Internal and External Growth

• Internal growth: Using resources from within the company to expand gradually.
• Examples of internal growth: Selling more products in existing and new markets; launching new products; hiring more staff; increasing advertising and promotion.
• Adv of internal growth: Less risk than external growth; can be financed through internal funds; builds on a business's existing strengths; allows a business to grow at a sensible rate.
• Dis of internal growth: Long time to grow; requires owners to reinvest profits into the business; growth may be dependent on the growth of the overall market; difficult to grow if the business is already a leader.
• External growth: Expanding by buying other businesses or merging with them, rather than growing organically.
• Adv of external growth: Faster growth; speed of access to new products or markets; increased market share; economies of scale; investing in fast growing markets.
• Dis of external growth: Difficult to make two different businesses work as one; takeovers can result in a bad-feeling in the workplace; the cultures of the two businesses could be very different meaning it could be difficult to agree on the new culture.
• Horizontal integration: When two businesses that are in the same industry and are at the same stage of production become one business.
• Vertical Integration: When two businesses that are in the same industry but are at different stages of the supply chain become one business.
• Forward Vertical Integration: When a business merges or takes over a customer base. For example, when a manufacturer merges with a retailer
• Backwards vertical integration: When a business merges or takes over a supplier. For example, when a retailer buys a food processing business.
• Conglomerate Integration: When two businesses that are unrelated join together. The businesses operate in different markets and have no connection with each other.