external growth

external growth

a mode of business growth which involves a firm in expanding its activities by MERGER, TAKEOVER, STRATEGIC ALLIANCES, or JOINT VENTURES, rather than through ORGANIC GROWTH (i.e. internal expansion). External growth may take the form of horizontal, vertical or diversified expansion (see HORIZONTAL INTEGRATION, VERTICAL INTEGRATION, DIVERSIFICATION).

In general terms, external growth allows a firm to expand more rapidly and in a more cost-effective way than internal expansion, while augmenting and widening the firm's resource base. Additionally, external growth has some specific attractions. For example, in the case of horizontal growth, a merger with, or takeover of, a competitor can enable a firm significantly to increase its market share while providing scope for exploiting economies of scale through rationalization of the two firms' operations. The alternative of attempting to improve market share through price and product differentiation competition may be prohibitively expensive by comparison. Likewise, in the case of conglomerate expansion, the firm may simply not have the expertise to develop products in non-related areas, whereas external growth allows a firm to move into new activities by acquiring a customized operation and related resource capabilities.

External growth, however, is not without its complications. For example, the merged or acquired firms have to be integrated into the one controlling organization which may require a major streamlining of operations and the creation of new management structures. If this is not done effectively, efficiency may be impaired and financial resources strained. See BUSINESS STRATEGY, ORGANIC GROWTH, PRODUCT-MARKET MATRIX, FRANCHISE.

external growth

a mode of business growth that involves a firm in expanding its activities by MERGER, TAKEOVER, STRATEGIC ALLIANCES or JOINT VENTURES rather than through ORGANIC GROWTH (i.e. internal expansion). External growth may take the form of horizontal, vertical or diversified expansion (see HORIZONTAL INTEGRATION, VERTICAL INTEGRATION, DIVERSIFICATION).

In general terms, external growth allows a firm to expand more rapidly and in a more cost-effective way than internal expansion while augmenting and widening the firm's resource base. Additionally, external growth has some specific attractions. For example, in the case of horizontal growth, a merger with, or takeover of, a competitor can enable a firm significantly to increase its market share while providing scope for exploiting economies of scale through rationalization of the two firms’ operations. The alternative of attempting to improve market share through price and product differentiation competition may be prohibitively expensive by comparison. Likewise, in the case of conglomerate expansion, the firm may simply not have the expertise to develop products in non-related areas, whereas external growth allows a firm to move into new activities by acquiring a customized operation and related resource capabilities. External growth, however, is not without its complications. For example, the merged or acquired firms have to be integrated into the one controlling organization, which may require a major streamlining of operations and the creation of new management structures. If this is not done effectively, efficiency may be impaired and financial resources strained. See BUSINESS STRATEGY, PRODUCT-MARKET MATRIX, FRANCHISE.

References in periodicals archive ?
Increases financial flexibility thanks to a strong balance-sheet to seize external growth opportunities and keep on building a major player in software-based security
US bank JPMorgan Chase & Co forecast in August that the Indian currency will hit 73/74 against dollar (19.9/20.2 vs dirham) in the coming months, mainly due to waning internal and external growth. Jonathan Cavenagh, head of foreign exchange strategy for emerging markets Asia at JPMorgan Chase, had said in August that the rupee was overvalued in real effective exchange terms.
The company is very pleased with the progress of its long-term growth initiatives, especially with the successful acquisition of Alpha Care Medical Group in the second quarter, which demonstrated our continued commitment to external growth through the successful execution of our acquisition strategy, said Kenneth Sim, MD, executive chairman.
After giving effect to these transactions, our $500 million line of credit will be undrawn and available to fund our external growth strategy.
Since KKRs acquisition in 2015, Webhelp has doubled in size as the result of an organic and external growth strategy that GBL aims to maintain and accelerate, together with the strong collaboration of the co-founders and management.
"One of the key pillars of the strategy is external growth with a focused and disciplined approach in selected growth areas, one of which is investment funds," the company said.
52% of survey respondents executed some form of external growth or M and A in 2018, up from 44% in 2017.
We continue to build our external growth pipeline and recently signed a letter-of-intent to build and operate three state-of-the-art automated facilities for a major customer."
In general terms, Philippe Castagnac, chairman of Mazars, said Mazars grew 10 percent over five years with a 50-50 ratio between organic and external growth. Castagnac said developing the people of Mazars is important to the success of the company that it develops, trains and retains its people.
Moreover, Al-Sager affirmed that NBK-Group will continue to focus on its international operations and foster external growth in order to complement its local dominance.
"If necessary, the FSS will conduct onsite checks because our internal analysis has shown Korean banks rely heavily on credit and short-term borrowing for external growth in their target markets.
In 2015, AGF completed its first external growth operation with $35 million (Sh3.5 billion) acquisition of Garantee Fund for Private Investment in Africa (GARI Fund).