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Pabilona, Marru B. FINANCE
BSA I-25
CONCEPTS OF BUSINESS FAILURE
Business failure refers to a company ceasing operations following its inability to make
aprofit or to bring in enoughrevenue to cover its expenses. A profitable business can
fail if it does not generate adequatecash flow to meet expenses.
REASONS OF BUSINESS FAILURE:
lack of experience- having an insufficient skills or experience may lead to lack
of self-confidence and may lead to business failure.
insufficient capital- business that has lack of capital wouldnt be enough to
support business needs
poor inventory management- not organize stocks or supplies in case of
emergency purposes.
over-investment in fixed assets- too much focus on internal equipments of the
business.
Competition- having a lack of competitive creativity or attitude may lead to
malfunction of business
Low sales- you should have right & enough sales to have higher profit
Personal use of business funds- too much withdrawal of business funds for
personal use. Fund should be for business future.
Poor location- location should be considered and you should look for location
with a lot of consumers related to your business.
How to Handle Business Failure and still Succeed
1. Be prepared to fail- we should be prepare for the outcome of business in the
future whether its good or bad. Prepare for failure to recover easily.
2. Dont take failure personal- dont recognize business failure negatively. Take
it positively
3. Take responsibility- do all your task and assignments in business.
4. Let your emotions flow- feel the job or business that you have established.
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5. Analyze the situation- we should try to understand and unlock the mysteries
that can be found in our business.
6. Take note of the lessons- we should remember and dont ever forget the
mistakes in our problems since these will serves as a foundation of business in
our future.
7. Resolve to succeed- when we have learned the lesson, we should apply it to
our business immediately that will serves as solution.
8. Start again- since we have identified and analyzed the mistakes and
mishandling in our business, we can start all over again.
INTERNAL EXPANSION
occurs when a business grows internally, using its own resources to increase the scale
of its operations and sales revenue. Internal growth is typically financed through the
profits of the business.
Internal expansion is the process of growing a business through the use of resources
within the business, and not involving the use of any type of outside activities to solicit
new customers.
METHODS OF INTERNAL EXPANSION
Changing price- raising the price of your selling products and it should be
affordable in the hands of consumer to meet their expectations.
Advertising and promoting- way of thinking an entertaining or attracting
projects that may caught consumers attention.
Producing improved or better products- the goods of our business that should
be in great quality to have satisfaction to consumers.
Selling in different location(placement)- refers to distribution of goods in
different places with a sufficient consumers to deal with.
Offering credit payment terms to customer- accepting credit payments will
help us to save fund in case of emergencies.
Increasing capital expenditure(investment)- giving more foundation to your
business fund to have a greater potential in the future.
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Improving training and development(T&D)- practicing of skills of your workers
to motivate workforces correctly and accurately.
BENEFITS OF INTERNAL EXPANSION
Maintains corporate culture- This will help us to have a strong consistency inour business
Relatively inexpensive- we strengthen our business in a cheaper way because
we did not spend a lot of money to communicate with external personnel.
Better control & coordination- this will help us to organize and have a unity of
workers inside the business.
EXTERNAL EXPANSION:
External expansion refers to business combination where two or more concerns
combines and expand their business activities. The ownership and control of the
combined concerns may be undertaken by a single agency.
FORMS OF EXTERNAL EXPANSION:
Merger or Amalgamation -In business or economics a merger is a combination
of two companies into one larger company. It may be in the form of one or more
companies being merged into an existing company or a new company may be
formed to merge two or more existing companies
. Acquisitions or Take-Over-An acquisition, also known as a takeover or abuyout, is the buying of one company by another. It is an act of acquiring control
over management of other companies. An acquisition may be friendly or hostile.
BENEFITS OF EXTERNAL EXPANSION:
It has a greater potential than internal expansion.- though it is more
expensive than internal expansion, still having an external expansion in business
will make sure that a business will have a potential in the future.
You can have higher capital to stand a business- because of expanding
business, there will be a lot of members or managers that will contribute capital.
You can get higher profit.- because of high capital, we can get high profit
because there are a lot of members functioning in a business.