3.2.3 Organic growth

Question 1

What is organic growth?

Answer 1

Growth that originates from within the business

Question 2

What is inorganic growth?

Answer 2

Growth that occurs as a result of taking over or merging with another business via integration.

Question 3

What are the methods of organic growth?

Answer 3

1) New shops/stores
2) franchising
3) e-commerce
4) increased capacity
5) product development

Question 4

How do businesses organically grow by opening new shops/stores?

Answer 4

• businesses establish new shops and locations in domestic or overseas markets.
• Uses resources such as cash, stock, vehicles and utilities
• It leads to growth as an expansion of stores leads to greater geographical reach and higher footfall.

Question 5

What are the positives and negatives of organically growing by opening new stores?

Answer 5

+ better relationships built, new geographical market could lead to rapid growth
- Loss of control and cash, become decentralised, hidden costs

Question 6

How do businesses organically grow by franchising?

Answer 6

• when a business sells the rights to another business to operate as a franchise
• generates cash via royalties
• leads to growth as they spread quickly without much hassle reaching large markets

Question 7

What are the positives and negatives of organically growing by franchising?

Answer 7

+ spreads risk, less concern, already established business,

- negative PR damages entire brand image, lack of control,

Question 8

How do businesses grow organically by using e-commerce?

Answer 8

• process of buying and selling via the internet

- global market without high barriers to entry

Question 9

What are the positives and negatives of organically growing by using e-commerce?

Answer 9

+ global market, 24/7, more distribution channels

- at risk of cyber attacks –> forced to invest into security

Question 10

How do businesses grow organically by increasing their capacity?

Answer 10

Improving capacity leads to storage gains which increases the businesses ability to deal with big orders.

Question 11

What are the positives and negatives of organically growing by increasing their capacity?

Answer 11

+ E.O.S, wider range of customers
- may lead to poor acid-test results and depreciation in stock value, the business may have to amend their storage system depending on the season

Question 12

How do businesses grow organically by developing their products?

Answer 12

• ensures that innovation is at the forefront of business operations
• leads to USPs and differentiation leadership/focus which will in-turn improve consumer appeal

Question 13

What are the positives and negatives of organically growing by developing products?

Answer 13

+ leads to USPs and differentiation improving customer appeal and revenues, motivates employees improving productivity
- hard costs and opportunity costs, a possible trade-off between marketing schemes

Question 14

What are the positives of organically growing?

Answer 14

+ sustainability, control, financed internally, less risk, brand reputation, develop key assets, better working environment and motivation

Question 15

What are the negatives of organically growing?

Answer 15

• slower, existing competitors may take quick offensive action, the possibility of missing opportunities (SWOT), slower to react to opportunities, diversification may be difficult (less innovation and lack of brand strength)