2.3.3 - Business Failure

Question 1

What is business failure

Answer 1

• Business failure is when a business ceases to trade or when a business does not trade in a profitable way or when a business makes a terrible decision

Question 2

what are the internal causes of business failure

Answer 2

1. Poor efficiency
2. Poor marketing
3. Failure to innovate
4. Bad management of working capital

Question 3

what are some reasons for business failure

Answer 3

1. Economic recession
2. Strong pound – reduced export demand

Question 4

what is economic recession

Answer 4

• As a country enters economic recession, customers start to save rather than buy
• They put off decisions to purchase large expensive items and they also switch to buying more inferior goods
• These buying decisions means that some businesses fail in a recession – whereas others might prosper

Question 5

what is strong pound

Answer 5

• Strong pound means that manufacturing businesses who heavily export will be affected
• It means their goods and products that they manufacture will cost their customers more
• Some businesses shift production overseas to counter this effect but not all can afford to do this

Question 6

What is business efficiency

Answer 6

• how well the business uses its resources (Finance, workers, technology, land)