Page 2: Organic growth
Charles Handy, a British business expert, has frequently stressed the importance of growing a successful business. He argues that the most important time to introduce change and innovation is when the business appears to be most successful. A business that grows complacent may appear to be riding the crest of a wave but may actually be on the edge of a trough. An intelligent organisation continually seeks to design better products. Organic growth involves developing new ideas and products from within the business.
New and successful products can be sold to the market at a premium price - i.e. one that reflects value for money through high quality, rather than having to sell products at discounted prices because they are not differentiated from those of rivals.
FKI operates in what is termed an inelastic market for many of its products. An elastic market is one in which it is possible to increase demand by reducing price. For example, if the price of chocolate is halved, it is likely that more chocolate will be bought – it is an elastic market. However, if the price of cookers is halved, demand will not increase significantly as most households have only one in the kitchen. A price decrease in an inelastic market will not generate significantly increased sales because the price reduction will rapidly be matched by competitive sellers. The key to success in an inelastic market is to create better products which are clearly differentiated from rival products. The better product is more desirable and therefore, the customer is prepared to pay a higher price.