Business Growth Flashcards
What is organic growth
It is when the business expands itself by increasing the range of products, innovating existing products or developing new ones through research and development
What are the advantages of organic growth?
- Less risky than taking over other businesses
- The development of new products helps a business stay ahead of its competitors
- New products increase potential revenue from current and new customers
- Builds on the strengths of the business
- Can be financed through internal funds
What are the disadvantages of organic growth?
- Developing new products can be expensive
- There will be slow growth
- Harder to build market share if business is already a leader
Give one more example of organic growth
-Entering new markets where you target a new market in a geographical location or targeting customers in international markets.
Give one benefit and drawback of entering a new market
- Increases the number of potential customers
- Businesses may not understand the needs of the new customers, especially when targeting international customers with a different language
What is inorganic growth?
A business grows when a business joins or takeovers a new business
Give me two examples of inorganic growth
- Merger which is an agreement of businesses to join together and it is beneficial for both as they have larger assets and more employees
- Takeover where one business takes over another but it may not have been agreed. It happens when a public company has a majority stake on stock exchange
What are the benefits and drawbacks of inorganic growth?
-Growth is faster than organic growth
-New assets and new skills and knowledge can be gotten
-Competition can be eliminated of a rival business
-Costs might have been saved instead of having duplicated facilities
Disadvantages:
-It is riskier than organic as it might be difficult to align two businesses as there might be different cultures or technology
-May not have enough knowledge
-Clashes of culture may occur and reduce effectiveness
Why may objectives and aims change and what could be their new aim?
- Market conditions as competition or economic conditions might change. They would change the objective from growth to survival or reverse if market conditions improve
- Changes in technology as there are advances. Objectives may be reducing workforce to lower costs and let technology do work and it could be more efficient
- Changes in legislation as there might be new laws like changing minimum wages. The profit targets would be reduced due to increased costs
- Performance as it might do well and increase product range or do bad and decrease it
- Internal reasons like interests or employees
