2.3.3 business failure external causes

Question 1

What are some external causes of business failure?

Answer 1

• Poor planning
• Ineffective business plan
• Poor budgeting
• Lack of research and development
• Lack of leadership
• Poor decision making
• Lack of urgency
• Failure to delegate
• Lack of skills to run a business
• Ineffective marketing
• Cash flow problems
• Not enough or inappropriate market research
• Poor understanding of customer needs
• Flawed product and pricing decisions
• Promotional mistakes
• Lack of funds
• Failure to attract investment
• Difficulties in borrowing
• Limited owner capital

External causes refer to factors outside the control of the business that can lead to its failure.

Question 2

How do economic challenges contribute to business failure?

Answer 2

• Business failures increase during periods of recession due to reduced demand
• Rising interest rates increase business costs
• Exchange rate fluctuations affect planning and can increase costs

Economic challenges can significantly impact a business’s ability to operate profitably.

Question 3

What legal factors can lead to business failure?

Answer 3

• Products or assets may need to be redesigned or replaced to meet changed legal standards
• Legal rulings can affect business operations
• Legislation can increase staffing and transport costs

Compliance with legal standards is crucial for business sustainability.

Question 4

What internal issues may contribute to business failure?

Answer 4

• Poor understanding of customer needs
• Flawed product and pricing decisions
• Changes in consumer tastes
• The need for frequent market research increases costs
• Dated stock may be unsellable

Internal issues often stem from a lack of market awareness and adaptability.

Question 5

How do market challenges impact businesses?

Answer 5

• Competitors undercut prices to gain market share
• Market selling prices may be too low to achieve break even

Market challenges require businesses to be agile and competitive.

Question 6

What is a significant technological change that can affect businesses?

Answer 6

• Significant capital spending is needed to replace obsolete non-current assets
• Product innovation leads to disappearance of a business’s market

Technological advancements can render existing products or services obsolete, necessitating continuous innovation.

Question 7

Fill in the blank: Lack of _______ can lead to poor decision making in business.

Answer 7

[leadership]

Question 8

True or False: Poor budgeting is an internal cause of business failure.

Answer 8

True

Question 9

Fill in the blank: Businesses often fail to attract _______ due to lack of funds.

Answer 9

[investment]

Question 10

What are some consequences of poor marketing?

Answer 10

• Ineffective marketing strategies
• Cash flow problems
• Not enough or inappropriate market research
• Promotional mistakes

Marketing plays a crucial role in a business’s success and can lead to failure if not executed properly.