3.2.3. Organic Growth

Question 1

Inorganic growth

Answer 1

Inorganic- growth that occurs by taking over or merging with another business. Usually used by businesses with:
-Poor record of new product development and innovation
-Need to grow very quickly
-Business looking to eliminate competitor

Question 2

Organic growth

Answer 2

Growth from within, not by merging or taking, expanding its own capacity or opening new branches.
Can be done by reinvested profits or loans. May include expanding product range, increasing no. Of locations etc.

Question 3

Methods of growing organically

Answer 3

-Launch new products
-Launch in new market

Question 4

Advantages of organic growth

Answer 4

-Leaders influence stays strong: preserve original organisational culture, likely to be more successful

-Reduction of financial risk:As it’s slower than inorganic, finance required likely to be needed in smaller steady batches. Suits use of retained profit

-Secure career paths: as it grows or as, structure will grow and more senior managerial positions will open up.

Question 5

Disadvantages of organic growth

Answer 5

-Limited speed leading to limited size: May fall behind growing rivals who use inorganic methods of growth. Rivals achieve econ of scale.

-Failing to fully exploit short lived opportunity: By failing to fully expand its capacity before the product enters decline phase , business misses out on significant levels of sales by ignoring opportunities to grow inorganically.

-Predictability:Often doing similar thing in new place each time. In long term may lead to turnover of potentially innovative and entrepreneurial staff.

-Franchise may be difficult to manage