Page 1: Going for growth
Growth is an important business strategy; many advantages flow from being bigger. Size brings with it many savings, e.g. an ability to buy at a lower cost in bulk and to spread the company's fixed cost base over a far larger output. This allows the company to create leverage and improve the return on its asset base, achieving economies of scale. Some businesses are much better placed than others for growth.
A business can grow through:
- Internal growth - funded by investing profits back into the business and issuing new shares or borrowing as a source of cash, to expand and improve the existing assets.
- External growth - by acquiring an existing business, e.g. Sofa Workshop. Acquisition is a speedy form of growth. The acquired businesses can be integrated into the existing operation thereby providing synergy from their combination.
MFI has pursued both internal and external growth.