The Common Causes Of Business Failure Business Essay

The Common Causes Of Business Failure Business Essay wishing of intentness Experience and Knowledge, Insufficient Start-up Money, Failure to Understand Market and Customers, Poor Employee Management Skills, Wrong Location, Improper Pricing of Product or Service, Failure to Understand and reply to Competition, Incorrect Cash-Flow Estimates (Poor Budgeting), Insufficient duration Devoted to Business, Mis guidance of Assets,(Cash ,Inventory, Receivables, Fixed Assets)Prepargon Sales levyation Make Quarterly Payments, Estimate Income Tax, Make Payments, Analyze equivocal Accounts Receivables, Review Detailed Inventory Schedule, Analyze Prepaid Expenses, Review Schedule of Property and Equipment, Review Accounts Payable/Accrued Expenses, Review Schedule of Insurance Policies. harmonize to PL, analyze Inventory Write-downs, Analyze some other Assets and Other Liabilities, Analyze Current/Long-Term Debt, Prepare IRS Forms W-2 (employee) and Forms 1099 (consultant), Close Financial Books for the Year, Draft Financial Reports (if needed), Draft Tax ReturnsIf they deliver no ideas of these items there was maximum chance of strain ill and need to minimize the agate line and go ahead to victory.Fredland and Morris (1976) says when a owner strike a headache he/she/ telephoner accept the three kinds of risk. which resolve the success to the crease. firstly. risk related with the economy in which product line is located. it referred to economy found risk. Secondly, risk related with the industry in which that bloodline is operating. It referred to industry based. Thirdly, risk related with the business itself which is unique. I t refereed to starchy based risk.According to (Dun and Bardstreet 1997), utter that most of the business are loser because they bear non survey approximately their business and their employees. Only 20 employees make believe 37% chance to surveying four categorys. 9% chance of surveying 10 years and these failed business 10%of them closed involuntarily due to bankruptcy and 90% closed because the business was not successful. Other thing is owner didnt pay how much the employee wants or desired as for their effort.In US over 43000 business failed on 1997 thats total liabilities nearly $20 billion.90% business failure in the US are cause by a lack of general business management skills and imagening. According to Dun Bradstreet statistics7, 88.7% of totally business failures are due to management slides. The following list summarize the 12 leading management mistakes that lead to business failures.1) Going into business for the wrong reasons2) Advice from family an friends3) existence in the wrong come forth that the wrong metre4) Entrepreneur gets worn- unwrap and/or underestimated the time requirements5) Family pressure on time and money commitments6) Pride7) drop of market awareness8) The entrepreneur falls in love with the product/business9) Lack of financial responsibility and awareness10) Lack of a fire up charge11) Too much money12) Optimistic/Realistic/PessimisticIt should be unders besidesd that no magic solutions forget guarantee a business success. However, the following items should assist in the improvement of chances for success.1) Development of a business plan2) Obtaining accurate financial information about the business in a timely manner3) Profile of fool4) Profile of competition5) Go into business for the right reasons6) Dont borrow family money and dont ask the family for advice7) Network with other business owners in similar industries8) Dont forget, someone will always have a lower price than you9) Realize that consumer tastes and preference change10) Become better communicate of the preferences that are available1.2.2 some causes of business failure in the market1. Lack of clear links mingled with the objectives and the organisations key strategicalal priorities, including agreed measures of success.2. Lack of clear senior management and other l evel.3. Lack of heartive engagement with stakeholders.4. Lack of skills and established approach to project management and risk management.5. Too piddling attention to breaking development and implementation into manageable steps.6. Evaluation of proposals driven by initial price rather than long- enclosure value for money (especially securing speech of business benefits).7. Lack of understanding and contact with the supply industry at senior levels in the organisation.8. Lack of effective arranging team integration between clients, the supplier team and the supply chain.1.2.3 Small Business Success storyOne of the success busine.ss story of Oscar Neal Asbury who is the founder and president of Greenfield World Trade. He convoluted in exporting of high quality US product since 1979.he gives the service for the food and equipment over 130 countries to both retail and commercial market.Now a days Asbury is the US economy stragglers he expanding his products. He is a success busine ss man at getting loan during the national credit just nowterfly and witness to the financial strength of his company as well as the strategic importance of being an exporter to over 130 countries. He won the reputable award 2008 small business week National Exporter Year award and E-Star Export and the Export Achievement award from the US Department of commerce.In 1981 he went to Asia for re stand fored several US manufactures throughout the region and In 1987 he found Asbury worldwide which became the largest American Export management company in its atom with 12 distri notwithstandingion facilities around the world. He starts FAB Asia, Inc. In the Philippines which was the exclusive Asian fabricators of commercial kitchens for McDonalds as well as other well cognise American restaurants and chains. In 1999 Mr. Asbury established his current company, Greenfield World trade ,.Inc. He published over 50articals on global trade issues, a column for to The power point News and In ternational Trade Blog for asburysworld.com .Mr. Asbury is similarly an advocate, leader in this field and also the US secretary of commerce, he serves as the chairman of the southeastern Florida district Export Council and is a founding faculty member of Export University. He is also the member of the international policy committee at the US chamber of commerce in Washington DC.This is the successful business story of Asbury in the small business governance who gives his effort for the organization. At that time he used various types of ideas and business strategy with their business competitors.when the business start it need to faced many kinds of internal and external problems. For the success business organization reduce or solving problem which effect the organization . The modern business is very complex. Due to scientific and technological development, changes are taking place very fast in every business field. Following are the basic personal skills or qualities which a good man of affairs must be possessed of1. Ability to Plan A businessman, if he wants to shine in business, must have the ability to plan and organize it.2. Activator He had to activate his workers. If he activates his workers past this is good for business.3. Bold or Courage Courage is a great asset of a businessman. A good businessman should be a gamy and bold person. May be his some angry ends gave him loss in future, so he has to be courageous and be bold.4. Cooperation A good businessman should have to cooperate with his workers. With the help of cooperation with his workers he can run his business well.5. Courtesy Courtesy is to business what oil is to machinery. It costs nothing but wins a reputation. So businessman has to win the heart of everyone with his polite manners.6. Decision Making A good businessman should be a good and quick decision plantr. Quick decision of a businessman is an important asset of businessman. And businessman has to know that his quick decisio n will give him benefit or not.7. determine A good businessman should have to care about the take of the business. If he doesnt care about the discipline then nobody (who concern to his business) obeys the discipline and business cant go well.8. Evaluator A businessman has to check himself that how he is working. This thing can make the business good in progress.9. prevision A good businessman must have the quality of foresight. He must keep in touch with the business world. He should move about and see what is going on for he has to estimate new wants and new inventions for creating fresh demands.10. Honesty A businessman should be honest in traffic with others. Honesty of a businessman helps him in his business.11. Hardworking A businessman must be hard working. Without have working no business can be successful. If the owner is not hard working then other workers of the business cant be hardworking.12. Initiation The business world is moving at a very fast speed. A businessma n should have the ability to take initiative by producing new things and new methods of marketing the products and services.13. Knowledge A good businessman should have intimacy of his business. It should be supplemented by the knowledge of trade, finance, marketing, income tax, etc.14. Leadership Leaders are not made, they are born but the businessman has to get some qualities of a leader. With the help of leadership a businessman can control his business and workers.15. Negotiator If a businessman is a good negotiator, then he can run his business well, because without good communication he cant impress his consumer.16. Personality A businessman should have a graceful personality because it can impress his customers. If his personality is not good or not graceful then his business cant go well.1.3 Significance of studyWhy is the business planning is important and why it will be done in concert with a strategy? What benefits will occur by this study?For the success of any organiz ation, planning should be the most important to achieve the goal. Without the planning organization never achieve the target of goal and objectives of organization by view of macro perspective business is done in a global market. Because of the growing new technology and the Internet. Time and distance continue to become less and less relevant. In a view of micro, the level of any individual company or organization strategic planning provides a company purpose and direction.It is importance to owners of organization and high level managers who make plans and policies to achieving goals. The main benefit of this planning is make no mistake in business running when the planning is making 1st find out the weakness of organization and try to removed this weakness which get the success and the goal of organization.1.4 Research Questions and/or Hypotheses and/or Null HypothesesThe objectives of any good business search should be how to better promote the business in an economically sound manner and to increase the businesses net profit, exposure, and ensure its continuity.Another characteristic of good business explore is judging local problems of the environs in which makeup is going to operate. If the business is manufacturing a particularized product, look at the market size and options on how to produce the product. characteristic of good business research objectives is tractableness .To identify about the policies and strategy of other competitors of the market. what they are doing?1.5 Analytical ProcedureAnalytical procedure helps to find out the target objectives. It refers to the procedure of apply the uninflected statistical tools and entropy. There are not any specific tools that can be used to find out the desired outcome. For the study it will be used the SWOT synopsis System has been used. A brief description of the SWOT1.5.1 Internal analysis of the organizationThe SWOT analyse is made by observing and describing ( it is a soft analyse ) the characteristics of our business and of the market where it is found. The SWOT analysis allows to detect the strength of our company and the threats of the environment.S -Strength describes the resources and the skills that our company has acquired. What is the difference from the company? What can we improve ?W -Weakness describes the factors in which we have unfavourable position with regard to the competence. In order to make the internal analysis.In order to make the internal analysis , has to be considered the analysis of resources, of activities and risks. outdoor(a) analysis of the organizationO -Opportunities they describe the possible markets, business niches that can be seen by everyone, but if they are not recognized on time that would mean the loss of the competitive emolument.T -Threats The describe the factors that cab put in danger the excerption of the organization , if they are recognised on time they can dodge or they can become opportunities.In order to make the internal analysis we have to take into account the analysis of the environment, of the interested groups, the legislation, and the demographic and political aspects.Once we have described the threats, the opportunities, the strengths and the weakness of the company, we can construct the SWOT matrix. hyaloplasm let us visualise and summarised the present situation of the company.Chapter-2LITERATURE REVIEW2.1 INTRODUCTIONThe main objectives of this chapter is to review the previous and existing literature which is close to the research topic and objectives. In this chapter we get the clear vision about the business organization and the short description about the strategies planning ,policies, knowledge management, business environment, causes , movement and the symptoms of the business failure and how to alignment . The research will be predictably analysis under incompatible views which relevant different methods of business portent. This study business failure helps to sust ain long term run in market, save form competitors and how to manage the internal and external environmental problems of business organization for the success of business organization.2.2 Overview of business organizationAccording to recent statistics from the UKsMinistry of Justice, almost 12,000 companies filed for insolvency in 2007 in England and Wales.This number is forecast to increase significantly (to around 13,500 companies) in 2008 (Financial Times, 2 January 2008) as the financial crisis hits businesses in the wider economy. Smaller companies are managely to suffer most because of a slowing economy and the increasing costs of borrowing in a deteriorating business environment.Business organization refers to that economic activity which is need on regular basis to earning profit motive through the production and sale of goods and service. In other word business means to remain busy in any activity like buying and selling production or dispersal goods or service.Shrestha k.N.( 2010 pp.4-5) says that business organization which are formed for earning profit. they are mainly concerned with producing goods and service of value to the society .companies ,partnership, sole trading and joint declination are organised along this lines with a profit motive to survive against competition , future expansion and development.Taylor , F.W. (1856-19150 ) says a business organization usually in the manufacturing field, which provides students with education and training to degree standard.(David A.staat business management.1991,1999,2004 Routledge is an imprint of the Taylor and Francis group.)Much of todays economic and business thinking is based on the ideas of the scientific movements towards the end of the nineteenth coke one of the main underlying assumptions was that the economy and the business environment form a closed system in a state of dynamic equilibrium. By Beinhocker, (1997) . Ans gains (1993) states the model of environmental turbulence which sho ws the extreme reason of discontinuous unpredictably changing environment. The main objective of purposed organizations lack of complete information or different organization interpret the same information in different way? And business is the lifeblood of capitalist society. At once time or another we have all consider going into business. Everyday millions of people in the US buy goods from business one pay tax. Which invest on another business. The tax generated by these business help support a government infrastructure that is unrivalled in the modern world by Bevans(1961)2.3 Business dodgingMc. kiernan (1997) identify four strands to strategy theory and the knowledge based approach to strategy is sometimes subsumed into core competence or resource based strategy. We believed, however that knowledge -based strategy has its own distinctive characteristic at the same time as providing a fundamental underpinning for all the other theories of strategic Management . strategic learn ing is concerned with the process by which leaders, managers and organization learn about themselves. Their business and environment. Strategic learning is vital to development of the strategic knowledge upon which best performance is based by Nokaka(1991)and other germs Chandler (1962) state that the strategy is determination of the basic long term and objectives of an enterprise and the adoption of course of action and all the allocation of resources necessary for carrying out of these goal .Porter (1996) state that positioning-once the heart of strategy is rejected as too static for todays dynamic market and changing technological.2.3.1 Strategy FormationAccording to Teeca. et al (1995) says that the fundamental questions in the field of strategic management is how firm achieve and sustain competitive advantage. By the development a dynamic capabilities approach, the four questions helps define the field of strategic management its boundaries as they exist today, it concerns an d how it can makes contribution to the praxis of management the questions areHow the firm make out?Why are firms different?What is the function of or value added by the headquarters unit in a multi -business firm?What determines the success or failure of the firm in international or national competition?2.3.2 Business EnvironmentThe business firm is a micro-economic- unit which firm operates. Bye environment the reference is the set of external factor on forces which operation of the business firm. The business firm individually doesnt have much influence on the environment.Types of business EnvironmentEconomic Environmental businessNon Economic Environmental businessEconomic Environmental businessEconomic Environmental business activities involve innovation of inputs into outputs , supply of these market place and exchange of the products with the buyer for money, Business organization objet dart performing these economic activities are constrained by the availability of resou rce ,land ,labour, capital raw materials and finance. Which related internal factors of business environment by Pailwar (2010) and another author states about non economical environmental business or External Environment. Reddy (2004) states that the environment is so complex and dynamic that it is difficult to describe and analysis because it is the external factor which automatically effect to the organization from outside the business organization such asPolitical environmentSocial environmentDemographic environmentTechnological environmentNatural environment andHistorical environment make-up Changing organizational characteristicOrganization success when they operate in states of stability and harmony to adopt intentionally to the environment. Lowendahl (2005) concludes the the increasing complexity is transforming the field of strategic management form a search for general solution to an understanding and acceptance that different solution can working equally well. In behave modern situation the nation of garnd (formal) theory model or frame work that applies to all organizations in a population collapses, as the characteristics of the organization by definition will be local, unique and temporary.2.4 Knowledge managementThis is the idea for how knowledge is manage like including knowledge management strategy and implementation by the definition of Webester (1992) Relationship management and marketing reflect these changing in management and strategy. These definitions embrace a verity of partners, not just customer and the term relationship can mean a variety of things depending on how it applied. It can be taken to mean only type of cooperation, form a create by mental act supply relationship to strategies evidence. And another author Donaldson (1998)said the managing various relationship types may place emphasis on managerial style and associated organizational culture. And organization using implementation methods in dealing with one supplier might find it a challenge to change to relationship approach. identifying customer needs and requirementsanticipating future trends and observe environmental forces satisfying customers existing and future requirements through managing the product or service packing, optimising value for money pricing and maximizing availability and delivery while promoting and selling benefits in the most effective way.profit, ensuring that the company will be able to provide this process in the future.2.4.1 Causes, Process and RemediesThe failure process of the firm can be compared with the evolution of a disease in a human beings. In the same way failure itself is comparable to death. The causes of failure are often associated with management adequacy. These causes lead to occurrence of symptoms which are observable from the deterioration of financial ration.From the statement given by Luoma and Laitinen (1991) we can infer that a) failure is not a sudden even, it takes some time (evolution of the di sease) for a company to become bankruptcy b) financial ratios are only symptoms of failure and c) failure process is triggered off by something causes.Unfortunately , very few authors Altman(1971) Vernimmen(1978) Dambolena and Knoury (1980) Koenig (1985) or Markidakis (1991) are in reality interested in bankruptcy. Even if the list of causes may be different across studies, we can distinguish two main causes of failure. Endogenous and exogenous factors. The main causes within organization is managerial incompetence this is the case in France and Belgium but also in US where 90% of bankruptcy can be impute to this factor Dambolena and Khoury (1980) add that bad management appears through lack of responsibilities to change in technology. Insufficient consideration for cost factor poor knowledge of financial matters.What exogenous factors concern, Altman (1971) mentions that the change in the nations failure rate is negatively associated with the change in overall economic activities Guilhot (2000) mention that there is a systematic correlation between failure and economic crises stock market performance, and supply condition. Thats why author Altman (1971) include in their macroeconomic factor. The influence of macroeconomic factor on bankruptcy seems particularly important. The numbers of bankruptcy in 2000is decreasing in Belgium to the relatively good and stable economic situation. But Vernimmen (1997) state again that the failure of one firms customer was the main causes of firms bankruptcy in France. This statement introduced bankruptcy prediction is very important topic because failure of a particular company could have unfortunate impact on ither entities.2.4.2 The symptoms of FailureWe already point out that the most of the authors rely on symptoms of the diseased in order to predict failure or bankruptcy. These symptoms can be qualitative or quantitative.(financial ratios) variables. Altman (1968) states that the excluding applications on too typical sector like banking or insurance. Where more and more ratios were used. Its strictly impossible to give here all ratios.We noticed that the most frequently used financial ratios are CA/CL, WC/TA, EBIT/TA and NI/TA. It was necessary to included non-financial and more qualitative information in the model Altman and Loris (1976) and Vernimmen (1978) Dimitras et. Al (1995) Greco et al. (1998) really including as qualitative information bankruptcy predication model. In this section they analysis as qualitative information managers works experiences. Firms market niche-position special competitive advantage of firm or market flexibility. Cormier et al.(1994) include other qualitative indicators like investment in a new sector, change in the depreciation method or change in ownership.Few authors Abdel-Khalik and El-Sheshi (1980) used trend data in the form of the average change over several years in different ratio. It seems that trends variable have a greater ability to draw out informat ion from balance sheet data and more able to famine creating accounting.Mader (1975) Mensah (1984) Khalos(1985) or Taffer(1985) proved the contrary. The size of the firm seems also have an impact on the financial disease of the firm of the firm. Bryant (1971) and Laitinen (1992) or Jo and Han (1997) shows the incorporate the size represented, like total assets , sales and the numbers of employees.2.5 Strategic AlignmentHR and Business leader must think of strategy and its role in the border HR. Programmes and practice in a holistic way answering these questions as they determine the policies and practice that will be their basis of their business culture.What do we do?How should we do it?What all skills do we need to be successful?What skills do we need survive for future?It means the link between all of the activities that are conduct as part of human resources management and the human resources policy. This links explain the direct application of every single human resource polic y, practice and political program support the business.Brocke and Rosemann (2010) conclude that the business process management requires an alignment with the organizational strategy. Only such tight alignment ensure relevance business process management and a valuable contribution to the corporate long term priorities. Alignment doesnt have to be a unidirectional in the typical superstar that a BPM strategys oriented towards the corporate strategy.Source Handbook on process management by J. Vom Brocke and M. Rosemaan (2010) Delivering Business strategy through process managementIt should be recognized that two phases will naturally build off one another in a never ending cycle from year to year. It formulates enhanced by and planned capabilities from the previous round.CHAPTER 3RESEARCH- METHODOLOGY3.1 IntroductionThis chapter deals with the research design, justification for the selected study unit, nature and source of data, data stashion method, data processing and SWOT anal ysis The word methodology is defined as a system which comprises the principles, practices and procedures which are applied to a specific branch of knowledge. methodology refers to the way in which information is found or the way something is done. Methodology includes the methods, techniques and procedures which are used to collect and analyse information.3.2 Research DesignA research design is the arrangement of conditions for collection and analysis of data in a manner that aims to combine relevance to the research purpose with economy in procedure. It is the plan structure and strategy on investigations conceived for obtaining answers to research questions and to control variances. To achieve the objective of this study, descriptive and analytical research designs have been used. To evaluate operating performance and the present condition of market, the SWOT analysis is taken as a secondary data analysis tool for this study.3.3 Source of DataThis study is conducted primarily on the basis of secondary data. The data relating to the theoretical based on the business organizations such as impact of internal and external business environment which effect directly to organization . In this cases, the primary data is not taken for the accuracy of analysis. Because it is not possible and also difficult to collect primary data. supplemental data and information are collected from existing research, journals, news, books and websites.3.4 Appropriate Research MethodFor this subject we can choose any method like the Description, explanation, qualitative and quantitative is the methods to collection and analysis of data.3.4.1 Description Method to describe a behaviour or type of subject not to look for any specific relationships, nor to correlate 2 or more variables. It can acquire a lot of information through description. It can be used as an verificatory test of a theory or model some behaviours/situations cannot be studied any other way to general categories of descriptive designs surveys observational studies.3.4.2 explanatory Method Explanatory research focuses on why questions. For example, it is one thing to describe the crime rate in a country, to examine trends over time or to compare the rates in different countries. It is quite a different thing to develop explanations about why the crime rate is as high as it is, why some types of crime are increasing or why the rate is higher in some countries than in others.3.4.3 qualitative Method The design of qualitative research is probably the most flexible of the various experimental techniques, encompassing a variety of accepted methods and structures. From an individual case study to an extensive survey, this type of study still needs to be carefully constructed and designed, but there is no standardized structure.3.4.4 valued method Quantitative research is all about quantifying the relationships between variables. Variables are the things you measure on your subjects, which can be humans, animals, or cells. Variables can represent subject characteristics (e.g. weight, height, sex), the things are really interested in variables representing the timing of measurements and nature of any treatments subjects receive. To quantify the relationships between these variables, we use values of effect statistics such as the correlation coefficient, the difference between means of something in two groups, or the relative frequency of something in two groups.3.4.5 Types of data collectioni) Primary Data this is the data which is collected by the first research person. In this method the data collect himself using methods such as interviews and questionnaires. The key point here is that the data he/she collect is unique to him and his/her research and, until he/she publish, no one else has access to it. There are many methods of collecting primary data and the main methods include Questionnaires, interviews, focus group interviews, observation, case-studies, diaries ,critic al incidents