Why External Business Growth Should Be Part of Your Growth Strategy
Growing a business is a challenging task that requires an effective strategy and the right approach. Many businesses focus on internal growth, which involves expanding their offerings, diversifying their products and services, and increasing their market share. However, external growth can also be a vital aspect of a growth strategy, and businesses that overlook it may miss out on significant opportunities.
External growth refers to the process of expanding a business through acquisitions, mergers, or partnerships. These methods allow businesses to gain access to new markets, customers, and resources that can help them achieve their goals. Here are some reasons why external growth should be part of your growth strategy:
Access to New Markets
One of the most significant benefits of external growth is the ability to access new markets quickly. When a business acquires another company or partners with it, it gains access to its customer base, distribution channels, and marketing strategies. This can help a business expand its reach and attract new customers who may not have been reached through internal growth.
For example, in 2019, Nike acquired the data analytics company Celect to expand into the optimization of inventory and supply chains. The acquisition allowed Nike to gain access to Celect’s data-driven insights and customer base, which helped improve its supply chain and online sales.
Increased Innovation and Technology Adoption
External growth can also lead to increased innovation and technology adoption. Businesses that partner with or acquire innovative startups or companies can gain access to new technologies, processes, and ideas that may be complicated to develop in-house. This can help businesses stay competitive and adapt to changing market conditions.
For example, in 2014, Apple acquired Beats Electronics to expand its offerings in the music streaming industry and gain access to Beats’ technology and design expertise. The acquisition allowed Apple to introduce Apple Music, which became one of the leading music streaming services worldwide.
Greater Economies of Scale
External growth can also provide businesses with greater economies of scale. By acquiring or merging with another company, a business can combine its strengths with those of the other company to improve efficiency, decrease costs, and increase profitability. This can also provide businesses with more bargaining power with suppliers and distributors, leading to better deals and contracts.
For example, in 2019, Bristol-Myers Squibb acquired Celgene in a $74 billion deal to gain access to Celgene’s pipeline of cancer drugs. The acquisition helped Bristol-Myers Squibb reduce duplication of costs and improve its drug discovery and development processes.
Conclusion
In conclusion, external growth can be a vital aspect of a growth strategy. It provides businesses with several benefits, including access to new markets, increased innovation and technology adoption, and greater economies of scale. By incorporating external growth into their strategy, businesses can stay competitive and achieve their growth objectives effectively. Therefore, it’s essential to assess the potential benefits of external growth against the risks and costs involved and determine whether it’s the right option for your business.
