1. Why Businesses Fail
Year 12 AS

2. Mind maps: Internal / external
Complete your mind maps

3. 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.

4. 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?

5. 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?

6. http://www. businessstudiesonline. co

7. Comet going into liquidation
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