Business: Methods of Growth

Business: Methods of Growth

Internal (Organic) Growth

• Internal growth or organic growth is achieved by expanding the business’s operations from within.
• This might involve increasing sales via marketing and promotional activities, or opening new branches, stores or factories.
• Investing in new technologies or equipment to boost production capacity can also contribute to internal growth.

External (Inorganic) Growth

• External growth or inorganic growth involves joining or acquiring other companies.
• This can include methods such as mergers, acquisitions, and strategic alliances.
• This type of growth can be faster than organic growth, and it may provide access to new markets, technologies, or customers.

Mergers

• Mergers happen when two businesses join together to form a new business entity.
• Mergers can provide opportunities for cost savings through economies of scale, diversify a business’s product range or help the business enter new markets.
• Not all mergers are successful and they can be complex, costly and time-consuming to arrange.

Acquisitions

• Acquisitions occur when one business buys another to gain control of its operations.
• Acquisitions can help a business quickly expand its market share, reduce competition, and provide new resources or capabilities.
• Businesses must carefully consider the costs and benefits of an acquisition, as they can also be risky and complex.

Strategic Alliances

• Strategic alliances are agreements between businesses to work together on specific projects or initiatives that benefit both parties.
• These alliances can take various forms, including joint ventures, franchising, or licensing arrangements.
• They allow businesses to pool resources and collaborate, leading to cost savings, learning opportunities and enhanced innovation.

Franchising

• In franchising, a business (the franchisor) allows another business (the franchisee) to sell its products or services under its brand name.
• This can be an effective way to expand operations and reach without the high outlays associated with other methods of growth.
• The franchisor may have less control over individual franchises, but will generally receive a percentage of the profits from each franchise.

It’s important to understand these are not the only methods of growth. Different strategies may be more or less suitable depending on a company’s specific circumstances, objectives, and resources. Companies usually adopt a combination of these methods to achieve their growth objectives.