Business Growth

• Organic growth

  When a business expands from within, such as by expanding its product range, increasing the number of its business units or adding new locations
• Organic growth


  • Businesses do this in order to improve their chances of increasing their customers, revenues and profits
• Ensuring organic business growth is successful

  1. Engage in research and development

  2. Work directed towards the innovation, introduction and improvement of products and processes
• Business example

  • An established soft drinks brand or manufacturer might start off selling one cola product, then later expand its product portfolio with new drinks, such as vanilla cola, cherry cola, lemon cola and sugar-free cola
• Business growth is important as it enables businesses to increase the scale of their operation and competitiveness
• Market share

  The percentage of a market taken by a particular business or product
• Profits


  The amount of money made after all costs are deducted
• Revenue


  The income earned by a business over a period of time from selling its goods or services
• Business growth can occur by employing more people, opening more branches, increasing sales or revenue, or increasing profits
• Organic growth


  Internal growth of a business, increasing the scale of its operation and competitiveness
• Inorganic growth

  External growth of a business, increasing the scale of its operation and competitiveness
• Entering new markets

  1. Entering overseas markets

  2. Amending marketing mix (product, price, place, promotion)

  3. Taking advantage of technology
• Entering overseas markets

  • Provides access to a brand new market, which could increase profitability
  • Developing new, unfamiliar markets can be complex and expensive
• Amending marketing mix

  • Vital when entering a new market, particularly overseas, to understand the new market
  • Changes may be needed to price, product, promotion etc. to appeal to new market
• Taking advantage of technology

  • Use e-commerce to enable customers to buy even if not near physical store
  • New technology may mean items are cheaper to produce, so can target lower-income market
• Organic growth

  Low risk, business can maintain its own values without interference from stakeholders<|>Benefit from economies of scale and lower average costs
• Disadvantage of organic growth

  Slower growth, long period between investment and return on investment<|>Growth may be limited and dependent on reliability of sales forecasts
• Business growth

  Enables businesses to increase the scale of their operation and competitiveness
• Types of business growth

  • Internal (organic) growth
  • External (inorganic) growth
• Merger

  When two or more businesses join together to operate as one business
• Takeover


  When an existing business expands by buying more than half the shares of another business
• Merger example

  • Business A and Business B join to form a new (but larger) business
• Takeover example

  • Business A buys over 50% of the shares in Business B to take control
• Methods of merger and takeover

  • Horizontal integration
  • Forward vertical integration
  • Backward vertical integration
  • Diversification
• Horizontal integration

  Two competitors join through a merger or takeover, increasing competitiveness and market share
• Forward vertical integration


  A business takes control of another that operates at a later stage in the supply chain
• Backward vertical integration


  A business takes control of another that operates at an earlier stage in the supply chain
• Diversification


  Businesses in unrelated markets join through a takeover or merger, enabling risk to be spread over a wider range of products and services
• Advantages of external growth

  • Competition can be reduced
  • Market share can be increased very quickly
• Disadvantages of external growth

  • It can be expensive to takeover/merge with another business
  • Managers may lack the experience to deal with the other businesses