It may result in the decline of the stock price (Sukma et al., 2019).

• In some markets, organisations have been kept under control so that they cannot gain a huge amount of market share all by themselves. It is a potential risk of market penetration strategy.

New Products and service development

New service of the product development process in the Ansoff Matrix can be highlighted as the approach of delivering some new range of products and services while operating from a similar market. It can also be highlighted as a product line extension, which can be beneficial for the organisations in the context of developing an existing market share. It can involve a greater amount of risk since it can contain a varying degree of diversity (Gumel, 2019). While making new product or services for the different consumers, some of the organisations may use their old technologies and others may use new technologies. If organisations are using their old technologies, then the risk level is not quite high. However, if an organisation is considering new technologies for making new products and services, then the risk level is greater. List of some other risks have identified below:

• It can involve a wide degree of diversification, which is very risky for new and small-scale organisations.

• Some of the new strategic capabilities may seem to be very risky for news organisations.

Market Development

Market development can be high as a less risky and alternative way of new product or service development process. It mainly works while offering the existing products or services of an organisation to new markets (Martins, 2020). In some cases, market development process inhibits some degrees of product or service development process, as it is required for changing some features or styles of a certain product before it can be marketed to a new destination. Risks of the market development process of organisational growth are illustrated below:

• When marketing some existing products or services in some new markets, different market developers may lack the required skills and capabilities of making progress in an unfamiliar market that is consisting of ranges of different unfamiliar users.

• Management and coordination of different tasks and activities may become difficult to conduct in a new market. It may take some time to build supply chain base and to be familiar with new market locations.

Diversification

According to the perceptions of many others, product or service diversification is one of the riskiest strategies (Schmidtova and Formanek, 2019). Even when operating in new market scenarios, organisations must consider a product diversification strategy. Application of Ansoff’s growth matrix is quite valuable in the context of visualising the existing market or product condition. Different risks of diversification strategies are delivered below:

• The main risk of diversification strategy is associated with its cost.

• Increased risk capital formation can be highlighted as another potential risk of market diversification strategy.

Organisations can have available growth options while exploiting recent technologies and while expanding market in different types of digital platforms (Verhoeven and Johnson, 2020). Additionally, considering the changed behaviour and attitude of recent consumers can also be done as a part of having growth strategies.

M1 Discuss the options for growth

There are different available growth options for different organisations like Ethiqana Limited. Some of the growth options are illustrated below:

Collaboration

Business collaboration can be highlighted as the way of creating some internally connected ways for achieving specific goals or to solve some existing problems through sharing various strengths, skill sets and other perspectives (Johnson, 2018). One advantage of business collaboration is it may allow different organisations to thrive on potential risks so that different mitigation techniques can be achieved. Another advantage of using collaboration is it allows sustaining a healthy and effective business context. The disadvantage of collaborative business is a company that needs to resolve many conflicts than usual. Team cohesion and lowered team morale level can be highlighted as the negative aspect of collaboration.

Horizontal and vertical integration

Horizontal integration can be highlighted as the process of acquiring similar small-scale organisations from the same industry to achieve some certain growth levels. The resources and other aspects of two subsequent companies can be merged from horizontal integration process, which is its advantage (Hayes et al., 2017). Vertical integration can be highlighted as a way of expanding an existing business process by acquiring an organisation that operates before or after the supply chain. Organisations will be able to improve its external supply chain process while considering vertical integration.

Partnerships in the value chain

The value chain can easily be delivered as a chain of different companies that work alongside one another for satisfying the needs and expectations of a specific service or product. It allows organisations to grow further while capitalising on their core competencies and business strengths. Common organisational goals and objectives can be achieved.

Franchising

Franchising is one of the most common market growth strategies that allow organisations to expand on other markets without any extra cost of equity and risk of debt (Leyva et al., 2018). Greater usage of resources and capital can be done by recent organisations while utilising franchising as the growth strategy.

Task 2

P3 Analyse the potential sources of funding available

Investment decision-making

The investment decision-making process is very important in recent times, as it allows selecting different business contexts where money, machine or even material can be invested for having a further return of investment. Several different aspects support the investment decision-making process. The strategic and other advantages have to be checked before making the investment decision-making process.

Payback period

The payback period is primarily a set amount of time that is required for recovering the overall cost of investing. In a simpler aspect, the payback period is the total required time for an investment to reach its break-even point. The desirability of investment can be directly linked with the payback period of an organisation like Ethiqana Limited.

Net present value

NPV or net present value can be calculated while taking the differences between present values of cash flows with the present values of cash outflows (Kurnianto et al., 2019). It helps organisations like Ethiqana Limited to calculate the revenue generation rate. Discounting the cash inflow and cash outflow can improve the funding possibilities of different organisations.

Descriptions about different sources of findings are illustrated below:

Funding from personal savings

Debt financing

Debt financing is another term of taking a business loan and it can be taken from different types of financial institutes or baking organisations. In such funding technique, the lender (often-different banks or financial organisations) provide funding in exchange for an interest rate. However, the lender of money need to make sure that the likelihood of paying back the loan is high, or otherwise, organisations like Ethiqana Limited may face other threats due to the loan.

Friends and families

It is the easiest and most feasible process of having the source of funding. It is the less risky method of financial sourcing. However, different organisations like Ethiqana Limited may not be able to get as much funding as required while taking help from friends and families.

Funding from personal savings

Funding from personal saving can be declared as one of the most common funding sources; however, it is also quite risky at sometimes. However, financial sources from personal saving depend on two distinctive factors (Foster, 2017). How much personal savings an individual is willing to risk need to be assessed before considering the funding source.

Angel investors

Angel investors can be highlighted as a form of friends and families to different business owners. However, business owners do not know the angel investors personally. The angel investors mainly check on business potentials of different companies before trying to invest in an organisation.

Venture capitalists

VC funding can be illustrated as the suitable funding options for such organisations who are residing at beyond the start-up period. Different types of venture capitalists may need some larger amount of capital so that they can invest that in different types of business organisations (Minyoim, 2018). Different milestones have to make before taking an adequate amount of funds from venture capitalists.

M2 Evaluate potential sources of funding and justification for the adoption of an appropriate source of funding

Ethiqana Limited is still a small-scale organisation and it has not fully developed yet in its business operations and functions. For expanding the market in different ways, it is required for the organisation to have some appropriate source of funding. Debt equity is one of the best ways of funding for the organisation, as the company can make the lender believe that it can pay back the total amount. Furthermore, despite the organisation is small scale, it is way over of its start-up period. Therefore, the venture capitalist can be considered as the ways of funding source.

Task 3

P4 Design a business plan for growth that includes financial information

M3 Develop an appropriate and detailed business plan

The strategic intent of the company

Analysing the strategic intent of an organisation can be very helpful in developing the intended vision and mission of the organisation. However, for knowing about the existing strategic intent of Ethiqana Limited, a SWOT analysis is needed to be done so that a general idea regarding the strength, weaknesses and opportunities of the company can be acquired.

SWOT analysis

Strength The organisation conducts its business in a sustainable format and always considers the ethical ways of conducting business. It is their key strength (Bogáth, 2019). It has some loyal consumers, which is strength. It develops the economic sustainability and development process for women artisans of different rural areas. It helped in developing a greater market image of the company.	Weakness The organisation is not being able to make as much profit as they would like to make. The employee base of the organisation is not well developed, which is why the organisation is not being able to make as much success as it may want to make. Not having a variety of products and services can be stated as a weakness for the company.
Opportunity The organisation can utilise product or market development techniques for expanding its market overseas. Since the organisation is sustainable in its business context, it has the further opportunity of acquiring investment from different personals. Developing a new range of services for different consumers can be highlighted as an opportunity.	Threat Lack of having adequate strategic directions and lack of enough funding can be highlighted as the threats for the company. Every form of business and market context is highly competitive and can pose threat to the organisation.

Table 1: SWOT analysis

(Source: Created by the learner)

Vision and mission

Analysing the strengths and weaknesses of the company has helped identify the probable strategic vision and mission of the company. A vision of the organisation is to be known as one of the main social enterprises of the entire UK and to make as much profit as possible in an ethical and environmentally sustainable fashion. Further business growth in other parts of the UK while improving the number of potentials and existing consumer base can be highlighted as the organisational mission.

Values and ethics

Maintaining values and ethics can be demonstrated as one of the major business functions of the company. It does not conduct business in unethical fashion and always considers environmental concerns in its business process and perspectives (Ivanisevi? et al., 2019). The organisation sells hand made products of different artisans via the internet, internet-based services, and all of the products offered by the organisation are environmentally sustainable. Proper scales of corporate ethics have followed by the leadership and management department of the organisation, which is necessary for future business growth.

Expectations of stakeholders

As usual, stakeholders of the company always expect good things from the organisation. Major stakeholders of the company include the UK government, the artisans, the local communities, the consumer base, employees and the leaders and managers of the company. As the sellers to the organisation, the artisans expect a great price range of deals for their products. The consumers expect reasonable pricing range and the employees expect to have greater benefits and remuneration from the higher management and leadership department of the organisation.

Funding expectations

The organisation can assess business findings from its previous profit levels. Other than that, taking help from banks and other financial institutes can be considered for funding. The corporation can consider taking personal savings of the leaders and managers and utilising as business funds. Other than that, taking financial help from friends and families can be done in the context.

Financial plan

Particular activities	Cost of the activities (in £)
Utilising different tools and equipment	3700
Staffing of the different employees	5500
Marketing and promotional activities	3000
Legal expenses	400
Taxation and licensing expenses	350
Power supply related cost	800
Stationary and office supplies	200
Total cost: £13950

Table 2: Financial plan

(Source: Created by the learner)

Future recommendation

List of different recommendations that will help the organisation to be better at its future business perspectives are as follows:

• Considering cost leadership strategy can be recommended for the company so that more and more consumers can be attracted to the artisan products offered by the organisation (Turner and Endres, 2020).

• Different innovation techniques can be utilised by the corporation for minimising the cost of delivering sustainable business-related instances.

• Additionally, it can be recommended for the organisation to capitalise on market penetration techniques so that it can get desired success in other areas.

Task 4

P5 Assess exit or succession options for a small business

Main reasons for unsuccessful business

Not being able to comprehend the financial hurdles is one of the primary reasons why business organisations may fail in the recent context. Inadequate leadership or management structure can be idealised as another reason behind business failure. Different companies and profit-oriented companies may fail due to ineffective business planning and marketing mishaps. Overdependence on some of the organisational workers could the reason for business failure.

List of different exit strategies considered by the small or medium-scale organisations are delivered below:

Selling

It is the most common exit strategy for different types of organisations and small-scale organisations. Selling the properties and other business functions to other business owners have always been considered as the most effective and efficient exit strategy for ranges of different organisations (Ballaro and Polk, 2017). However, the buyers and the sellers need to come up with some mutual agreement before conducting the selling process. Companies with effective qualities can be sold on higher financial values and companies with low quality can only be sold in lower financial instances.

Integration

Two types of integration process can be experienced in recent times, which are virtual integration and horizontal integration. While considering vertical integration, it has seen that the companies can sell their assets, liabilities and other instances to the organisations with similar attributes and industry. Organisations can have an adequate amount of value while making vertical integration. Horizontal integration is the process of selling organisations to some entirely other organisation that is operating from a different industry. Both the vertical and horizontal integration processes have their advantages and disadvantages. Organisations have to consider all of the advantages and disadvantages before selecting the type of integration.

Merger and acquisition

Merger and acquisition are one of the best methods of selling an organisation to exit from a specific market. While conducting merger and acquisition, organisations made a strategic partnership with other organisations so that joint business operations can be made. The strategies and capabilities of different business organisations may be joined together while considering the exit strategy

M4 Evaluate exit or succession options for a small business

From analysing different exit or succession options, it has seen that all of the different exit options have their strengths and weaknesses. Ethiqana Limited is a small-scale organisation and the potential of the company is quite high (Sparkman, 2018). Therefore, it can be described that the selling capability of the organisation is higher than most of the recent organisations. Selling can be one of the most effective and efficient business exit options for the company. In addition to that, strategic merger and acquisition can also be considered as the major exit strategy that can be considered by the organisation. However, the risk of selling is quite low as an exit option compared with merger and acquisition.

Conclusion

From the assignment, it can conclude that the growth factors of different organisations depend on ranges of different instances. Based on factors like different growth and its related strategies, the organisations have to decide effective insights so that they can gain a proper market growth level. Additionally, PESTEL analysis provides a nice overview of the external environmental conditions of different companies. Organisations as Ethiqana Limited can get competitive advantages while deciding on proper environmental strategies and insights. There are different sources of funding available for the current organisations. However, the assessment of different factors has to be done before selecting the source of funding.

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