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Introduction Of Organic Growth Marketing Essay

Paper Type: Free Essay Subject: Marketing
Wordcount: 2106 words Published: 1st Jan 2015

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Organic growth represents the true growth for the core of the company, as a results of how well one company can use it’s internal resources to expand profits. It’s the process of business expansion due to the increasing of sales, overall customer base, total assets, intangible assets or any combination of the following above. It also reflect the sustainable capacity of one company

As a results of organic growth, Inorganic growth is the opposed of organic growth which results mergers and acquisitions, such as growth that are not coming from one company’s existing business which also includes the impact of foreign exchange or growth that come from buying a new business that may be negative.

Organic growth expanding are adjusted for the effects of acquisitions and disposals of business. Organic growth does include growth that are over a period that results from investment in businesses in one company owned at the beginning. Acquisitions, and the decline from sales and closures of whole businesses are not included into the organic growth expanding.

When a company does not disclose organic growth number, it’s usually possible to estimate them by estimating the numbers for acquisitions made in the period being looked at and in the previous year, It’s useful to break down organic sales growth into that coming from market growth and that coming from profits gains in market share, this also makes it easier to see how sustainable growth is.

Relating to organic input in an organization, it can also relate to the act of closing or shutting down cost centers through established organic methods instead of waiting for a finance list.

How is Organic Growth Measured

Organic growth is generally measured in terms of increased sales, profits or total assets. And most companies are constantly faced with the challenges from this in their business.

Businesses can choose to build their in-house competencies, invest to create competitive advantages, differentiate and innovate in their products or service line or leverage upon the market, products and revenues of other companies. Simply put, business expansion with the help of the businesses core-competencies and sale refers to organic growth and is in contrast with inorganic growth approach where expansion objectives are met though mergers and acquisition. This is also known as M&A which is one of the most popular program now.

An excellent example of organic growth probably (Apple Inc.). The growth rate at Apple is driven by trend-setting product innovation. Macintosh, I Mac, I Pod and the latest technological breakthrough pioneered by Apple is the I Phone, don’t mention about the latest I phone 5.

In research, Steve jobs, Founder of Apple Inc. comments “Our belief was that if we kept putting great products in front of our customers, they would continue to open their wallets. Microsoft, on the other hand is a clear case of In-Organic growth is measured as it has successfully completed more than 100 acquisitions since 1986.

Inorganic growth or growing through mergers and acquisitions also provides the following benefits below to the business plan.

To reduce market competition

Instantly adds service lines to acquiring company

Provides access to fresh customer base and adds new geographical locations within

Acquire an established marketing channel

New management skills

Time to market substantially reduced which gives businesses a significant competitive edge

Building brans and marketing channels to serve customers better

Focus on growth strategies

(It is easy to prepare and plan well)

Organizational efficiency

Industry and economic factors play a crucial role in motivating companies to adopt the inorganic route for growth. Slowing industry growth rate, fragmented industry, too many competitors fighting for the same market share are some compelling reasons which push businesses towards M&A route. Other than that, economic slump creates opportunities for cash rich companies to get hold of unutilized capacities of loss making competitors at attractive valuation.

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The success of organic growth is a test of the management’s ability to share a common vision and deliver that vision. Companies growing organically not only measure their success on financial metrics alone but take careful note of other metrics like customer satisfaction metrics, product quality metrics, logistics and supply chain metrics etc…..some of the typical characteristics of businesses which believe in the benefits of organic growth are customer centricity.

3.Types of Organic Growth

Type of organic growth strategies are built up of, Revenue, Headcount, Public Relations & Quality. This are all the four main pillars that support Organic Growth.

Revenue is the lifeblood of any business. Without dollars flowing in, it is impossible to pay employees, suppliers and vendors. Businesses that are growing organically seek to grow revenue volume in the most efficient manner possible. Revenue growth eventually leads to profit growth, which is the final goal of organic growth strategies.

Headcount is critical for any growing business. As revenue grows, companies can afford to hire more employees. For customer service, sales and marketing and production departments to function efficiently, they must properly well staffed. A good HR department is critical to the success of a growing company. Quality is more important than quantity for company headcount, as employees are the biggest asset of any small or big enterprises.

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Public Relations and advertising allow companies to get the word out about their products and services. Good public relations drives traffic to company websites and gets perspective customers attention. Good public relations strategies also allow for revenue growth to keep those properly staffed departments busy. While bad public relations can be more damaging to a company than good Public relations can be effective. Word of mouth or social media and traditional public relations avenues all must be used and monitored to ensure positive word of mouth advertising and branding.

Quality in growing company started with the first contact a customer has with the corporation all the way to delivery of the final product. To successfully grow any enterprise, there needs to be a quality product. Organic growth relies on repeat business from satisfied customers. Customers will rarely buy a product a second time if the first impression or experience isn’t top notch. Quality control and customer service are critical to gaining a sufficient sales volume to grow a company. Whether it’s a website or an in person sales presentation, the initial contact with potential clients must be top notch. Product quality, customer service and product support need to continue the standard of excellence that the marketing and sales departments begins. With all four pillars growing in sync, organic growth is inevitable.

Organic Growth (Internal & External Methods)

Compare Internal growth & External growth, internal growth is typically a slower process and can be financed by asking shareholders to contribute more capital, or by ploughing back profits into business. The main disadvantage of such an approach is that it takes time.

In the meanwhile, rivals may be expanding and gaining competitive advantage. However, the main advantage is that the business is able to maintain a healthy gearing position. Because it is not building up external debts that require interest repayments, it is better placed maintain solvent growth. In addition ownership and control of the business is more likely to be retained by the existing shareholders. Many of the leading companies owe much of their early growth to internal growth, where through hard work and careful planning the original owners were able to grow their businesses successfully.

While External growth can be carried out by seeking external finance, or merger and acquisition. These approaches tend to reply on bringing external fiancé into the business in order to fund expansion, and therefore can lead to a deteriorating gearing postion. Merging with another company is a mutual arrangement whereby two companies join together. Typically one company will issue shares in exchange for shares in another company.

A take-over occurs when one business acquires a controlling interest in another. This Involves purchasing at least half of the shares in the company being taken over. External growth enables fast expansion of business but there are a number of problems. Where two companies come together, the cultures may be quite different and difficult to match up. In additional there may be disagreements between managers who are used to work in a different practices and systems. The business change needs to be handled carefully from the human resource management perspective.

Experts Comments

According to experts, getting organic growth right is the key point to success. Organic growth is the lifeblood of every company. While acquisitions are a path to growth, Booz & Company research shows that few acquisitions can be justified on cost synergies alone; buyers must be able to grow organically what they acquire. Yet most companies struggle with organic growth, especially when their business models and markets have matured. There are many reasons for this. For example, short-term pressures to produce profits can stunt investment, and typecasting some businesses as cash cows and others as growth engines can become self-defeating. One very common problem is chasing rainbows that will never be caught, while the best opportunities are hiding in plain sight. In an economy still facing massive headwinds, the ability to grow organically is more crucial than ever; companies can no longer see organic growth as an everyday task best to the operating units.

Organic Development Preferred

Many see organic growth as the most preferred growth strategy, for example, Banks considered organic growth to be the number one strategic priority, a survey by PricewaterhouseCoopers (PWC) has found that 92 percent of survey participants saw opportunities more on organic growth than in acquisition. The proportion was 10 percentage points higher. The survey of more than 100 senior banking executives found there could be a growth in branch expansions in 2012, as 39 percent of those polled said they planned op open up to 25 braches this year, while 11 percent planned to open more then than 100 branches.

According to one of the spoke man, that fiqure was in line with the finding that 35 percent say small and medium enterprises (SMEs) will generate the highest growth in lending in 2012, while savings accounts (43 percent) will be the most popular form of funding.

Conclusion

To conclude, Overall growth option offer intrinsic value in their own way and the choice is dependant on the market and industry scenario as well as the strategic vision of the business. In face, a good management principle would be to use a combination of both methods to gain a steady growth pattern in which benefits the business in a long run.

Using organic growth options for things which one does best, and using inorganic growth measures for the expanding the business potential is a potent mix when it comes to gearing up for growth. Inorganic growth is not necessarily in conflict with the organic growth, acquisitions are meant to complement the organic growth rather than act as a substitute, that talent and technology that was “elsewhere” and which can now be integrated to boost company performance.

Thus, smaller companies with low risk taking abilities should establish their presence in market through organic approach to growth and eventually should look to accelerate their growth rate by strategic acquisitions once they have financial ability to bear the risks that come along with mergers and acquisitions.

Bigger companies on the other hand should allocate their investment capacity between

internal investments on enhancing competitiveness and acquisitions to tap into faster growth options by consolidating within the industry, acquiring presence in other markets and bringing in newer technologies or talents that complement and enhance their competitive position.

 

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