Growth strategy is the organisation formulating their plan to accomplish their objectives and goals to grow in revenue and size of the business. However according to (Bridge, O’Neill and Cromie 2003), she defines growth strategy as a “...the movement of the business into bigger premises, taking on more staff, significant increases of turnover, taking on a new product line or lines, buying another business, and so on” Growth Strategies are important for businesses as they allow the business to move in a formal direction. Businesses can easily be affected by the smallest of changes for example new customers or the arrival of new competitors which could have a negative impact, so planning is very important and takes care of additional effort and resource for faster growth. With these growth strategies, organisations try to achieve numerous things for example, obtaining economies of scale, attaining market leadership and retaining talented staff.
2.1 Organic/Inorganic Growth
There are 2 ways that a firm grows, which are organic and inorganic growth. Organic growth is internal growth which means to expand your business and increase your turnover without acquisitions or moving to new markets. This type of growth is more planned, slower and more natural hence the term “organic”. It involves very little change to the organisations structure and can be easily managed. Advantages of organic growth is that it is much safer than rapid growth or growth using external resources through acquisitions and mergers. Not as much capital is needed so there is less risk on your finances. Disadvantages on this type of growth is that it is much slower and that it is very limiting as there is only a certain point that an organisation can grow in the given long time period.
Modernisation is a growth strategy that uses internal resources, so this strategy is organic growth. Modernisation is when the technology is upgraded within the business. This allows the business to increase the quality and size of production in addition to reducing the waste of production. This strategy enables stability within the business because of an increase in revenue. There are limitations to this for example, the business may not be able to finance this type of strategy and the employees may find it difficult to adapt; leading to confusion and spending time and money on staff.
The second type of growth is inorganic growth or in other words external growth. This type of growth uses external resources therefore businesses can grow through 3 growth strategies, merging with other organisations, acquiring a company or networking. A merger occurs when 2 separate businesses join to form a new business. They share each other’s resources and focus on the best activities of each. The main reason for merging is to save costs on production and also generate capital to allow them to enter markets and promote new products which they won’t be able to do as 2...