Organic vs Inorganic growth
-
Upload
saurabh-chauhan -
Category
Documents
-
view
233 -
download
0
Transcript of Organic vs Inorganic growth
-
7/30/2019 Organic vs Inorganic growth
1/12
-
7/30/2019 Organic vs Inorganic growth
2/12
Globalisation Strategy and
Localisation
-
7/30/2019 Organic vs Inorganic growth
3/12
Learning Outcome
Understand the concepts of organic and inorganic growth
Deliberate on the trends in organic and inorganic growth in recent past
Discuss how some companies have successful used sustainable business
strategies to pursue growth
-
7/30/2019 Organic vs Inorganic growth
4/12
Top-line vs Bottom Line Growth
It is extremely essential for companies to maintain profitable growth to
increase or maintain shareholder value
To achieve this, a company must grow its top line (i.e.. revenue) and also grow
its bottom line
A company can grow its top line by buying other companies. A company can
also grow by increasing its sales on its own without buying other companies
This is called organic growth. Growing revenue by acquiring other
companies is sometimes called inorganic growth
Organic growth can be achieved by increasing the sales of existing products
and developing new products for both existing and new customers
Inorganic growth is achieved by adding the revenue of the acquiredcompanies
Companies usually employ a combination of organic and inorganic growth to
achieve their top line growth target
-
7/30/2019 Organic vs Inorganic growth
5/12
Growth Strategies for Companies
Growth Strategy
InorganicOrganic
Asset Replication
New Market
New Technology
New Customers
Takeover/ Acquisition
Joint Venture
Strategic Alliance
Horizontal Vertical Conglomerate
Merger
-
7/30/2019 Organic vs Inorganic growth
6/12
Terms And their Examples
Takeover/ Acquisition
Joint Venture
Strategic Alliance
Merger
Takeover/ Acquisition
Joint Venture
Strategic Alliance
Horizontal Vertical Conglomerate
Merger
Sony - Ericsson
Tata - Corus
Microsoft and Nokia
Glaxo and Smithkline
-
7/30/2019 Organic vs Inorganic growth
7/12
Choosing Between Organic and Inorganic
Strategies
Developing new products
and customers can also belong and costly
A safer option as growth is
closely controlled by the
company
Acquisitions can be a costly
proposition, often leading tohigh debt
It may take a long time to
integrate the acquired
companies into existing
operations Much faster way of growing
business
Organic Inorganic
-
7/30/2019 Organic vs Inorganic growth
8/12
The Agony and Ecstasy of Growth Strategies
Business acumen is critical in helping to weigh the advantages and
disadvantages of each approach. Here are some questions that must be
considered in deciding which approach to use:
Acquisitions of big companies can be costly and it may take a long time to
integrate the acquired companies into existing operations. HR practices, IT
systems, and corporate culture are key factors that must be taken intoaccount. But acquisitions lead to immediate increases in revenue
Organic growth avoids problems of integration and overpaying, but developing
new products and customers can also be long and costly. This will delay the
increase in revenue as well as profit.
Cisco, a leading provider of communications equipment and services, is aperfect example of a company that uses acquisitions as the mainstay of its
growth strategy. Over the years, it has acquired numerous companies, both
large and small
An example of failed acquisitions in recent years is Daimler-Benzs purchase
of Chrysler
-
7/30/2019 Organic vs Inorganic growth
9/12
Good To Read.
The New M&A Playbook
Even though organizations spend trillions on mergers and acquisitions
each year, the failure rate is between 70% and 90%. Authors ClaytonM. Christensen, Richard Alton, argue that the chance for success with
a M&A strategy can be improved if target selection, how much to pay
for the target, and target integration are better understood
They discuss the reasons for mergers and acquisitions as well as how
to realize the benefits of each strategy
-
7/30/2019 Organic vs Inorganic growth
10/12
Tata Group Case Study Learning Outcome
Examine Tata Group's organic growth strategies.
Understand how inorganic growth strategies played a crucial role in the success
of Tata Group
Analyze the issues and challenges faced by Tata Group while implementing
organic and inorganic growth strategies
-
7/30/2019 Organic vs Inorganic growth
11/12
Situation
A Range of Recent Books Talk about how Sustainable Businesses are
Adding Value for both the Society and their Shareholders
-
7/30/2019 Organic vs Inorganic growth
12/12
Situation
Sustainability is broadlydefined as meeting theneeds of the present
generation withoutcompromising the ability of
future generations to meettheir own needs
But what exactly is Sustainability? And what are Sustainable
Enterprises?
According to a research conducted by the University of Michigan in 2002, Sustainable enterprises
formulate new ways to create and capture environmental, social and financial value
There are plenty of examples of entrepreneurs that have demonstrated that sustainability reveals
opportunities to improve our natural environment, peoples quality of life, while at the same time
creating economic value
http://images.google.com/imgres?imgurl=http://www.go.dlr.de/wt/dv/ig/icons/funet/icon4.gif&imgrefurl=http://www.go.dlr.de/wt/dv/ig/icons/funet.html&h=312&w=192&sz=2&hl=en&start=4&sig2=SGKDis-uq8mEwVCWf_tE7Q&um=1&tbnid=LQDoFpE85ZywtM:&tbnh=117&tbnw=72&ei=5cgyR86dM42WiQHr0fSvDA&prev=/images?q=blue+men+restroom+logo&svnum=10&um=1&hl=en&newwindow=1&rlz=1T4GGLJ_enCN224CN224