Organic growth is, in the business world, the growth that a certain business experiences due to the availability and use of the company’s own resources.
In other words, organic growth occurs when we see an increase in our turnover. That is, we observe an increase in customers who demand the good we produce or the service we offer. In this sense, the fact that it is called "organic" is due to the fact that this growth has been motivated by the use of the available resources that the company has.
A readjustment in strategy, a review of our product portfolio, or resourcing staff to work more efficiently can be good examples of what we would call "organic growth" in a company.
This growth is in contrast to "inorganic growth." Another type of growth that, as we will see below, presents differences with the growth that concerns us here.
Difference between organic growth and inorganic growth
As we said in the previous section, in the same way that we have organic growth, we have inorganic growth.
On the one hand, we must remember that organic growth, in the business world, is that growth that has been motivated by the use of available resources that the company has. In other words, the growth that the company experiences as a result of a better use of resources, a readjustment in the supply chain, a reorganization of personnel, as well as other phenomena.
On the other hand, inorganic growth, unlike the previous one, is that experienced by the company as a result of a merger, an acquisition, as well as any operation in which, in addition to own resources, capital is the predominant factor that motivates the growth that the company registers. The fact that it is called inorganic, as it happens in the world of social networks, is because we motivate growth through the injection of capital and the acquisition of a company, for example.
Unlike organic growth, inorganic growth offers a series of advantages that, even though it is more expensive in terms of capital, make this growth, in many cases, more desirable than organic growth. This is mainly due to the fact that it is a more showy and faster growth. Although this, as we will see below, is not without its drawbacks.
Advantages and disadvantages of organic versus inorganic growth
Thus, we cannot leave ourselves behind the advantages and disadvantages that this type of growth presents compared to inorganic growth. Therefore, let’s see some below:
Advantages of organic growth versus inorganic growth
- It is cheaper and provides greater autonomy and independence : Unlike inorganic growth, this type of growth is much less expensive. Therefore, it does not require large capital injections. Injections that sometimes lead us to depend on external investors and banks with whom there are conflicts of interest.
- It’s more sustainable : Organic growth, unlike inorganic growth, is also more sustainable. Nobody is able to base their strategy on buying companies every month to sustain a very high growth rate. However, we can maintain a consistently lower growth rate.
- The risk is lower : As it is a progressive expansion, the risks we assume are lower. In the same way, we do not have to be involved in debt to finance the expansion, as it is considerably less expensive.
Disadvantages of organic growth versus inorganic growth
While the main disadvantages are the following:
- Growth rate : As we know, this type of growth is considerably less accelerated than if we were talking about inorganic growth. The expansion is much more gradual.
- Expansion and performance : Finally, it is difficult for a company, if it wants to position itself globally, to be among the world’s leading firms in its sector with only organic growth. As your business expands, it will have to turn to inorganic growth. Sometimes to complement your strategy and expand around the world.
- It does not require a lot of capital, but it does require a lot of resources : It is often said that this type of growth is less expensive. However, on many occasions we must resort to a lot of human capital and many hours to make the company grow. If we calculate the balance of time and resources allocated to organic growth, the scenario could arise that the operation would not be profitable compared to the inorganic alternative.
Organic growth in social networks
We often hear about organic growth in the world of social media. People often talk about organic growth on Instagram, Facebook, as well as other social networks. Networks that, incidentally, implement advertising spaces for companies to expose their products and services to the public registered on the network.
As in the business world, and also dealing with one aspect of this, organic growth in social networks is, as in the business world, a regular growth, the product of a readjustment of publications, an increase in themselves, as well as an adaptation of the strategy adopted. This allows us to increase our followers and views without resorting to inorganic growth. A growth that would be based on capital, and on the payment of ads to increase our exposure on the network.
Therefore, we are talking about the same type of growth, but in the world of information technology and social networks.