ACCA Strategic Professional · Strategic Business Leader · Strategic choices
Baltic Marine plans to enter a new product market where it has strong existing technical skills, a loyal customer base and time to build gradually. Its board wants to retain full control, avoid integration problems and avoid paying a takeover premium. Which is the main disadvantage of the organic development route it is likely to choose?
The main drawback is slower growth, since Baltic must build capabilities, market access and reputation on its own. Cultural clash and takeover premiums arise with acquisition, and loss of intellectual property control arises with alliances. Organic development retains control but sacrifices speed.
- AHigh risk of cultural clash with an acquired firm
- BSlower growth and the need to build capabilities and market access without outside helpCorrect
- CLoss of control over intellectual property to a partner
- DPayment of a premium over fair value for the target
Explanation
Organic growth gives control and avoids integration and premium costs, but it is typically slow and requires the firm to build capabilities and market position itself. The other options are drawbacks of acquisition or alliances, not organic growth.
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