Certain reasons why big firms fail: A firm is known to be a private business organisation or company owned by an individual or group of p
Certain reasons why big firms fail: A firm is known to be a private business organisation or company owned by an individual or group of people. The firm also falls under the category of business in any form. Most time, business experience change in it operation and some business could be active or dull.
Firms as a business that involves buying/selling of product and services in exchange for money or other value, it can also experience a downfall in its operation. Some certain reason makes most firms fail while running it, this can be caused by mistake, disaster or most time bad factors.
In some cases, the minority of them recover quickly due to the help of their business insurance plan. It serves as a backup to solve any problem at that particular time.
Although, the firm is operated privately which is mostly owned by entrepreneurs, and some times cooperative. But the main purpose of a firm is to make a profit and earn from its output. Some of these organizations are;
- Gucci e.t.c
They make a profit through the selling of their product to the consumers in exchange for money, as explained above. For the durability and establishment of a firm,
a lot of processes are involved, which requires a lot of document and files to be included. The firm is a private business and there are needs for knowing if it is genuine or not, only Government-owned companies have fewer procedures in the establishment.
5 unseen cause why big firms fail
The failure of a most firm is due to some certain reason that occurs most when running the business, the reasons are highlighted and enlightened below;
1. Bad management
The poor way a firm is been maintained will define the current status of it. Also, the entrepreneur or manager who is in charge of the business is responsible for the maintenances of the organization, he/she gives command and control to other employers in the organisation.
Bad management may include;
- Poor accountability
- Disobedient to rules guiding the firm
- Incompetent opinions by the workers
There are still more factors of bad management, but few of them are listed above. With the factors highlighted above, they affect the firm negatively and hinder its development.
Fact: Consistent bad management of an organisation will definitely lead to it failure.
For an industry to properly avoid this, there should be an adequate good managing system. An entrepreneur is strictly advised to proper take note of what is going on in his/her organisation, and also correct any form of bad behaviour.
2. High rate of Tax and Vat
In most countries, payment of Tax and Vat by companies are made compulsory and necessary. As it is both relating to either a small or big company. Most time, this Tax and Vat are of high value.
The government of a particular country charges the companies and firm a large amount of money, which they are expected to pay at every end of the month.
A newly founded firm will experience a slow rate in development due to the Tax and Vat they are charged, 15% of the little profit earned as a beginner will be given to the government.
A firm that experiences low purchases and demand won’t be able to pay their Tax and Vat, and this could lead to them been shut down or closed.
If the amount of profit earned by an industry cannot conveniently cover the Tax and Vat, the company won’t be able to continue in its operation.
Although, some certain group of government are trying to reduce the amount a firm pays for Tax and Vat,while some are thinking of a way to increase it.
If a firm does not consider the amount its country is paying for Tax/ Vat, and also if it is not balanced with the company potential earning.
Then, there is a probability that the firm may later end up loosing/failing unexpectedly.
In today’s world, especially in this 21st century. There have been multiple establishments of companies and organizations that compete with each other, most of them are found in the same geographical area.
The production of similar goods and services by firms/organization are rampant these days, which creates competition among each other.
An organization with the best product and services tend to stand-out among others because they possess the market by attracting a lot of potential consumers.
In this case, if a company is in the last position of the competition. It means that its output is not performing well in the market, which is due to the effect of quality production by other competitive organizations.
Too much competition leads to the downfall of other industry, not all organization can withstand the competition. In most cases, consumers go after a product that matches their taste, attached with standard quality.
Today’s world of business requires an organization that keeps its high positions in competition, for other firms that tend to lose their position will automatically lose their consumers.
Instantly after the loss of the majority consistent consumers by the firm, the organization will gradually fail and end its operation.
4. Slow rate in production
The main functions of an organization are productiveness, the ability to keep producing business out-put consistently. It states the activeness of the business, and also its capability.
A company is required to be fast in production and speed in operation to improve its supply.
As the rate of competition increases, productivity must also increase. That is, when the production rate of a firm is low, there is a tendency that the organisation will experience a sudden breakdown in its profit.
And also, there will be a decrease in consumers and potentials.
The moment an industry start experiencing low productivity, the relating and competition organisation will take advantage of it.
It gives them the chance to overtake and dominate the market, automatically it will inversely affect other firms with low productivity.
5. Employers of low quality
Before the employment of any individuals by major firms, they are screened and interviewed vividly. In this case, the right and competent individuals are employed. Without employers, no operation will be performed, but it also depends on the type of employers employed.
Employments contribute to the major operations in an organization, they are even the main reason while the organization is built physically. The type of individuals employed as employers will determine how unique and standard a firm/organization will be like.
An organization that is doing well and still at the top, this occurs through the help of the quality and competent employers employed.
Let take Google, Facebook and Amazon, for example, these three companies are known worldwide and their service and product spread across the world. If this firm lacks good employers, they won’t be able to achieve their goal occasionally.
They keep on improving and providing more means to reach their potential consumers, this is due to the good and quality employers they obtained.
A company that experiences frequent downfall and failure should check the activities and the operation of its employers, adequate measures should be made on them to prevent the permanent failure of the firm.