Organic and External Growth Flashcards
Organic Growth
Organic growth when a firms expands by selling more of its existing products
External Growth
External growth is growth by acquisitions,takeover or merger
Benefits of Organic Growth
There is less risk than external growth this is because the business using its own finance to grow as a result this will ensure that the business may low gearing as its is using its own capital in order to grow
This is a slower method of growth as the business is waiting till it has enough capital to grow and expand as result this allow the business to avoid diseconomies of scale as their control over the rate of the growth
The business will able to achieve economies of scale
Disadvantages of organic growth
This can have impact on the competitive position of the business this is because the business may have lost out on market share due to how competitive the market is and the rate in which competitors are growing rate
As organic growth is a slower method means that the business can miss out on market opportunities
Growth achieved may be dependent on the growth of the overall growth
Evaluation of Organic Growth
It depends on the business ability to increase its profit margin this is because organic growth is dependent on the business having the capital as a result the business needs to increase their overall sales
Benefits of External Growth
This is a quicker methods of growth this will allow the business to able to penetrate the market at the quicker rate this is being is taking over/merging with a company that already has knowledge over the market this will allow the business this allow the business to gain an advantage.
Allow the business economies of scale (Purchasing,mangerial) this allow the business to access the expertise offered by the business
Allows the business to expand their overall product range by acquiring the business
disadvantages of External Growth
It can be increased risk this is because the buisness id investing heavily in order to expand
If the business over pay this may impact the business share value
