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The growth strategies for a firm can be divided into internal and external growth strategies. Discuss different types of external growth strat

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the meaning of growth strategy, doesn't matter whether it is an  internal or external growth , is to help our organization to protect and to sustain its existing advantages or to develop new advantages such as the competencies of the organization in the market, how to get and maintain the resources to make the product and so on.

1) mergers
A merger is an external business growth strategy that occurs in two ways: takeover and amalgamation. In a takeover or acquisition, a company buys a majority stake in the other company and takes over control. In amalgamation, two or more companies join forces to form a single entity. Achieving economies of scale, entering new lines of business and accessing scarce raw materials are some of the reasons why companies join forces.

2) Joint venture
A joint venture is an external business growth strategy. In a joint venture, two or more companies decide to establish a new business enterprise to exploit a specific business opportunity. A joint venture is a quick and efficient way to exploit a business opportunity. A small business may not be able to secure enough resources to enter a new market or develop a new product or service. Additionally, a joint venture is a desirable strategy to share the risks of starting a new enterprise to enter a new market.

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External growth strategies develop actual company size and asset worth. External strategies focus on strategic mergers or acquisitions, increasing the number of mutual relationships through third parties, and may even include franchising the business model. The larger the number of business partners and/or franchisees, the greater the network of the company and throughput of cash. The goals of external growth strategies are to provide larger opportunities to increase the worth of the company, and for this reason external growth strategies tend to produce immediate return on investment.

1) Mergers can be defined as the pooling of interests to combine two or more firms into one. For example, horizontal mergers may happen between two companies in the same industry, such as banks or steel companies. Vertical mergers occur between two companies in the same industry value chain, such as a supplier or distributor or manufacturer.

2) Acquisition can be defined as the outright purchases of one firm by another. When a target company is acquired by another company, the target company ceases to exist in a legal sense and becomes part of the purchasing company. Acquisitions are commonly made by using cash or debt to purchase outstanding stock, but companies can also use their own stock by exchanging it for the target firm's stock. Acquisitions can be either hostile or friendly.

3) Joint venture can be defined as an entity created when two or more firms pool a portion of their resources to create a separate, jointly owned organisation.

4) Licensing can be defined as the granting of permission by one company to another company to use a specific form of its intellectual property under clearly defined conditions.

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External Growth Strategy:It is a form of growth strategy where two or more firms combine together. Firms combine to form large enterprises and grow their operations. It overcomes economic stagnation by providing avenues to open new and wider markets through cost reduction, new products or new processes. External growth strategy is also called integrative growth strategy.

1.Mergers: An entrepreneur can grow his business either by internal expansion or external expansion. In the case of internal expansion, a firm grows gradually over time in the normal course of business, through acquisition of new assets, replacement of the technologically obsolete equipment’s and establishment of new lines of products.

In external expansion, firm acquires a running business and grows through corporate combinations. These combinations are in the form of mergers, acquisitions, amalgamations and takeovers and have now become important features of corporate restructuring. They have become popular because of increase in competition, breaking of trade barriers, free flow of capital across countries and globalization of businesses.

In the light of economic reforms, Indian industries have also been restructuring their operations around their core business activities through acquisition and takeovers both domestically and internationally. Mergers and acquisitions are strategic decisions that maximize company’s growth by enhancing its production and marketing operations.

Mergers and acquisitions are taking place in wide areas such as information technology, telecommunication and business process outsourcing as well as in traditional businesses in order to expand the customer base, reduce competition or enter into new markets or product segments.

2. Acquisitions and Takeovers:Acquisition is an act of acquiring effective control by one company over assets or management of another company without any combination of companies.

Thus, in an acquisition, two or more companies may remain independent with separate legal entities, but there may be a change in control of the companies.When an acquisition is ‘forced’ or ‘unwilling’, it is called a takeover. In an unwilling acquisition, the management of ‘target’ company would oppose a move of being taken over.

But, when managements of acquiring and target companies mutually and willingly agree for the takeover, it is called acquisition or friendly takeover.

In the Companies Act (Section 372), a company’s investment in the shares of another company in excess of 10 percent of the subscribed capital can result in takeovers. An acquisition or takeover does not necessarily require full legal control. A company can also have effective control over another company by holding a minority ownership.

3. Joint Ventures: Joint venture is a combination of two or more independent firms that decide to participate in a business venture by contributing to the equity capital of the newly established organisation.

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Different types of external growth strategies.

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Different types of external growth strategies.

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Two types of growth strategy.
1) Mergers
- Mergers occurs in two ways, takeover and amalgamation. In a takeover, a company buys a majority stake in the other company and takes over control. In amalgamation, two or more companies join forces to form a single entity. The reasons why company join forces are because of to achieve economies of scale, entering new lines of business and accessing scarce raw materials.
2) Joint Ventures
- In a joint ventures, two or more companies decide to establish a new business enterprise to exploit a specific business opportunity. A joint ventures is a quick and efficient way to exploit a business opportunity. A small business may not be able to secure enough resources to enter a new market or to develop a new product or service. Besides, a joint ventures is a desirable strategy to share the risks of starting a new enterprise to enter a new market.