Internal Growth: What It Is and Strategies for Success

Updated June 24, 2022

Businesses can grow through the implementation of several different strategies. Usually, however, growth occurs either internally or externally. Understanding the differences between these two categories of growth and how they impact a company's functionality can help you make important career decisions. In this article, we explain what internal growth is, describe the advantages of internal growth, outline the differences between internal and external growth and list five internal growth strategies.

What is internal growth?

Internal growth, also known as organic growth, occurs when a company uses its own tools and resources to expand. In most cases, this involves increasing production, developing new products or services or other developmental strategies. Internal growth can take time since the company must evaluate its growth potential, determine a strategy and then implement the growth plan. However, internal growth is usually sustainable and can help improve the company's overall success.

Advantages of internal growth

There are several advantages to implementing an internal growth strategy. Consider these benefits of pursuing internal growth for your organization:

Increased knowledge: Since internal growth necessitates a deep understanding of the company's strengths and weaknesses, employing an internal growth strategy helps the organization's leadership develop a deeper understanding of how the business works and performs.
Strategic investing: While most internal growth strategies require capital investments either from the company's coffers or from investors, often, the company can spread the cost of the total growth strategy over the course of the project rather than needing all the funding upfront.
Flexible timing: External growth relies on another company or partner to develop the organization, which means the business is reliant on their timeline and needs. Internal growth, by contrast, is completely independent, allowing for flexibility in the implementation process.
Sustained independence: Since the company itself drives internal growth, there's no reliance on any other organizations for guidance, leaving the company fully independent.
Consistent culture: When companies partner with one another in an external growth strategy, the company's internal culture can shift to reflect the merger. Internal growth means the company can maintain its current culture.

Internal growth vs. external growth

Internal growth and external growth seek to accomplish the same goal — increasing a company's size, market share and profits. However, the methods and strategies within these two growth categories differ tremendously:

Internal growth

Internal growth is the organic development of an organization through strategic decision-making designed to increase a company's size, usually in a specific arena, like production, customer base or region. Internal growth is a singular undertaking — the company uses its own resources and strengths to grow rather than relying on external forces.

External growth

External growth, sometimes called inorganic growth, occurs when the company desiring to grow partners with another organization to achieve its goals. Most commonly, this type of growth happens through mergers or acquisitions. External growth does provide several advantages, but it also limits the amount of singular control the original company maintains.

Five internal growth strategies

Within the umbrella of internal growth, companies can employ a variety of individual strategies to achieve their goals. Consider these five strategies for internal growth:

Increasing production

One strategy for internal business growth is increasing the production of your company's current product or products. This is particularly useful if there's a wide demand for your product, and you know that increasing production will increase sales. Take the time to vet your sales numbers before increasing production, since this strategy is one of the most costly and time-consuming. However, if effective, it can result in some of the highest levels of internal growth.

Example: Shorty's Shoes wants to grow its business through internal means. It decides to increase the production of its toddler shoe line to meet growing demand and maximize the growth opportunity.

Developing new products

Another internal growth strategy is adding a new product or products to your sales line. Depending on the industry you're in, there may be an obvious direction to go in, while in other industries, you may have to think more creatively. Regardless, introducing a new product to the marketplace can attract a new customer demographic to your company and increase the overall size and company value. New product development is usually a high cost, but a high reward internal growth strategy. Ensure your company properly researches the earning potential of a new product before committing to development.

Example: Hannah's Hats is famous for making winter hats for adults and children. It decides to develop a summer sun hat for adults to see if it can increase sales and potentially its customer base.

Establishing new markets

Establishing a new market is another internal growth strategy many companies use when trying to develop their company. A new market is a region or demographic with which your company does not yet work. Depending on your product or service, this could be a different state, region or country or simply shifting your marketing efforts to include a new group of people in your current geographic reach. Establishing new markets is one of the most cost-effective ways of stimulating internal growth since it doesn't involve research, development and production.

Example: Bobby's Books is a local bookstore that historically makes most of its sales in person. However, it recently overhauled its online platform to engage with customers outside of the local area and grow its business.

Increasing current market share

Another low-cost internal growth strategy is to increase your company's current market share. Most organizations do this by evaluating their brand recognition, performing intensive market research and increasing their marketing efforts. To reach more customers in your company's current market, it's best to take the time to establish a thorough marketing strategy that uses both digital and traditional means of customer connection. Usually, developing outreach in a current market is one of the quicker strategies for internal growth.

Example: Sue's Socks has a niche following amongst active adults. It has a dedicated following, but it wants to reach more customers in its current demographic. Sue's Socks creates a new marketing plan designed to reach active adults who don't yet know about the company.

Creating a new business

An additional internal growth strategy is to create an entirely new business in conjunction with your current business. This method is often one of the most costly and time-intensive, but it offers enormous potential for overall growth and continued profitability.

Example: Brittany's Bakery sells homemade breads and pastries. It decides to grow its business by introducing an associated restaurant that uses the baked goods from its bakery on the restaurant's menu.