Summary
Summary Business Failure
- Institution
- PEARSON (PEARSON)
Describes the internal and external factors contributing to the failure of a business.
[Show more]
Content preview
Theme 2 Topic 14Business Failure
Causes of Business Failure
Internal Factors
These arise from problems inside the business:
Poor cash flow management – 70% of business failures are due to this. Even firms which are
profitable find it impossible to continue trading as they are unable to pay their debts
Lack of effective market research – small businesses often lack the resources to undertake sufficient
research and consequently have limited information about their target market and competitors.
Larger firms may neglect market research and don’t spot changes in the market or what their
competitors are doing
Lack of skills needed to run a business – small businesses often lack the resources needed to employ
skilled staff with specialist business knowledge, so they make bad decisions
Difficulties establishing a customer base – new businesses often find it hard to attract sufficient
customers – could be due to having insufficient funds to spend in marketing
External Factors
These arise from problems outside the business:
The actions of bigger competitors – more established competitors may be able to charge lower prices
or launch more effective marketing campaigns
Changes in economy – especially if it goes into recession, consumers will have less money to spend.
Businesses suffer from lack of demand and may have to reduce prices, leading to lower profit margins
Rising cost of raw materials, rent and energy – these will increase costs. If a business increases its
prices to cover these costs, it may lose customers
Government regulations – these will add to business costs, as well as restricting business activity.
There is also the ‘opportunity’ cost resulting from completing all the paperwork required by the
regulations
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller emily1744. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £2.99. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
64438 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy revision notes and other study material for 14 years now