Methods of Growth
How does a small firm become a big one? Compare organic and external growth, weigh mergers against takeovers, and see how growth is paid for.
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From small to big 📈
Most businesses want to **grow**: more customers, more sales, more profit. But there is more than one way to do it, and each has its own risks. The big split is between growing from **within** and growing by **joining with others**.
Two kinds of growth 🗂️
Learn the four key terms:
Match each method to its meaning
- Merger
- Takeover
- Organic growth
- E-commerce
- Two businesses agree to join together
- One business buys control of another
- Growing with the business's own resources
- Growing by selling online
Name it
What is a takeover?
- One business buying control of another
- Two businesses merging as equals
- Opening a new shop of your own
- Closing a business down
Ways to grow 🌍
A business can grow **organically** by: - opening new **branches** or stores; - entering new **markets** (new areas or countries); - selling online through **e-commerce**; - launching new **products**. Or it can grow **externally** through **mergers** and **takeovers**.
Organic or external?
Which of these is an example of organic (internal) growth?
- Opening a new branch of your own shop
- Buying a rival company
- Merging with a competitor
- Being taken over by a bigger firm
Paying for growth 💡
Big growth needs money. A business may become a **public limited company (PLC)** and sell **shares** on the stock exchange to raise finance; it can also use **retained profit** or **loans**. The trade-off: **external** growth is **faster but riskier**, while **organic** growth is **slower but keeps more control**.
External growth
Select the TWO examples of external (inorganic) growth.
- Merging with another business
- Taking over a competitor
- Opening a new store yourself
- Launching your own new product
Match each term to its description
- Organic growth
- External growth
- A new market
- Retained profit
- Slower, lower risk, keeps control
- Faster, but higher risk
- A new area or country to sell in
- Profit kept to reinvest in growth
Growth frame
_____ growth uses a firm's own resources, such as opening branches. _____ growth means joining with or buying another firm through a merger or _____. External growth is faster but carries more _____.
Choose how to grow
An interactive activity.
A path to growth
An interactive activity.
Recommend a method
An interactive activity.