Page 3: Creating organisational growth
A key issue facing any large business is that of developing an organisation which is the right size for the markets in which it operates. Bass recognised the need to seek a global competitive advantage from large scale production and widespread market presence. It would do this by growing its core business within the organisation, as well as seeking to acquire companies with long-term growth prospects.
The two routes towards this organisational growth have therefore been:
- Organic growth - this involves the gradual build-up and development of the businesses within the Bass Group. Although organic growth takes longer and is more difficult to achieve, it is cheaper and involves less risk.
- Acquisitions - this is a dynamic form of growth which involves the integration of other businesses into the Bass umbrella. The many benefits of acquisition include instantly becoming larger which helps to increase market share and improve competitiveness.
Horizontal integration occurs when two companies producing similar goods or providing a similar service integrate. Vertical integration involves the acquisition of organisations which will help to secure supplies of raw materials or sales of finished products.
Although acquisitions mean growth targets are achieved more rapidly, it also involves more risk. It is sometimes difficult to integrate the culture of another organisation into the host Group and many customers might not appreciate their supplier being ‘bought’.