Organic+Growth


 * Organic growth** is the process of business expansion due to increasing overall customer base, increased output per customer or representative, new sales, or any combination of the above, as opposed to [|mergers and acquisitions], which are examples of [|inorganic growth] . Typically, the organic growth rate also excludes the impact of foreign exchange. Growth including foreign exchange, but excluding divestitures and acquisitions, is often referred to as //core growth//.

Organic growth has some advantages over growth through mergers and acquisitions. First, organic growth occurs through the use of the firms' earnings, which are produced by the firm's stock of resources. If this resource-earnings model is effective, then firms can grow organically over time as long as they pace their growth (size of the firm) with growth in earnings. Therefore, organic growth can replicate and augment a firm's competitive advantage through its resource bases. Starbucks is a well-known example of a firm that has used organic growth successfully.

In contrast, firms that grow through mergers and acquisitions may be purchasing redundancies in functions such as accounting and human resource management that are cast off after the M&A is complete. Also, mergers and acquisitions frequently involve the merging of different company cultures and idiosyncratic routines and procedures that had provided the firms in pre-M&A status with a competitive advantage. Because of these negative outcomes, M&As are frequently regarded as //**value-destroying**//.

Starbucks

 * Since 1992, Starbucks has grown at a phenomenal pace in the number of stores it operates and, as a consequence, in its revenues. This growth is even more impressive when you consider that Starbucks did this largely through organic growth. As the accompanying chart shows, Starbucks added in 2007 a number of stores (~2,600) that was essentially the entire number of stores it had operated just eight years earlier.

What are the real limits to sustaining this growth? The company has plenty of cash and a sustainable revenue model. In a 2010 interview, CEO Howard Schultz stated that the company's limits to sustained grow were quality people - human capital. Schultz acknowledged that one of his firm's key resources - quality people - could not be replicated across stores through organic growth. Does Mr. Schultz need a Starbucks University? || ||

Why is organic growth so difficult?
https://docs.google.com/file/d/0B9rgPFlyKRqbS3ptNGRBR0NhX0U/edit?usp=sharing

=Two-Bit Rush Project =
 * Case details || [[file:Two-Bit_Rush__Finance.pdf]] ||
 * Excel worksheet || [[file:Two-Bit Coffee Financing to 50.xlsx]] ||