Organic and external growth

Overview

Organic growth through new customers and products, external growth by merger or takeover, horizontal, vertical and backward or forward integration, diversification, and the case for each.

What you need to know

Answer each one before you reveal it.

Questions from this subtopic

Each one with the model answer underneath.

1. 1

   What is organic growth?

   Model answer

   Organic growth is when a business grows from within, using its own resources. Examples include opening new branches or selling more to existing customers.

2. 2

   Name four methods of organic growth.

   Model answer

   A business grows organically by producing more, winning new customers, launching new products and taking a bigger share of its market.

3. 3

   How can gaining new customers help a business grow organically?

   Model answer

   New customers raise sales without the business having to buy another firm. A business can find them by entering new locations or new market segments.

4. 4

   How does developing new products lead to organic growth?

   Model answer

   New products give existing customers more to buy and attract new customers. A wider range also spreads risk across more products.

5. 5

   State two advantages of organic growth.

   Model answer

   Organic growth is lower risk because the business expands at a pace it can manage. The owners keep control and the business culture stays the same.

6. 6

   State two disadvantages of organic growth.

   Model answer

   Organic growth is slow compared with buying another business. A business growing this way may miss opportunities that rivals take first.

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