Introduction
Business expansion is an excellent strategy in the life cycle of commerce for it promotes growth and development. The expansion process facilitates the enhancement of product positioning and market share, which are significant in boosting competitive advantage and profitability. However, businesses must identify crucial strategies and appropriately articulate them to succeed. Thus, this expansion plan outlines the financial component of establishing a business extension and discusses the fundamental environmental factors that will ensure success.
Financial Plan
Ecofriendly Mobile Phones (EMP) intends to open a second store at a projected cost of $50,000. The cash will cover the first phase of expansion and reduce the risk margin of competing in a large market space with lean capital (Marc, Sprcic, & Zagar, 2018). Since EMP is still at its formative stages, the extension of its operations helps to establish a strong company brand and enhance the market share.
Financial Goals
The projected capital caters to the establishment of an additional store and a reserve fund to cover emergency and unexpected expenses. The establishment of the second store amounts to a total of $35,000 for renting, designing the store, purchasing stock, recruiting staff, and advertising, while $15,000 caters for emergency needs. Marc et al. (2018) advise businesses to set aside a fraction of their working capital to navigate financial challenges and ensure sustainable exploitation of unanticipated opportunities. Conversely, EMP estimates its profit to reach $3,000 within the first quarter, triple after six months, and hit $15,000 in the first year. However, the total expenses projected are approximately $2,000 in a month. Therefore, the company intends to service sourced finances directly from the monthly income of the business.
Source of Financing
EMP plans to secure the capital needs from savings, debt financiers, and equity financing. Since the proposed expansion plan will take effect within the first year of operation of the first store, the company intends to plow back the projected savings of $10,000 in the new store and raise an additional $5,000 from equity financing. Thus, the company will source a balance of $35,000 from the debt financiers to meet the expansion budget.
Guerrilla Marketing Strategy
Since a large number of rival firms have saturated the cell phone industry selling high quality and enhanced features gadgets, EMP anticipates utilizing a solution-seeking strategy in establishing its brand. Chionne and Scozzese (2014) assert that identifying consumer needs helps to design and create an appealing element in an advertisement message that persuades a large number of audiences. The company will utilize the economic and environmental concerns of the target market to develop its advertisement message and adopt physical and online marketing campaigns.
Product Positioning
EMP will utilize an emotional message in its advertisement to arouse consumers’ concern of responsibility to the environment through its slogan ‘use what you need, share experience, earn a dollar, and save the planet slogan.’ Chionne and Scozzese (2014) hold that emotional targeting is a significant component of product positioning in an advertisement message. This responsive approach positions the company as a protective and problem-solving brand that appeals to the social needs for environmental conservation initiatives. Despite the consumers’ unidentified need, the striking element in the message will challenge their interest and desire for involvement as part of this revolutionizing concept. Marc et al. (2018) affirm that persuasive promotion positively influences consumers’ perception of business existence and transforms its market value to stand out among competitors. Therefore, coining a message aimed at environmental preservation will attract and influence consumers to dispose of their extra gadgets at a discounted rate to increase the company’s inventory and facilitate low product pricing, resulting in the promotion of sales.
Promotional Tactics
EMP strategizes to adopt both physical space and digital marketing types of advertisements. Physical space marketing involves donating branded garbage buckets, landscape takeovers, and issuing flyers in crowded destinations such as in colleges (Ting, Ho, Yee, & Matsah, 2018). The company will seek clearance and collaborate with the local authorities to donate garbage buckets with the company’s brand and promotion slogan, which will be located strategically in busy streets and areas with high human traffic, such as bus stops. Furthermore, EMP will conduct environment-sensitizing promotion in the market within the vicinity of its two facilities through the acquisition of a cleaning license from the local authority. Landscape takeovers involve creating engaging advertisements such as sandwich boards with the message that informs consumers of the need to pass through the store and dispose of their unused gadgets or purchase a standard second hand as an environmental protection measure.
In the digital platform, EMP will run ads on its website and social media platforms containing videos and pictures of staff participation in environmental conservation through market cleaning programs. Since the message in the advertisement is to influence consumers’ perception of second-hand gadgets, the company will utilize this creativity to brand itself as a caring partner but not just a profit-oriented entity (Chionne & Scozzese, 2014). This strategy facilitates the identification of the company’s existence to the social need for improvement of lives. Overall, this conservation-tailored form of a marketing tactic acts as a blue ocean strategy to create an uncontested market space that improves the company’s competitive position.
Selection of Business Location
The appropriate location identified for the establishment of a new store is Melrose Street, Los Angeles in California. Ting et al. (2018) argue that the identification of a business location requires a thorough market analysis with a consideration of the potential technological and consumer challenges on second-hand gadgets. The features identified as significant for the success of this business in the new location include environmental regulation, competition, accessibility, and business environment.
Environmental Regulations
California is a credible state with strict environmental conservation measures. The utilization of conservation elements in advertisement facilitates market penetration and significantly promotes the guerrilla marketing strategy adopted for the business with the potential to go viral, leading to a strong company brand (Chionne & Scozzese, 2014). Therefore, since EMP is established as an environment-oriented business, the choice of this location is essential as it portrays the image, reputation, and commitment that will make the population feel indebted to identify themselves with the business.
Competition
The technological innovations in California are significant elements that ease the availability of high-tech devices. Silicon Valley has promoted intense competition in the development and modification of mobile phone features that have led to the availability of a high volume of disposable gadgets by techno-insatiable consumers. In this aspect, locating EMP in this environment promotes convenience in the access to high-quality second-hand supplies. However, since consumers have varying tastes depending on their needs and financial position, this market feature enables EMP to facilitate the exchange of resources within the population.
Accessibility
Melrose Street is an accessible location with an ample parking space, spacious road facility, adequate bus stop locations, and a railway network. The sufficient parking space provides customers with the comfort and convenience of flexible movements through the streets and thus, encourages them to stop by the shop. Ting et al. (2018) hold that communication network is an element critical for reducing the puzzle of the inconvenience of meeting travel plans while still affording the time to take a store visit. Given that EMP receives a supply of its items from consumers, the need for a convenient location is essential in ensuring customer’s smooth visits and evasion of harsh street hassles, which could deter their commitment to transact with the company. Moreover, the network is indispensable in reducing traffic and guaranteeing reliable delivery services to customers.
Business Environment
Second-hand electronic gadgets highly depend on customer traffic. The business environment in Melrose Street is both consumer and merchant-friendly due to the high population density in the area (Ting et al., 2018). Melrose is a shopping and tourism destination with great dining and entertainment facilities. Additionally, the street’s culture embraces diverse business models, which have facilitated the establishment of both high-end shops and side-street stalls, majorly known for second-hand clothes such as the 2nd Street shop. Therefore, given the high influx of shoppers and tourists, which has significantly promoted the growth of other forms of businesses such as restaurants and boutique stalls, EMP will essentially tap on an already established lucrative business environment.
Securing Sources of Debt Financing
Debt financing for small businesses is available from a range of sources such as Small Business Administration (SBA), banks, credit unions, private investors, and commercial finance companies. Yazdanfar and Öhman (2015) state that since lenders are not beneficiaries in debt financing, companies repay the borrowed cash with interest at a specified future time. After the identification and familiarization with the potential debt funders, EMP will undertake an analysis to understand their regulations and lending requirements. Yazdanfar and Öhman (2015) recommend a review of debtor firms to determine their best lending terms and avert ones that would compromise an organization’s business objectives. Therefore, the most imperative aspect is the determination of a source that can finance short-term or long-term loans and the associated interest rate from each facility.
Thus, securing longer-term financing is the most appropriate form of funding for EMP. Since lenders qualify debt financing based on the business’s capability to repay the borrowed money out of its earnings, securing a long-term fund acts as a second assessment of the company’s potential for success. Secondly, if the business meets the terms of the loan agreement, there is no extra cash payable apart from the regular installments agreed (Yazdanfar & Öhman, 2015). In addition, by securing a longer-term debt funder, EMP will have an opportunity to establish an abiding relationship with the lender for convenient future business.
Conclusion
Business expansion requires proper planning and evaluation of the market environment. The proposed expansion plan provides a clear roadmap significant in setting the business to succeed. Since the proposed framework has considered financial requirements and examined market factors, the adoption of appropriate market strategies and the development of a flexible business model to enhance consumer experience will be critical in creating a sustainable competitive advantage over rivals that ensures the success of the venture.
References
Chionne, R., & Scozzese, G. (2014). Some evidence on unconventional marketing: Focus on guerrilla marketing. International Business Research, 7(12), 153-165. Web.
Marc, M., Sprcic, D. M., & Zagar, M. M. (2018). Is enterprise risk management a value-added activity? Economics and Management, 21(1), 68-84. Web.
Ting, C.Y., Ho, C. C., Yee, H. J., & Matsah, W. R. (2018). Geospatial analytics in retail site selection and sales prediction. Big Data, 6(1), 42-52. Web.
Yazdanfar, D., & Öhman, P. (2015). Debt financing and firm performance: An empirical study based on Swedish data. The Journal of Risk Finance, 16(1), 102-118. Web.