Business Planning for Growth of Airdri Ltd

MAIN BODY

TASK 1

P1. Analyse the key consideration to evaluate the growth opportunity in the business

In context of Airdri Ltd, Porter’s generic model helps the organization to identify the key consideration.  It farther helps in providing growth in the business operations as well as provides competitive advantage. It includes some stages to enhance their overall performance which mentioned below: 

Cost leadership:

It is refer to the low cost strategy where management set low price for their products in order to target huge number of customers. It is beneficial for small organization to gain competitive advantage. It context of Airdri Ltd, it can helps in attaining various benefits such as attract large customers, increase demand which automatically increase the sales as well as revenue through keeping low prices of their products and services.

Differentiation:

In this strategy, business deals in the variation such as manufacture different varieties of products to attract different perspective customers (Bakhtiari and et.al., 2015). Managers of Airdri Ltd can follow this strategy through introducing new products with attractive features at reasonable price.

Focus:

In this strategy either company focus on cost leadership or differentiation because both will be following at the same time is quite impossible. Small organizations such as Airdri have to make sure that which strategy is suitable for their business and which one provide more benefits. Large organizations can adopt both strategies the same time because they have enough capital to invest.

From the above discussion it has been concluded that Airdri should focus on cost leadership strategy because initially they have to make strong customer base which increase their products demand or provide reasonable profit. So they have to keep their product low in comparison to their competitors.

PESTEL Analysis - 

Political:

Under this factor, government make some policies which required following such as trade or tariffing policy. In context of Airdri, UK has stable government which is beneficial for them to operate their operations or maximise productivity or profitability.   

Economical:

It includes those factors which impact the overall profitability of the economy such as GDP, inflation rate, exchange rate etc. UK is developing company so they have opportunity to grow or increase their production as well as profitability. It helps the Airdri Company to sustain in the market for longer period.    

Social:

It is the factor which includes the needs of consumers, their values, culture etc. So Airdi Company has to focus on consumer’s needs and preference regarding product which continuously change as per the individual or market demand.  

Technological:

Change in the technology always creates opportunity for the business or make them able to attract large number of customers which maximise the sales or revenue (Frank, Gray, and Schwartz,  2014). Use of latest technology will improve the overall output which reduces the cost or maximise the profit margin. It helps the Airdri Company to provide competitive advantage to their rivalry firm.    

Environmental:

It include those factors which impact the organization in favourable condition such as business have to maintain consistency in the work through following all the laws regarding business environment such as minimum wage law, discrimination, climate change etc. In context of Airdri, company all the environmental rules which create opportunity to move further or smoothly run their operations.       

Legal:

It includes all the laws or regulations which required implementing otherwise government will interfere which is not good for them. Airdri Company follows all the rules & regulations which make them able to achieve business goals & objectives in order to maximize productivity or profitability.     

P2: Evaluation of growth opportunities using Ansoff's growth matrix.

Ansoff's growth Matrix:

It is the strategic planning tool which help the top management to build strategies for the future growth. With the help of it, organization able to get comparative advantage and it adopted by the Airdri Ltd which discussed below:

Market Penetration:

Under this strategy, organizations has less risk because they promoter existing products in the existing marker. It makes them capable to get growth or increase market share (Hellum and et.al., 2015). In context of Airdri Ltd, they can follow this strategy in order to get sustainability in their business or maintain its position in the market for longer period.

Advantage

• It helps in maximising sales as well as profit margin because they are families with the existing market conditions or customer's demand.
• Offer products on low price as compare to their competitor which make them capable to capture the large market share.

Disadvantage

• Chances of innovation reduce which limited the sales as well as revenue of the company. It will also reduce the expansion of business operations in the new market.

Market development:

In this strategy organization enter in the new market with existing product. Basically, company geographically expand their business to target new customers. In context of Airdri Ltd, they can follow this strategy to entered into new market with existing products to maximise their sales and revenue.

Advantage:

• It helps in targeting huge customers which make them capable to increase their sales through market development.
• It further beneficial in making strong customer base and able to achieve their vision or goals.

Disadvantage:

• In order to enter new market is quiet risky which required more capital investments or effective promotional strategies.
• They required intense market research to know about customer's taste & preferences then choose the market to enter.

Product development:

In this strategy, business introduces new products in the existing market which is beneficial for them because they already have existing customers (Light, Wang and Gomez-Lobo, 2017). It enables the business to survive in the competitive market through developing new opportunities which maximise productivity as well as profitability.

Advantage:

• It provides competitive advantage when they introduce new product in the marker along with innovative feature. It further helps in maximising number of customers because of new product development.

Disadvantage:

• At the time of developing new products for strong customer base they have to generate demand through identifying their needs & preferences. If organization fail to know then it negatively impact the business.

Diversification:

In this strategy, business introduce new product in the new market which is highly risky. It is kind of business expansion in the new market so they have to make their strategies accordingly. This strategy can be followed by the Airdri Ltd in order to launch new product in the newer market segment to maximise productivity as well as profitability through targeting new customers.

Advantage:

• It helps in maximising sales as well as revenue or provide huge growth in the market with the help of diversification (Lima, Almeida and Oden, 2015). With the help of diversification, organization can capture market share.

Disadvantage:

• This strategy involves huge risk because entering into new market with new product is very risky. Along with this, company required huge capital investment for diversification.

Above mention strategies help the Airdri Ltd to grow or maximise their sales as well as revenue. Company should adopt market development strategy where they launching existing products in the new market.

TASK 2

P3. Identify the sources of funding with their advantages and disadvantage

In organizational context, they required finances in order to perform their operational activities which help in maximising their final outcomes. There are various sources of funding which used by the business to get financed and perform their activities. Some of the source of funding mentioned below which is used to provide for small organizations such as Airdri Ltd  along with its advantage or disadvantage:

Internal sources of funding:

Owner's investment: In the beginning, owner use their money as capital investment which is very important to have. Most of the organizations face the failure in the initial stages because of lack of adequate finance in the organization. 

Advantage:

• There is full control over finance and they make payment decisions as per the requirement without taking permission from others.  
• It improve the overall value of the project because it does not include the debt which generate the risk.

Disadvantage:

• It may have negative impact because all the invested money it belong to owner.
• If they use external source of money then they get tax benefits from overall profit. 

            Most of the organizations limit their internal sourcing or they prefer to take finances from outside of the organization which comes under external sources which mentioned below:   

External source of funding: 

Bank loan: It is the most common or best source of external funding which is used by organization in order to fulfil their operational requirements (Padma and et.al., 2015). Airdri Ltd can borrow money from banks for short term as well as long term duration with predefine interest rate which organization have to pay. This source of funding has some advantage or disadvantage:      

Advantage: Banks provide money in terms of loans to the individual as well as organization as per their requirement. Interest rate is fixed which they have to pay according to the time period which they getting loan.  

Disadvantage: Banks will provide loan against the security, so if the not able to pay on time then banks will repay through selling their assets.

Overdraft: It is kind of mutual agreement where parties get the facilities to extend their credit limits. Agreement will be signed between companies or banks with some terms and conditions. It has some benefits or drawbacks which need to analyse and it mentioned below:    

Advantage: It helps in resolving their financial issues at the time of emergency when business required money. For example: managers of Airdri get the money on immediate basis to fulfil the requirement of money.

Disadvantage: If organization crosses their limit of spending then they have to pay interest which is very high in comparison to normal rate. Small business such as Airdri enables to afford it.  

Airdri Ltd adopted bank loan as a source of funding for their organization. They can borrow money from banks as per their requirement such as short term or long term period. 

TASK 3

P4 Business plan for growth of the business

Business plan is the written document which is produced by the organization in order achieves their business goals & objectives. This document includes the various strategies such as objectives of the company, marketing strategy, financial analysis, budget etc. Airdri Ltd produce business plan and its main purpose are to attract large number of investors to generate their interest to invest in the new venture of Hand dryers with fragrance systems ( Rajesh and et.al., 2015).  All the relevant information for the business plan is mentioned below:  

Vision: Is to expand their market or able to introduce range of products in the world or improve their brand name in the global market.

Mission: Mission of Airdri Company is to attract large number of customers through providing quality product which make their experience better.  

Objective: Main objective of the company is to earn high profit margin through increasing demand of their products. Airdri set their objectives to earn around 15% in the next financial year. 

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Financial information: Airdri Ltd focuses on funding because in order to implement their business plan they required enough money so they have to arrange it before introduction of new product. Company can raise funds from various sources such as taking loan from banks, owner use their saving as capital investments, overdraft etc. Airdri choose the bank as sources of funding, here they have to pay low rate of interest which help the business to launch their new product successfully such as Hand dryer with Fragrance. Company also focus on promotional strategy for new products which helps in maximising profitability of the business. Estimated budget for the new product development is mentioned below:

Estimated Budget:

Particular	31/12/16 ($)	31/12/17 ($)	31/12/18 ($)
Employing technology expenditure	10000	-	8000
Promotional cost	10000	6000	2000
Publicity cost	1000	6000	3000
Listing cost	9000	6000	5000
Grooming cost	9200	6000	2000
Total Cost	39200	24000	20000

 

Internal analysis: With the help of internal analysis Airdry Ltd able to identify their strength, weakness, opportunity and threats. It help in providing competitive advantage which help the managers to make their future decisions.

Strength	Opportunities
Airdri Ltd has strong customers base which helps in capturing market share through providing quality work as per demand.	Company has greater opportunity to expand their business through introducing new products in the market with technology advancements.
Weakness	Threats
Company suffer from lack of knowledge regarding consumer's needs. So they have to include advanced features in their products.	Due to high competition in the market Airdri affected because it influence their productivity as well as profitability.

     

 

Income statement projection:

Particulars	2020 (£M)	2021 (£M)	2022 (£M)	2023 (£M)	2024 (£M)
Sales	19	22	20	17	26
Expenses:
COGS	7	9	5	6	7
Depreciation	0.8	0.8	0.8	0.8	0.8
Advertisement	1.2	2.5	1.1	2.3	1.8
Rent	0.5	0.5	0.5	0.5	0.5
Salary & WagesÂ	1.8	1.9	2.1	2	1.2
Furniture & EquipmentÂ	3
Travel	0.1	0.3	0.4	0.2	0.1
Interest Exp.	3	3	3	3	3
Total Expenses	17.4	18	12.9	14.8	14.4
Net income before tax	1.6	4	7.1	2.2	11.6
Income tax exp.	0.2	1.5	2.8	1.2	2.9
Net income after tax	1.4	2.5	4.3	1	8.7

 

Cash flow projection:

Cash Flow
Particulars	2020 (£M)	2021 (£M)	2022 (£M)	2023 (£M)	2024 (£M)
Cash Inflow
Investment	5000
Credit sales	2000	4500	3000	4500	1500
Total Inflow	 7000	4500	3000	4500	1500
Cash Outflow
Fixed: Rent & Electricity	3000	2500	1500	2000	1200
Variable: Material	2500	350	200	3500	150
Total Outflow	5500	2850	1700	5500	1350
Net cash Inflow	1500	1650	1300	-1000	150
Opening balance	0	1500	3150	4450	3450
Closing balance	1500	3150	4450	3450	3600

 

P5. Succession or exit plan for small business with its advantages and disadvantages

In the business environment, every organization affected due to various factors such as political, social, consumer's demand etc. These factors create challenges for the company such as Airdri Company also get affected due to these elements, so they take necessary decisions regarding exit plan or succession plan ( Zhang  and Ying, 2015). There are various ways which any organization used to exit market are mentioned below:

Liquidation: It is one of the common exit strategies from market where organizations sell their business to interesting buyers. It is the permanent winding up the firm because company unable to pay their debt.     

• Advantage: Employees of the company perform without paid salary in the particular time period. Such as Airdri company develop effective relation with their staff members. 
• Disadvantage: Liquidation of business not allows the company to trade in the market such as Airdri wind-up their operational so they are unable to perform in the trading market.    

Management But In: It is one of the corporate action where outside managers team or managers purchase the control of ownership in outside of the company and replace existing market management team.       

• Advantage: Buyers purchase undervalues shares which further provide the benefits when price of shares increases. Aidri company can generate money through outside business in the case of undervalue.    
• Disadvantage: If new management team will fail to provide success then it will demotivate the employees and impact their working relations. Change in the management team will impact the employees of Airdri Company and their performance as well.      

Floating shares: It is referring to those shares which can freely bought or sold in the market without any restriction (Myronycheva,  2019). Shares available in the market for trading purpose which attract investors to invest at higher floating rate.    

• Advantage: Airdri Company can issues shares as per organizational requirements through inviting people in the open market.  
• Disadvantage: If company issue additional shares without any requirement then it will impact the earning of the company (Minor and Arizpe, 2015). Such as increase in the floating shares can reduce the earning per share of the company.   

From the above exit strategy, organization focuses on liquidation method which helps in winding entire business operations. It helps in paying unpaid amount such as employees salary, debt etc.

CONCLUSION

From the above discussion it has been concluded that planning is most essential element for the organization in order to archive their business goals & objectives. With the help of various competitive tools such as Ansoff model, PESTEL analysis etc. It helps the managers to evaluate the market and all the factors which can impact the productions as well as profitability. So they make their strategies accordingly to achieve business goals & objectives. With the help of effective business plan, organization performs their task in well manner.      

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