We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Finance

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What is Inorganic Growth?

Malcolm Tatum
By
Updated: May 16, 2024
Views: 10,013
Share

Inorganic growth refers to a type of business growth that occurs for reasons other than the normal activities of a company. Growth of this type is not generated by an increase in sales of goods or services, or by cutting costs that improve the bottom line of the business. Often, 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.

There are several advantages to inorganic growth. One has to do with gaining access to technology that the business does not currently have in place. For example, an electronics firm may choose to merge or acquire a competitor that has a reputation for innovative product development. As a result of the union, the business benefits from whatever new products are developed and eventually marketed to consumers.

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. In some cases, this means that the business has a presence in consumer markets that was not possible in the past. Broadening the client base in this manner is typically considered a quick and relatively easy way to increase market share without putting a great deal of time and resources into an expanded sales and marketing effort.

In some cases, inorganic growth is generated as the result of removing a primary source of competition from the marketplace. The combination of two main competitors under one umbrella typically means that consumers who had not dealt with either company in the past may choose to do business with the combined company, simply because there are less choices in the marketplace. Once again, additional growth is created not by increasing the sales effort, but as the result of changing the status of the company within the consumer market itself.

While inorganic growth is often realized by mergers and acquisitions that are friendly and considered advantageous for everyone concerned, there are situations in which the strategy involves a hostile takeover. In this scenario, the business identifies a target firm and begins to gain control of the business, often by purchasing as much stock in the target company as possible. Once the business has controlling interest in the target, it is a simple process to force the takeover and make use of the acquired company in whatever manner is anticipated to generate the highest amount of inorganic growth.

Share
SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including SmartCapitalMind, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.
Discussion Comments
By vogueknit17 — On Sep 24, 2011

@mitchell14- That has been happening a lot, although that doesn't mean inorganic growth is not a good thing anymore. A lot of local businesses in my town and state have been joining up because it lets them have strength in numbers, which is good in a weaker economy. That can be really helpful for their business development strategy. Of course, we have had a few takeover issues too, which is less of a good thing, at least for the original owners, though people who end up buying another company often seem to have done so through some strategic business development plan.

By mitchell14 — On Sep 24, 2011

For a long time businesses seemed to be doing a lot of merging, but lately the opposite seems true. I don't know what you would call it if a company splits into two separate, still sort of connected, companies. Inorganic shrinking, maybe? I know that, like inorganic growth, it can be a good thing because it allows both sides of a company to better organize themselves and really use their assets to the best possible ability.

Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
Share
https://www.smartcapitalmind.com/what-is-inorganic-growth.htm
Copy this link
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.