IGCSE, A Level Business Student Forum

Q19 Analyse the benefits of internal growth strategies to a business. [6]

Possible Structure:
[KN]
[AN]
[AN+]

[KN]
[AN]
[AN+]

[KN] Cost-Efficiency.
[AN] When a business grows internally, it can often achieve cost savings through economies of scale. As the business expands, it can negotiate better deals with suppliers, take advantage of bulk purchasing, and optimize its operations.
[AN+] This can lead to lower production costs and increased profitability.

[KN] Lower Risk.
[AN] Internal growth strategies are generally less risky compared to external strategies like mergers or acquisitions. There is less chance of integration issues, cultural clashes, or unforeseen liabilities.
[AN+] This can help ensure a more stable and predictable business environment.

[KN] Customer and Brand Loyalty
[AN] Existing customers often appreciate a business's commitment to enhancing its products or services.
[AN+] This can foster customer loyalty and trust, resulting in repeat business and positive word-of-mouth marketing.

[KN] Innovation and Quality Improvement
[AN] Internal growth strategies encourage the business to innovate and improve its products or services.
[AN+] this continuous development can lead to higher quality offerings and a competitive edge in the market

KN: Employee Development
AN: Internal growth provides opportunities for existing employees to take on new roles and responsibilities
AN+: This can boost employee morale, retention, and skill development.
KN: Efficient Resource Utilization
AN: Companies pursuing internal growth can optimize their existing resources and facilities
AN+: which can lead to cost savings and improved resource utilization

[KN]Stable business expansion(less costs)
[AN]As in internal growth, expansion is self funded and driven by existing resources it reduces its cost
[AN+]Thus this makes inter growth more sustainable and a better option for expansion

[KN]Better quality products
[AN]Internal growth may lead to the business being more efficient and improving quality of their products
[AN+]This may lead to better brand image and customer loyalty

[KN]Control and Autonomy
[AN]the business retains full control over its operations and decision-making processes.
[AN+]This means that strategic decisions are made internally, allowing the company to maintain its vision and values.

[KN]Optimal Resource Utilization
[AN] Internal growth primarily relies on utilizing the company's existing resources, including capital, personnel, and infrastructure.
[AN+]This allows for efficient resource allocation and minimizes the need for significant additional investments.

[KN] Control and autonomy
[AN] With internal growth, the business maintains full control over its expansion and operations.
[AN+] This allows for a consistent alignment with the company's vision and strategy.

[KN] Sustainable growth
[AN] Internal growth strategies often lead to more sustainable and stable growth because they are built on the company's existing strengths and resources.
[AN+] This can result in a more enduring competitive advantage.

[KN] Control and Autonomy
[AN] The business retains full control over its operations and decision-making processes.
[AN+] This means that strategic decisions are made internally, allowing the company to maintain its vision and values.

[KN] Optimal Resource Utilization
[AN] Internal growth primarily relies on utilizing the company's existing resources, including capital, personnel, and infrastructure.
[AN+] This allows for efficient resource allocation and minimizes the need for significant additional investments.

(Kn) employees satisfaction (an) a firm internally expanding means more posts in higher degree will open uo like management which the existing workers would want(an+)this will increase thei motivation and hence productivity as they will work hard to get those posts
(Kn) control(an) in case of internal growth the company eill have the control in its hands rather than sharing it in growing externally(an+) thus the settled control can improve confidence not just in the directors but also in shareholders to invest more

(kn)low risk
(an)as the capital involved in it is relatively low then in external growth
(an+)if the project fails the capital can be reinvested back into the business
(kn)higher production
(an)the business can benefit from economies of scale (lower average cost)
(an+)which could further decrease per unit cost

[KN] Customer brand loyalty
[AN] Existing customer always encourage the increase in production on by the frim
[AN+] this would result in increase in sentiments for the business by the customer

[KN] Reducing per unit cost
[AN] With an increase in size the business will face economies of scale thus resulting in lower per unit cost
[AN+] this would increase their profit thus help them to expand event further

[kn] economies of scale
[an] as businesses raise production, the company will profit from economies of scale
[an+] expenses for the business decreases and efficiency also increases

[kn] increased sales for business
[an} if the business decides to focus on innovation of their products and create an an original product is attracts more customers due to its uniqueness
[an+] usp for business

[Kn] Cheaper. 
[An]Companies mainly rely on internal financing for expansion such as retained earnings instead of external funding
[An+]So, the company does not need to pay regular interest.

[Kn]Consistent culture
[An]When companies patner withone and other with same enviroment this can lead to develop a deeper understanding of how the business works and performs
[An+]Therefore increase the productivity and knowledge

[KN]Less dilution of control
[AN] when a business grows internally, the owner remains the same hence decision making may become time efficient and accurate
[AN] leading to less delays and improved quality


[KN]Diversification of products
[AN] internal growth focuses on innovation and producing variety of products hence more markets can be targeted
[AN] leading to greater market share

[KN] Sustainable growth.
[AN] By utilizing existing resources and slowly building upon them will help business achieve long term growth.
[AN+] Thus, this can result in increase in market share and brand image.

[KN] Customer loyalty and trust.
[AN] Existing customers will appreciate business improvement and expansion because of the use of existing resources which will help increase their trust and positive word of mouth will be spread.
[AN+] Thus the business may also get a competitive edge over the competitors.