3.2.3 organic growth

Question 1

Organic or internal growth occurs when

Answer 1

a business expands in size by opening new stores, branches, functions or plants

This may be achieved within the UK or on a multinational scale
Can be time consuming but is a relatively low risk strategy
Control is easier to maintain

Question 2

Inorganic growth occurs when

Answer 2

a business expands in size by either merging with or taking over another business

This may be with other business within the UK or on a multinational scale
This allows a business to expand more rapidly as it is buying businesses that are already established
Can be high risk if the two businesses are not compatible

Question 3

Methods of growing organically

Answer 3

New products
-Extending the existing product range e.g. Trunki sit on suitcases adding other travel accessories
Widening the target market e.g. New Look bringing out a gents range

New markets
Opening new outlets across the UK e.g. Valerie Patisserie opening new cafes
Expanding into other countries e.g. The Range opening stores in the UK

New routes to market
Multi-channel distribution e.g. Debenhams strengthening its online offerings
Increasing type and location of stores e.g. M&S Food at service stations, airports, railway stations

Franchising
Adapting the business model to allow for quicker growth through franchises

Diversification
Bringing out new products in new markets

Question 4

Advantages of organic growth

Answer 4

Less risky
-Avoids conflicts
-More likely to be funded with retained profit
Greater consistency
Maintain distinctive capabilities
Less threat of brand dilution
Can be steady
Less loss of control

Question 5

disadvantages of organic growth

Answer 5

Missed opportunities from acquisitions
Potential for growth maybe more limited
Lack of shared expertise
Lack of competiveness due to a lack of economies of scale (especially if competitors are growing via inorganic methods)
Pressure on leaders 
Dissatisfaction from shareholders