Organic (Internal) Growth
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Last updated 22 Mar 2021
Organic (or internal) growth involves expansion from within a business, for example by expanding the product range, or number of business units and location.
Organic growth builds on the business’ own capabilities and resources. For most businesses, this is the only expansion method used.
Organic growth involves strategies such as:
- Developing new product ranges
- Launching existing products directly into new international markets (e.g. exporting)
- Opening new business locations – either in the domestic market or overseas
- Investing in additional production capacity or new technology to allow increased output and sales volumes
Some examples of businesses that have implemented successful organic growth strategies are illustrated in the charts below for Dominos UK, Apple and Costa Coffee.
Benefits and Drawbacks of Organic Growth
Less risk than external growth (e.g. takeovers)
Can be financed through internal funds (e.g. retained profits)
Builds on a business’ strengths (e.g. brands, customers)
Allows the business to grow at a more sensible rate
Growth achieved may be dependent on the growth of the overall market
Hard to build market share if business is already a leader
Slow growth – shareholders may prefer more rapid growth
Franchises (if used) can be hard to manage effectively