- July 28, 2022
- Posted by: Ramkumar
- Category: Posts

Organic vs Inorganic Growth Strategy? Which one to choose and When?
One of the frequent questions founders ask is how to resolve this ๐ฏ๐๐ ๐๐ ๐ฏ๐๐ถ๐น๐ฑ conundrum.
๐๐ ๐ถ๐ป๐ผ๐ฟ๐ด๐ฎ๐ป๐ถ๐ฐ ๐๐๐ฟ๐ฎ๐๐ฒ๐ด๐ ๐ฎ ๐ฟ๐ผ๐๐๐ฒ ๐ณ๐ผ๐ฟ ๐พ๐๐ถ๐ฐ๐ธ๐ฒ๐ฟ ๐บ๐ฎ๐ฟ๐ธ๐ฒ๐ ๐๐ต๐ฎ๐ฟ๐ฒ/๐ด๐ฟ๐ผ๐๐๐ต ๐ฟ๐ฒ๐น๐ฎ๐๐ถ๐๐ฒ ๐๐ผ ๐ผ๐ฟ๐ด๐ฎ๐ป๐ถ๐ฐ?
1๏ธโฃ In my view, if the firm intends to enter a new business segment related to its existing business, then the organic strategy works better, mainly if it is an excellent performer in its current industry. For instance, a ๐ณ๐ถ๐ฟ๐บ ๐๐ถ๐๐ต ๐ฎ ๐๐๐ฟ๐ผ๐ป๐ด ๐ฏ๐ฟ๐ฎ๐ป๐ฑ ๐๐ต๐ผ๐๐น๐ฑ ๐ถ๐ป๐๐ฒ๐๐ ๐ถ๐ป ๐ถ๐๐ ๐๐ฎ๐น๐ฒ๐ ๐ณ๐ผ๐ฟ๐ฐ๐ฒ ๐ฟ๐ฎ๐๐ต๐ฒ๐ฟ ๐๐ต๐ฎ๐ป ๐ฎ๐ฐ๐พ๐๐ถ๐ฟ๐ถ๐ป๐ด ๐ณ๐ถ๐ฟ๐บ๐ ๐๐ผ ๐ด๐ฎ๐ถ๐ป ๐ฎ๐ฐ๐ฐ๐ฒ๐๐ ๐๐ผ ๐ป๐ฒ๐ ๐ฐ๐๐๐๐ผ๐บ๐ฒ๐ฟ ๐ฟ๐ฒ๐น๐ฎ๐๐ถ๐ผ๐ป๐๐ต๐ถ๐ฝ๐.
2๏ธโฃ A firm should decide if the inorganic strategy helps in either giving it a ๐ณ๐ถ๐ฟ๐๐ ๐บ๐ผ๐๐ฒ๐ฟ ๐ฎ๐ฑ๐๐ฎ๐ป๐๐ฎ๐ด๐ฒ ๐ผ๐ฟ ๐ฐ๐ฎ๐ป ๐ผ๐๐ฒ๐ฟ๐ฐ๐ผ๐บ๐ฒ ๐ฐ๐ผ๐บ๐ฝ๐ฒ๐๐ถ๐๐ผ๐ฟ๐ ๐๐ต๐ผ ๐ต๐ฎ๐๐ฒ ๐ฎ ๐ณ๐ถ๐ฟ๐๐ ๐บ๐ผ๐๐ฒ๐ฟ ๐ฎ๐ฑ๐๐ฎ๐ป๐๐ฎ๐ด๐ฒ. For instance, if a firm has invested $10 million in blockchain for the last five years to build its market share. A competitor cannot dislodge the firm’s first mover advantage by investing organically worth $50 million in a single year. Instead, he is forced to consider inorganic growth.
๐ง๐ต๐ฒ ๐ฝ๐ผ๐ฝ๐๐น๐ฎ๐ฟ ๐ป๐ผ๐๐ถ๐ผ๐ป ๐๐ต๐ฎ๐ ๐ถ๐ณ ๐๐ฝ๐ฒ๐ฒ๐ฑ ๐ถ๐ ๐ฒ๐๐๐ฒ๐ป๐๐ถ๐ฎ๐น, ๐ถ๐ป๐ผ๐ฟ๐ด๐ฎ๐ป๐ถ๐ฐ ๐ด๐ฟ๐ผ๐๐๐ต ๐ด๐ฎ๐ถ๐ป๐ ๐ฝ๐ฟ๐ฒ๐ฐ๐ฒ๐ฑ๐ฒ๐ป๐ฐ๐ฒ ๐ผ๐๐ฒ๐ฟ ๐ผ๐ฟ๐ด๐ฎ๐ป๐ถ๐ฐ ๐ด๐ฟ๐ผ๐๐๐ต ๐ถ๐ ๐ณ๐ฎ๐น๐น๐ฎ๐ฐ๐ถ๐ผ๐๐. The problem is the ๐๐ฒ๐ฐ๐ผ๐ป๐ฑ ๐บ๐ผ๐๐ฒ๐ฟ ๐ฑ๐ถ๐๐ฎ๐ฑ๐๐ฎ๐ป๐๐ฎ๐ด๐ฒ. If competitors have relevant assets and it is difficult for you to replicate them, or there is a substantial second-mover disadvantage for trying to build similar resources, then ๐ถ๐ป๐ผ๐ฟ๐ด๐ฎ๐ป๐ถ๐ฐ ๐ด๐ฟ๐ผ๐๐๐ต ๐ถ๐ ๐๐ต๐ฒ ๐ฟ๐ถ๐ด๐ต๐ ๐ผ๐ฝ๐๐ถ๐ผ๐ป.
Inorganic growth strategy has its downsides – High control premium, loss of motivation of target employees and integration costs. If the ๐บ๐ฎ๐ด๐ป๐ถ๐๐๐ฑ๐ฒ ๐ผ๐ณ ๐๐ต๐ฒ ๐๐ฒ๐ฐ๐ผ๐ป๐ฑ ๐บ๐ผ๐๐ฒ๐ฟ ๐ฑ๐ถ๐๐ฎ๐ฑ๐๐ฎ๐ป๐๐ฎ๐ด๐ฒ ๐ฒ๐ ๐ฐ๐ฒ๐ฒ๐ฑ๐ ๐๐ต๐ฒ ๐ฑ๐ผ๐๐ป๐๐ถ๐ฑ๐ฒ๐ ๐ผ๐ณ ๐๐ต๐ฒ ๐ถ๐ป๐ผ๐ฟ๐ด๐ฎ๐ป๐ถ๐ฐ ๐ด๐ฟ๐ผ๐๐๐ต ๐๐๐ฟ๐ฎ๐๐ฒ๐ด๐, ๐๐ต๐ฒ๐ป ๐ฏ๐๐๐ถ๐ป๐ด ๐ถ๐ ๐ฎ ๐ฏ๐ฒ๐๐๐ฒ๐ฟ ๐ฑ๐ฒ๐ฐ๐ถ๐๐ถ๐ผ๐ป ๐๐ต๐ฎ๐ป ๐ฏ๐๐ถ๐น๐ฑ.