Category: Business Failure

Introduction

Entrepreneurs in the United Kingdom (UK), like all other regions of the world, experience business success and failure. However, these outcomes depend on different factors, some of which are specific to an organization, while others are relevant to the industry in question (Caruana et al., 2021). According to the UK Department of Business Innovation and Skill (2021), there are close to 6 million small businesses registered in the UK. These enterprises play an important role in bolstering the country’s economy because they employ about three-fifths of the nation’s overall workforce (Department of Business Innovation and Skill, 2021).

The SME sector also generates a turnover of around £2.5 trillion, which accounts for 52% of the total turnover in the UK (Department of Business Innovation and Skill, 2021). These figures show that the Small and Medium Enterprises (SME) sector plays a significant role in promoting the economy of the UK.

Despite the importance of the SME sector to the UK economy, recent statistics suggest that 60% of all small businesses will fail within their first year of inception (Accounts and Legal Consultants Ltd., 2018). These statistics suggest that the success rate of small businesses in the UK decreases from 91% in the first year to 40% in the fourth (Accounts and Legal Consultants Ltd., 2018). This change in performance represents a decline in the success rate of small businesses throughout their business lifecycles.

The poor performance of small businesses is further affirmed by an increase in the number of business closures, which happened during the 2018 – 2019 period when there was an increase in the number of business closures from 311,000 to 336,000 (Office for National Statistics, 2021). These findings suggest that small businesses have a failure rate of about 11.26% annually in the course of a five-year business lifecycle (Office for National Statistics, 2021). In this paper, the main causes of business failure in the UK are investigated and ranked according to their merits.

Why Businesses Do Not Survive

Family Involvement

The involvement of family members in the running of small businesses in the UK is one of the major causes of the failure of small business enterprises. Particularly, this reason is the main cause of business failure among enterprises run by migrant communities in the UK (Camfield and Franco, 2019). For example, a study by Hack-Polay, Igwe, and Madichie (2020) attributed the main reason for small business failure among migrant families from Sub-Saharan Africa living in the UK is the involvement of many family members in the enterprise. The argument advanced to support this narrative suggests that the multiplicity of views from different family members on how to run a business impacts organizational leadership by creating confusion and frustration among some members (Kolk and Rivera-Santos, 2018). This problem creates conflict and inefficient operational systems that lead to declined performance.

The correlation between family-run businesses and high rates of small business failure has been explained by the institutional theory, which suggests that the involvement of family members in the running of such enterprises contributes to the development of prejudices, biases, and nepotism (Bilal, Fatima and Imran, 2020). If left unchecked, this environment creates a toxic atmosphere where business goals and practices are skewed towards fulfilling the wishes of specific groups of family members or factions of it at the expense of developmental goals. In the end, the business will be endearing only to a cultural group that shares the same norms and attitudes as the owners, thereby making it less appealing to a bigger audience (Hack-Polay, Igwe, and Madichie, 2020). This weakness limits its growth and development, thereby leading to underperformance.

The involvement of family members and kinships in business draws attention to the resilience of small enterprises to social networks and familial relations that have hampered business performance for years. For example, there is an inverse correlation between the vastness of an entrepreneur’s social networks and the performance of their small businesses (Herbane, 2020). This relationship has been attributed to changes in organizational resilience that are affected by perceptions of how managers and other business stakeholders view environmental factors impacting business performance (Hack-Polay, Igwe, and Madichie, 2020).

Location attributes have the biggest impact on business resilience because data from 268 SMEs showed that businesses located in one park had a higher level of resiliency compared to those that were not operating in such a setting (Herbane, 2020). In this regard, the involvement of other players in the SME model has a significant impact on business success. Specifically, this analysis draws attention to the use of a place-based approach in predicting organizational success or failure.

The role of family involvement in exacerbating the failure of small business enterprises has also been linked to poor management practices at the administrative level. For instance, the lack of diversity in the board of management of many SMEs is one of the main impediments to the development of sound corporate management policies in the SME sector (Uhlaner et al., 2020). Particularly, the failure to include outside views in board meetings has been singled out as one of the main sources of ineffectiveness and redundancy in thought, which hampers the ability of small businesses to grow effectively (Uhlaner et al., 2020). Therefore, the existence of a monolithic way of thinking in small business development is one of the reasons for their high failure rate.

Lack of Capital

The lack of adequate capital has hampered the performance of some small businesses in the UK, thereby making them vulnerable to environmental and systemic shocks. Unlike large corporations, small businesses have a relatively smaller financial buffer that could help them to endure periods of financial uncertainty (Hack-Polay, Igwe, and Madichie, 2020). Comparatively, large organizations can insulate themselves from market shocks for a longer time than their smaller counterparts are capable of, thereby increasing their probability of success. However, smaller businesses without a line of credit are easily vulnerable to market shocks due to limited capital.

The lack of investment cash for small and medium-term investors has been partly caused by new structural adjustment policies by commercial banks, which have seen them avoid lending to SMEs (Owen and Mason, 2017). Instead, they are focused on large and established enterprises because of their vast cash reserves and verifiable credit history (Owen and Mason, 2017). This practice has created a gap in funding that has primarily affected small business performance. Particularly, those that are less than two years suffer acute capital shortages because credit lending institutions avoid lending to them.

In the UK, angel investors and co-investment groups have ventured into the credit market to fill the existing lending gap in the SME market because of the importance of capital in helping businesses to scale their operations (Owen and Mason, 2017). Most of these co-investment groups provide small and medium-term business loans of between £500,000 to £2 million (Owen and Mason, 2017). This means that they only serve a small percentage of firms that need investment capital because they exclude those whose capital needs fall outside of the stipulated group.

Poor Business Management

The adoption of ineffective business management practices is also a significant contributor to the failure of small businesses in the UK. Particularly, most entrepreneurs who experience business failure because of this reason attribute their missteps to the adoption of ineffective strategies for growth and development (Antcliff, Lupton and Atkinson, 2020). For example, using the resource-based view of managing organizational resources to analyze longitudinal data from various small businesses in the UK, small business owners have been accused of seeking knowledge on how to manage their businesses as opposed to strategies that would make their business successful (Antcliff, Lupton and Atkinson, 2020).

Particularly, the failure of small business owners to seek human resource support during periods of growth is one of the main reasons for their failure, especially in the UK (Antcliff, Lupton and Atkinson, 2020). This outcome is feasible because the inclusion of human resource (HR) support gives it dynamic capabilities for managing different macroeconomic influences on the operations of a business.

The relationship between the failure to seek the right support and high rates of small business closures is supported by the dynamic capabilities theory, which suggests that businesses need to expand their capabilities during growth (Antcliff, Lupton and Atkinson, 2020). Failure to do so would stretch its limits and cause a strain in the management of business operations. Relative to the need for businesses to be agile, small enterprises have been linked to low levels of adaptability to their business environments, regardless of the time they have been in operation. For example, in some places, small businesses located in flood-prone areas are not equipped to deal with the same risk for several years after being exposed to it (Harries, McEwen and Wragg, 2018).

The reason given for the low level of adaptability was the limitation that local identities and organizational structures had on a business’s capability to respond to external shocks (Harries, McEwen and Wragg, 2018). This example suggests that small and medium enterprises are more vulnerable to market and business forces compared to larger organizations.

The strategies chosen by an entrepreneur to communicate business failures may also affect the future success or failure of a business. For instance, those that are poorly managed have little or no chance of being reviewed, while those that are prepared to manage uncertainties well have a greater possibility of being reviewed (Kibler et al., 2021). This statement stems from studies, which have highlighted the importance of managing failure as a determinant of future business success (Kibler et al., 2021). They opine that the potential negative implications from failure can be mitigated if entrepreneurs create a general background of acceptance for it, such that when the business collapses, its shareholders better manage or cope with the eventuality (Kibler et al., 2021). This type of planning makes it possible to revive a business or not.

Most and Least Convincing Explanations

Most Convincing Explanations

The involvement of family members and kinship relationships in business has been highlighted as a major cause of business failure. In this paper, this reason is ranked as a convincing argument explaining small business failure in the UK because most SMEs have been struggling to detach from such family relations as a determinant of business success (Bika and Frazer, 2020). This trend started in the 1980s when many family-run firms realized that their kinship connections were detrimental to their success (Bika and Frazer, 2020). Consequently, most of them restructured their operations to reflect elite networks as opposed to family connections as a determinant of business success.

This is why, today, the success of most small business enterprises in the UK are defined by business networks as opposed to family connections. Given that this change has happened at a national scale, there is merit in arguments highlighting kinship and family relationships as one of the biggest causes of small business failure in the UK.

Existing research evidence also indicates that business performance follows the gender divide, especially when evaluating the performance of small and medium enterprises. For example, women-owned enterprises have suffered high rates of failure compared to male-owned firms (Manolova et al., 2020). The effects of the COVID-19 pandemic reinforced this outcome because female-owned businesses reported more closures compared to male-owned enterprises (Manolova et al., 2020).

The difference in outcome between both sets of enterprises highlights the role of social differences in influencing business performance. Family and kinship ties are closely linked to the same outcome because the pattern of SME closures in the UK follows both sets of entrepreneurs (Höllerer et al., 2020). The commonality in business outcomes necessitates the importance of delving deeper into understanding the causal factors explaining high rates of closure for women and family-run small businesses.

Additionally, in this paper, it has been demonstrated that small businesses have relatively lower financial resources compared to multinational companies. Consequently, they are more vulnerable to financial and market shocks, which could make them close down indefinitely. Given that the COVID-19 pandemic has exposed the extent that such market weaknesses could have on business performance, lack of capital has been included in the list of factors that contribute to the failure of small businesses (Ertel, 2021). Stemming from this categorization, limited financing is also categorized as an important cause of failure for small businesses because of the extent of government involvement in addressing limited capital as a significant impediment to the success of small business development.

For example, the UK introduced the Enterprise Capital Funds to aid small businesses in getting capital to meet their short-term and medium-term goals (Baldock, 2016). On a broader scale, governments around the world have lent money to small businesses by giving them a line of credit to overcome the effects of the COVID-19 pandemic on their business (Ertel, 2021). These collective efforts by government agencies and some financial entities to help raise capital for small businesses demonstrate its importance in supporting the growth of the SME sector. Consequently, the lack of capital emerges as an important reason to explain the failure of small businesses in the UK.

The growth and spread of the informal capital market as a source of short-term debt financing for SMEs also emphasizes the importance of debt financing to small businesses. In the UK, the industry thrives in certain sections of the market, such as South England and London (Cowling, Brown and Lee, 2021). Additionally, there is a localized trend of investment in these regions where high net worth investors choose to inject capital in projects that are locally owned or will benefit the local SMEs (Williams and Needham, 2016). Differences in investment patterns and behaviors across different jurisdictions suggest that there are disparities in the sources of entrepreneurial finance in the UK and SMEs are the most affected.

Least Convincing Explanations

Poor management was mentioned as one of the reasons for business failure in the UK. However, this reason is subjective to the organization or market in question, thereby informing its low rank in the list of convincing reasons for SME failure in the UK. This is because countries have different management behaviors that are moderated by external market forces – some of which may be beyond the control of a business or sector (Jaklič et al., 2021).

For example, while researchers have focused on understanding business performance by measuring key performance indices, another group of researchers claims that a person’s entrepreneurial spirit has a significant role in impacting performance (Wynn and Jones, 2019; Solberg et al., 2021). This statement is true in small businesses where the success of a business could be tied to the personality of the owner. Therefore, the argument that poor performance is a reason for the high rate of failure among SMEs is undermined by the fact that intrinsic factors could be tied to poor performance in the first place (Short et al., 2016). Given that small businesses experience unique challenges affecting their growth and development, compared to multinational organizations, poor management emerges as the least convincing reason.

The involvement of external parties in small business management also undermines the credibility of the reasons for ranking poor performance as one of the causes of small business failure. Relative to this statement, governments around the world have been supporting SMEs directly and indirectly. For example, the UK and US governments provided a Coronavirus relief fund to aid struggling businesses in paying for their utilities (Clampit et al., 2021).

This type of financial aid negates the power of management practices because such a financial aid package levels the performance of such enterprises. Broadly, governments have been involved in the funding of business enterprises, including non-profitable ones (Kourula et al., 2019; Clampit et al., 2021). The merits and demerits of adopting such an approach have been debated extensively (Sa and Chai, 2020; Kalé, Harland and Moores, 2020), but its effects on management practices cannot be ignored. In other words, government assistance plays a significant role in determining the quality of management for a business or a sector of the economy.

The limited role of poor performance in dictating the success of small business enterprises is also informed by varying goals that businesses share. For example, some organizations strive to maximize shareholder interests, while others are meant to promote a non-monetary goal (Hernández and Muñoz, 2021). This variation in business objectives makes it difficult to use one benchmark of organizational performance to evaluate reasons for business failure. In light of this development, small businesses are being encouraged to adopt an ecocentric strategy to make them more resilient and adaptive to market forces (Hernández and Muñoz, 2021). This shifting diversity in goals means that poor performance is a weak reason for explaining the failures of SMEs.

Conclusion

This study has identified patterns of business failure in the UK by highlighting some of the main impediments of small business growth. The lack of adequate financing, poor management, and family/kinship connections emerged as the most notable reasons for understanding patterns of business failure in the UK. The lack of capital and family relationships emerged as the most convincing reasons for small business failure because limited financing and changes in business structures, which have occurred over the years, suggest that the two reasons have influenced growth for years.

The least convincing reason for the failure of small businesses was poor management. Although there are differences in management outcomes between small and established organizations, this reason did not emerge as a formidable one, given that small businesses have unique challenges impacting how they operate. Therefore, poor performance is a subjective concept and does not merit to be highlighted in the same category as the lack of capital or kinship ties.

Overall, small businesses in the UK suffer several challenges related to their growth and development, but the lack of capital and kinship relations have emerged as being the most notable reasons for their failure. To overcome these challenges, greater emphasis should be made to minimize the inequalities that exist in small business financing in the UK. This approach would better streamline financing operations and decrease the impact of private investor funding on business operations. The risk posed by private investments in business operations is akin to the risk posed by family connections and relationships in the running of business operations. In both instances, the needs of the business may be substituted for those of the owners of the enterprise. In such an environment, growth is stifled and the development of the enterprise constrained. Therefore, these risks need to be minimized by replacing the family management structure with a professional one.

Reference List

Accounts and Legal Consultants Ltd. (2018) Small business advice. Web.

Antcliff, V., Lupton, B. and Atkinson, C. (2020) ‘Why do small businesses seek support for managing people? Implications for theory and policy from an analysis of UK small business survey data’, International Small Business Journal, 7(1), pp. 1-19.

Baldock, R. (2016) ‘An assessment of the business impacts of the UK’s enterprise capital funds’, Government and Policy, 34(8), pp. 1556–1581.

Bika, Z. and Frazer, M. L. (2020) ‘The affective extension of ‘family’ in the context of changing elite business networks’, Human Relations, 5(22), pp. 1-19.

Bilal, A. R., Fatima, T. and Imran, M. K. (2020) ‘Shutting eyes to merit! The curse of cronyism in Pakistani small and medium scale business’, South Asian Journal of Human Resources Management, 7(1), pp. 61–90.

Camfield, C. and Franco, M. (2019) ‘Professionalisation of the family firm and its relationship with personal values’, The Journal of Entrepreneurship, 28(1), pp. 144–188.

Caruana, R. et al. (2021) ‘Modern slavery in business: the sad and sorry state of a non-field’, Business and Society, 60(2), pp. 251–287.

Clampit, J. A. et al. (2021) ‘Performance stability among small and medium-sized enterprises during COVID-19: a test of the efficacy of dynamic capabilities’, International Small Business Journal, 8(2), pp. 1-18.

Cowling, M., Brown, R. and Lee, N. (2021) ‘The geography of business angel investments in the UK: does local bias (still) matter?’, Environment and Planning A: Economy and Space, 53(5), pp. 1180–1200.

Department of Business Innovation and Skill (2021) UK Small business statistics. Web.

Ertel, S. (2021) ‘Small business post–COVID-19: motivational needs through uncertain times’, Compensation and Benefits Review, 53(1), pp. 8–15.

Hack-Polay, D., Igwe, P. A. and Madichie, N. O. (2020) ‘The role of institutional and family embeddedness in the failure of Sub-Saharan African migrant family businesses’, The International Journal of Entrepreneurship and Innovation, 21(4), pp. 237–249.

Harries, T., McEwen, L. and Wragg, A. (2018) ‘Why it takes an ‘ontological shock’ to prompt increases in small firm resilience: sensemaking, emotions and flood risk’, International Small Business Journal, 36(6), pp. 712–733.

Herbane, B. (2020) ‘Locational contiguity and business continuity: perceived organizational resilience of small- and medium-sized enterprises in U.K. business parks’, SAGE Open, 4(1), pp. 1-18.

Hernández, M. and Muñoz, P. (2021) ‘Reformists, decouplists, and activists: a typology of ecocentric management’, Organization and Environment, 4(1), pp. 1-19.

Höllerer, M. A. et al. (2020) ‘The interlinking theorization of management concepts: cohesion and semantic equivalence in management knowledge’, Organization Studies, 41(9), pp. 1284–1310.

Jaklič, J. et al. (2021) ‘The orchestration of corporate performance management and business process management and its effect on perceived organizational performance’, SAGE Open, 6(1), pp. 112-133.

Kalé, S. H., Harland, D. and Moores, K. (2020) ‘Impact of national culture on governance and management of family businesses: Australia versus India’, NHRD Network Journal, 13(1), pp. 73–83.

Kibler, E. et al. (2021) ‘Post-failure impression management: a typology of entrepreneurs’ public narratives after business closure’, Human Relations, 74(2), pp. 286–318.

Kolk, A. and Rivera-Santos, M. (2018) ‘The state of research on Africa in business and management: insights from a systematic review of key international journals’, Business and Society, 57(3), pp. 415–436.

Kourula, A. et al. (2019) ‘New roles of government in the governance of business conduct: implications for management and organizational research’, Organization Studies, 40(8), pp. 1101–1123.

Manolova, T. S. et al. (2020) ‘Pivoting to stay the course: how women entrepreneurs take advantage of opportunities created by the COVID-19 pandemic’, International Small Business Journal, 38(6), pp. 481–491.

Office for National Statistics (2021) Business births, deaths and survival rates. Web.

Owen, R. and Mason, C. (2017) ‘The role of government co-investment funds in the supply of entrepreneurial finance: an assessment of the early operation of the UK angel co-investment fund’, Environment and Planning: Politics and Space, 35(3), pp. 434–456.

Sa, M. L. L. and Chai, Y. K. (2020) ‘Managerial orientations and business performance in small and medium tourism accommodation businesses (SMTABs): a resource advantage-knowledge creation approach’, The International Journal of Entrepreneurship and Innovation, 21(1), pp. 17–37.

Short, J. C. et al. (2016) ‘Oh, the places we’ll go! Reviewing past, present, and future possibilities in family business research’, Family Business Review, 29(1), pp. 11–16.

Solberg, E. et al. (2021) ‘Encouraging or expecting flexibility? How small business leaders’ mastery goal orientation influences employee flexibility through different work climate perceptions’, Human Relations, 6(1), pp. 1-19.

Uhlaner, L. et al. (2020) ‘Are outside directors on the small and medium-sized enterprise board always beneficial? Disclosure of firm-specific information in board-management relations as the missing mechanism’, Human Relations, 8(1), pp. 1-19.

Williams, T. L. and Needham, C. R. (2016) ‘Transformation of a city: gentrification’s influence on the small business owners of Harlem, New York’, SAGE Open, 8(2), pp. 1-10.

Wynn, M. and Jones, P. (2019) ‘Context and entrepreneurship in knowledge transfer partnerships with small business enterprises’, The International Journal of Entrepreneurship and Innovation, 20(1), pp. 8–20.

Amankwah-Amoah, J., Khan, Z., & Wood, G. (2021). COVID-19 and business failures: The paradoxes of experience, scale and scope for theory and practice. European Management Journal, 39(2), 179-184. Web.

This article is an alternative to all solely optimistic expectations and the consequences of the covid crisis. The article concerns the negative effects of the pandemic and numerous cases where the business failed to operate for some reason. To build a more comprehensive and accurate picture of ongoing events in the service market, it is crucial to consider the crisis from both sides, negative and encouraging. The article specifically regards gaps in supply chains, breaks in geopolitical and economic relations, the inability to develop a successful anti-crisis campaign. In addition, the document includes feedback from employers on ongoing events and personal views about alternative outcomes of current events. The writer of the article is a professor of International Business at the University of Kent. His analysis encounters multinational enterprises and strategies concentrating precisely on company collapse in emerging conditions of the economy. The work is suitable for those who want to get a better look at the overall global picture and the reasons for the incapacity of a business in a crisis.

Anakpo, G., & Mishi, S. (2021). Business response to COVID-19 impact: Effectiveness analysis in South Africa. The Southern African Journal of Entrepreneurship and Small Business Management, 13(1). Web.

The article includes an extensive analysis of business response programs to the pandemic crisis. The investigation strived to analyze the efficacy of business reactions to the impact of COVID-19 on industry consequences. The general conclusions show the particular effectiveness of measures such as greater automation of all procedures, efficient online trading, and a reasonable increase in working hours. There is a generally positive trend of rapid and sufficient adaptation of even small and little-known businesses. The document advocates the creation of a holistic unit of the government with the sector of the economy, where both parts mutually assist and guide each other. The article is useful for its first conclusions about the anti-crisis work carried out in relation to various business projects, including in the field of cosmetic and stylistic services. In addition, there are visual statistics of unsuccessful and thriving strategic attempts of companies, according to which it is conceivable to conclude positive influencing aspects and practices. The authors of the article, Godfred Anakpo, and Syden Mishi, are graduates of the Faculty of Economics of Nelson Mandela University. The work has value for all employers and employees interested in keeping track of the current situation in the market and willing to prevent the business campaign failure.

Carnevale, J. B., & Hatak, I. (2020). Employee adjustment and well-being in the era of COVID-19: Implications for human resource management. Journal of Business Research, 116, 183–187. Web.

This article is valid for its rather innovative approach to assessing the actions of HR managers and analyzing what is happening in the service market during a pandemic crisis. The paper suggests ways to effectively educate a business team and outlines potential obstacles to enhancing work practices. Basically, it is about the opportunities and responsibilities of the managerial level of the working structure. At the end of the article, one can see an enthusiastic call for a global debate on the issue of customer centricity and security. The author of the article, Joel B. Carnevale, is known for his comprehensive research on work ethic, the perception of the manager as a leader, and psychological patterns in the workplace. The article is valuable for HR professionals who must quickly and effectively establish disinfection of the workplace, design a procedure for preventive measures, and so on. The successful implementation of these activities presently depends on the work of the personnel department and its ability to timely assess the situation.

Donthu, N., & Gustafsson, A. (2020). Effects of COVID-19 on business and research. Journal of Business Research, 117, 284–289. Web.

This article is a global study of the impact of post-COVID on the market for goods and services. The document was written by Naveen Donthu, the editor-in-chief of Business Research. The writer is a well-known representative of the modern marketing field and shares his professional experience in numerous articles. The second author of the article, Anders Gustafsson, is a professor of marketing at the Norwegian Business School. He has also devoted a lot of work to the topic of business support and recovery processes. This material is of value for research due to the vastness of the field of study. It involves the sphere of trade, tourism, education, transportation, and many more. Particularly useful is the part about the provision of care and beauty services, which include barbershops. The article observes the crisis not so much in terms of labor protection as economic instability. The article includes excerpts from 13 different papers on the implementation of anti-crisis methods, ethical issues resolution, and the reorganization of employees’ work responsibilities. It is necessary to pay attention to the year 2020 of publishing the article, which is the beginning of the pandemic issues. All conclusions and studies of the document should be carefully subjected to critical revision in connection with the events of recent years. The article is suitable for specialists interested in anti-crisis measures in terms of establishing ethical standards, introducing a new cultural code for workers, and improving modernized preventive measures.

Sheth, J. (2020). Impact of Covid-19 on consumer behavior: Will the old habits return or die? Journal of Business Research, 117, 280–283. Web.

The article states that any business should rely primarily on customer safety and positive experiences. All current businesses try quickly and efficiently adapt to the new wants and needs of customers. This article describes all the changes in the habitual behavior of the consumer and his recent injunctions. Professor Sheth has over 50 years of teaching and market research experience. He is internationally renowned for his critical expertise in crisis and geopolitical concerns in the marketing sector. The work is good for professionals with comprehensive understanding of the situation in the market and new customer demands. It may be a demand for a certificate of vaccination from the master, a request for additional disinfection of the workplace, maintaining social distance, and other safety measures.

Woodside, A. G. (2020). Interventions as experiments: Connecting the dots in forecasting and overcoming pandemics, global warming, corruption, civil rights violations, misogyny, income inequality, and guns. Journal of Business Research, 117, 212–218. Web.

The problem of the pandemic is a much deeper crisis and covers a large number of aspects. It applies not only to the conduct of business and the operation of the healthcare system but to any national and local regulations that affect people’s daily lives. In this study, business and marketing are viewed as a holistic global response to the changes taking place in the world. It includes any activities, opinions, fear responses, feelings of both: organizations and firms, as well as individuals and clients. The article reviews successful preventive business support strategies that have been implemented in New Zealand, Denmark, South Korea, Finland, and Vietnam. This article can help the study by describing the solely positive experiences of these countries. The work is divided into several segments covering the most essential matters. These are the mechanisms of the anti-crisis effort, the scientific component of this preventive mechanism, objective covid statistics and the situation within States, and the positive experience of other countries. Arch G. Woodside, the author of this article, has dedicated extensive background, especially in the tourism and service industries. This study is of great value, as it includes an extensive picture of possible concerns, including those directly related to the pandemic. It can be a significant difference in the capital of the residents, a violation of civil rights, inequality between different social strata, and so on. The article is highly recommended for anyone who perceives the current crisis globally and wants to learn about successful updates and preventive measures from other countries.

References

Amankwah-Amoah, J., Khan, Z., & Wood, G. (2021). COVID-19 and business failures: The paradoxes of experience, scale and scope for theory and practice. European Management Journal, 39(2), 179-184. Web.

Anakpo, G., & Mishi, S. (2021). Business response to COVID-19 impact: Effectiveness analysis in South Africa. The Southern African Journal of Entrepreneurship and Small Business Management, 13(1). Web.

Carnevale, J. B., & Hatak, I. (2020). Employee adjustment and well-being in the era of COVID-19: Implications for human resource management. Journal of Business Research, 116, 183–187. Web.

Donthu, N., & Gustafsson, A. (2020). Effects of COVID-19 on business and research. Journal of Business Research, 117, 284–289. Web.

Sheth, J. (2020). Impact of Covid-19 on consumer behavior: Will the old habits return or die? Journal of Business Research, 117, 280–283. Web.

Woodside, A. G. (2020). Interventions as experiments: Connecting the dots in forecasting and overcoming pandemics, global warming, corruption, civil rights violations, misogyny, income inequality, and guns. Journal of Business Research, 117, 212–218. Web.

Introduction

According to the Federation of Small Businesses (2012), “there are 4.5 million small businesses in the UK”. Their significance in the country’s economy is confirmed by statistics from the same organization, revealing that small business account for 99% of all the businesses in the United Kingdom.

They account for more than 48% of the private sector turnover and employ 58.8% of the people working in the private sector. London is leading with the highest number of small businesses approximated at 748,000. The South East is second with 745,000 registered small businesses.

The number has been on the rise in the recent past with over 87,000 small business registered in2010 alone. Even as this number goes up, the rate of failure is still alarming, and a cause for concern. In 2004 alone, small businesses in the UK registered a 43% failure rate (Small Business UK, 2012).

According to Federation of Small Businesses (2012), “the government recognizes that small businesses are the backbone of the United Kingdom’s economy”. Combining the public and private sectors together, each year, the small businesses represent over 90% of the employer firms.

In the last 15 years, 64% of all the news jobs created in the UK have come from the small businesses. Furthermore, “small businesses produce 13 times more patents per employee than large patenting firms; these patents are twice as likely as large firm patents to be among the one percent most cited” (Federation of Small Businesses, 2012).

The sectors significance in the country is further proven by the fact that they create more than half the country’s non-farm gross domestic product comes from it.

Half the country’s high-tech workers are employed in the small businesses. These include the computer programmers, chemical analysts, engineers and scientists. Small businesses in the UK offer income and convenience to a big percentage of the investors.

More than half are home-based, while 2% are franchises (Small Business UK, 2012). According to the same statistics, small businesses made up more than 97% percent of all registered and identified exporters in the country in 2007. In the same year, 30.2% of the known export value in the United Kingdom was from them.

Other than the financial benefits that they offer the country, small business have a political and social importance both domestically and internationally. They have been found to make significant contributions to the economical and foreign relationships between the UK and other nations, especially with most of the industrially advanced and developing nations including the United States.

Small businesses are considered as one of the major driving forces of socio-economic development in the country. Because small businesses stimulate private ownership and entrepreneurship skills they generate more innovative opportunities (Repa, 2010)

They offer stability since they are flexible and adapt themselves to changing market demand and supply situations easily. Review of relevant literature indicates that many international agencies and governments have identified the importance of maintaining healthy and supportive growth standards in small businesses (Kakkar, 2009).

However, there exist very few details of the strategies recommended by prior research. Provision of services, information and support for small businesses is not well defined in most of the past studies. Nature of small business, changing patterns of employment and changes in economic environment are found to be some of the reasons for lack of focus in the research (Trevino and Katherine, 2011).

Nature of small businesses

The contribution to modern economic life by the small enterprises is significant and cannot be ignored. In many of the advanced industrialized nations, the enhanced share of contribution to the economic growth is the strong evidence for their prominent place in changing the economic profile of these nations.

Available information from government statistics has shown that failures are more common in small businesses than in larger companies, perhaps from the fact that big businesses have the capacity to handle risks and potentially dangerous uncertainties. “It is acknowledged that such high incidence of failure is not mainly because the small enterprises undertake more dangerous business tasks; but because of unsatisfactory management and implementation arrangements in small businesses” (Koeng and Root, 2006).

Effective management of strategy in small businesses faces considerable challenges from the fact they are more vulnerable and exposed to uncertainties and changes in the markets.

As far as management is concerned, the owner is regarded as the central and dominant actor in relation to any proposal for changes in the structure or operations of small businesses. Many researches point out the personal values and priorities of the owners as the determinants of culture, social relations and attitude of the small enterprises.

Based on such characteristics, small businesses could be described as organizations that have to fight for survival. These organizations have the owners as the responsible persons to handle several issues affecting the business at the same time (Tsai and Wen, 2009). The owner-manager gets significant part of his identity from the enterprise.

The personal values and beliefs of the owners form the guidelines for the development of small businesses. The management style of owners of small businesses is often a patriarchal one, and hence it is ego-centric and action-oriented (Longenecker, 2010).

Causes of failure among small business

Cash flow problems

The most significant challenge among small entrepreneurs is having a healthy and managing cash flow. Daily (2011) points out that “many businesses struggle through poor cash flow management”. Even where good skills are available, less than enough financial resources make it hard for them to bear any fruits.

A common mistake among small business people is going into business with the exact amount needed to start up, and sometimes even less. When the business is not profitable immediately, there is no money to cater for expenses and cater for the day-to-day expenses of the business. The results are either accumulated debts at an early age of the business, or failure at an early stage.

Poor business planning

Daniels (2010) advices that “a business plan should cover aspects such as marketing, finance, sales and promotion plans, as well as detailed breakdowns of costs and profit predictions”. Unfortunately, small businesses lack a comprehensive plan and more often leave out the important aspects of a business.

For example, a plan that lacks direction on costs and expenses may not be able to sustain itself regardless of how well marketing and sales were planned. In the UK, a considerable number of small business owners are young and may lack the much needed level of experience to address some of the challenges that arise from poor planning. The result is the inability for small businesses to go through any challenges that arise.

Poor marketing

Understanding a market is paramount for businesses that intend to establish a long-lasting presence in any market. For a business to be successful, they have to understand and meet the needs of their clientele. When this is lacking, resources spent to introduce products and market will not bear any positive results for the business.

Furthermore, small businesses in the UK suffer from stiff competition since most industries are quite competitive. Lack of sufficient funds makes it even more difficult for them to invest in understanding markets and even compete effectively. Most of them also lack proper distribution channels and are unable to create a consistent flow of goods or services to the targeted clientele.

Lack of finances

According to Barreto (2007), “insufficient finance often means that businesses are unable to take opportunities available to them, or have to compromise-going for high cost solutions to problems, rather than lower cost ones that would yield greater competitive advantage”. In the UK, the government recognizes the significance of the small businesses by offering different kinds of support.

This is through grants, financial advice and information, as well as making loans more available to small entrepreneurs. Grants are today more available through the government and other non-governmental organizations. Information and advice are essential since most small businesses suffer from poor financial management, bad credit and inability to sustain the high costs in the early days of business.

Failure to embrace new technologies

Inability to embrace new developments and technologies arises from a lack of financial resources. At an age when technology is evolving so fast, dragging behind may cause more harm than a business could anticipate.

In a fast changing world, leading investors are those that access to modern solutions and know how to use them to their advantage. Young business may suffer weak and inexperienced capacity to manage changes that occur too fast as far as their technological needs are concerned.

Issues of safety

“The issues that surround running a business are more pronounced in small enterprises by virtue of their sizes act to restrict the initiatives for meeting the health and safety standards for their workers” (Armstrong, 2009). The issue of safety is especially important for those businesses in high risk industries such as production.

Issues of safety can further be categorized into management, finance, compliance and environmental practices. All these issues are inter-linked, are dependent on each other, and operate as a total force. Based on this premise, the key factors that affect the occupational health and safety in small businesses can be grouped under these heads.

They are

• low or lack of management and training skills;
• lack of financial and human resources;
• burden of statutory and regulatory compliance;
• relationship with regulatory agencies and the use of consultants;
• dependent relationship with large businesses; and
• employment and occupational health and safety practices.

Poor management

Management in small businesses differs largely from that of a large undertaking with formal structures. As against large businesses, in small business enterprises, the lines of communication are shorter with simple organizational structure (Bohlander, 2010). The small enterprises feel the commercial pressures almost instantaneously and severely.

In the small businesses, management practices are intertwined with other aspects of running the business and it is not possible to separate them for higher focus. According to (Bohlander, 2010) “a shift in one area of functioning will have immediate consequences on another because of the inter-relationship between the functions of operating a small business is tightly knit”. In most cases the employer has to consider the provision of even basic management measures based on the cash flow.

Human resource management

Most of the small enterprises face the challenge of training and skill development. This is especially so in the area of business communication and management. Small businesses mostly lack both the management attainment and adequate resources to meet their commitments on human resource requirements of the industry (Clutterbuck, 2007).

The small business owners generally do not understand their obligations and responsibilities as far as their workers are concerned. Small business employers are often specialized in their particular trade rather than on the business management practices. They can frequently be characterized by a norm of independence and a shared belief in their personal values.

The small business owners are keen in their individual autonomy and hence do not take much care of what the rest of the team thins or requires. The tension between the role of management and the rest of the team in the small business also act to distance the owner-managers from meeting the requirements of the employees.

Statutory and regulatory requirements

The burden of compliance with statutory and regulatory requirements is a challenge that the small businesses have to face continuously. While medium and large sized firms are able to keep their knowledge up to date on the changes in business laws and regulations, small businesses have not.

Unlike large businesses, meeting the regulatory requirements may often place considerable financial burden on small businesses. This is because the smaller businesses are unable to spread the cost of compliance over large number of products as it is the case with larger firms. This inability may put the small businesses at a significant disadvantage.

Studies also indicate that small business owners consider that government regulations may affect their profitability and ultimately lead to the closure of the business (Vance and Yongsun, 2011). This presumption that the cost of compliance will negatively affect the profitability of small businesses has led a large number of small businesses to find ways in which they could opt out of their legal obligations in the country.

Viable solutions to reduce failure rates

In consistent with the previous researches, Longenecker (2010) suggested that the small and medium enterprises in the UK have slowly evolved their management systems to make them better. Steingold (2009) found that with the increase in the organizational size the quality of business issues management increased.

Lack of resources has been identified to be one of the major reasons small businesses are failing in the UK. Schneider and Pietra (2010) found more evidences to prove that small business organizations had resorted to more preventive activities such as insurance and compensation when challenges occur. Putting this into consideration, it is notable that availability of resources will be very helpful to the small entrepreneurs.

The first resource that small businesses need is education and training. This is in areas of cash flow management, health and safety, marketing, and compliance with laws and regulations, among other areas. Santos, Fatima and Joaquim (2011) studied health and safety systems in small construction companies in the Asian region.

The authors reported that newly hired construction workers in the small organizations are particularly at risk of occupational injuries because of insufficient safety education and training. This is important for small businesses in such industries where safety issues could collapse a business. It is also important for small businesses to learn how to receive and send important information on issues that affect them. For example, full compliance to the law would require being fully updated on any new changes and new requirements.

Another area in which small businesses need help is managing human resources. Many times small businesses employ less qualified personnel in an attempt to cut cost. Low level of literacy among the workers then makes it hard for them to be trained or adapt to new and challenging business environments in the UK. Because of their lack of knowledge, the workers are unaware of how different factors affect the business.

In small enterprises, controls are normally decided by custom and practice and not by an exact risk assessment of the work practices. Reason (2008) found that the owners cited number of barriers including limited resources, lack of in-house expertise and competition as to why they were failing in human resource management. It is therefore important that small business use everything they have to improve their human resource, as well as seek help on those issues that they cannot address.

Another significant area of concern for small business is attitude towards their relationship with the government and law enforcement bodies. Small businesses are characterized by their indifferent attitude towards and their unwillingness to cooperate with regulatory agencies, as well as a common tendency to use consultants who may not be qualified for regulatory advice (Delgado, 2011).

The same author observed three major reasons for the small business owners resorting to external consultants to assist them in compliance issues rather than dealing with the government agencies directly. First reason is that many small business owners feel alienated from the state. As a result, small business owners choose not to approach government agencies and relevant authorities directly for advice or guidance on matters that affect occupational, safety and health at work.

Secondly the small business enterprise owners always presume that they might be prosecuted by the government for not meeting the regulatory requirements. The result is that small business owners are not in direct contact with the government, and will instead be more comfortable to use the services of small business advisors.

The intermediaries may not relay all the information to both stakeholders, creating a communication breakdown. Thirdly when the small business owners do not have the competence to understand their obligation and do not seek advice from small business advisor. It is important that all relevant stakeholders put effort to fill the gap in their management knowledge.

It is important for businesses and the government to note that by relying on the advisors to guide them on managing regulatory requirements, small businesses may not have access to all the relevant information. Important subjects such as financial, tax and legal issues may not be fully addressed. For this reason, the government must ensure easy access of such information by reaching the small business instead of waiting for them to reach them. Compliance can also be improved by making it affordable for the small businesses.

Financial challenges are obviously challenges that stakeholders cannot afford to ignore. Small businesses are at a higher risk of closing down due to lack of sufficient funds to run their day to day expenses. Financial related challenges can be solved through education, training and making funds available for small businesses.

The UK government can get involved by having subsidized interest rates for small business loans, making the process of accessing funds easier, and encouraging non-governmental organizations to get involved through grants and training. The UK government in the recent past has put in place measures to encourage small entrepreneurs through government funded grants. Budgetary allocations for small businesses further need to be increased to help more start-up access financial support.

Even though the government plays a major role in the problem, every stakeholder needs to be involved aggressively for failure rates to be reduced. “Businesses need to put a plan ahead to know what the most likely risks are in a given workplace environment and prepare for them to avoid them altogether” (Shane, 2008).

To avoid stagnation and the consequences that arise when they happen, it is important for businesses to have a specific plan and regularly train employees on how to avoid being in such situations. It is also paramount for businesses to train employees on how to react when hardships occur so that they do not panic and aggravate the problem further.

The size of the small business may not really be an important factor in the provision of workplace support. The assumption of high risks, poor assessment and high incidence of failure in small businesses compared to larger once has not been supported by empirical evidences. The right information is paramount in ensuring that the right policies and measures are installed correctly and that irrelevant assumptions are not made. Information at the employees’ level is also crucial in helping employees avoid any areas where they may easily expose themselves the business to risks that hurt the business. Employee and public education can be carried out through training at the workplace, government forums and annual awareness week, usually addressing different types of challenges.

As discussed earlier, issues of safety are a significant problem for small businesses which may not have the resources to manage damages that arise when incidents occur. For manufacturing businesses, and those that use hazardous substances, health and safety should be addressed comprehensively.

It is important to ensure that chemicals do not mix or come into contact with each other accidentally. The cleaning of production and storage facilities must be done in accordance with procedures that ensure safety and protection.

Many industries in the region adopt mechanisms such as continuous process cleaning (CPC), to avoid any contact with the contaminated water during cleaning. Other mechanisms adopted from other regions such as Japan allow employees to arrange offices, stores and other facilitates in a way that allows easy exit in case of emergencies.

Another important step for proper management and protection management of small businesses is compiling a highly skilled team in the businesses. A proper team is important for preparation, prevention and response when problems and risks that could lead to closure occur.

The team must have access to every part of the business, meaning that a business must have the right teams in all its departments from the executive to the ground level. Since it is very easy to make the wrong decisions in panic, procedural manuals for incidents such as cash shortages, damaged goods and low sales must be in place to prevent such happenings.

It is important for the new businesses in the United Kingdom to seek external help from bigger and more mature businesses who may have been exposed to significant crises and business threatening incidents in the past, and were able to manage it effectively. To fully benefit from new technological innovations, companies must also consult to benefit from each other’s new ideas.

Consultations are made possible by fine tuning a company’s communication style and establishing good relationships with fellow investors. Such initiatives prove very helpful when a company needs help in times of trouble.

Setting timeline for important projects will help the small businesses improve their preparedness. It also helps manage its workers in a timelier manner. “Each process scenario must be highlighted in the timeline to ensure that teams don’t spend unnecessarily long times on one aspect of a crisis” (Reuvid, 2010). Timeliness allows order and organization during an incident management mission, an initiative that could go a long way in saving lives and minimizing damage.

Waste management and environmental challenges should be accorded the right attention in a business right from its inception. For those who make products from raw materials, reactivity and toxicity tests can be used to further determine whether waste should be considered hazardous or not. All wastes must go through these tests to determine how hazardous they are to the environment and human health before disposal.

When collecting waste, it should be segregated and collected according to different waste categories depending with how they test for different parameters. Waste should be not be mixed and should be collected in containers with secure lids securely sealed thereafter to avoid spillage. When these measures are not addressed, small businesses find themselves in trouble with environmental organizations and may end up paying hefty fines that will eat into its capital base.

Small business should have the capability to test the level of risk and exposure in the markets they venture into. The level of interaction with risks allows the analysts to determine the amount of damage that may have occurred in a business (Haddow, Jane and Damon, 2011).

In case of Therefore, it is important for small businesses to be equipped with the necessary tools and kits to perform these assessments and minimize negative effects on its operations. The other important step is identifying the most fundamental success factors for safety in their business strategy.

These are factors that must be available if sustainability initiatives have to work out and give results. They include things such as technology requirements, availability of resources, tools for measuring performance and the how the process will be aligned.

Conclusion

In conclusion, a proper workplace management plan can help small businesses in the United Kingdom preserve their reputation as the backbone of the country’s economy. The first step towards a proper management planning is having the right information (U.S Small Business Administration, 2011).

Any company intending to perfect their art of survival must have the right data and information about their population, level of threat, climatic trends, and rates at which risks occur in the industry region and causes. False facts can lead to wrong decisions in the face of a crisis and could cost more losses than should have happened.

In the country, small businesses have done much to ensure their survival rates increase. There needs to be more awareness and training for small entrepreneurs, especially those in high risk industries. The general view of planning is to create a specific response to economical, physical, social, psychological and environmental challenges.

The effectiveness of the plan is influenced by both local and external factors. Particular circumstances such as the economic environment, human resources conditions, accessibility of business papers, number of people involved and many other parameters may also influence the outcomes of a new business. When all these factors are put into consideration, all small businesses in the United Kingdom will be in a position to develop a more effective strategy.

Reference List

Armstrong, M., 2009. Armstrong’s handbook of management and leadership: A guide to managing for results. London; Kogan page.

Barreto, H.V., 2007. The engine of America: The secrets to small business success from entrepreneurs who have made it. Hoboken, N.J.: John Wiley & Sons.

Bohlander, G.W., 2010. Managing human resources. Mason: South-Western.

Clutterbuck, D., 2007. Coaching the team at work. Boston: Nicholas Brealey International.

Daily, F.W., 2011. Tax savvy for small business. Berkeley, Calif.: NOLO.

Daniels, O.O., 2010. The small business guide (U.S). Evanston: The Small Business Zone.

Delgado, M., 2011. Latino small businesses and the American dream: Community social work practice and economic and social development. New York: Columbia University Press.

Federation of Small Businesses, 2012. Small business statistics. Web.

Haddow, G.D., Jane, A.B. and Damon, P.C., 2011. Introduction to emergency management. Burlington, MA: Butterworth Heinemann.

Kakkar, A., 2009. Small business management concepts and techniques for improving decisions. Global India Publications.

Koeng, S. and Root, H., 2006. The small business start-up guide: A surefire blueprint to Successfully launch your own business. Naperville, III: Sourcebooks, Inc.

Longenecker, J.G., 2010. Small business management: Launching and growing entrepreneurial ventures. Australia; Mason, OH: South-Western Cengage Learning.

Reason, 2008. The human contribution: Unsafe acts, accidents and heroic recoveries. Farnham: Ashgate, cop.

Repa, B.K., 2010. Your rights in the work place. Berkeley, Calif.: Nolo.

Reuvid, J., 2010. Managing business risk: A practical guide to protecting your business. London; Kogan page.

Santos, G., Fatima, M. and Joaquim, B., 2011. Certification and integration of management systems: the experience of Portuguese small and medium enterprises. Journal of Cleaner Production, 19(17): pp. 1965-1974.

Schneider, S. and Pietra, C., 2010. Read about it: The role of the media in improving construction safety and health. Journal of Safety Research, 41(3): pp. 283-287.

Shane, S., 2008. Startup failure rates. Web.

Small Business UK, 2012. What is the percentage of success of small businesses in UK? Web.

Steingold, F., 2009. Legal guide for starting and running a small business. Berkeley, CA.: Nolo.

Trevino, L.K. and Katherine, A.N., 2011. Managing business ethics; Straight talk about how to do it right. New York: John Wiley.

Tsai, W.H. and Wen, C.C., 2009. Selecting management systems for sustainable development in SMEs: A novel hybrid model based on DEMATEL, ANP, and ZOGP. Expert Systems with Applications, 36(2): pp. 1444-1458.

U.S Small Business Administration, 2011. Advocacy for small business statistics and research. Web.

Vance, C.M. and Yongsun, P., 2011. Managing a global workforce: Challenges and opportunities in international human resource management. Armonk: Sharpe.

As jobs become more complex and firms go global, firms are faced with an increased need for effective work teams. According to Lencioni (2002), “teamwork is the ultimate competitive advantage, because it is so powerful and so rare.” This implies that teamwork is more popular today, and as such becoming a vital tool through which firms attain business growth and development. As a result of this, all the major firms, especially the Fortune 500, utilize teams for a variety of tasks, with the aim of increasing firm’s output (De Meuse, 2009). However, as indicated by Barron (2003) firms do not always achieve desired results from teamwork. Actually, the rate at which teamwork fails to achieve desired results is worryingly high, and can be attributed to a number of reasons.

There are numerous context based reasons why teams fail. According to De Meuse (2009) most teams fail due to an ever-present disconnect between a firm’s need for teamwork and the prevailing employee functions. Despite needing effective team to achieve set goals, most firms have individualized employee functions. This implies that rather than creating and fostering teamwork, most firms naturally create individualized employee functions. This creates problems of effective individuals in non- effective teams and implies that structurally, firms are ill equipped to utilize teams.

The assertions made above allude to poor team strategies by modern day managers. Kennedy (2002) agrees with this and adds that teams fail to achieve desired results owing to the poor behavior of team members. Today, human resource practitioners, with the help of psychologists and career development experts, have intensified employee behavior modification. This not withstanding, maladaptive behavior by employees seems to pervade most firms. As a result of this, most firms have shifted their focus from professional development, to behavior modification. This implies that rather than working towards enhancing teamwork, most firms are involved in developing individual employees. This curtails opportunities for growth of teams in modern day firms.

Other than the reasons mentioned above, Kennedy (2002) also identifies poor team dynamics as another major reason why teams fail to achieve desired results. Today, one of the most common problems facing many firms is how to organize teams to effectively perform team tasks. Poor team dynamics are not essentially technical. Most of the problems involving poor team dynamics concern the major functions of the teams, and include a lack of understanding of the roles of individual team members.

In most firms, team members fail to understand their individual roles and how each role contributes towards the achievement of desired objectives. Such a problem is further compounded when team leaders fail to understand and execute their duties effectively. In addition to this, poor team dynamics also include a lack of necessary knowledge and skills, as well as how to apply (facilitation) the knowledge and skills effectively for the attainment of team objectives. This problem is further compounded by the existence of numerous team leadership and facilitation models, most of which are ineffective. But as Kennedy (2002) suggests, only a few of these models, such as the Six Sigma Model, seem to be effective.

The existence of teams within firms is not a guarantee that such teams will be effective. As indicated herein, there are reasons which render teams ineffective. For teams to be effective, team leaders ought to understand such challenges as well as identify effective solutions.

Reference List

Barron, B. (2003). When smart groups fail. The Journal of the Learning Sciences, 12(3). Web.

De Meuse, K. (2009). A comparative analysis of the Korn/Ferry t7 model with other popular team models. Web.

Kennedy, J. (2002). Six sigma team dynamics. Web.

Lencioni, P. (2002). The five dysfunctions of a team. New York: Wiley Publishers.

Tyco International was established in 1960 by Arthur Rosenberg, as a research laboratory that dealt with experiment for the United States government, later changing into manufacturing industrial products. However in 2002, Tyco was in crisis amid revelation of corruption mainly within top management, which led to the resignation of the then CEO, Dennis Kozlowiski. At that time, the conglomerate was at risk of bankruptcy.

Tyco had over 240,000 employees, thus being a major player in the economy. Despite Tyco registering large profit in the past years mainly through mergers and acquisitions, it was however revealed that its large earnings were because of fraud and accounting tricks. This proved that Tyco was led by fraud, greed, and criminal activities that camouflaged as hard work, allegedly leading to the company’s success.

In May 2002, a criminal investigation was opened to investigate the actions of the CEO, Kozlowiski, which included avoidance to pay income tax, and the transportation of $13million in terms of art in to the company’s headquarters, New Hampshire, as a means to escape over $1million sales tax.

Tyco absorbed many companies as it rose to a conglomerate, in which it would pay these companies; but, rather than indicating this cost as an expense, it would report it as a reduction in earnings. Therefore, the company absorbed massive amounts of goodwill to about $35billion. In addition, many companies were affected by the crisis of Tyco, since they had invested in the company’s shares, (Kay, 2002).

Organizational -behavior theories that could have predicted or explained the company’s failure

Culture of an organization determines the type of leadership involved within the organization, as it determines the degree of motivation present in a firm, which results to performance, satisfaction, and development of an employee. Organizational behavior involves people’s behavior in an organization and the way their behavior affects the organization’s performance.

According to Cole (2001, p.6), management theory involves goal setting, leadership, employee motivation, teamwork and coordination. An organization is made up of management and employees, with the management duty being to co-ordinate, direct and assign task to employees, who in return tackle the tasks to their best capability.

It is however evident that the management of Tyco used employees to perform unethical tasks, like altering financial records and engaging in fraud, actions that are clearly unethical for the organization. Indeed, management fraud can go unnoticed for a long time, as the management has the absolute control of the organization, hence it can engage in any activities as it pleases.

When management is irresponsible, there is a possibility for a calamity in the future, which could result to bankrupts; however, Tyco was lucky, as its case did not result to bankruptcy, despite the executive having stolen close to $600 for their personal gain.

According to Thoreen (2008, p.28), fraud is committed sometimes as a means of rewarding oneself due to their hard work, a similar case in Tyco where the top management rewarded themselves in term of bonuses without the stakeholders’ knowledge. Nevertheless, if the internal controls were keenly monitored, it could have been easier for auditors to discover malpractices in Tyco in earlier stages.

It is however evident that the top executive ordered their employees to commit fraud on their behalf by altering the financial records and offsetting imaginary costs. Sometimes, employees are left with no choice other than adhering to their seniors’ orders, in order to keep their jobs.

Compare and contrast how leadership, management, and organizational structures contributed to the failure

Management skills determine effective and ineffective managers, whereby, skills are the key to achieving goals. According to Proust (n.d, p.7), Mintzberg’s managerial roles include being a figurehead, whereby a manager is required to perform a number of legal duties, and he is responsible for motivating and directing employee.

However, the CEO of Tyco acted contrary to his role and led the company down the drain, as he led in overstating the company’s operating income. Kozlowiski and his management team failed to disclose millions of compensations to the senior management.

A manager’s duty is to direct his employees, however, Tyco management failed on this area when it encouraged its employees to engage in illicit payments to foreign individuals as a way of retaining business for the company.

The ineffective leadership at Tyco, led by Kozlowski, contributed greatly to the collapse of the once booming conglomerate. Kozlowiski was mainly concerned with his personal interest, as he applied million of dollars for personal interests.

This act of greed inconvenienced approximately 240,000 employees who would lose their jobs incase the company was rendered bankrupt. Nevertheless, the millions used for his court cases were at the cost of the company; therefore, he acted contrary to his managerial and leadership ethics and put many shareholders and employees at risk of losing everything.

Kozlowiski portrayed characteristics of a selfish, greedy, and unethical leader, who tarnished his image for those who admired him as a role model over the years. Despite Kozlowski having big ambitions for Tyco, he preferred unethical practices in handling the activities, other that hard work, and determination.

Kozlowski, Swartz and Belnick, were accused of stealing from the company, in terms of unapproved bonuses and loans, whereby, they would give themselves low-interest loans or interest-free, which they would camouflage them as bonuses. Nevertheless, poor strategic decisions, overexpansion of acquisitions, dominant CEO, greed, and desire for more power were the key factors that led to the business failure at Tyco.

The poor leadership by Kozlowiski and his management team resulted in fraud practices at the expense of employees and stakeholders. The CEO managed to get away with his actions as he had backup of some members in the board of directors.

Kozlowski was a goal achiever in the way he led Tyco, however, he would go to any lengths to accomplish those goals, thus hurting the company in the end. Nevertheless, Kozlowski can be defined as a derailed leader who never gave anyone an opportunity to question him, thus decisions made were poor and final.

Conclusion

Management of any firm should first concentrate on ethics and then profitability, since a company may be booming but on unethical practices, which when discovered lead a firm in to crisis and in the verge of loosing almost everything. However, if an organization is run on pure ethics, all its operations are genuine and free from fraud, therefore, all the profits it accumulates are based on hard work and integrity.

Nevertheless, in case of fraud concerning big entities like Tyco, the government uses a lot of tax money for investigations. In addition, if the firm has to close down, many families suffer, as the employees loose their jobs.

Secondly, potential foreign investors lose faith in countries whose companies are associated with fraud, thus affecting the country’s whole economy. Ethics starts from the management down to the employees, however, if the management entertains unethical practices, the employees eventually follow suit.

References

Cole, G. (2001). Organizational Behavior; Lets Higher Education List Series. OH: Cengage Learning EMEA Publisher.

Kay, J. (2002). Tyco: US conglomerate falls amid revelations of greed and corruption. World socialist website. ICFI publishers. Web.

Proust, M. (N.d). What is organizational behavior? Chapter1. (Attached material).

Thoreen, T. and Jakobsen, A. (2008). Greed at the Top: Fraud and the Failure of Oversight at Adelphia Communications Corporation and Tyco International Ltd. Norwegian School of Economics and Business Administration. Web.

Introduction

Venturing into new markets, especially in foreign nations, requires organisations to exercise due caution to ensure success. While organisations can develop strategies to cope with bazaar entry changes that relate to their internal structures, dealing with macro-environmental factors in a foreign nation is incredibly problematic. This situation underlines the importance of developing an appropriate entry strategy that can ensure that an organisation makes use of the existing knowledge and experience in its operations in foreign nations. Such strategies include opting for franchising and licensing before focusing on full ownership arrangements. As Holt and Quelch assert, “all businesses operate within an environment, which directly or indirectly affects how they function” (69). This claim implies that successful colonisation of new markets in Asia calls for Carrefour to enact entry strategies that minimise possibilities of failure. However, in the Japanese market, this was not the case. This paper discusses the failure of the Carrefour business in the Japanese markets. It also recommends strategies that would have prevented the failure.

Statement of Problem

New markets present challenges in terms of aligning an organisation’s business model with the local business model of foreign nations. Factors such as consumer purchasing behaviour, the most important brand elements, and loyalty of the local people in a given foreign nation may determine the success or failure of an organisation (Hill and Ettenson 87). Carrefour did not adopt the best strategies and hence the reason why it failed. What should have Carrefour have done to avoid the failure? Did it generalise its analysis on Asian markets such as China to the entire Asian continent? Was its entry strategy to the Japanese market misplaced and misaligned with the business microenvironment of the nation?

Issues/Problem Identification and Analysis

From the case study, several issues emerge concerning Carrefour’s entry strategy into the Japanese market. First, it did not screen the new market appropriately. Indeed, it assumed that the purchasing behaviour of the Japanese people was similar to the situation in other Asian nations. Mikkilineni confirms, “Asians are more concerned about price than the product and they purchase products more hastily and at varied points of time” (5). This observation suggests that Carrefour could have successfully ventured into the Asian markets by offering its products at low prices. After making the products easily attractive to people who purchase in a hurry, Carrefour included value additions for its products in a bid to build customer patronage. While it succeeded in other Asian markets in creating customer patronage, the Japanese market posed immense challenges.

Secondly, the failure to screen the environment properly led to poor planning of an appropriate new market entry strategy. New markets often present challenges in terms of aligning organisations’ culture to the local people’s tastes and preferences, attitudes, and beliefs (Kotler, Adam, and Denize 49). For this reason, various options for entry modes in the Japanese market were worth considering. Possible entry modes that may have worked in the markets include franchising, exporting, and joint ventures such as mergers and acquisitions. Nevertheless, each of these modes is suitable to different extents and depending on different situations. Unfortunately, Carrefour did not consider this factor. It presumed that success in other Asian markets could be duplicated in the Japanese markets.

In the process of marketing planning, a myriad of issues is considered, including decisions on products that are offered in the market for trade, the place where they are to be sold, pricing, and even their promotion techniques. These issues require a heavy data input of consumption patterns in a given market. Carrefour never acquired this data. It only focused on introducing its products in the Japanese market with the mentality that they would appeal to it just like in China, Malaysia, or any other Asian nation. Consequently, it experienced significant failures in studying and analysing consumer behaviour.

From the above-identified issues, some of Carrefour’s failures could also be related to negligence and wrongful generalisation of market characteristics. From the case study, negligence is evident as Carrefour failed to deploy its iterative methodology for analysing the appropriateness of market before committing its resources to invest in the market (Mikkilineni 6). Indeed, the Japanese market did not meet any of its criteria for market analysis, yet Carrefour made a go-ahead to invest.

While it was the norm for Carrefour to ensure that a potential new market did not have advanced retail small-scale firms, the Japanese market already had an immense number of small-scale outlets that offered products at discounted rates (Mikkilineni 6). However, the timing of opening stores in the Japanese market was excellent. Organisations need to analyse the legal environment while making decisions of venturing into different markets. An organisation needs to ensure that the legal environment supports its business models and cultures. Carrefour ventured into the Japanese market after Japan had permitted foreign investors to open large stores in the nation upon its abolishment of the famous “large store law” (Mikkilineni 5). Therefore, it was sure it would not encounter any unfavourable legal climate.

Generation of Solutions/Alternatives

Considering the different problems that Carrefour encountered in the Japanese market, several alternatives or solutions can be adopted. Firstly, it can exit the market by selling its stores to another local organisation or any other organisation that has Japanese shoppers’ loyalty. Secondly, it can enter into a joint partnership with another organisation by forming a merger. Carrefour can also change is operational strategies to meet the needs of the Japanese markets. For example, as Mikkilineni reveals, “Japanese consumers prefer frequent shopping and buy goods in small quantities every time they shop” (7). Carrefour deployed one-stop-shopping business model. Even though the company could have managed to change the shopping cultures of the Japanese people, it could not make people buy high volumes of stocks due to lack of space to keep them in their homes (Mikkilineni 7). Japanese people usually have small houses. The company cannot change this situation but can adopt measures to ensure that Japanese shoppers do not buy anymore from general stores within their neighbourhoods. For example, by adopting appropriate promotional strategies, the company could have presented shopping in big stores as a fashionable behaviour that matched with changes in one’s social-economic status.

Pricing of products in the Japanese market also encompasses an important issue that Carrefour can address to replicate its success in other markets in the Japanese souk. While shoppers in other Asian markets view low prices as an important factor in making a buying decision and in their selection of an organisation to buy from, Japanese shoppers value quality over prices. This assertion is supported by the fact, “they feel that a product sold at low prices will be of low/cheap quality” (Mikkilineni 7). However, their appreciation of fashion is important in establishing strategies for success in the Japanese markets. Considering the characteristics of the Japanese shoppers, price differentiation can help to boost Carrefour’s sales.

Recommendations

Although the suggested alternatives are important, they are currently not useful to Carrefour since its bad brand image has already been established. Without rebranding, it cannot erase the already existing brand image. Since this situation is an expensive adventure that has no guaranteed success, Carrefour should absorb losses in the Japanese market, sell its stores to other organisations as planned, and focus on building stronger brand loyalties in successful markets. It can also open other stores in different nations, but using its failures in the Japanese market as a benchmark for entry into such new markets.

Implementation Plan of Action

An action plan for success in a market works well before an organisation has opened its operations in the market. However, Carrefour has been operating in the Japanese market where it has faced a poor reception. Its brand image has been that of offering cheap poor quality products. While implementing the action plan for closing down its operations in Japan, Carrefour needs to value its assets, look for potential buyers, and negotiate the terms for acquiring them. After entering into a valid contract, subject to Japanese legal provisions, it can then cease its operations once the contract is fully honoured without frustrations. The money that is generated through this acquiring agreement should then be channelled into improving its brand image and loyalty in more successful markets together with researching other potential markets to avoid duplication of the failures in the Japanese souk.

Conclusion

Carrefour experienced a myriad of challenges in the Japanese market since it joined the market with customised success solutions. It failed in terms of joining the market with a partner who could have assisted it in developing a marketing model that met the tastes and preferences of the local Japanese shoppers. Its pricing strategy was wrong. This situation translated to building the wrong brand image. Currently, the company needs to close down its operations in Japan but look forward to strengthening its operations in more successful markets.

Works Cited

Barnett, William. “Four Steps to Forecast Total Market Demand.” Harvard Business Review 2.1(2008): 28–34. Print.

Hill, Stephen, and Tyson Ettenson. “Achieving the Ideal Brand Portfolio.” Sloan Management Review 2.1(2005): 85-90. Print.

Holt, Arthur, and Timpson Quelch. “How global brands compete.”Harvard Business Review 7.3(2009): 68-75. Print.

Keller, Lil. Strategy Brand Management: Building, Measuring, and Managing Brand Equity. New Jersey, NJ: Prentice Hall, 1998. Print.

Kotler, Peter, Smith Adam, and Stephens Denize. Principles of Marketing. Australia: Prentice Hall, 2009. Print.

Mikkilineni, Pushpanjali. Carrefour Exit from Japan. ICFAI: Centre for Management Research, 2006. Print.

Introduction

A report released by Bloomberg revealed that 8 out of 10 businesses fail within one and half years after their creation. There are several lessons that business people and entrepreneurs can learn from the colossal amount of failure experienced in the creation of businesses. They can apply the insights they gain from the failures to improve their businesses and prevent them from crashing and failing. Studies have shown that successful companies have certain characteristics in common. These include great customer service, innovative products and services, competitive pricing, focus on customer needs, differentiation in the market, superior business models, and articulate communication of value propositions.

Reason for Business Failure

If I were to start a business, the main reasons why it would fail include poor planning, focus on profits rather than customers, and poor leadership. Many businesses fail because people do not create short-term and long-term plans (Finlab, 2012). It is important to plan and decide the milestones that should be achieved in the next few months and the next few years. The success of the business would depend on the complete understanding of customers about their tastes, likes, dislikes, and needs (Finlab, 2012). It would be important to provide products and services that meet the needs and demands of customers (Bovee & Thill, 2014). Otherwise, the business would fail because of providing products that customers do not need. The dreams, values, and goals of customers are critical in the creation and running of a successful business (Bovee & Thill, 2014). Effective leadership includes aspects such as employee and financial management, quality decisions, training and development, and timely problem-solving (Finlab, 2012). Business failure could be avoided by creating both short and long-term goals, creating business goals based on the needs of customers, and hiring a competent individual to run the business (Finlab, 2012).

Source of Advice When Staring a Business

Three sources of information when starting a business include the internet, print, and television. Technological advancement has turned the Internet into the vastest and reliable source f information. Several subscription services allow users to access databases that provide information on how to start and run a business effectively. The Internet is a great source because it contains information that includes market demographics, case studies of business success and failure, financing, tax compliance, banking, registration of companies, and government laws and regulations (Smith, 2012).

Print sources such as books, magazines, and pamphlets are also a great source of information on how to start a business. Magazines and newspapers such as Wall Street Journal, Business Week, Fortune, Forbes, and Nation’s Business provide information on a wide range of topics regarding the proper running of businesses (Smith, 2012). These sources can provide information on aspects of starting a business such as creating a good business plan, financing, laws and regulations, effective business models, and what to avoid.

Television is also a source of business information even though it is not as extensive and reliable as print media and the Internet. Several programs are devoted to businesses that could provide useful information. These programs cover stories of businesses that succeeded and those that failed. They also invite professionals to talk about how to start and run a successful business enterprise.

How Such Services Might Help Me

If I wanted to start a business, the aforementioned sources of information would help me in various ways. First, they would supply information on all the requirements of starting a business. For instance, they would provide information on how to register a company, get financing, and act within the limits of the law (Smith, 2012). Besides, they would be useful when developing a business plan. Second, they would supply information on the common mistakes that en5erpreeurs make and how to avoid them when building a business. Gaining insights from entrepreneurs who failed is would be an integral part of learning to avoid making similar mistakes in my business (Smith, 2012). Third, the services would educate me and provide insights on making effective decisions. For instance, they would teach me about choosing a business structure, choosing a business location, business financials, filing and paying taxes, and hiring and retaining employees.

Reasons for a Business’s Failure

I have shopped at several stores and eaten in restaurants that led me to conclude that they were not going to make it in the business world. The reasons that prompted me to make that conclusion included poor customer service, bad location, and lack of competitive advantage.

The places I visited had poor customer service. The attendants were rude, slow, and inattentive. The service was poor and the attendants were unreliable. Another reason was the bad geographical location. I once shopped at a store whose demographics caused me to conclude that it would fail. It had low foot traffic, was inaccessible, and had inadequate parking, and there were few businesses and services in the vicinity. A larger competitor that offered cheaper products and was accessible was a few just blocks away. The store lacked a competitive advantage. It was small, poorly located, and offered products at higher prices than the larger and conveniently located competitor. In many cases, the location of competing companies matters in the success of a business because of comparison shopping. This is beneficial only if the business offers products of a higher quality than its competitor and at a lower price. The store was offering products of similar quality but at a higher price. Lower prices and ample parking space gave the competitor a competitive advantage.

Conclusion

Many businesses fail because of factors such as lack of planning, poor leadership, lack of differentiation, inability to learn from failure, lack of capital, and ignoring customer needs. Entrepreneurs need to develop certain skills and gain knowledge on how to run a business before starting one. Sources of information include print media, television, and the Internet. Successful businesses provide quality customer service, plan properly, and choose locations that are convenient to customers.

References

Bovee, C. L., & Thill, J. V. (2014). Business in action (8th ed.). New York, NY: Pearson.

Finlab, D. (2012). Why startups fail: And how yours can succeed. New York, NY: Apress.

Smith, J. (2012). Smarter business start-ups: Tips and techniques to start your dream business. Oxford, England: Infinite Ideas.