organic growth


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Organic growth

Refers to growth achieved by internal investments of the firm. This could be the day to day business of the firm or a division of the firm starting a new business from scratch. This is distinguished from growth by acquisition or merger which involves an outside firm.

Organic Growth

The growth rate of a company coming from its operations. Organic growth comes about when a company has solid sales, a large client base, and/or low overhead. Organic growth can lead to an expansion of operation without resorting to issuing securities or borrowing from a bank. Specifically excluded from organic growth is growth resulting from a merger or acquisition. Organic growth is considered a leading indicator of a company's underlying performance.

organic growth

or

internal growth

a mode of business growth which is self generated (that is, expansion from within) rather then being achieved externally through MERGERS and TAKEOVERS. Organic growth typically involves a firm in improving its market share by developing new products and generally outperforming competitors (see HORIZONTAL INTEGRATION), and through market development (that is, finding new markets for existing products). Organic growth may also involve firms in expanding vertically into supply sources and market outlets (see VERTICAL INTEGRATION), as well as DIVERSIFICATION into new product areas.

The advantages of organic growth include the ability to capitalize on the firm's existing core skills and knowledge, to use up spare production capacity and to match available resources to the firm's expansion rate over time. Internal growth may be the only alternative where no suitable acquisition exists or where the product is in the early phase of the PRODUCT LIFE CYCLE. The disadvantages of organic growth are that in relying too extensively on internally generated resources, the firm may fail to develop acceptable products to sustain its position in existing markets, while existing skills and know-how may be too limited to support a more broadly based expansion programme.

For this reason, firms often rely on a combination of internal and external growth modes to internationalize their operations and undertake product/ market diversifications.

See EXTERNAL GROWTH, BUSINESS STRATEGY, PRODUCT-MARKET MATRIX, NEW-PRODUCT DEVELOPMENT.

organic growth (internal growth)

a mode of business growth that is self-generated (that is, expansion from within) rather than achieved externally through MERGERS and TAKEOVERS. Organic growth typically involves a firm in improving its market share by developing new products and generally outperforming competitors (see HORIZONTAL INTEGRATION) and through market development (that is, finding new markets for existing products). Organic growth may also involve firms in expanding vertically into supply sources and market outlets (see VERTICAL INTEGRATION) as well as DIVERSIFICATION into new product areas. The advantages of organic growth include the ability to capitalize on the firm's existing core skills and knowledge, use up spare production capacity and more closely match available resources to the firm's expansion rate over time. Internal growth may be the only alternative where no suitable acquisition exists or where the product is in the early phase of the PRODUCT LIFE CYCLE. The disadvantages of organic growth are that in relying too extensively on internally generated resources, the firm may fail to develop acceptable products to sustain its position in existing markets, while existing skills and know-how may be too limited to support a broader-based expansion programme.

For this reason, firms often rely on a combination of internal and external growth modes to internationalize their operations and undertake product/market diversifications. See EXTERNAL GROWTH, BUSINESS STRATEGY, PRODUCT MARKET MATRIX, NEW PRODUCT DEVELOPMENT.

References in periodicals archive ?
The second quarter of 2015 saw continued strong organic growth that boosted profitability to 24.
3% compared with 2012 as the organic growth was more than offset by the successful strategic divestment of non-core activities and a negative effect from exchange rate movements which decreased revenue by 2% and 3%, respectively.
The Rule of 20 is a Reagan Consulting benchmark that correlates with value creation and is calculated by adding an agency's organic growth rate to half of its EBITDA margin.
According to Forum's research, the five actions that companies can pursue to successfully implement their organic growth strategies are:
6 million last year, while organic growth was five per cent.
So we were fine with our organic growth considering the acquisitions.
CEOs are under in tense pressure to deliver profitable and sustainable growth, but most will still admit that organic growth has not been pursued aggressively because historically it has been difficult to achieve," said Dr.
28 percent of large-company respondents reported below-average organic growth (vs.
Strong growth, particularly in the protective packaging and incontinence product segments, are likely to help SCA on the organic growth side of the equation; but if the company is to deliver on its 8%-10% top line promise, being perceived as "nice" may turn out to be a key strategic asset.
For 2001, PerkinElmer estimates organic growth of 11%-13.
NEW YORK -- Hales & Company announced today that it will be presenting four full day seminars on Mergers & Acquisitions and Organic Growth Strategies at the following locations:
Although we continue to experience overall challenging macroeconomic conditions, ISS delivered robust organic growth in Q3 and recorded strong Cash Conversion, driven by our continued focus on profitable growth and our efforts to improve working capital.