Assess whether expanding by organic growth was the right decision for Mumtaz - Edexcel - A-Level Business - Question 1 - 2018 - Paper 2

To evaluate whether organic growth was the right decision for Mumtaz, several factors need to be considered.

Reasons for Organic Growth

1. Retaining Control: As a family-owned business, Mumtaz can manage its operations and culture more effectively. Organic growth allows them to maintain their management structure, ensuring that decisions are aligned with their values and long-term vision.

2. Growth in Demand: The ready meals sector is experiencing significant growth, with Mumtaz's ready meal segment growing at 15-20%. This indicates a strong market demand that can be capitalized upon through organic expansion.

3. Strategic Planning: Organic growth enables Mumtaz to carefully plan and manage its expansion, such as the recent opening of a second factory. This allows for a controlled approach to meeting increasing customer demand without overextending resources.

Possible Counterbalance

1. Market Competition: While organic growth is beneficial, Mumtaz may risk falling behind competitors who might expand more quickly through mergers or acquisitions, potentially offering larger product ranges.

2. Limitations of the Market: Organic growth may be slow; Mumtaz has been operating since 1979 and has only gradually grown to its current size, which may limit future opportunities.

3. Financial Constraints: Depending solely on internal financing can restrict the scale and speed of growth, particularly in a competitive sector like ready meals.

Conclusion

In conclusion, while expanding by organic growth has allowed Mumtaz to maintain control and benefit from market demand, there are risks associated with this strategy. Overall, the focus on organic growth appears to be the right decision given their ability to adapt to market trends and gradually increase their market share within the Asian food sector.