3.2.3 Organic Growth

Question 1

Organic growth

Answer 1

The business has grown from within.

Question 2

Methods of organic growth

Answer 2

1. New product launches - product development/diversification.
2. Opening new stores.
3. Expanding into foreign markets.
4. Expansion of the workforce.
5. Franchising.

Question 3

Benefits of organic growth

Answer 3

+ Avoids risks and pitfalls of joining with another business - growth is financed by internal resources.
+ Cheaper than inorganic.
+ Retains company culture and existing management.
+ Can be planned for unlike a takeover - pace of growth is manageable.
+ Higher production scale and lower average costs.

Question 4

Drawbacks of organic growth

Answer 4

• High risk strategy - capital required.
• Growth may be limited and is dependant on reliability of sales forecasts/revenue. Growth achieved may be dependent on growth of market.
• Pace of growth can be slow - long period between investment and return on investment.
• New markets and countries can be dangerous to enter without foreign links - won’t benefit from external expertise.