Causes of Business Failure
The main causes of business failure are summarised in this video for A-Level Business students.
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VIDEO CHAPTERS
00:00 Introduction
00:17 What is business failure?
01:24 Internal causes of business failure
03:27 External causes of business failure
04:30 Financial & non-financial causes
VIDEO SUMMARY
According to the video, the main causes of business failure can be categoriSed into two: internal and external.
Internal causes are factors within the control of the business and its management. Some of the common internal causes include:
Running out of cash: This could be due to high levels of debt or the business making losses.
Ineffective marketing: The business might not have a product that customers want or might not be effectively marketing the product.
Operating inefficiently: The business might have high unit costs due to inefficiencies.
Failing to pick up on trends: The business might fail to innovate or adapt to changes in the market.
Poor management: Poor decision making and lack of strategy can lead to business failure.
External causes are factors outside the control of the business. These include:
Economic shocks: A sudden downturn in the economy or a lockdown during a pandemic can cause business failure.
Technological change: New technologies can disrupt existing businesses.
Increased competition: New entrants or competitors doing things better can lead to business failure.
Changes in the political or regulatory environment: New regulations can make it difficult for businesses to operate.
Societal changes: Changes in fashion, tastes, and demographics can lead to business failure.
The video concludes by saying that financial causes of business failure can usually be resolved with good management, but non-financial causes are harder to address.
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