New Assignement

Name: - Muqadar Karamat
Roll-Number: - F19-1080
Assignments: - Entrepreneurship
Question: -
 Explain in detail internal growth strategies and external growth
strategies from entrepreneurship point of view?
 Why we need to study growth strategies for enhancement of a
business?
 ‘Growth Strategy’ refers to a strategic plan formulated and

implemented for expanding firm’s business. Every firm has to develop
its own growth strategy according to its own characteristics and
environment.
 internal growth strategies
 external growth strategies
 Internal Growth Strategies: - Internal growth (or organic growth)

is when a business expands its own operations by relying on
developing its own internal resources and capabilities. This can
for example be done by assessing a company’s core competencies
and by determining and exploiting the strength
 Moreover, companies can decide to grow organically by
expanding current operations and businesses or by starting new
businesses from scratch.
 e.g., greenfield investment
 Knowledge improvement: organic growth strategies improve
the company’s knowledge through direct involvement in a new
market or technology, thus providing deeper first-hand
knowledge that is likely to be internalized in the company
 Investment spread: gradually growing internally helps to
spread investment over time, which allows a reduction of upfront
costs and commitments, making it easier to reverse or adjust a
strategy if conditions in the market change
 No availability constraints: the company is not dependent
on the availability of suitable acquisition targets or potential
alliance partners. Organic developers also do not have to wait for
a perfectly matched acquisition target to come on to the market
 Strategic independence: this means that a company does
not need to make the same compromises as might be necessary
in an alliance, for example, which is likely to involve constraints on
certain activities and may limit future strategic choices
 Culture management: organic growth allows new activities to
be created in the existing cultural environment, which reduces the
risk of culture clash—a common difficulty with mergers,
acquisitions, and alliances.
 Example:
 New Zealand based Natural health care products company Comvita
purchased its Hong Kong distributor Green Life Ltd. And thus,
achieved forward integration by having access to green life's retail
stores, sales staff and in store promoters.
 External growth strategies: - External growth (or inorganic
growth) strategies are about increasing output or business reach
with the aid of resources and capabilities that are not internally
developed by the company itself. Rather, these resources are
obtained through the merger with/acquisition of or partnership
with other companies.
 Business extension: M&A can be used to extend the reach of
a firm in terms of geography, products or market coverage.
 Consolidation: M&A can be used to bring together two
competitors to increase market power by reducing competition;
to increase efficiency by reducing surplus capacity or sharing
resources, for instance head-office facilities or distribution
channels; and to increase production efficiency or increase
bargaining power with suppliers, forcing them to reduce their
prices.
 Building capabilities: M&A may increase a company’s
capabilities. Instead of researching a new technology from
scratch, for instance, acquirers may wait for entrepreneurs to
prove an idea and then take them over to incorporate the
technological capability within their own portfolio.
 Speed: M&A allows acquirers to act fast—and this may be an
advantage in itself, wrong-footing competition and changing the
industry landscape faster than competitors can evolve in
response.
 Financial efficiency: This may allow a company with a strong
balance sheet to combine with another company with a weak
balance sheet, enabling the latter to save on interest payments by
using the stronger company’s assets to pay off its debt. The
acquired firm could also access investment funds from the
stronger company that were otherwise unavailable.
 Tax efficiency: For example, profits or tax losses may be
transferable within the combined company in order to benefit
from different tax regimes between industries or countries,
subject to legal restrictions.
 Asset stripping or unbundling: Some companies are
effective at spotting other companies whose underlying assets are
worth more than the price of the company as a whole. This makes
it possible to buy such companies and then rapidly sell off
(unbundle) different business units to various buyers for a total
price that is substantially in excess of what was originally paid for
the whole. Although this is often dismissed as merely
opportunistic profiteering (asset stripping), if the business units
find better corporate parents through this unbundling process,
there can be a real gain in economic effectiveness.
 Why we need to study growth strategies for enhancement of a

business?
 Growth strategies are important because they keep your company

working towards goals that go beyond what's happening in the
market today. They keep both leaders and employees focused and
aligned, and they compel you to think long-term.

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Name: - Muqadar Karamat

 ‘Growth Strategy’ refers to a strategic plan formulated and

 Internal Growth Strategies: - Internal growth (or organic growth)

 Why we need to study growth strategies for enhancement of a

 Growth strategies are important because they keep your company

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