Organic And External Growth

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Organic and External Growth Organic growth is the growth rate that a company can achieve by increasing output and enhancing sales. This excludes any profits or growth acquired from takeovers, acquisitions or mergers. Takeovers, acquisitions and mergers do not bring about profits generated within the company, and are therefore not considered organic. Organic growth represents the true growth for the core of the company. It is a good indicator of how well management has used its internal resources to expand profits. Organic growth also identifies whether managers have used their skills to improve the business. The growth of BSkyB in the UK is an example of a business that has grown organically. BSkyB has been able to add over £2bn of annual revenues since 2004.Several years ago, the firm set itself the corporate objective to achieve 10 million household subscribers in the UK. BSkyB achieved that objective earlier than expected, and that is one key reason why they have been able to enjoy consistent growth in revenues and profits, despite the recent economic downturn. As well as adding many new subscribers BSkyB has been able to increase the average amount spent by each subscribing household on its services. Pay-Tv subscribers have been persuaded to buy their Internet broadband from BSkyB; customers have upgraded to access HD and 3D; customer loyalty has been improved resulting in a lower percentage of subscribers leaving each year. BSkyB’s strategy has been focused on market penetration, where they have succeeded in increase their share in the subscription television market and product development via innovation leading to the highly successful Sky HD services. This organic growth strategy has resulted in impressive momentum despite a difficult external environment such as the pressure on household spending and advertising. However, not all attempts of organic

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