Organic growth Flashcards
Define organic growth.
Organic growth is the process of business growth which comes from within the business, as opposed to mergers and takeovers.
What is inorganic growth?
This means that a business has grown by buying its way into being larger, this may be through;
- A merger
- A takeover (also known as an acquisition)
- A joint venture
Explain organic growth.
Organic growth means that the business has grown from within
The business has grown within itself without a merger or takeover with another business
This may be through;
- Increasing the product range
- Opening more branches
- Taking on more staff
List the different methods of organic growth.
New product launches
Opening new stores or branches
Expanding into foreign markets
Expansion of the workforce
Explain new product launches as a method of organic growth.
A business can grow from within by launching new products
If the risk pays off then the business will be able to enjoy increased revenue and profits
Explain opening new stors as a method of organic growth.
A business can grow organically by opening a series of new stores or outlets
Explain expanding into foreign markets as a method of organic growth.
A business can grow organically by expanding into foreign markets
e.g. M&S aims to open 250 stores out of the UK, including 20 in india
Explain expansion of the workforce as a method of organic growth.
A business can expand organically by taking on new staff
What are the advantages of organic growth?
This avoids all the risks and pitfalls of merging with another business
Cheaper than merging
Retains the company culture
Can be planned for unlike a takeover
Higher production means EOS and lower average costs
More influence comes with more market share, can start setting prices for the industry
What are the disadvantages of organic growth?
This is a very high risk strategy, opening lots of stores and taking on thousands of new staff is very risky and capital intensive
Long period between investment and return on investment
Growth may be limited and is dependent on reliability of sales forecasts
New markets and countries can be dangerous to enter into without buying a business already operating in that country
