Organic Growth

Organic Growth Meaning

Organic growth is the rate of growth that a company achieves by increasing sales revenue by increasing volume of products sold or by achieving greater operational efficiency leading to a reduction in the cost of production or any other internal improvement such as increased marketing and sales efforts. It does not take include incremental revenue and profits that accrue from acquiring external companies.


Organic Growth

You are free to use this image on your website, templates etc, Please provide us with an attribution linkHow to Provide Attribution?Article Link to be Hyperlinked
For eg:
Source: Organic Growth (

Examples of Organic Growth

Coca-cola, one of the oldest companies in the beverage market, was first started in 1886, and till 1948, it captured approx 60% of the market share, and by 1984, this share reduced to 21% when it started facing stiff competition. The company made its first acquisition in 1960 by acquiring Minute Maid. Therefore it is clear that from 1886 to 1960, the company grew organically, which is a growth period of 74 years.

During this time, the ownership of the company changed many times; however, the company didn’t make any acquisition. It based its growth solely through organic development.

Every company uses a combination of both the strategies because, after a while, the company reaches the mature stage of the product life cycleProduct Life CycleThe term "product life cycle" refers to the entire process that a product goes through from the time it is launched in the market until it is taken off the market and is divided into four stages: introduction, growth, maturity, and more, and to stay relevant, it either has to diversify or develop new products. In 2018, the organic growth of the company was 5% globally.


There can be several drivers of organic growth that tackle different line items on the income status to increase the bottom line. These can be broadly classified as follows:

#1 – Increase in Sales Revenue

It can be achieved in various ways:

  1. Selling more units at the same price requires increasing product awareness through sales promotion and marketing efforts. Developing brand investing in advertising might expand the demand
  2. Selling the same units at a higher price by creating segments of the market, for example, the snacks in the multiplexes are one way of doing this
  3. Also, it can be done by exploring more geographical areas, such as rural areas or international sales. Therefore one way of achieving growth is by impacting the top lineThe Top LineThe top line is the revenue earned by the business by selling goods or services, reported in the income statement for a defined period. read more.

#2 – Reducing Cost

There are various kinds of costs which go into the production of goods and services. Material, Labour, and Overheads are three broadheads for the same.

  1. Being able to source raw material cheaply through developing a vendor network is one way to keep material costs in check.
  2. Hiring more contract labor as per the regulatory guidelines is another way of cost-cutting.
  3. Locating the plant near the source of raw material is also a way to reduce transportation costs.
  4. These days people have also reduced office space as a lot of work can be done online. Companies opt for shared working spaces to reduce fixed expenditures.

#3 – Improving Operational Efficiency

This can be achieved by conducting periodic training of the operations personnel so that the marginal productivity of labor increases and the value added by each labor is higher.


Below is some importance.

#1 – Brand development

Organic growth is an essential factor in developing the brand. The sustainable existence of a company in its range of products for decades is what makes the company a household name. For example, Coca-cola has existed for decades because it grew organically first. One product has to become successful for the company to create faith and confidence in the consumers about the company.

#2 – Drives Inorganic Growth

Organic growth provides the companies the resources to achieve growth through M&A. It acts like a platform that is used for inorganic growth because even the target companies would want to merge into more prominent brands only if they see some benefit out of it. MergersMergersMerger refers to a strategic process whereby two or more companies mutually form a new single legal venture. For example, in 2015, ketchup maker H.J. Heinz Co and Kraft Foods Group Inc merged their business to become Kraft Heinz Company, a leading global food and beverage more imply that both the companies exist but under the same umbrella. Therefore Target companies would not want to involve themselves in a merger, which doesn’t lead to any synergies.

Difference between Organic Growth and Inorganic Growth

#1 – Meaning

Organic growth is achieved through increasing sales revenueSales RevenueSales revenue refers to the income generated by any business entity by selling its goods or providing its services during the normal course of its operations. It is reported annually, quarterly or monthly as the case may be in the business entity's income statement/profit & loss more or by reducing costs to achieve greater profits. Inorganic growth is achieved through mergers and acquisitions done by a big company where it thinks that a specific smaller player would add synergy or help in diversifying its product range.

#2 – Life Stage

Organic growth is mandatory at a primary stage for any successful company. Inorganic growth can only follow a steady growth. No company exists solely for acquiring other companies. That is the motive of a retail investorRetail InvestorA retail investor is a non-professional individual investor who tends to invest a small sum in the equities, bonds, mutual funds, exchange-traded funds, and other baskets of securities. They often take the services of online or traditional brokerage firms or advisors for investment more who invests in the stock of a company. An investor who has a control perspective needs to have a more significant reason for entering into inorganic growth.

#3 – Growth Rate

Organic growth is achieved slowly over time as the brand gets established. Inorganic growth is achieved relatively quickly because both acquirer and target have achieved a certain level of organic growth, and if it is not a hostile takeoverHostile TakeoverA hostile takeover is a type of acquisition of a target company by an acquiring company in which the target company's management is not in favour of the acquisition but the bidder still uses other channels to acquire the company, such as acquiring the company through tender offer by directly making an offer to the public to buy the shares of the target company at a pre-specified price that is higher than the prevailing market more, it is a consensual interaction and therefore, can be achieved quickly.



  • Slow: It takes years or even decades to get established in the market and stay relevant. Organic growth can be achieved overnight, and in comparison, inorganic growth is a lot faster if not overnight.
  • Low success rate: Not every company can succeed organically. Out of many coming into the business, very few are able to stay till they can start earning profits, and even fewer are able to become a going concern in the true sense. The failure rate is very high.


Therefore, we understand that Organic growth can be achieved through increasing sales, reducing costs, and increasing efficiency. It leads to brand development, but it is a long term process. It has a high risk and high return profile because success is achieved after a long gestation period, but if achieved, it lasts for decades and, in some cases, for even centuries.

However, we also need to understand that it ends after the product or the company reaches saturation. From this point onwards, the company has to either diversify or integrate. These can be achieved either internally or through Inorganic growth channels.

Recommended Articles

This article has been a guide to Organic Growth and its meaning. Here we discuss examples, strategies, and the importance of organic growth along with advantages and disadvantages. You may learn more about financing from the following articles –