3.1 - Growth Flashcards
How is organic growth defined?
Process of economic growth by means of increased output, new product development or consumer base expansion
How is inorganic growth defined?
Process of economic growth by means of mergers + acquisitions
What are the advantages of organic growth?
Self sufficiency
Avoids merger induced shareholder stipulations
Less risk - No need to borrow, reduced debt threat
What are the disadvantages of organic growth?
Competition
Growth is slower + restricted
Harder to spread risk
What are the 4 main growth constraints?
Size of market
Access to finance
Owner objectives
Regulations
How does market size constrain growth?
Growth + expansion difficult in smaller markets
Lower demand, lesser variety
Elevated monopoly risk
How does access to finance constrain growth?
Readiness of access has direct correlation with growth
More finance, more capital investment, 4FOP etc.
How do owner objectives constrain growth?
Owners may fear investment at expense of lost profit
May prioritise personal gain/pleasure
May become satisfied with certain level of growth
How do regulations constrain growth?
CMA aim to prevent monopolies + excessive dominance
Govt intervention, pollution permits etc.
What is an alternative name used for organic growth?
Internal growth
What are the primary causes of organic growth?
Capital Investment
Develop + launch new products
Exporting into new markets
New distribution channels (Online etc.)
Expanding consumer base
