organic growth and inorgnic growth Flashcards
organic growth
achieveing growth inside the business
ways of oragnic growth
increasing sales-try and find additional customers by using promotional techniques, changes in pricing strategies etc
release new products onto market place. having addional products in profoli, increase in sales
might use initial protfolio but try to sell to difefrent maket segmesnts, findings different products
by franchising, find individuals who woudl be willing to start franchise of our business
benefits of organic growth
less risky, ratherr then going through integration, trying to find more customer etc
financial costs of it not working are not as great as failed takeover would be
can be spread overr longer period of time
no integration-no much risk of probelms follwoing the growth unlike inorganc growth
dis of oragnic
slower, growth is slower over time, takes longer
less economies of scale-staggeredincreae gets spread ove time
rivals may grow faster inorganically, if two of our greater rivals decide to merge togetrh
were in trouble
inorganic growth
growing from outside the business e.g mergers and takeovers
mergers
two business combine togetrh to form new business
takeovers
where one business takes over another business/purachse and own all assets of another business and their brand names
no new business is being formed
horizontal integration
happens when a business combines with another business in same industry at the sam stage of the production process
vertical integration
when business combines with another business at same industry but different stage of production process
adv of inorganic growth
synergy-when bring two things together, the end result is greater then individual sum of parts
something better, bigger and greater is created
economies of scale-can purchase economices of scake
profits-tow businesses profits can be combiend and costs can then be reduced
maybe some resoruces that are duplicated can be sold off
improving profits of organisations
dis of iorganic growth
regulated-if think is too powerful and monopoly power, regulators may investigate
human resources issues-inscuriety for staff as may freel tehre job is thretened/job may be removed to somewhere else
can reduce motvation therefore increasing labour turnover, absensittsim
challneging to bring two organsiations together as may disagree on more/cultural clashes
diseconomies of scale-may cost 100 millions, may be from external finance
can eb expensive process to do
suffer frominefficiencies/difficulties managing organsiaitons effectively
unit costs may rise
