Introduction:
An organization cannot survive for long and it has to adapt itself to the ever dynamic operating environment and also engage itself into strategies that foster growth. No matter, if the business organization is a multi-million corporate or just a start-up, each of them frames out growth strategies. Most business enterprises are constantly faced with the challenge of ‘prospering and growing their businesses. Simply stated, Growth for any organization is measured in the form of increased revenue figures, profits or asset base. However, pertaining to its own individual needs and characteristic, each of the organization decides to go with creating competitive advantages, differentiate and innovate in the product line(Organic growth) or leverage on products of other companies(In-organic growth). Both of these growth strategies are discussed below:
Organic Growth
Organic growth is the rate of business expansion achieved through means as attaining competitive advantages, economies of scale, re-investment of profits to increase production capacity and revenue figures, etc. In other words, any sort of business expansion achieved through efficiency of managerial resources or product quality is termed as organic growth. This form of growth strategy represents true growth for the core of the company and directly indicates as how efficient was the management and their skills in using the available resources to achieve expansion.
Example: Apple Inc.
Apple Inc, is one perfect example for any organization citing an organic growth. Before the launch of I-Phone, the companies like Nokia and Motorola were the key market players, however, courtesy efficient management(not to forget the impeccable visionary, Steve Jobs), focus on high quality and never-seen before product innovation was good reasons for the company to witness organic growth. Although the company was a major player with Macbook and I-Pod, but it was the I-Phone and then, I-pad that paved the path for organic growth for the company. Such was the impact of organic growth delivered by I-Phone and I-Pad that there was a time when cash reserves of Apple Inc were more than few of the federal states in 2011.
“Our belief was that if we kept putting great products in front of customers, they would continue to open their wallets.” Steve Jobs
Methods of achieving Organic Growth
Market penetration: This implies increasing revenue figures by selling more of the products to existing customer base of the company.
Market development: Gate crushing or market infiltration where the company prepares itself to sell its product to new markets, either at home or off-shore.
Product Development: This refers to increasing the product portfolio of the company by launching new products or services for the customers.
Conditions required for organic growth strategies to succeed
i) Since organic growth requires operational investment that has a direct impact over the profit margins of the company, it is not possible for any organization to make investment in each segment. Hence, at the time of selection, only the most financially relevant segment should be chosen. For Instance, the company can prioritize on emerging markets where much growth is anticipated than mature countries.
ii) The management tools and performance indicators should also be adapted to the organic growth targets.
iii) Organization that is willing to grow organically must also alter its organizational structure accordingly. This is because profit strategies are completely different from growth strategies and it is highly advisable if the organization looking for organic growth organize itself through growth zones rather than geographic zones. Such organizational structure allows each division to focus on main issues pertaining to each growth zone.
Inorganic Growth
Often cited as a risky source of growth, Inorganic growth refers to business expansion achieved through sources other than internal resources. Most of the inorganic growth is achieved through the activities or mergers and acquisitions. Important to note, this form of growth strategy is considered to be fast paced as compared to organic growth
Example: IMI
IMI is involved in engineering business and is also a member of FTSE 1000. The company employs around 15000 employees and manufactures its product in 20 countries globally. The company has attained appreciable growth in recent past courtesy its carefully planned major acquisitions strategy. As for IMI group, the reason for involving into acquisition activity is to acquire companies that are the leaders in their own fields to strengthen the company’s share market share. Some of the acquisitions deals held by the company are discussed below:
Remosa-2012: During 2012, IMI acquired Italy based engineering business house, Remosa. This acquisition activity allowed the company to become the global leader in the customized engineered valve and control solutions. Since, Renova was also trading in power generation engineering , IMI also benefited from the same as IMI already had a wealth of expertise for creating engineering solutions in that industry. It also expanded IMI’s presence in South America and Asia where Remosa was already highly active,
InterAtiva-2012: During the same year(2012), IMI entered into another acquisition of InterAtiva, a brazil based isolation valve business unit serving oil and gas industry. This acquisition also assisted IMI to support their market development strategy. In addition, since InterAliva had a strong presence in Brazil, the acquisition also allowed IMI to increase its customer base and geographical reach to Brazil
Methods of achieving Inorganic Growth
Acquisition: An acquisition refers to one company buying only a part of another company while the typical acquisition activity usually involves the purchase of assets or business segment from another company.
Mergers: A merger refers to a corporate activity where the buying company absorbs the entire target company. To be noted, once the merger is completed, only one company will remain and other one will ceases to exist.
Considerations for assuring Inorganic Growth
i)Since the corporate activities relating to mergers and acquisitions involves huge amounts, the organization must pay utmost attention while planning for inorganic growth strategy and should merge or acquire a company only when it is sure to be financially viable for the company.
ii)If the company is planning for acquiring or merging with a company that is different from the organization’s current core competencies, it should ensure that it has the necessary skills, resource and knowledge to run the business profitably.
iii)Once the acquisition or merger activity has been finalized, the acquiring company must ensure that the whole process of integration should be carefully managed so that a smooth transition takes place without a loss of value in the acquired company.
Works Cited
Berg, J. (n.d.). Three Growth Models. Retrieved October 5, 2014, from http://www.estin.com/cn/pdf/publications/ThreeGrowthModels.pdf
IMI. (2013). Annual Report 2013. IMI Inc.
Inorganic Growth. (n.d.). Retrieved October 5, 2014, from http://www.investopedia.com/terms/i/inorganicgrowth.asp
Organic Growth. (n.d.). Retrieved October 5, 2014, from http://businesscasestudies.co.uk/imi/developing-growth-strategies-to-become-a-market-leader/organic-growth.html#axzz3FILUrP1u
Organic growth vs Inorganic Growth. (n.d.). Retrieved October 5, 2014, from http://www.iisjaipur.org/iiim-current-09/OORJA-May-August-2009/03Infocus.pdf
