Organic Vs Inorganic

1. DIVERSIFICATION: ORGANIC
& INORGANIC GROWTH
STRATEGIC MANAGEMENT
DIPANJAN ROY
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2. ORGANIC GROWTH vs INORGANIC GROWTH
ORGANIC GROWTH INORGANIC GROWTH
Achieved by increasing output and
enhancing sales internally
Arises from mergers or takeovers rather
than increase in company’s own business
activity
Internal Growth External Growth
Non-Comparable Growth Comparable Growth
Favorable to Investors Not always Favorable to Investors
• Researchers analyze organic sales growth by analyzing inorganic sales growth
• Inorganic Growth is considered as faster way to grow when compared to
Organic Growth
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3. PROS & CONS
PROS REASON CONS REASON
ORGANIC
GROWTH
CONTROL
Management & owners
have control over pace
and direction growth
SLOW
Steady growth is slow – it
could take years to gain
public awareness and
market share
STABILITY
Business as usual, No
disturbance to day to day
operations
COMPETITIVE
RISK
Introduction of other
players in your market,
which can pose a threat
INORGANIC
GROWTH
FAST
Immediate market share
increase COST
Large upfront investment
required
COMPETITIVE
EDGE
Increase knowledge &
expertise increase
financial position
VOLATILITY
Integrating 2 companies
cause management
challenges, culture &
processes challenges
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4. EXAMPLES
ORGANIC GROWTH INORGANIC GROWTH
• Walmart grew its comp sales by 2.6% in the
fourth quarter of its fiscal year 2018 — a
clear example of organic growth that
Walmart's CEO attributed to accelerated sales
(and increased demand) in the firm's fresh
meat, bakery and produce departments. In
addition, the retailer said its e-commerce
sales jumped 23% year over year
• Being the 3rd largest software services company,
Wipro has been acquiring companies to grow its
digital technology strength. Till now the company
has taken an aggressive approach in acquiring
companies like many other companies like
Accenture and Cognizant which have acquired 10&
20 companies respectively. As of now Wipro has 20
acquisitions with recent being Appirio (2017) and
Alight Solutions (2018).
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5. QUESTIONS
• How should you decide between organic or inorganic
growth?
• Is organic growth better than Inorganic growth ?
• Do different types of revenue growth earn different returns
on capital?
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6. THANK YOU
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