GCSE-ready- Home
- Lessons
- GCSE & IGCSE Business
- Methods of business growth
Methods of business growth
🎬 The doodle video for this lesson is coming soon. Subscribe on YouTube to see it first.
Successful businesses often want to grow. They can grow from within, or by joining with other businesses.
Organic (internal) growth
Growing using the business's own resources.
New products: through innovation and research and development (R&D).
New markets: changing the marketing mix, using technology such as e-commerce, or expanding overseas.
Organic growth is slower but lower risk, and the owners keep control.
New products: through innovation and research and development (R&D).
New markets: changing the marketing mix, using technology such as e-commerce, or expanding overseas.
Organic growth is slower but lower risk, and the owners keep control.
Inorganic (external) growth
Merger: two businesses agree to join to form one new business.
Takeover: one business buys control of another (by buying more than half its shares).
This is fast and can bring new customers, products and skills, but it is expensive and the two cultures may clash.
Takeover: one business buys control of another (by buying more than half its shares).
This is fast and can bring new customers, products and skills, but it is expensive and the two cultures may clash.
Public limited companies (plc)
A plc can sell shares to the general public, usually through a stock exchange.
Advantages: can raise very large amounts of capital; limited liability.
Disadvantages: expensive to set up; accounts must be published; the original owners may lose control because anyone can buy shares, including a business planning a takeover.
Advantages: can raise very large amounts of capital; limited liability.
Disadvantages: expensive to set up; accounts must be published; the original owners may lose control because anyone can buy shares, including a business planning a takeover.
A coffee chain opens 20 new branches using retained profit. Is this organic or inorganic growth?
- It is using its own resources.
- It has not joined with another business.
Answer: Organic growth
Organic growth: new products (innovation, R&D) and new markets, slower but lower risk. Inorganic growth: mergers and takeovers, fast but costly and risky. A plc sells shares to the public on a stock exchange.
Check you have got it
Answer 7 quick questions with instant marking. If you get one wrong, GCSE-ready shows you why and gives you another go. It is free, and you do not need an account.