Th3.1: Organic Growth

Question 1

What are the two main types of growth?

Answer 1

internal/organic growth and integration

Question 2

What is organic growth?

Answer 2

where the firm grows by increasing their output e.g increased investment or more labour.

Question 3

Almost all growth of firms is…

Answer 3

organic

Question 4

What are the two advantages of organic growth?

Answer 4

expensive, time-consuming and high risk

keep control

Question 5

Expensive, time-consuming and high risk

Answer 5

(with evidence suggesting that the long-term share price of the company falls following integration)
firms often pay too much for takeovers and integration is often poorly managed with many key workers tending to leave after the change

Question 6

Keep Control

Answer 6

the firm is able to keep control of their business

Question 7

What are the three disadvantages of organic growth?

Answer 7

market or an asset
too slow
new ideas

Question 8

Market or an asset

Answer 8

sometimes another firm has a market or an asset which the company would be unable to gain through organic growth e.g integration would allow a European company to expand into the Asian market

Question 9

Too slow

Answer 9

organic growth may be too slow for directors who wish to maximise their salaries

Question 10

New ideas

Answer 10

may be hard for firms to get their new ideas