7.7.2—Internal growth

Internal, or organic, growth occurs when a firm increases output or capacity through its existing operations—such as new outlets, investment, product development or entering a new region.

It is usually slower and more controllable than buying another firm, and the culture and systems are easier to integrate. Funding constraints, management capacity and demand risk can limit the pace.

A bakery opens two new shops, trains staff and develops a delivery line. It becomes larger without acquiring another bakery.

Internal growth is not automatically safer: a firm can overinvest, dilute quality or enter a market it does not understand.