To Understand the difference between Internal & External growth Learning Outcomes To Understand the difference between Internal & External growth

Internal (or organic growth) can be defined as: “Expansion from within a business by expanding the range of products and/or locations” As you read the business news or watch business stories on television on online, you should be able to identify lots of stories of businesses that are growing organically.  Here are some good examples…

Dominos UK has grown strongly in recent years through a rapid expansion of the number of Dominos Pizza outlets and significant growth in amounts sold per store Apple has followed an organic growth strategy by focusing on the development and launch of new products like the iPad and iPhone Hotel chains like Jury Inns achieve growth by investing in new hotel locations and by refurbishing existing hotels to boost revenues

Keep a look out for these kinds of business stories and add them to your notes. Has the business achieved organic growth by adding new products, expanding into new geographical areas, or increasing its share of the market? Research our Case study companies and evaluate if they have grown internally?

Task Research our Case study companies and evaluate if they have grown internally?

Internal growth builds on the business’ own capabilities and resources Internal growth builds on the business’ own capabilities and resources. For most businesses, this is the only expansion method used.  Internal growth involves approaches such as:

Internal growth approaches Altering price ( depends on? ) Advertising and promotions Improving products Altering Placements Preferential credit limits and duration Training and Development Capital Expenditure

- Designing and developing new product ranges - Implementing marketing plans to launch existing products directly into new markets (e.g. exporting) - Opening new business locations – either in the domestic market or overseas - Investing in research and development to support new product development - Investing in additional production capacity or new technology to allow increased output and sales volumes - Training employees to help the best acquire new skills and address new technology

What would be the advantages and potential disadvantages of internal growth?

Advantages and Disadvantages Advantages Less risky than taking over other businesses 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 Disadvantages may be dependent on the growth of the overall market Harder to build market share if business is already a leader Slow growth – shareholders may prefer more rapid growth 1.7.3 b.