2.3.3 Business Failure 🔏 Flashcards
What are the internal reasons for business failure?
Lack of planning
Cash flow problems - may not have enough WC to fund day to day activities
Lack of funds
Marketing problems
extras
Relying on narrow customer base
Failure to innovate
Lack or business skills
poor leadership
What are external factors of business failure?
Competition
Changes in legislation
Changes in customer base
Economic climate
Changes in market prices / tech advances
How may lack of planning lead to business failure ?
Lack a business plan - unable to see the future outlook of business and keep on track of the main idea - identify problems
Plan financially ASWELL to avoid e undercapitalisation + good relationships with manufactures
How may the internal factor of Cashflow problems lead to business failure ?
(Focus too much on profit -
Over trading - trade large volumes of production with inadequate cash
Investing too much in fixed assess - leaves business insufficient
Allowing to much credit towards customers - too long waiting for customer payments - leads to borrowing and debt
Over borrowing - may borrows to help with financial growth - increase in interest - debt
Seasonal factors - manages stock and costs better and cash may not flow for a while
Unforeseen expenditure - need to prep- breakdown in Machinery ect due to lack of experience or lack of planning
Inverting in too much fixed equipment
External factors - consumer tasted exchange rates economy
Poor financial management - incorrect predictions for variegate analysis Or sales time series data lead to inadequate overspending )
Don’t have enough WC
How may lack of funds lead to business failure ? (Internal )
Due to unreliability and pose too much of a risk to investors - credit crunch
How relying on a Narrow customer base lead to business failure ? (Internal )
Rely too heavy on a narrow customer base - risky in competitive environment
How may marketing problems lead to business failure ? (Internal )
Use of inappropriate pricing strategies or inappropriate advertising- fail to advertise customer need
Fail to reach target market - don’t know needs
How would a failure to innovate lead to business failure?
Can’t Meet new needs or trends - fail to compete with competitors
How would a lack of business skill lead to business failure ?
Fail to execute tasks such as market research or IT to meet needs
How may poor leadership lead to business failure ?
Workers unable to conduct or manufacturers the correct products toward the market
Poor decision masking or lack of correct obj set
How may competition lead to external failure?
May take away target market - through having lower costs or superior quality
How may changes in consumer tastes lead to external failures ?
Fail to adapt to change - don’t meet customer needs
How would economic conditions lead to external failures?
Go into recession unable to proving raw materials needed or customer base lack disposable income need- lose sales
And exchange rates
How may changes in market prices cause external failure ?
May be below the break even price
What are the financial factors that may lead to business failure
Insolvent
Shortage of cash
Bankruptcy
