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Skip to 0 minutes and 3 seconds For many organisations, the most important decisions they will make are about how they can successfully expand and grow their business. Growth is the objective for businesses, as it’s really only by growth that profit and cash flow will grow and further funding will be able to be sought by the business owner. So growth is a virtuous circle, in that some growth will usually allow the funds to be secured to allow further expansion. If we take a look at successful companies, there are two common ways in which they can grow, organically or via acquisitions. You have two options in growing. Either you can try and grow it yourself in what one would call growing organically or you can try and buy growth.

Skip to 1 minute and 1 second In our case, because we created this product from scratch, there isn’t another beer brand in Britain that is a household name that is only 25 years old. Most beer brands are ancient, many centuries old in many cases. So we were able to do that by creating something that didn’t exist before, that was different and better. Organic growth is where a business uses its own staff, ideas, and imagination to develop new products and services. Apple Inc. became the world’s largest company on the stock market in 2011. This achievement was mainly due to organic growth. It started off selling one product, in the form of desktop computers.

Skip to 1 minute and 48 seconds It used the profits made from the desktop sales to fund research and help design laptop computers, then MP3 players, then mobile phones, and then tablets. All of its products have come from internal design teams and some have taken years to develop. It’s not always been successful, as can be seen from the company’s share price since it first started trading, but it’s had more successes than failure. There is another way to grow the business and this is through buying another company. Many household names today are actually owned by someone else. The advantage of growth through acquisition is it can be a quicker way to obtain both customers and sales.

Skip to 2 minutes and 34 seconds Organic growth and growth by acquisition are not mutually exclusive for a business. Many organisations will pursue both strategies to expand. A good example is the sportswear company Adidas. From growing our product base, we have to innovate. We have to drive progress or the business won’t succeed. If you look at a sporting analogy, any sportsman who wants to succeed will continue to strive for better results, for improved performance. We have to do that with our own product portfolio. So from that point of view, yes, Adidas would always want to grow through innovation and through improved products and a different product portfolio.

Skip to 3 minutes and 17 seconds In terms of acquisitions, again, absolutely of interest in the Adidas group, as well– certainly over the years I’ve been here, we have bought a number of different companies. Reebok was an acquisition back in 2006, again, a major competitor of Adidas. So a number of different reasons to acquire– not only to reach different parts of the markets, particularly in the US that we were interested in succeeding in, but also to complement our already broad sport portfolio. However an organisation grows, through either acquisition or organically or by a combination of both, all successful businesses need people who understand the costs and benefits of the different strategies for growth.

How can businesses grow?

For many organisations the most important financial decisions they will make are about how they can successfully grow their business

Growth is part of a cycle that is essential for most businesses and organisations. When a business grows, so does its potential profits and cash flow. This in turn will attract investors to the business, allowing it to grow further.

As we will see in this video, there are two common strategies for businesses to grow:

  • organic - companies expand by developing new products or services;
  • acquisition - businesses buy other companies to gain their sales markets or acquire their products of services.

Have your say

Can you add to the list of companies which are owned by other companies? Think of some examples and post these as a comment.

You might also like to think of any organisations you have worked for in the past or work for now. What type(s) of growth has this organisation pursued? Do you think there are any limits to its growth? If so, why?

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This video is from the free online course:

The Importance of Money in Business

University of Leeds