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Internal and External Growth

Caitlin Hush and Einer Lim

Caitlin Hush

on 25 October 2012

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Transcript of Internal and External Growth

Caitlin Hush, Einer Lim Internal and External Growth Internal Growth Businesses can grow internally in several different ways, such as: Advantages: Disadvantages: External Growth External Growth, or inorganic growth, occurs through dealings with outside organizations. This growth usually comes in the form of alliances or mergers with other firms or through a takeover. Advantages: Disadvantages: Internal Growth Internal (Organic) Growth: - occurs when business grow internally, using its own resources to increase the scale of its operations and sales revenue. External (Inorganic) Growth: - refers to businesses growing externally through mergers and acquisitions. This is also known as amalgamation or inorganic growth. - Changing Price;

- Advertising and Promoting;

- Producing Improved or Better Products;

- Selling in Different Locations (placement);

- Offering Customers Preferential Credit Payment Terms;

- Increasing Capital Expenditure (investment);

- Improving Training and Development. · Better control and coordination
· Relatively inexpensive
· Maintains corporate culture · Diseconomies of scale
· Overtrading
· A need to restructure
· Dilution of control and ownership and · Is a much faster way of growth for a business.
· It is a quick way to reduce competition in a market.
· External growth can bring about greater market share.
· Working with other businesses means a sharing of good practice and ideas, therefore, external growth can generate new skills, experience and customers.
· Growth can help a firm to evolve thereby spreading risks across several distinct markets. Meaning that they can benefit from risk-bearing economies of scale. Advantages: · The main disadvantage of external growth is cost. The cost of external growth tends to be relatively higher than that of internal growth. Disadvantages: Sample Exam Question: A.S Watson Group With a history dating back to 1828, the A.S Watson Group has evolved into an international retail and manufacturing business with operations in 36 markets worldwide. The A.S Watson Group employs over 98,000 staff and its portfolio encompasses some of Asia's best-known brands and retail chains. These include Watson's personal stores, Park'n'Shop supermarkets, Fortress electrical appliance stores, Watson's Wine Cellar and Nuance-Watson airport duty free shops. A.S Watson is also a major producer and distributor of water products and beverages in the region. Growing the business remains a long-term strategy at A.S Watson. The Question: a) Outline the type of business organization the A.S Watson might be classifies as operating.
Giving reasons and examples from the case study. Thank You for listening :) · Internal growth occurs within the business. External growth is when business grows by merging with other companies.

· External growth is more expensive to do rather than internal growth.

· External growth is a much quicker way for the business to grow because they merge with other companies.

· External growth can easily produce new technologies with the help from other companies.

· Internal growth can maintain their corporate structure unlike that of external growth. External Growth and The Difference Between
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