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External Growth Strategy

 It is a form of growth strategy where two or more firms combine together. Small and medium firms combine to form large enterprises and grow their operations. It overcomes economic stagnation by providing avenues to firms for opening new and wider markets through cost reduction, products or new processes. External growth strategy is also calls integrative growth strategy.


External growth strategy offers the following benefits;

1. It provides economies of scale.
2. It provides opportunities to firms to expand their operations by expanding the products/markets/ processes.

3. Firms have greater control over marketing activities.

4. It eliminates unhealthy competition.

5. It provides opportunity to overcome economic stagnation.

6. Firms become self-sufficient in obtaining their supplies and selling the outputs.


External growth strategy suffers from the following limitations:

1. Combining two or more business firms requires complete re- organization of their structures.

2. It requires competent management to operate the combined business housed.

3. Huge amount of financial resources are requited to combine business units.

4. There may be problems of co-ordination and integration if managers of combining business houses have conflicting opinions.

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