Introduction of Planning For Enterprise Growth Assignment
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- Small and medium size companies are those which have less numbers of employees or revenue as compare to other organizations.
- Generally, the upper limit for employees in SME is 250. SMEs are very important in development of an economy, it helps in providing more employment and contribute to the Gross domestic product in an economy (Love and Roper 2015).
- The government try to encourage SMEs by various ways, such as tax benefits, subsides, low rate credit facilities, etc. These SMEs are the base of every economy because it provides employment at large number of people.
- This study also include information related to developing a business and expansion of it. To explain all the above things this study is taking the example of the companyryanair, it is an irish utra low cost carrier headquater in Dublin, swords, Ireland.
Note: The objective of this report is to analyse various factors that should be consider for evaluation of growth opportunities for the SMEs. This includes detail about the factors related to planning, analysis of SMEs, funding for growth, the ways of expansion, and various other factors.
Evaluation of growth opportunities for SMEs
Three approaches to industry innovation allow for the introduction of more efficient products or systems.
- Collaboration is key to delivering stand-alone solutions or integrated parts of platform. Currently collaborating with stakeholders to offer Variable Recurring payments. This will enable businesses to collect recurring payments without the customer authorising each time(Tewary,al 2021).
- Enhancing innovation and competition through future and current payments platform - including key processes supporting Direct Debit or Direct Credit - to enable overlay providers to create propositions that support SMEs.
- By providing deep insights and encouraging market cooperation, Company should facilitate innovation and competition. It is suggested that Request to Pay (RtP), as a tool to help SMEs improve their bill payment processes and reduce reliance upon manual reconciliation (Ahmed,et.al 2019).
Note: The economy is dependent on small and medium-sized businesses, or SMEs. The majority of UK companies are SMEs, from small shops to tech firms that work out of serviced offices to large multinationals. The country's 99% percent of businesses was represented by 5.7 million SMEs identified by Parliament in 2018. Micro businesses, which are companies with between 0 and 9 employees, accounted for 96% in total UK businesses. SME's are the moral fibre of any country. They drive growth, create job opportunity, and unlockinnovative markets.
- Political Analysis: The sale of tickets will suffer if the passenger tax rise to a upper rate than the small rate. In the past 24 years, the UK government has enlarged the tax three times on both elongated- and short-distance journeys. People can also choose to travel by train or bus for shorter journeys. RyanAir could lose money in either case(Matovic, 2020).
- Economic Analysis: The oil price has seen so many increases in the past year. Recently, however, it has started to decline again. RyanAir will see a marginal increase in revenue. The weakness of the pound created an obstacle that had a negative impact on travel spending. The UK's airline industry saw a decrease in leisure travel spending, which resulted in a contraction of its revenues. RyanAir has been focusing on short-haul capacity growth, which will help increase air traffic during the year. The investment in capacity growth led to a decline in profit.
- Social Analysis: British people are more interested in holiday travel than ever before. According to a new study, nine out of ten people have taken holidays. This change in British habits will have an impact on long- and short-distance travel. This will lead to a gradual increase in sales as low-cost flight are favoured by most UK passengers.
- Technological Analysis: This invention is extremely close to the internet, particularly shared networking. These services may allow airlines to draw more customers to fly with them. Several airlines also offer the ability to notify customers about the movies that will be playing while they travel. The rising popularity of mobile banking will enable passengers to book their flights in advance and make payment if required.
- Environmental Analysis: The carbon footprint has reached alarming levels. The EU might place restrictions on carbon emissions. This could make it difficult for airlines to operate.
- Lagal Analyse: RyanAir might have to follow the EU and UK regulations for Brexit. This could make it difficult for RyanAir to operate in a low-cost policy. There might also be flight deferment from other location in the EU. This could result in the closure of operations at different locations.
Note: PESTEL analysis can be used to evaluate the external environment of a company. PESTEL stands for the legal, political, economic and social factors that affect the external environment of a company (Citilci 2020 and Akbalik 2020). This analysis helps to understand the company's business environment and its plans for growth.
- Strength-The main strengths of Ryanair include low cost, low fare rates, innovative technology and a large fleet. They also have a focused management team. The company's unit cost is the lowest in Europe. Raynair has the lowest traffic cost of any European airline company(Teoli, et.al 2019).
- Weakness- Ryanair's two biggest weaknesses are its perception of the brand and their earning performance in a specific season. Ryanair's low fare prices are not a weakness, but it still performs poorly in awards, surveys, and polls. Earnings are dependent on the season. Summer season revenue is the most important, while winter season earnings are decreasing.
- Opportunities-There is a lot of growth potential for Ryanair in three areas: customer service, business travel and new aircraft. Ryanair should improve customer service by improving intertection with passengers and redesign its website to make bookings easier with fewer steps. Ryanair recently launched products for business travelers. Ryanair has entered into an agreement to purchase 100 boeing737 MAX200 aircrafts in 2020-2024 (Lüttgens,al 2016).
- Threats- One of the biggest threats to Ryanair is the possibility of an accident. Media reports suggest that low costs will also impact safety. Although the company has a strong safety record, it should be more focused on it as a major accident could severely damage the company's reputation. Ryanair's second threat is that management may lose sight of its main goal, which is to provide low-cost air travel at punctual times. Ryanair has been trying to buy rival aerlingus for the past decade. These two companies have a completely different business model, which can distract the focus of the management team.
Note: SWOT stands for strength, weakness, opportunity, threats of a company. SWOT analysis of Ryanair is given (Lüttgens,et.al 2016).
- Market penetration–This strategy focus on the enhance in the sale value of the company in the existing market (Schawel and Billing, 2018). It includes attracting more and more customers so that the market share of company can be increased. This will help company to grow its business in the existing market.
- Market development – This strategy focuses on the expansion of the business into the new markets (Mukangai and Murigi, 2021). New market can be a new city, a new state or a new country. In strategies, company work on the market extension strategies and try to focus on global expansion.
- Product development – this strategy focuses on the development of new product to expand business and attract more sales. Company try to increase its product line to attract every category of customers.
- Diversification –In this strategy, company focuses on launching a new product in a new market (Omosa et. al. 2022). This strategy is determines high risk which also leads to high return, by adopting diversification strategy a company can increase its revenue to a next level.
Note: This matrix help in finding the best growth strategy for a company, in case of ryanair it will suggest most suitable growth startegies. the ansooff’s model includes following four startegies(Omosa et. al. 2022).
Porter’s 5 force model
- Threats of new entrant –The airline industry is an expensive industry and the threat for new entrants is low. Buying or even renting jets are very expensive and advertisement include high cost, and these factors make entry barriers high (`Omsa, et.al 2017).
- Threats of substitute –There is low threat of substitute for Ryanair because company provides low cost travel than any other transport system. The company’s website also shows a comparison between train fairs and its flight fairs, which encourages people to travel by air in affordable prices .
- Consumer bargaining power - In the low cost airline industry, consumers have significant bargaining power. Due to a lack of loyalty on the part of the consumer, they choose the cheapest airfares. While negotiating for a flight, clients are unable to move to another flight at no additional expense to them.
- Bargaining power of suppliers –The rate ofbargaining is high in power of suppliers because there are only two supplier of Ryanair that are boeing and airbus. Boeing supplies the plane and in return charge high price because of duaopoly of suppliers. The other supplier of the company are supplier of jet fuel. The prices of jet fuel are decided by world trade, and Ryanair have no control over it. All these factors results in the high bargainging power of supplier (Omosa, al 2022).
- Competition - Due to the abundance of low cost airlines, like easy jet, Go, Wizz air, and others, there is a considerable concern of saturation. To increase the number of passengers travelling on their aircraft, all airlines are working to cut costs. The company's main goal is to cover every route and outperform the competition with a sizable fleet.
Note: The porter 5 forces are discussed with the help of several examples which can affect the SMEs and solutions are provided with the help of these models(Omosa, et.al 2022) The important porter 5 force model from above is threat of substitute which should be considered by Ryanair.
Methods for organizational funding
- Bank loan – This financing method is easily available to SME, In this company can select a bank loan and agrees to pay specified rate of interest on the future date (Zhao and Jones-Evans, 2017). The only disadvantage of this method is, when the interest are high for the loan amount then the higher level of influence is made while calculating total expenses of SMEs.
- Venture capitalist - In return for interest, venture capitalists invest SMEs through venture capital funding. Venture capitalists typically make early investments in firms in order to increase future profits (Baldock and North, 2015). This approach is suited for SMEs like Ryanair and will aid in the expansion of the business.
- Crowdfunding – In this method of finance, the company can raise money from the general public rather than banks or venture capitalists. The company can raise money and provide various banefits to the society for example, protecting environment, development activities, etc.
- Government funding –These benefits includes tax benefits, subsidies, low rate credit facilty, etc. The main hurdle in this type of funding is there are so many legal formalities and eligibility criteria decided by the government. Government funding takes more time than bank loan and venture capital.
- Note: UK government luanches various schemes to boost the growth of SMEs and provide various opportunities to them.Venture capitalistis suited for SMEs like Ryanair and will aid in the expansion of the business.
Recommendation on the best source of funding
- Ryanair's cash balance is being supported by the $730 million loan. Ryanair stated in a May 18th update that its current cash balance was EUR4.1bn ($4.475bn). This is on top of the full-year profit.
- This will support Ryanair, which has seen its cash burns decrease. Ryanair's weekly cash burn averaged EUR200m ($218m) in March. The airline now burns about EUR60m per semaine ($65m)(Prichinet, et.al 2020).
- Ryanair should consider bank loans and crowdfunding as the best sources of funding. The company's main focus right now is to maintain its liquidity.
Note: through Crowdfunding Ryanair can raise money and provide various banefits to the society for example, protecting environment, development activities and the bank loan is easily available to SME.(Prichinet, et.al 2020). In this company can select a bank loan and agrees to pay specified rate of interest on the future date
Developing a business plan
- Executive summary – In this part of business plan, summary of whole plan is given. This includes brief description about market segmentation, objectives and goals, and financial plan. It also states vision statement and mission statement of the company (Efthymiou,al 2021).
- Describe the company – in this detail about the company is described, it includes company’s registered name, address of the company, names of board of direction and other key persons. The company descrition includes the business structure of the company, in the case of Ryanair it is a corporation not sole proprietorship or partnership. Ryanair is uk based ultra low cost carrier, its headquarters are in Dublin, sword and Ireland.
- Company’s goals–It isalso called objective statement, this states clearly what company wants to doin short term as well as in the long term. Company’s goal states vision statement and mission statement of the company. Ryanair’s visualizationassertion is “ A world where passaengers fly for free”. The extended term strategy followed by company should be low fares with excellent customer services and use of updated technology.
- Describe services– This part include information related to expalnaintion of what company provides, sales strategy, distribution strategy, pricing model, supply chain of the company. Ryanair is an airline company and it offers some ancillary services as well. These services includes internet related sevices, in flight food and beverages, etc. The company markets provide various services such as car hiring, travel related insurance and holidays package, etc.
- Determine marketing strategy and sales strategies-Company growth depends on its marketing strategy and sales strategy. Marketing strategy includes price, product, promotion, and palce. Ryanair's pricing strategy is to set the lowest price possible, and only allow online purchases. Ryanair should promote its website via television, radio and newspapers.
- Financial analysis – In this company perform analysis of itsfinancial statement that are profitable including balance sheet, cash flow statement of the company. This helps to know about the income of the company, assests and liabilities with the help cash flow and financial accounting in the company(Wonglimpiyarat, 2015). This analysis also includes calculation of net profit margin and current ratio. Profit margin of Ryanair is 7.21% and the currenet ratio is 1.0142.
- Addition information – In this part all material information is included, such as patents, contracts, licenses, permits, receipts, leases, etc. all information which is important but could not fit into any other section is mentioned here.
Note:A business plan is base for the path to success for every organization, without a proper plan a company can never achieve its objectives. Developing a business plan is important for every size of company ,wether its small or medium size or for large size company. A business plan should be time saving, easy to understand and a blueprint about what to do how to do and when to do. A business plan should be made while considerding the main goal of the business. For Ryanair following business plan is recommended:(Wonglimpiyarat, 2015)
Exit plan for SMEs
Developing an exit plan for SMEs
- Preparing finances. Preparing an accurate financial account is the first step in creating an exit plan. A resonanceperceptive of costs, assets, and business presentation will allow to negotiate for an offer that is aligned with the true value of business.
- Considering options. Consider all options after having a clear picture of financial situation. The choice of exit strategy choose will depend on vision of living after the exit and how company fits in it. Talking to a business lawyer or financial professional can help make a decision.
- Consulting Investors. Reach out to stakeholders and investors to discuss plans to exit the company. Make a strategy to inform investors about how they will be paid. This will help investors understand financial situation.
- Find new leadership. After have made the decision to sell business, can transfer some of responsibilities over to new leadership. It will be easier to transfer new responsibilities if SMEs have already documented business strategy's operations(Lim,et.al 2020).
- Inform employees. Tell employees about succession plans once they are in place. Be geared up to answer any questions. Show empathy and transparency.
- Inform customers.. Introduce the new owner to clients if business is going to continue. Offer clients alternative options if closing down business.
Note: A business exit strategy is often viewed as a way to close a business. However, in reality, it's a plan to move a company toward long-term goals. It allows for a even conversion into a original segment (de Wit, et.al 2017). The six steps which help SMEs to sketch an exit strategy to maximizes the worth of company.
Recommendation for exiting the business
Two strategies are available to help plan exit strategy.
- Transfer to a new owner: A confidentialconsumer such as an member of staff or family unitassociate can help transition from the daily operations of trade. The ideal purchaser will share enthusiasm and carry on inheritance.
- Close the business and liquidate it: Although it can be difficult to close down a business have work so hard to create, it could be the superlative way to reimburse investors while still making capital(Das, et.al 2018).
Note: liquidating the business has the advantage that still receive a paycheck and can continue to live y life as normal. Thiswill likely upset employees and investors. This can also slow down business' growth and make it less attractive on the market if decide to change mind or sell.
- To comprehend the numerous ways that organisations get financing and when to employ different sources of funding, the presentation is provided on the topic of planning for growth.
- The development of the business plan is based on the competitive advantage of the company, and the potential for the company are highlighted using Ryanair as an example.
- The presentation's main components also include a critical assessment of the sources of finance and financial possibilities. Finally, an exit strategy for SMEs is developed along with a number of suggestions for the company.
Note: The study came to a conclusion by applying Ansoff's growth vector matrix, Pestel analyses, SWOT analyse and Porter’s 5 force model with an effective development plan for an evaluation of each growth option's in SMEs.
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