3.2.3 Organic Growth

• What is organic growth?

  • growth that is driven by internal expansion using reinvested profits or loans
• What is organic growth generated by?

  • gaining greater market share
  • product diversification
  • opening a new store
  • International expansion
  • investing in new technology/production machinery
• Firms will often grow organically to the point where they are in a financial position to integrate with others
• Advantages of organic growth 

  • Pace of growth - manageable
  • Less risky, growth is financed by profits and there is industry expertise
  • Avoids diseconomies of scale
  • The management knows & understands every part of the business
• Disadvantages of organic growth

  • Pace of growth can be slow & frustrating
  • Not necessarily able to benefit from economies of scale
  • Access to finance = limited
• What is Ansoff's Matrix?

  •  a strategic planning tool that helps businesses identify potential organic growth opportunities by analysing their product and market strategies
• Ansoff's Matrix & organic growth

  • Market Development - Expand into new markets by opening stores in new countries = organically increase market share.
  • Product Development - Introduce new products = organically increase market penetration, sales, revenue & profitability.
  • Diversification - New markets & new products = increased strength of brand = organically increase market penetration = higher sales revenue & profit.