The difference between organic and inorganic company growth

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What is organic company growth?

Organic company growth is when firms grow through internal development. Customers are gained over time and the internal resources are developed by the company. 

Challenges of organic company growth

The key challenge associated with organic company growth is that the firm needs to be able to build the necessary recourses itself or be able to increase the customer base. If the resources are far from the customer’s existing capabilities, then this can be hard to achieve. Similarly, if customers are locked into existing companies, then it may be hard to attract the customers away from their existing base.

The other key limitation of organic company growth is the speed at which it can be achieved. Individuals need to be hired, the capabilities build, and customers gradually increased over time.

What is inorganic company growth?

Inorganic growth in comparison is when a firm grows through acquiring or merging with other companies. This is a much quicker way of growing the company – rather than having to spend time developing resources internally, or gradually growing the customer base, inorganic growth involves combining the firm with another that already has strengths in these areas.

Challenges of inorganic company growth

While inorganic company growth may be substantially faster than organic company growth, and solve the challenge of how to build resources far from the company’s existing experience, it has its own challenges. Specifically, firms need to integrate the new resources that are acquired into the company. This can be a challenging activity, particularly in combining the cultures and reporting structures of the two firms. 

How to decide between organic and inorganic company gorwth

One approach for determining between organic and inorganic company growth is the build-borrow-buy framework. This approach considers how close the new area is to the company’s existing operations, to decide whether the company should build the resources organically internally, obtain it by partnering with an external firm (borrow), or to inorganically grow by buy it through an acquisition of another firm.