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Management Essay

2537 words - 11 pages

Critically analyses why a business can fail during the early stages of operation in a context you are familiar with.

Bakr and Ellis(1987) There is no generally accepted definition of business failure,but from the economic approach,it can be defined as firm earning a rate on return on investment which is less than the company’s opportunity cost.
Starting the new business at the beginning of stage is the most difficult period.
There are no guarantee that the business is going to success or fail in the future, it all about how the owner of the business to handle the situation, catching the change in market,beating the competitor and making profit year over year.There are also thousands ...view middle of the document...

Financing dried-up is actually a deadly and common weakness for all the business, no matter which stages is the company in, it still can lead a company stop running immediately and get into some serious problems,For example,the company can not purchase any raw material or equipment with out enough capital or even have the right to negotiate with the suppliers,because it is very risky to trade with the company suffering cash flow problem, especially for the new born business, the growth business usually do not have a very experience management team to management the cash inflow outflow,without the accurate data to support, the manager can’t make a wise decision which may lead to the situation even worse and because of the credit issue,in this situation, the bank would also refuse to help, because the risk to help a new born business which is suffering from the cash flow problem is too high. State of market is also one of the main reason for the bank to consider. The future of the business, is it come with a growth,bright future or suffering from the recession. According to.Jerry(2009) in the business, especially critical of the early stages of the business that you diligently control costs.Many businesses fail in their early years because they do not have enough funds to carry on operations until business grows sufficiently. After developing the innovation products that bring into market,because of the financing problem and credit problem,the new born business would be very difficult to financing form the bank or other private credit markets to keeping running on until the business goes into the mature period,the new born business may directly goes into bankrupt or taken over by some other existing business with huge capital with relatively low market price. Financing problem is not only the weakness for the new born business but also existing in some mature business,once there is a cash flow problem in the company,the whole company can be go through some very tough time.According to the latest news from China Daily,One of the biggest Property development company in China, Agile Property,is suffer from the financing difficulties,facing with more than 1 billion USD loans to repay, and because of offering the bribes to the local local officials, the chief director of the company was caught by the administrative agency,the stock price of the company drop immediately and the company is now suffering from the financial problem with difficulties of collecting the funds form the stock market to keep the operation running.Also, Suzy and Denise(2014) mention China’s property market has cooled sharply since the start of the year. New Home sales volumes were down 12% in September compared with a year earlier. New home prices were also down in 69 of China’s 70 biggest cities. The market performance is suffering form the recession, at the same time the company also suffering from the financial difficulties which makes the situation even worse. Financing...

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