Your newfound resources, assets, and market share, meansif the implementation goes wellyou will be a force to be reckoned with in your industry. Still, the combination of two or more companies in M&A is a complex matter with rather unpredictable outcomes. "The New Growth Game: Beating the Market With Digital and Analytics. Pros of Organic Growth Acquisitions can be accretive to earnings, but the implementation of the technology or knowledge acquired can take time. Taking the example of Bibby Line Group again, which moved into financial services in 1982, and today Bibby Financial Services is UKs largest independent debt provider. In doing so, Company A now offers its customers new technologies and gains access to new markets that were established by the acquired company. The purchase price of the acquisition can also be prohibitive for some firms. Acquisitions can help immediately boost a companys earnings and increase market share. Costs in the form of restructuring charges can greatly increase expenses. By combining your companys forces with those resources of another company, you are gaining the knowledge and expertise of their key players. A business shouldnt go for inorganic growth when it is already struggling. In the worst-case scenario, attempting to pursue inorganic growth can actually cause a decline in growth and erode a companys profit margins considering how costly M&A can be. May decrease your competitive edge. by Jerry Vance | Mar 2, 2020 | Business Growth. We also reference original research from other reputable publishers where appropriate. Market behavior- The behavior of market can also be a huge challenge, whether it is ready to accept the inorganic growth or not. If a company merges with another in pursuit of inorganic growth, that company's market share and assets become larger. External (inorganic) growth - advantages and disadvantages These are all things that companies can do to grow sales using internal, or organic, measures. This compensation may impact how and where listings appear. Since theres no infusion of market, product, assets, or resources, a company growing organically must do so at a sustainable pace. The sudden growth from a merger or acquisition generates complexities associated with properly scaling operations such as systems, sales, and support. To ensure quality for our reviews, only customers who have purchased this resource can review it. It is critical for the success of a company. Study notes, videos, interactive activities and more! Taking a second example of the Bibby Line Group which acquired two companies- first which provides the returnable packaging market and second, which provides logistics to food manufacturing industry. Firms can choose to grow inorganically in several ways including engaging in mergers and acquisitions and, in the case of retail or branch organizations, opening new stores or branches. External growth (also known as inorganic growth) refers to growth of a company that results from using external resources and capabilities rather than from internal business activities. Firms lose their competitive advantage and finally exit the market. Generally, only the top-tier level companies opt to utilize more than one strategy at once.