Why Businesses Fail Year 12 AS.

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Presentation transcript:

Why Businesses Fail Year 12 AS

Mind maps: Internal / external Complete your mind maps

Some analysis skill: Why do Businesses fail? Market Conditions – Characteristics such as competitors, market growth rate, legislation, level of innovation and level of demand. Sometimes businesses have the right product but at the wrong time. E.g. Selling Electronic Vapour Pens at the start of the smoking ban – Right product at the right time? Recession – When the economy slows down consumers spend less and therefore demand decreases. Consumers may even get a wage cut. This means that the level of luxury goods and services will decrease. E.g. Decrease in the demand for expensive Television packages. Weak Management – Bad cash-flow control can cause a disaster for a business. Also bad management of staff may mean quality and productivity decrease.

Evaluation comments: Cash flow problems If a business does have cash flow problems this can be serious and they may need to take corrective action… By serious we mean very serious as businesses do fail as a result of cash flow problems. What would happen if at the end of the week there was not enough cash to pay the workers, purchase new stock, fill the van with petrol etc? So it is important to look for solutions Can you think of any practical solutions suggested from the case? Potential solutions? What more information might be needed to complete your judgement?

Solutions to cash flow problems Slow down money flowing out of the business Negotiate credit terms with suppliers e.g. buy now pay in 30 days Can you think of any possible problems with this? Reduce amount of money flowing out Can you reduce costs e.g. find a cheaper supplier Speed up money flowing in Get customers to pay quicker or possibly in advance e.g. pay a deposit Increase money flowing in Take out a loan? Attract more customers – but how?

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