Issues and Challenges Organisations Face When Pursuing Organic Rather Than External Methods of Development
”Critically discuss the issues and challenges organisations face when pursuing organic rather than external methods of development”
Nowadays every company faces the need for strategic growth in the fast moving business world where every organisation has to be flexible and needs to adapt to changeable environment. A lot of organisations fail to growth successfully. What are the main reasons for inefficient strategic growth? In order to answer this question, it is essential to understand what the methods of strategic growth are in general and how the company can choose the most suitable. Two methods of strategic growth are existing – the internal method (organic growth) and the external method. According to Investopedia (2009) “organic growth represents the true growth for the core of the company” and it is an indicator of how efficient the company is using its internal resources to increase the profit. The efficiency of using internal resources mainly depends on managers’ skills and knowledge. (Investopedia, 2009) The contrary method of the strategic development is an external method, mentioned as an inorganic growth in the literature, too. These words “inorganic growth” indicate that the growth is not natural, that means, it is not developed inside the company but arises from mergers or takeovers. (12 Manage, 2009) It is fast way how to develop the company. (Bruner, 2004) There are the advantages and disadvantages for each of the method which will be described further in order to estimate the issues and challenges organisations face when pursuing organic rather than external methods of development. In order to evaluate the organic growth (internal method), first of all, company has to analyse its internal potential by evaluating the organisation’s skills, available resources and compare them with the requirements for competitive success in future. It also should analyse its main competitors and their strengths and weaknesses. (Thompson,
Nowadays every company faces the need for strategic growth in the fast moving business world where every organisation has to be flexible and needs to adapt to changeable environment. A lot of organisations fail to growth successfully. What are the main reasons for inefficient strategic growth? In order to answer this question, it is essential to understand what the methods of strategic growth are in general and how the company can choose the most suitable. Two methods of strategic growth are existing – the internal method (organic growth) and the external method. According to Investopedia (2009) “organic growth represents the true growth for the core of the company” and it is an indicator of how efficient the company is using its internal resources to increase the profit. The efficiency of using internal resources mainly depends on managers’ skills and knowledge. (Investopedia, 2009) The contrary method of the strategic development is an external method, mentioned as an inorganic growth in the literature, too. These words “inorganic growth” indicate that the growth is not natural, that means, it is not developed inside the company but arises from mergers or takeovers. (12 Manage, 2009) It is fast way how to develop the company. (Bruner, 2004) There are the advantages and disadvantages for each of the method which will be described further in order to estimate the issues and challenges organisations face when pursuing organic rather than external methods of development. In order to evaluate the organic growth (internal method), first of all, company has to analyse its internal potential by evaluating the organisation’s skills, available resources and compare them with the requirements for competitive success in future. It also should analyse its main competitors and their strengths and weaknesses. (Thompson,
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