Internal or External Growth

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Most big companies try to grow by expanding it activities. This is done by internal or external growth. In the internal growth companies wants to grow sales, their assets, their profits or both if they can. “A company can grow internally with increases in operations globally and domestically. This growth can be accomplished in many ways, including horizontal or vertical growth” (Grashaw, 2009). Internal growth can cause a company’s strategic focus and flexibility to become diminish. Managers now have to look closer at the company’s strategic plan and look at all option for future growth with the Internal growth strategy They have to look at all potential opportunities for growth and evaluate them. For example, “Transactional cost economies proposes that vertical integration is more efficient than contracting for goods and services in the marketplace when the transaction costs of buying goods on the open market becomes too great. When highly vertically integrated firms become excessively large and bureaucratic, however, the costs of managing the internal transactions may become greater than simply purchasing the needed goods externally” (Grashaw, 2009). Internal growth can help an organization to focus on their strengths that might help a company to grow and have a higher rate of return on their investment. Trying to expand into a new market requires a company to be organized and united to reach their goals. “For example, vertical growth, when used with a distinctive competency and to expand a competitive advantage along the industry value chain, can improve market position. However, it can also reduce a company’s strategic flexibility and focus” (Grashaw, 2009). Internal and external growth is designed for the same reasons, but external growth looks at trying to gain market share, work on gaining international recognition, trying to gain a competitive

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