Why Do Businesses Fail?

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Why Do Businesses Fail?

Analyze the reasons and provide a case study of one or more companies that have failed or suffered serious setbacks before they recovered.

Name: YAN Hong
ID number: 100004456
Tutor: Mrs. Dawn Cremonese

It is well known that the financial crisis which started in 2008 is a worldwide recession. Even the Lehman Brothers Holdings, which was a global firm with a high reputation, went bankrupt on September 15th, 2008. Lehman Brothers Holdings failed because it was unable to retain the confidence of its lenders and counterparties and because it did not have sufficient liquidity to meet its current obligations. (Anton R. Valukas, March 11th, 2010) Undoubtedly, the impact of Lehman’s bankruptcy was tremendous and it included a fall in NY stocks, approx 5000 Lehman staff lost their jobs and a series of small banks collapsed. (Gary Duncan, Sep 16th, 2008) It is widely hold that the risk, along with the interest, in business is so ordinary and ranges according to the scale of a form that, one day; it is possible that another big corporation may go bankrupt without any warning. Indeed, the recession may roll over the business world again. This essay will present five reasons why businesses fail and will list some actions which may help corporations to avoid bankruptcy. The five reasons will be divided into two parts: internal and external.

Firstly, there are three internal reasons, which are failure in market strategy, quantity over quality and lack of diversification. Initially, the failure in market research is to blame. Corporations do substantial research, which is closely related to the expectations of future markets, before they investigate in a new product or area. That is to say, market research and expectation are two determinants of a market strategy. More to the point, market research and expectation are equally vital for market strategy. For instance, Edsel, a model of Ford, launched in September, 1957, with high...
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