”Critically discuss the issues and challenges organisations face when pursuing organic rather than external methods of development”
Nowadays every company faces the need for strategic growth in the fast moving business world where every organisation has to be flexible and needs to adapt to changeable environment. A lot of organisations fail to growth successfully. What are the main reasons for inefficient strategic growth? In order to answer this question, it is essential to understand what the methods of strategic growth are in general and how the company can choose the most suitable. Two methods of strategic growth are existing – the internal method (organic growth) and the external method. According to Investopedia (2009) “organic growth represents the true growth for the core of the company” and it is an indicator of how efficient the company is using its internal resources to increase the profit. The efficiency of using internal resources mainly depends on managers’ skills and knowledge. (Investopedia, 2009) The contrary method of the strategic development is an external method, mentioned as an inorganic growth in the literature, too. These words “inorganic growth” indicate that the growth is not natural, that means, it is not developed inside the company but arises from mergers or takeovers. (12 Manage, 2009) It is fast way how to develop the company. (Bruner, 2004) There are the advantages and disadvantages for each of the method which will be described further in order to estimate the issues and challenges organisations face when pursuing organic rather than external methods of development. In order to evaluate the organic growth (internal method), first of all, company has to analyse its internal potential by evaluating the organisation’s skills, available resources and compare them with the requirements for competitive success in future. It also should analyse its main competitors and their strengths and weaknesses. (Thompson, Martin, 2005) Secondly, the company should take the attention to the people as invaluable asset who are working for the company and who are responsible how successful organic growth will be for the company. They must be committed to the work, competent, cost-effective and, ideally, must have the same values as the company has. (Reynold, 2006) Finally, the important issue is empowerment and there are two methods how to empower the employees - hard approach and soft approach. The first one judges the people as the resources and they have to be used efficiently and effectively and managed by the line managers. The second one judges the employees as personalities, the company trusts them and workers are more committed to the organisation. (Thompson, Martin, 2005) The challenge of the organic growth can be the communication within the company. A lot of people have the idea that the communication is not the complex issue because it appears everywhere, on any time and in different forms. According to Keefe (2004), the communication is a complex science and it should be used properly: “breaking through the barriers and getting employees and managers working together helps everyone advance a strategic vision and attain goals.” In any cases, the organic growth takes a lot of time because it is time-demanding to strengthen and develop the company internally and it requires a strong leader who can manage the other employees to achieve desired aims. Hess (2006) in his book “The Road to Organic Growth” has researched specific companies which has used internal methods rather than mergers or takeovers to successfully develop their business. The author has found that only 22 of more than 800 organisations have been competitive and “have created meaningful economic value”. Similar research has been developed by Coulson-Thomas (2008). The author has examined 2000 and 500 professional firms (different sectors and sizes) in order to determine the success factors for the...
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