Internal (organic) growth - marketing
Entering new markets
A business may decide to enter new marketA new country, area or target market that a business enters with the aim of selling or trading goods and services. to try to achieve growth. However, this comes with a higher risk than developing new productA product is a good or service that is sold to customers or other businesses.. This is because the business will not have dealt with these markets before, and entering the markets may be complex and expensive.
There are three ways a business can attempt to enter new markets:
- entering overseas markets
- amending its marketing mix (product, price, place and promotion)
- taking advantage of technology
Entering overseas markets
A business that operates in a domestic market The supply and demand of goods and services within a single country. might consider beginning to trade in other countries to try to achieve growth. Operating in this way could give the business access to a brand new market, which could prove extremely successful and increase profitability. However, developing new, unfamiliar markets can be complex and expensive.
Amending the marketing mix
Whenever a business enters a new market, it is vital for it to re-examine its marketing mix. This is particularly important when a business is considering entering an overseas market, because the business might not know or understand the new market.
For example, the price might need to be changed so that the product appeals to the new market. Alternatively, the new market might not know about the brand at all, in which case the marketing mix would need to be changed to encourage people to try it.
Taking advantage of new technology
Businesses may also take advantage of new technology to target new markets. For example, a business could use e-commerceE-commerce is any transaction that takes place through the internet. to enable customers to buy products even if they do not live near its store. New technology may also mean items are cheaper to produce, so a business might be able to lower prices and target a lower-income market.
The advantages and disadvantages of internal (organic) growth
An advantage of internal growth is that it is low risk:
- a business can maintain its own values without interference from stakeholderStakeholders are those people who have a temporary connection with a business to carry out a particular role.
- higher production means the business can benefit from economies of scale Where the average costs (of production, distribution and sales) fall as the business increases the amount of product that it produces, distributes and sells. and lower average costs
A disadvantage of internal growth is that it is slower growth:
- there maybe be a long period between investmentWhen capital (money) is paid into a business for profit. For example, a company might invest in the purchase of new machinery, stock, workforce and processes. and return on investment
- growth may be limited and is dependent on the reliability of sales forecasting The process of estimating future sales. Accurate sales forecasts enable businesses to make informed decisions and predict short-term and long-term performance. Companies can base their forecasts on past sales data, industry-wide comparisons and economic trends.
