Skip to main content

External growth AO3 only

AO3 You need to be able to: Demonstrate synthesis and evaluation. Command terms these terms require you to rearrange component ideas into a new whole and make judgments based on evidence or a set of criteria. Compare,  Compare and contrast, Contrast, Discuss, Evaluate, Examine, Justify, Recommend, To what extent

There is often a limit to how much a firm can grow internally. This limit is the result of:

  • Lack of funds
  • Inadequate knowledge of new markets
  • A desire to grow more quickly than circumstances allow

External growth has the advantages of being:

  • a faster way to grow and diversify
  • a method of reducing competition
  • ability to gain market share
  • an excellent way of gaining new skills, experience and ultimately customers

However, external growth tends to be an expensive method of growth and can radically change the nature and culture of a business.

There are three methods of external growth:

    1. Joint venture
    2. Strategic alliances
    3. Mergers and takeovers
    4. Franchising