Critical Issues in Business Success and Failure

Importance of a business plan

It is a blueprint for future growth, so it is beneficial in keeping the business on track for its objectives.

Management

• Staffing: staff are the business biggest asset
• Teams: behavioural approach can lead to superior performance for some businesses.

Trend analysis

• Idea that the past can repeat itself
• Provides success by forecasting factors such as:
  • Potential sales
  • Total revenue
  • Total operating costs
  • Gross and net profits
  • Availability of labour
• Leads to effective planning

Identifying and sustaining competitive advantage

Businesses need to develop strategies to gain an advantage over competitors, such as:

• Offer customers something no one offers
• Differentiation by product quality, innovative design, positive brand image or top-quality service
• Sustaining a competitive advantage

Avoiding over-extension of finance and other resources

Should start small and gradually expand.

Over-extension of finances

• Purchasing excess stock
• Leasing commitment
• Committing to fixed contracts can lead to fees if not paid
• Purchase of business premises – unable to pay mortgage

Over-extension of resources

• Stock – too much money invested in goods or raw materials
• Staff – too much staff due to optimism. Need to reduce dependence.

Using technology

• Changing workplace environment and making these more convenient and cheaper
• E-business: use internet to find information, email, work online, marketing, research, lodge forms and apply for licenses
• E-commerce: buying and selling of goods and services via the internet

Economic conditions

Apart of external environment

• Strong economy: consumer spending is high, unemployment rate is low, increased production
• Falling economy: less consumer spending, rising unemployment, decreased production