Internal growth AO2 only
AO2 You need to be able to: Demonstrate application and analysis of knowledge and understanding Command Terms: These terms require students to use their knowledge and skills to break down ideas into simpler parts and to see how the parts relate: Analyse, Apply, Comment, Demonstrate, Distinguish, Explain, Interpret, Suggest
Internal growth, as we have seen, is a firm expanding by using its own resources. This is achieved by:
- Increasing sales revenue by improving products and services and making them more attractive to customers
- Better marketing of its product range
- Investment in research and development
- Improved training of its workforce
- Expanding the number of offices, factories and outlets
Benefits of organic growth
- Internal growth is relatively inexpensive, and the firm will not have to rely on outside sources of funds as most expansion is funded by retained profits.
- The owners of the business will be able to maintain control of the business whereas external growth may require the raising of additional capital. This may lead to a change in ownership.
- The business will be able to retain its identity and corporate culture as these will not be diluted by joining with other organisations.
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The reasons why the Prudential considered external growth are given in this article on:
- Define the terms:
- Annual General Meeting (AGM)
- Explain what is meant by the separation of ownership and control.
- Analyse the reasons why Prudential was considering expansion in Asia using a takeover.
- To what extent is there likely to be conflict between stakeholders within any business?