Organic growth strategy - the benefits if firms “believe in better”

The growth of BSkyB in the UK is a classic example of how to build a business using internal (or organic) growth methods rather than relying on acquisitions. It makes for excellent research-based evidence for students who need to provide examiners with relevant examples of growth strategy.

The charts below are a sample of those presented by BSkyB to investors as part of their interim results for 2011. They provide some excellent analysis of how BSkyB has been able to add over £2bn of annual revenues since 2004.

Several years ago, the firm set itself what, at the time, seemed to be quite an ambitious corporate objective. The target was to achieve 10 million household subscribers in the UK. BSkyB achieved that objective earlier than expected, and that is one key reason why they have been able to enjoy consistent growth in revenues and profits, despite the recent economic downturn.

However, the organic growth story at BSkyB is about more than simply adding many new subscribers. The business has been able to increase the average amount spent by each subscribing household on its services. Pay-Tv subscribers have been persuaded to buy their Internet broadband from BSkyB; customers have upgraded to access HD and 3D; customer loyalty has been improved resulting in a lower percentage of subscribers leaving each year (known as “customer churn”).

In terms of the Ansoff matrix, BSkyB’s strategy has been firmly focused on two of the four boxes; market penetration (increasing its share of subscription television) and product development (innovation leading to the highly successful Sky HD services).

The result of this organic growth strategy seems to be a business that has maintained impressive momentum despite a difficult external environment (e.g. pressure on household spending & advertising).