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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.