Organic Growth Strategies

Patrick McConnell

This chapter describes a number of cases, such as Lehman Brothers, Halifax/Bank of Scotland (HBOS) and others, in which boards of directors and management had adopted organic growth strategies but failed to manage the risks inherent in those strategies. Growth strategies are notoriously difficult to execute and can lead to considerable damage to shareholders, if the strategy fails.

GROWTH STRATEGIES

Chapter 4 described four main types of strategy, which are used to “actively” position a firm within the context of a generic strategy (Porter 1980), one of which was a so-called growth strategy. Such a strategy aims to position a firm to grow assets, revenues and income through three main “methods” (Johnson and Scholes 2002):

• 1. organically: using the firm’s own resources, possibly taking on more debt or equity, to generate profitable opportunities in existing or new markets (often called “diversification”);
  2. acquisition: by acquiring or merging with firms that will provide additional capacity in existing or new markets; and
  3. joint development: by entering into a formal relationship with another firm to jointly develop and/or market existing or new products in existing or