External Growth for a Business

Topics: Compaq, Hewlett-Packard, Stock market Pages: 2 (727 words) Published: April 3, 2011
Using this example and any others with which you are familiar, assess the potential implications for business of external growth as compared with organic growth.

Organic growth is when a firm expands its existing capacity or range of activities by extending its premises or building new factories for example. External growth however is when two or more businesses come together via a merger or a take-over. There are many implications of external growth. One of the main implications is the ignorance of the different cultures supported by the two different firms. It involves a lot of time for a firm to talk out differences which is generally unsupported by senior managers having little time. This reflects on poor leadership and unclear objectives for the business as a whole. A good example of this would be the Bell Atlantic Merger with Tele-Communications. Bell Atlantic is a phone company serving the NorthEastern U.S states and Tele-Communications is the nation’s largest cable-TV company. Bell Atlantic offered a £33billion deal to merge with the company in 1933 in what was at the time the biggest planned corporate merger. However the two CEO’s Raymond W. Smith and John Malone found their corporate cultures clashed causing the collapse of the deal in the early months of 1934. The problem however appears to be that it is not so much that there is direct conflict between the two sides, but that the cultures do not merge quickly enough to take advantage of the available opportunities. The corporate failure to consider and plan for long term consequences can result in financial problems, loss of employee loyalty, lowered employee morale and reduced productivity. Many companies oversee whether there businesses are actually compatible or not. This is because they usually look at the benefits in financial or commercial terms and miss the fact that they are compatible. This will have a negative effect through the stock market and share holders will tend to pull out. This...
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