Organic Growth (Edexcel A Level Business)

Revision Note

Reviewed by: Jenna Quinn

Organic growth is growth that is driven by internal expansion using reinvested profits or loans
Organic growth (internal) is usually generated by
- gaining greater market share
- product diversification
- opening a new store
- International expansion
- investing in new technology/production machinery
Firms will often grow organically to the point where they are in a financial position to integrate with others
- Integration speeds up growth but also creates new challenges

An Explanation of the Advantages & Disadvantages of Organic Growth

Advantages	Disadvantages
The pace of growth is manageable Less risky, as growth is financed by profits and there is industry expertise Avoids diseconomies of scale The management knows & understands every part of the business	The pace of growth can be slow and frustrating Not necessarily able to benefit from economies of scale Access to finance may be limited

Ansoff's Matrix (see sub-topic 3.1.2) is a strategic planning tool that helps businesses identify potential organic growth opportunities by analysing their product and market strategies

The Ansoff Matrix considers the firm's product and market strategy

The matrix consists of four growth strategies - market penetration, market development, product development, and diversification

Examples of Organic Growth Using Ansoff's Matrix

Business	Example
Apple	Market Development Apple expanded into new markets by opening its stores in new countries, such as China and India, and by partnering with telecom providers to sell its products. This helped them to organically increase their market share, sales revenue and profitability
Google	Product Development Google introduced new products such as Google Drive and Google Maps to complement its search engine and advertising businesses. This helped them to organically increase their market penetration, sales revenue and profitability
Disney	Diversification Disney has diversified into several areas such as theme parks, cruise lines, television networks, and movie studios. The brand strength has helped them to organically increase market penetration in each of these markets resulting in higher sales revenue and profitability

Last updated: 25 October 2024

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