ORGANIC AND INORGANIC

GROWTH IN BUSINESS

PRESENTED BY
Arathy V Kurup
 ORGANIC GROWTH
• Organic growth in business refers to a company
expanding its business through the use of its own
resources and assets.
• A company expands without the use of mergers and
acquisitions or other takeovers.
• A solid commitment to building the business.
• Organic growth can also be negative, meaning the
company's business is actually contracting.
• Investors look at organic growth numbers to see if a
company is increasing sales and revenues and if those
increases are sustainable over the long term.
Organic growth can be achieved
through…….

• Generating increasing sales – increasing

revenue to impact on overall profit levels
• Use of retained profit – used to reinvest in the
business
• Sale of assets – can be a double edged sword
Significance Strategic concern

• Organic growth • Organic growth allows

shows how well company executives
management of a to set and achieve
company is utilizing corporate goals in
internal resources to whichever manner
increase sales and they choose
output
 Advantages
1. Organization strategic goals can be
achieved
2. No crashes in culture
3. Cheaper compared to acquisitions
 Disadvantages
1. Longer time
2. Riskier
 Examples

• Infosys
• TCS
• Walmart
 Inorganic growth
• Not generated by an increase in sales of
goods or services, or by cutting costs that
improve the bottom line of the business.
• Inorganic growth takes place when a
business chooses to merge with a similar
company, or acquire other businesses as
a means of expanding the overall
operation.
 Advantages
• One has to do with gaining access to
technology that the business does not
currently have in place.
• Another benefit of inorganic growth is that
the approach often serves to increase the
client base by combining the customer
lists of the existing company with the
acquired company.
• Inorganic growth is generated as the result
of removing a primary source of
competition from the marketplace.
 Merger
• A merger refers to the process whereby at
least two companies combine to form one
single company
• Combination occurs generally by offering
the stockholders of one company
securities in the acquiring company in
exchange for the surrender of their stock
 Types of mergers
• Horizontal Merger: merger of two companies who are
direct competitors of one another. They serve the same
market and sell the same product.
• Conglomeration: merger of companies, which do not
either sell any related products or cater to any related
markets.
• Vertical Merger: effected either between a company and
a customer or between a company and a supplier.
• Product-Extension Merger: executed among companies,
which sell different products of a related category
• market-extension merger: merger between 2 companies
that sell identical products in different markets
 Examples of mergers
company Merged with
Lord krishna bank Centurian bank
Bank of Madura ICICI bank
A.P Cotex Asian Paints Ltd
Asoka Mills Ltd Aravind Mills Ltd
Tata Oil Mills Ltd Hindustan Unilever
Reliance Petrochemicals Ltd Reliance Industries Ltd
Arcelor Steel Mittal Steel
 Acquisition/Takeover
• When one company takes over another and
clearly established itself as the new owner, the
purchase is called an acquisition.
• This is done with the intend of more effectively
using a core competence by making the aquired
firm a subsidiary within its portfolio of business.
 Types of takeovers
• Friendly Takeover - the company bidding will approach
the directors of the other company to discuss and agree
an offer before proposing it to the shareholders of that
company.
• Hostile Takeover - the company bidding has their offer
rejected or does not approach the board of the company
they wish to buy before making an offer to shareholders.
• Reverse Takeover' - the final common type of takeover is
the reverse takeover. This happens when a private (not
traded on the stock market) company buys a publicly-
traded company as a means of acquiring public status
without having to list itself.
 Examples of aquisition
Target/seller Co Aquirer Co Deal date
Cairn India Ltd Vedanta Resources Plc 18th August 2010
Pioneer Natural Reliance Industries Ltd. 22 Jun 2010
Resources Co.
Atlas Energy Inc. Reliance Industries Ltd 09 Apr 2010
Himadri Chemicals & Bain Capital India 06 Jan 2010
Inds. Ltd. Investments
X T O Energy Inc Exxon Mobil Corpn 14 Dec 2009
Times group Virgin radio 2008
Workhardt Negma labs 2007
Tata Corus 2006