2.3.3 Business Failure

Question 1

What are some of the internal causes of business failure?

Answer 1

• Poor Planning- Ineffective business plan, poor budgeting, lack of R&D, little innovation
• Lack of leadership- Poor decision making,lack of urgency,failure to delegate,lack of skills to run a business
• Ineffective marketing- Not enough or inappropriate market research,poor understanding of customer needs,promotional mistakes
• Cash flow problems- flawed product & pricing decisions, promotional mistakes
• Lack of funds- Failure to attract investment, difficulties in borrowing, limited owner capital

Question 2

What are some external causes of business failure?

Answer 2

• Economic challenges, business failure increase during periods of recession due to reduced demand, Rising interest rates increase business costs
• Changes in consumer tastes- The need for frequent market research increases costs
• Legal factors Market challanges- Products or assets may need to be redesigned or replaced to meet changed legal standard
• Market challenges- Competitors undercut prices to gain market share, Market selling prices may be too low to achieve break even

-