3.2.3 Organic growth Flashcards
What is organic growth?
Organic growth is the process of business growth which comes from within the business, as opposes to mergers + takeovers.
What is inorganic growth?
-This means a business has grown by buying it’s way into being larger, this may be through: ▪️A merger
▪️A takeover (acquisition)
▪️ A joint venture
What are some common causes of organic growth?
-Increasing the product range.
-Opening more branches.
-Taking on more staff.
What are the 4 methods of organic growth?
1.) New product launches
2.) Opening new stores/branches
3.) Expanding into foreign markets
4.) Expansion of the workforce
1.) New product launches
-A business can grow from within by launching new products.
-If the risk pays off then the business will be able to enjoy ^ rev + profits.
2.) Opening new stores
-A business can grow organically by opening a series of new stores/outlets.
3.) Expanding into foreign markets
-A business can grow organically by expanding into foreign markets.
4.) Expansion of the workforce
A business can expand organically by taking on new staff.
What are the advantages of organic growth?
-This avoids all the risks + pitfalls of merging w another business.
-Cheaper than merging
-Retains the company culture
-Can be planned for unlike a takeover
-Higher production + EOS + lower avg costs
-More influence comes with more market share, can start setting prices for the industry
What are the disadvantages of organic growth?
-This is a very high risk strategy, opening lot’s of stores + taking on thousands of new staff is very risky + capital intensive.
-Long period between investment +return on investment.
-Growth may be limited + is dependent on reliability of sales forecasts.
-New mkts + countries can be dangerous to enter into wout buying a business already operating in that country.
