Organic growth

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Organic business growth is related to the growth of natural systems and organisms, societies and economies, as a dynamic organizational process, that for business expansion is marked by increased output, customer base expansion, or new product development, as opposed to mergers and acquisitions, which is inorganic growth.

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For businesses organic growth typically excludes the impact of foreign exchange. "Core growth" is the term that is used to refer to growth that includes foreign exchange, but excludes divestitures and acquisitions.

Organic business growth is growth that comes from a company's existing businesses, as opposed to growth that comes from buying new businesses. It may be negative.[ citation needed ] Through Growth planning, businesses are able to achieve organic growth by selecting the best strategies available to them. [1] For example, by examining Ansoff's matrix, businesses can select from market penetration, market development, product development and diversification to grow their revenue organically. In addition, organic business growth can be achieved using content marketing efforts, which drive organic search traffic.

Organic business growth does include growth over a period that results from investment in businesses the company owned at the beginning of the period. What it excludes is the boost to growth from acquisitions, and the decline from sales and closures of whole businesses.[ citation needed ]

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

Relating to organic input in an organisation, it can also relate to the act of closing down cost centers through established organic methods instead of waiting for a Finance list. [2]

The mechanisms and rate of growth of firms experiencing organic growth was extensively studied by Edith Penrose in her 1958 book The Theory of the Growth of the Firm. [3] [4]

An early reference to "organic growth" appeared in Inazo Nitobe's 1899 book The Soul of Japan.

Organic Growth is evolving to a new concept within the social media marketing of the 21st century. [5] Social networks also do organic growth in terms of followers and social presence.

See also

Related Research Articles

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Mergers and acquisitions (M&A) are business transactions in which the ownership of companies, business organizations, or their operating units are transferred to or consolidated with another company or business organization. This could happen through direct absorption, a merger, a tender offer or a hostile takeover. As an aspect of strategic management, M&A can allow enterprises to grow or downsize, and change the nature of their business or competitive position.

<span class="mw-page-title-main">Marketing</span> Study and process of exploring, creating, and delivering value to customers

Marketing is the act of satisfying and retaining customers. It is one of the primary components of business management and commerce.

Organic may refer to:

<span class="mw-page-title-main">Horizontal integration</span> Business process

Horizontal integration is the process of a company increasing production of goods or services at the same level of the value chain, in the same industry. A company may do this via internal expansion, acquisition or merger.

<span class="mw-page-title-main">Vertical integration</span> When a company owns its supply chain

In microeconomics, management and international political economy, vertical integration is an arrangement in which the supply chain of a company is integrated and owned by that company. Usually each member of the supply chain produces a different product or (market-specific) service, and the products combine to satisfy a common need. It contrasts with horizontal integration, wherein a company produces several items that are related to one another. Vertical integration has also described management styles that bring large portions of the supply chain not only under a common ownership but also into one corporation.

Corporate development refers to the planning and execution of strategies to meet organizational objectives. The kinds of activities falling under corporate development may include strategic planning, market and competitor mapping and tracking, phasing in or out of markets or products, arranging strategic alliances or partnerships or joint ventures, identifying and acquiring companies (M&A), securing funding or corporate financing, divesting of assets or divisions or selling the whole company, listing on a stock exchange or undertaking various capital management initiatives.

<span class="mw-page-title-main">Foreign direct investment</span> Purchase of an asset

A foreign direct investment (FDI) refers to purchase of an asset in another country, such that it gives direct control to the purchaser over the asset. In other words, it is an investment in the form of a controlling ownership in a business, in real estate or in productive assets such as factories in one country by an entity based in another country. It is thus distinguished from a foreign portfolio investment or foreign indirect investment by a notion of direct control.

Growth capital is a type of private equity investment, usually a minority interest, in relatively mature companies that are looking for capital to expand or restructure operations, enter new markets or finance a significant acquisition without a change of control of the business.

TD Cowen, is an American multinational investment bank and financial services division of TD Securities that operates through two business segments: a broker-dealer and an investment management division. The company's broker-dealer division offers investment banking services, equity and credit research, sales and trading, global prime brokerage, outsourced trading, global clearing and commission management services. Cowen's investment management segment offers actively managed alternative investment products. Founded in 1918, the firm is headquartered in New York and has offices worldwide. Cowen claims it is known for successfully identifying emerging industries early on, especially the emerging cannabis industry.

Jefferies Group LLC is an American multinational independent investment bank and financial services company that is headquartered in New York City. The firm provides clients with capital markets and financial advisory services, institutional brokerage, securities research, and asset management. This includes mergers and acquisitions, restructuring, and other financial advisory services. The Capital Markets segment also includes its securities trading and investment banking activities.

International business refers to the trade of Goods and service goods, services, technology, capital and/or knowledge across national borders and at a global or transnational scale.

Business development entails tasks and processes to develop and implement growth opportunities within and between organizations. It is a subset of the fields of business, commerce and organizational theory. Business development is the creation of long-term value for an organization from customers, markets, and relationships. Business development can be taken to mean any activity by either a small or large organization, non-profit or for-profit enterprise which serves the purpose of 'developing' the business in some way. In addition, business development activities can be done internally or externally by a business development consultant. External business development can be facilitated through Planning Systems, which are put in place by governments to help small businesses. In addition, reputation building has also proven to help facilitate business development.

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Diversification is a corporate strategy to enter into or start new products or product lines, new services or new markets, involving substantially different skills, technology and knowledge.

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Inorganic growth is the rate of growth of business, sales expansion etc. by increasing output and business reach by acquiring new businesses by way of mergers, acquisitions and take-overs. This kind of growth also takes place due to government directives, leading to enhancement of business in some identified priority sector/area. The inorganic growth rate also factors in the impact of foreign exchange movements or performance of other economies.

Corporate venture capital (CVC) is the investment of corporate funds directly in external startup companies. CVC is defined by the Business Dictionary as the "practice where a large firm takes an equity stake in a small but innovative or specialist firm, to which it may also provide management and marketing expertise; the objective is to gain a specific competitive advantage." Examples of CVCs include GV and Intel Capital.

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For international trade, Foreign market entry modes are the ways in which a company can expand its services into a non-domestic market.

<span class="mw-page-title-main">Ansoff matrix</span> Strategic planning tool

The Ansoff matrix is a strategic planning tool that provides a framework to help executives, senior managers, and marketers devise strategies for future business growth. It is named after Russian American Igor Ansoff, an applied mathematician and business manager, who created the concept.

References

  1. Locket, Andy; Wiklund, Johan; Davidsson, Per; Sourafel, Girma (31 January 2009). "Organic and Acquisitive Growth". Journal of Management Studies. 2 (1): 1–52. doi:10.1111/joms.2008.46.issue-1.
  2. "Organic Growth".
  3. "The Four Pillars of Organic Growth | How Hard Could It Be? By Joel Spolsky". January 2008.
  4. "Organic growth - Financial theory - Moneyterms: Investment, finance and business explained".
  5. "Social Marketing: Top Secrets To Grow Your Business". February 2012.