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Organic and inorganic growth. Organic growth. Organic (internal) growth is when a firm grows from within Profits may have been re-invested to increase capacity e.g. the building of new stores Sales increase through: Selling to more customers in existing markets Finding new markets
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Organic growth • Organic (internal) growth is when a firm grows from within • Profits may have been re-invested to increase capacity e.g. the building of new stores • Sales increase through: • Selling to more customers in existing markets • Finding new markets • Launching new products
Inorganic growth Inorganic growth occurs when firms join together, either through: • Merger – businesses agree to join together • Takeover/acquisition – one firm takes control of another by buying at least 51% of shares
Integration Inorganic growth occurs through integration: • Horizontal integration • Firms are in the same industry and the same stage of production e.g. two car manufacturers join together • Backwards vertical integration • A firm takes over a supplier e.g. car manufacturer takes over a windscreen supplier • Forwards vertical integration • A firm takes over a customer e.g. car manufacturer merges with a sales dealership • Conglomerate integration (diversification) • Integration occurs between firms in unrelated industries e.g. car manufacturer joins with a bakery
