TOPIC: BUSINESS FAILURE, BAD MANAGEMENT AND INADQUATE MIS

Business Failure- changes in technology mean that the firm’s production methods become
obsolete, and changes in consumers’ tastes and habits mean that the demand for the product
or service produced quickly disappears.
We have discussed the positive aspect of restructuring. We will now turn to negative reasons
for change. There can be so many different reasons why a company might encounter financial
difficulties and fail. There is evidence that the percentage of companies that fail in any year is
highly correlated with macro-economic factors such as changes in interest rates and changes in
the level of economic activity. Other significant factors outside the firm’s control can be
changes in technology and changes in consumer demands. The main reason why a particular
business fails is inadequate management. It can be argued that even if there are changes in
macro-economic factors, in technology or in consumer habits a management that thinks ahead
should have been ready for these events. They should have been able anticipate changes. A
management with a strategy, a plan should be sufficiently diversified to be able to withstand all
the most dramatic crises.