NATURE OF BUSINESS: business life cycle Flashcards
stages in business lifecycle
establishment
growth
maturity
post maturity - renew, steady, decline
establishment characteristics
- customers not familiar = little-no customer base
- expenses higher then sales revenue
- negative cash flow
- vulnerable
-lack of market share
growth characteristics
- rapid increase in sales
- pressure to have enough resources for demand (labour, cash)
- competitors increase
- increasing reliable customer base : marketing/word of mouth
maturity characteristics
- cash flows + spending costs are plateauing
- good relationship with competitors: reliability and loyalty
post maturity characteristics
- final stage
-falling sales/loss of market share - cash flow problems
- starts to decline if business does not renew
renewal: increase sales/profits - new products developed and expansion through merger/takeover
steady state: same as maturity phase
decline/cessation: competition more aggressive, failure to respond to external influences
Establishment challenges + strategies
challenge: sufficient capital, developping customer base, developing positive cash flow
Strategies:
- establish good communication with potential suppliers
- closely study target market
- use lost cost marketing (social media)
- create budget with specific allocation for suppliers and marketing
Growth challenges + strategies
challenges: unreliable cash flow, resource management - HR, financial, information, physical (equipment)
Strategies:
- To keep customers: sales promotion, deals, loyalty programs
- to manage HR: Develop a strong employer brand and offer competitive compensation packages to attract and retain skilled professionals.
- to maintain positive cash flow: long-term planning; budgeting, establishing a vision for the future, altering products, expanding the product mix.
- to increase product mix,market share, expand resources: partnership, merger (joining of two separate businesses) or acquisition (takeover of one business by another)
Maturity challenges + strategies
challenges: attracting new customers, developing renewal strategies, managing increasing competition, retaining customers
strategies:
- to attract: market research to look at ways to innovate
- manage increasing competition: Invest in technologies that enhance efficiency, improve customer experience, and enable new revenue streamsm, gain competitive advantage by getting into niche markets
- retain customers: Build strong relationships with existing customers through personalised experiences and exceptional service.
Post maturity challenges and strategies
challenges: avoiding decline - risk of change, managing resources,
maintaining morale with employees, retaining customers
strategies:
to avoid decline: promotion of new products (renew), expand product mix, downsize/alter operations = revival
retain customers: maintenance of loyalty
-be proactive : open to changes in tasts and demand
factors that contribute to business decline
poor planning to begin (inadequate business plan, lack of mart research)
lack of cash flow
unfavourable conditions
two main causes of decline
Lack of management expertise: failure to prepare, continually modify + update plans
Lack of sufficient money: UNDERCAPITALISATION: lack of funds to operate business, from establishment or when cash flow problems arise -> negative snowball effect
Voluntary and Involuntary Cessation
voluntary: OWNER DECIDES to cease operations, both positive (retirement) and negative (rising debts), sometimes ownere will foresee path and cease operations before debt accumulates overtime
Involuntary: FORCED to cease trading by creditors (people who are OWED MONEYe.g banks)
how does sole trader/partnership UNINCORPATED end business
Bankruptcy: voluntary or forced through creditos
- declaration that unincorporated business/person is unabl to pay their debts
- all assets sold, money divided by any creditors to pay debt
how does incorporated businesses end business
voluntary administration, then liquidation if needed
what is voluntary administration
- when an independent administrator is appointed to operate a business for a period of time in the hope of improving its functions and financial position
-RECIEVERSHIP
main role: oversee functions of operations and finacnes, attempt to investigate ongoing issues, also bring owners+ creditors together in attempt to solve issues - popular: gives opportunity to resume normal operations if successful without liquidising assets
