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organic growth
a business growing by building on its strengths to increase sales
methods of growing organically
new customers
new products
new markets
new business model
franchising
new customers
reliant on driving sales from existing activities
finding new customers by exploiting distribution channels
needs investment in marketing
new products
innovative and committed to research
businesses can identify customers with slightly different needs
requires adapting or modifying existing products
invests profits into product development
new markets
some businesses find new markets for their products
assets, systems and working practices can be copied in new locations
some may look to overseas markets
high risk - unfamiliar
geographic expansion - growing by selling in new areas
new business model
due to developments in technology or social change
quick growth as the size of the potential market opened up could be considerable
franchising
allowing entreprenuers to trade under the name of the original business
organic growth - advantages
low risk
well known practices
prevents errors
avoids complications when integrating with other organisations
cheaper
financed from retained profit
zero financial cost
opportunity cost involved
keep control
senior management has complete control of growth process
no outsiders with controlling interest
better protection
protects financial position
less strain on financial resources
stronger cash flow
more in liquidity
avoids diseconomies of scale
steady and measured growth avoids sharp increases in unit costs
easy to see difficulties that may rise from scale increases
controls costs
organic growth - disadvantages
slow pace of growth
if too slow for stakeholders - sell shared, share price falls, risk of takeover
lack of access to resources
prevents from using resources owned by other businesses
misses out on profitable developments
specialist companies
unable to be competitive
slow growth leading to left behind in the market
unable to fully exploit economies of scale
may have to operate with high costs for long
lowers profit margins
reduces competitiveness
may be inappropriate
not appropriate if the market grows rapidly