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Organic Growth & Inorganic Growth

Organic Growth & Inorganic Growth

snehanathwani ,  21-Nov-09

In finance, organic growth is the process of business expansion due to increased output, sales, or both, as opposed to mergers, acquisitions, or take-overs. 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 is growth that comes from a company's existing businesses, as opposed to growth that comes from buying new businesses. It may be negative.

Organic growth figures are adjusted for the effects of acquisitions and disposals of businesses. Organic growth does include growth over a period that results from investment in businesses the company owned at the beginning of the period. What it excludes is the boost to growth from acquisitions, and the decline from sales and closures of whole businesses.


Inorganic growth is the rate of business, sales expansion etc. by increasing output and business reach by acquiring new businesses by way of mergers, acquisitions and take-overs. This kind of growth also takes place due to government directives, leading to enhancement of business in some identified priority sector/area.The inorganic growth rate also factors in the impact of foreign exchange movements or performance of other economies.

As opposed to the organic growth this kind of growth is affected to a great extent by exogeneous factors. It is also a faster way for companies to grow compared with Organic growth (where main focus is productivity enhancement and cost reduction).

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