Business Growth

  • Business growth refers to the expansion of a business, either by increasing output, number of employees, or sales.
  • Organic growth is when businesses grow gradually using their own resources.
  • Organic growth strategies can include: introducing a wider range of products, opening new branches, and increasing the amount of existing products sold.
  • External growth is when a business merges with or takes over another business.
  • Mergers and takeovers can be horizontal (between firms in the same industry at the same stage of production), vertical (between firms at different stages of production), or conglomerate (between firms in different industries).
  • When businesses pursue growth, they must consider potential benefits and drawbacks. Benefits can include higher sales and profits, increased market share, and economies of scale.
  • Economies of scale refer to the cost advantages that businesses obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale.
  • Potential drawbacks of growth can include diseconomies of scale. These are the cost disadvantages that businesses accrue due to their scale of operation, with cost per unit of output generally increasing with too much expansion.
  • Other potential drawbacks of growth can include increased risk, possible loss of control, and organisational problems.
  • Businesses must also consider Ansoff’s Matrix, a strategic tool that provides a framework to help executives, senior managers, and marketers devise strategies for future growth.
  • Ansoff’s Matrix considers four strategies for growth—market penetration, market development, product development, and diversification.
  • Market penetration involves selling more existing products in the existing market to increase market share.
  • Market development involves finding or creating new markets for existing products.
  • Product development involves creating new products for existing markets.
  • Diversification involves launching new products in new markets.

Remember that business growth is a critical aspect of entrepreneurial activity and management decision-making. Knowing different strategies for growth, potential advantages and drawbacks, and how to manage the growth process can help businesses attain their objectives and increase their chances for sustainability and success.