Planning is a very important part for overall growth as well as development of the organisation. Planning is mandatory, be it small or big organisation, without a effective planning, the aims as well as objectives that an organisation wants to achieve may not be fulfilled. R.L Maynard Limited is a construction company, majorly operates in UK and nearby countries, the company is engaged in the business of providing construction services to its clients, in the form of executing Construction contracts. The company is planning to bid for a construction project with a value of around 3,00,000 Pound, out of which company will be incurring 20,000 pound out of its cash reserves. The current report will try to throw some light on the the workings of SME and how effective planning and procedure can lead to better growth. A systematic Business Plan will be made for the same, that will lead to development of business opportunities for the organisation.
There are various aspects that needs to be considered for the purpose of making a growth plan. The company has been growing substantial and therefore the management of the organisation has been able to see a need for proper plan that will take the firm to a path of growth and development.
It has been observed that the main reason behind inefficient growth of SME sector within UK is lack of Funds and financial support. Thus for effectively managing their business, they have to come up with right kind of planning of various factors that do have a direct impact on the overall working of the organisation in longer run (Barnett, 2017).
Porter's generic strategy:
Porter's generic strategy describes that how a company can achieve competitive advantage within the marketplace. Porter describes four kinds of strategies that can be used by companies of all sizes to achieve a competitive edge over rivalry and for formulating strategies to expand their business over period of time. It is considered as an effective analytical tool which can help an organisation in implementing suitable plans and strategies in order to achieve competitive advantage in market. Porter Generic strategy consists of fours types which are described in brief as under:
- Cost Leadership:Under this kind of strategy the organisation will try to capture market share through offering services at a price which is quite competitive than other players. This can be achieved by reducing the cost of providing construction services and achieving cost efficiency in the longer run.
- Differentiation:The differentiation strategy means the company will have a different and unique product or service then its competitors, which will make the organisation's reputation in the market over longer period of time. In order to achieve differentiation, an organisation will have to incur heavy expenditure on market research and innovation to deliver high quality products or services over period of time (Blackburn, Hart and Wainwright, 2013).
- Cost Focus: Under this, the organisation will try to focus on its cost structure and will aim at providing services at an affordable prices to clients. The focus of management under this kind of strategy is on cost and this can enhance the growth of business over period of time. An organisation can achieve huge success in the particular segment if the managers have sufficient knowledge about the market fluctuations and needs of targeted people.
- Differentiation Focus:Under this strategy, The management of R.L Maynard Limited will try to focus on niche market along with maintaining cost competitiveness and uniqueness in products as well as services. This strategy requires that there should be brand loyalty of firm within clients. Then only client will give orders to the company, because the expenses on marketing can not be much by the organisation as it have to keep its cost at low level for achieving cost efficiency in an effective way (Denton, Forsyth and MacLennan, 2017).
The company chooses cost differentiation strategy while delivering effective services to its customers like providing material that is going to be used in the construction contract will be provided by the company to its clients at very affordable prices that will make the organisation competitive enough against its competitors in an efficient way.
PEST analysis: -
It is used by various companies to identify factors that can affect the business and the environment of the market where the business is running. It include political, economical, social, technological, legal and environmental factors. R.L. Maynard Ltd. can use this analysis to determine the factors that can affect the business and its performance.
- Political: It refers to the political situation that is prevailing in the region within which the company operates. The policies framed by the government with regard to construction industry and Steps taken to promote SME investments comes under the analysis of this factor. R.L Maynard Ltd. Is consistently bidding on various government projects, and the current 3,00,000 Pound project is also belongs to the infrastructural development and hence it is necessary that political stabilisation is there to achieve higher market share.
- Economical: It refers to the economic situation of the country, if the same is not in a better state then it will translate in the project sanctions and bidding process of the government. Lower spending on infrastructure would result in lesser contracts and thus it will affect almost all the companies working within the sector. Thus R.L. Maynard Ltd. Shall analyse these factors in an efficient manner, in order to frame a effective policy for the growth as well as development of the business in longer run. R.L. Maynard Ltd will benefit in a huge way if there is a substantial growth in the economic position of a country, R.L. Maynard Ltd, being a subsidiary, will be able to raise necessary funds with ease that is beneficial for the organisation in future (Fahlvik, Elfving and Wikström, 2014).
- Social: The Social Structure of a nation is also a very crucial factor that can decide the level of growth that can be achieved in the business. This factor includes the geographical distribution of the masses, growth as well as demand of people, The distribution of income etc. It has a direct impact on the growth of business. Thus it is essential to make sure that various kinds of factors that do affect business is taken care of by the management of the organisation for framing effective policies over period of time.
- Technological: The technological aspect refers to the advancement that a country has in terms of its technology. If the company will be having right kind of Technological policies then this will lead to better growth as well as development of the business and it will help organisation in winning the bidding process. R.L. Maynard Ltd. shall make sure that effective and latest Technology are being used in the production of service which will not only ensure higher market share but also a competitive advantage can be maintained over period of time (Gatukui and Katuse, 2014).
R.L. Maynard Ltd. is looking for a suitable technique that can help them to grow and expand the business. Ansoff's growth matrix is the best technique for the company to get the right results. It can guide the company to the right direction. There are various methods and technologies available in the market to run the business activities smoothly. The main requirement of a company is to grow and to generate maximum profits.
SME's have desire to reach a particular level of growth that helps them to acquire more and more customers.
Ansoff's growth vector matrix: It is the most reliable technique that can be used by the managers of R.L. Maynard Ltd., because it can provide the exact information those market where company can expand its business. This matrix refers to the identification of various target marketplaces and opportunities for growth and expansion. It includes four strategies, that are as follows:
- Market penetration:It is the first growth strategy that an organisation can implement to grow its business in existing market with current products. This will cost less and help to acquire more and more customers, because marketers already have the knowledge of market and customer perception. R.L. Maynard Ltd. can use this strategy to attract more and more customers by providing best products (Huang and Zhang, 2014).
- Market development:This strategy refers to the sales of existing products in new market. It requires a lot of research, because if the product is introduced with poor research it can make loss for the company. R.L. Maynard Ltd. can implement this strategy to sell its existing goods in targeted market where it can attract new customers and retain them by providing best quality goods.
- Product development:It means to launch a new product in existing market. This is very beneficial for R.L. Maynard Ltd., because the marketers already have the idea of market demand and with a good market image the company can introduce a new product in existing market to attract prospect customers (Lewis, 2013).
- Diversification:It refers to the introduction of a new product in a new market. The managers of R.L. Maynard Ltd. have to conduct a proper research to implement this strategy. The cost of this type of launch of new products is very high because the company do not have the idea of the customers and have to spend huge money for promotions and marketing.
For effectively managing the business, it is of paramount importance that funds are being arranged from the right sources so that a fine balance between the cost of capital and the return available from the amount invested. R.L Maynard Ltd. Will invest around £20,000 Pound in investing through a bid in a government project. The Estimated Cost of Project will turn out around £3,00,000, So the rest of the amount has to be raised by company from the alternative source of funding that are being available. The various sources through which funds can be raised are as follows:
Internal Sources: These are the sources, that are being generated from within the organisation itself. The example of such kind of resources can be sale of asset, reduction of working capital as well as a reduction in retained earnings like reserves etc. for the purpose of fuelling growth and expansion of business in an effective manner (Mason, 2015).
External Sources: It refers to raising funds from external sources, there are various kinds of options in external sources like raising of funds from equity share capital, debentures, leasing, Crowd funding etc.
There advantages as well as disadvantages of various sources of funding, which are being discussed as follows:
Bank Loan: Under this, the company will approach a bank for the purpose of funding and after looking at the company's financial situation and taking necessary collateral security, the bank will issue a loan amount to the company based on their requirements in an efficient manner. The rate of interest on which loan is disbursed vary from time to time. Usually loan is disbursed at fluctuating rate of interest, however it can have issued at fixed rate of interest depending upon the needs of customers.
- Advantages:The main advantage is that the funds are available with ease and not much formalities are involved.
- Disadvantages:Unlike Equity Funding, In Debt Funding there is a burden on company of the funds that are being raised and thus it is quite essential to make sure that debt are taken in limit and not beyond the repayment capacity of the organisation (Moseley, 2013).
Overdraft: It is also an arrangement that is being made available by bank for the purpose of fulfilling the short term funds requirement of the businesses. For example, Working Capital need of R.L Maynard Ltd. can be effectively fulfilled through Overdraft facilities that are available.
- Advantage:The funds can be available easily without any hassles and is very beneficial for meeting the short term funds requirement of the organisation.
- Disadvantage: The rate of interest on overdraft is high along with high arrangement fees.
Crowdfunding: Under this method, the funds are taken from large number of people, instead of taking the same from small individuals. Crowdfunding are usually taken from online sources in the form of donations or subscriptions within the company.
- Advantage:The primary advantage of the same is, because crowdfunding is usually done from online sources, the company is able generate brand awareness and media attention can also be gained (Unit, 2015).
- Disadvantage: The organisation has to ignite the general interest of people, in order to raise the interest of people within their project and to raise funds efficiently.
With various methods to acquire funding, it is imperative for the company to effectively analyse each source to opt the most appropriate approach for its business. For crowdfunding, it is uncertain that interest of wide range of customers is generated in ways that they could provide effective funding to the business despite of reaching out to a large group of customers. Where Overdraft is concerned, the interest rates are very high that would cause a major burden on the firm to keep a smooth pace in its operations. The most appropriate funding type is hence, Bank Loans. This is because if R.L. Maynard acquires funding within its repayment capacity, it would effectively be easier for the firm to operate and to repay the loan amount without much pressure.
Business plan is written documentation which contains relevant information about the goals and objectives that to be achieve by company in future period of time. It requires maximum efforts from each departments of an organisation so that it can be achieved within pre-determined time period. RL Maynard is small-medium sized company of UK which is engaged in construction business. To achieve growth and expansion in competitive market, RL Maynard prepare a business plan which includes information related with mission, vision, objectives and other importance aspects. Such information directs management to make an effective decisions and suitable plans to execute business activities in more effective and efficient manner. For example, attracting investors through making decisions of providing them maximum rate of return. Therefore, business plan is necessarily required to prepare which are further understood under the below:
Vision: Vision statement of RL Maynard states “ to be preferred contractor of choice. A company that our customers want to work with and our employees are proud to work for”.
Mission: Mission statement of RL Maynard states that “ to maintain the highest levels of professionalism, integrity, honesty and fairness in relationship with the suppliers, shareholders and customers”.
Strategical objectives: The main objective of RL Maynard is to expand its business to large scale operations in future period of time which can be possible through fulling the demand of the targeted clients by providing them services according to their preferences and requirements within minimum time period. The desired objective can be achieve through SMART objective which communicates that goals must be specific, achievable, measurable, realistic and time bound.
Financial information: Financial stability is essential for an organisation to sustain in competitive market for longer period of time. For this, management are held liable to maintain financial stability through raising funds from various sources such as internal as well as external sources. Before deciding to expand its business operations to large scale operations, the management of RL Maynard need to prepare budget plan which shows the requirements of funds needed to be invested in business operations. Such statement contains the information regarding the expenses that will be incurred in execution of different business functions such as marketing, training, promotional activities, implementation of advanced technology etc.
Total forecasted budget
With the help of budget mentioned above, it provides an idea to RL Maynard regarding requirements of funds so that it can raised accordingly.
There are various ways that RL Maynard can either exit market or succeed its business for longer period of time. The management are held liable to make decision after identifying the company's financial situation at present which can be possible through analysing financial statements of company of previous years (Ward, 2016).
Various ways to exit business
Winding up: It is the process of dissolving business which can be done through selling of assets of company in exchange of paying all liabilities and debts. Remaining amount will be distributed among the shareholders of company.
- The debt liabilities of company is written off due to having insufficiency of funds with owners thus it gives an escape route from this “no win” scenario.
- Owner get free from all legal actions made against the firm while liquidation of business.
The disadvantage is that company has lost their efficient employees. In addition with this, the process of winding up includes various legal procedures which took more time.
Sell the business in open market: It is ongoing process in which an owner is willing to continue its business activities rather winding up the business. In this, owner have option to sell its business to some other entrepreneur in exchange of certain amount of money (Business Exit and Succession Planning, 2018).
- Less time consuming as compared to other business exit options.
- The goodwill of the company remain exist which enable business to earn stable sales volume.
- Receiving amount in exchange of selling business is much lower than the actual cost of business invested in it.
It is much difficult for owner to adopt suitable promotional plans in rephrasing the company's image in the competitive market.
Out of the two options, the most appropriate option for R.L. Maynard is selling its business in the open market. This is because in winding up, the firm would receive no money and thus, it would be difficult for the owners to start a new business or invest in a suitable plan in future. Whereas selling is concerned, the owners would receive at least some amount that would increase the opportunities for investment and the goodwill would be helpful for the firm to market its new ventures.
Ways of succession:
Merger and acquisition: It is considered as an appropriate and one of the best way of increasing brand value and product portfolio in competitive market. Under this, two continued business merge together to expand its business operations on large scale so as to achieve huge customer strength and capture large market share (Business Exit and Succession Planning, 2018).
It provides an opportunity to company to enhance quality of their products and services through having skilled and knowledgeable employees of both merge companies.
The chances of monopoly of one product increase that leads to emergence of conflicts between management of companies (Whelpton, Campbell and Patterson, 2015).
It is imperative that the firm evaluates this option before opting it out. The most effective aspect of merger and acquisition is that it would allow the company to access the resources of the merged organisation. This option is rarely available in any other option. Moreover, there are wide chances of reduction of conflicts if the firm divides its tasks and resources efficiently while setting up the activities and production on priority basis.
From the above analysis it has been summarised that an organisation can continue to survive in competitive market for longer duration if they have an effective management who are more knowledgeable and capable to frame suitable plans and strategies. Small-medium size organisation always try to expand its business operations to a large scale which can be possible through developing business plans containing aims and objectives that a company need to achieve. Financial stability is also very much important to expand business which can be possible through raising funds from different sources such as bank loans and crowd funding etc. The management should also focus on financial statements of company which directs them to decide whether to continue business or exit the market.
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