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Questions and Answers
What is internal growth also known as?
What is internal growth also known as?
Which method is NOT considered a form of internal growth?
Which method is NOT considered a form of internal growth?
What is a benefit of pursuing internal growth for an organization?
What is a benefit of pursuing internal growth for an organization?
Which of the following is an example of a strategy for internal growth?
Which of the following is an example of a strategy for internal growth?
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McDonald's new coffee concept, CosMc's, primarily targets which market?
McDonald's new coffee concept, CosMc's, primarily targets which market?
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Which of the following is a common reason for organizations to choose internal growth?
Which of the following is a common reason for organizations to choose internal growth?
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Retained profits used for expansion is a characteristic of what type of growth?
Retained profits used for expansion is a characteristic of what type of growth?
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How many of the largest IPOs listed originate from China?
How many of the largest IPOs listed originate from China?
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What is McDonald's primary aim with its new coffee concept in the US?
What is McDonald's primary aim with its new coffee concept in the US?
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What is a major disadvantage of internal growth for companies like McDonald's?
What is a major disadvantage of internal growth for companies like McDonald's?
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Which of the following is NOT a reason why organizations pursue external growth?
Which of the following is NOT a reason why organizations pursue external growth?
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What challenge does McDonald's face in its attempt to open 10,000 new sites by 2027?
What challenge does McDonald's face in its attempt to open 10,000 new sites by 2027?
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Which method of growth typically involves more risks for organizations?
Which method of growth typically involves more risks for organizations?
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What often complicates the process of achieving inorganic growth?
What often complicates the process of achieving inorganic growth?
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What does external growth usually require in terms of financial support?
What does external growth usually require in terms of financial support?
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What are the implications of mergers and acquisitions on a company's structure?
What are the implications of mergers and acquisitions on a company's structure?
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Study Notes
Internal Growth
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Internal growth, also known as organic growth, happens when a company expands using its own resources, such as retained profits, to invest in production facilities and new locations.
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Large companies can also raise finance for expansion by selling shares on a public stock exchange.
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New companies can raise share capital to fund business growth through an initial public offering (IPO) on the stock exchange.
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The World's 11 largest IPO's include Saudi Aramco, Alibaba.com, SoftBank, Agricultural Bank of China, Industrial & Commercial Bank of China (ICBC), AIA, General Motors, NTT DoCoMo, VISA, ENEL SpA and Facebook.
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Internal growth can result from increased sales revenues and higher profits, with retained profits being reinvested back into the organization.
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Using bank loans to finance expansion is still considered internal growth because the bank is a third party, not a partner organization.
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Companies pursue internal growth to foster brand awareness and loyalty, increase market share, maintain their corporate culture, maintain ownership and control of the organization, and avoid the high expenses and risks associated with external growth.
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For example, McDonald's expanding its business with CosMc's is an example of internal growth because they are using their own resources and brand.
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Internal growth can take longer to materialize than external growth due to limited resources.
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It can lead to diseconomies of scale due to inefficiency and coordination problems caused by a large organization.
External Growth
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External growth, also known as inorganic growth, involves partnering with external organizations for expansion.
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Examples of external growth include franchising, mergers, and acquisitions.
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McDonald's works with franchisees, who pay to operate restaurants using the McDonald's brand and products, allowing McDonald's to expand through partner businesses.
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Companies pursue external growth to grow at a faster pace, diversify their product portfolio, gain market share, gain customers in new and existing markets, and reduce competition in the industry.
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Compared to internal growth, external growth is usually faster, but also more expensive, especially with mergers and acquisitions.
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Inorganic growth typically requires external sources of finance and involves bureaucratic procedures.
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Gaining trust from partner companies can be challenging for achieving inorganic growth.
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External growth carries risks such as organizational culture clashes and diseconomies of scale due to inefficiencies created by a larger organization.
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Description
Explore the concept of internal growth, also known as organic growth, where companies expand using their own resources. This quiz covers various methods of raising finance for expansion, including IPOs and retained profits, along with examples of significant IPOs in the world. Test your knowledge on the factors influencing a company's growth and brand awareness.
