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Objective

The prime objective of this activity is to make the students familiar with the causes of success and failure of business.

Learning outcome of the activity

After attempting this activity, the students will be able to:
1. Identify the factors that can bring success or failure for small businesses in Pakistan.
2. Recommend the measure to avoid such pitfalls that can cause failure in businesses.
3. Solve a case study

Case study

After the death of Mr. Nadeem Khan, his business of confectionery was divided among his two sons, Mr. Khalel Khan and Mr. Raheem Khan. Both were interested in carrying the brand name of Eastren’s Bakers but Khalel was smart enough to carry the brand name and Raheem started the same business with the name of Fresh Bakers in the same city. From the day one, Mr. Khalel started enjoying good sales with less effort as having same salespersons working with his father whereas Mr. Raheem was facing difficulty to hunt good professional bakers. He was less interested in hiring previous salespersons. In the beginning, Mr. Khalel offered same
confectionery items but Mr. Raheem introduced some more items and for such purposes he took loan from his friend.
Raheem also tried to set a plant for dry milk but failed to manage the supplies as his actual cost was 50% higher as compared to estimated cost. It was a big loss. Mr. Khalel, as he has worked with his father, was having more information about the cost of raw material and machines thus avoided diversification at the initial stage. Now Mr. Raheem is getting advices from friends and 

relatives to get out of this situation whereas Mr. Khalel is enjoying good returns.

Requirement:

Solve the case study while answering following questions:

Q1. Identify any five factors that bring failure for Mr. Raheem. (5 Marks)
Q2. Advice Mr. Raheem, how he can get out of this situation? (5 Marks)

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Replies to This Discussion

Make questions understandable......Discuss to solve the above assignment...

Muhammad Ali, please go ahead with your ideas.

Please Discuss here about this assignment.Thanks

Our main purpose here discussion not just Solution

We are here with you hands in hands to facilitate your learning and do not appreciate the idea of copying or replicating solutions.

The Main Causes Of Business Failure

1) The poor management of cash flow is the main reason that small businesses fail.

it is possible to have a paper profit but still have problems simply because there is insufficient cash flow to pay creditors. Poor cash flow may arise from:

Significant increases in stock levels
Inadequate credit control
Increasing debtor days
Bad debt incurred
Poor accounting practices including late invoicing
Inaccurate forecasting by management
Failure to plan for capital and/or exceptional expenditure

2) Lack of management control is another major reason why business find themselves in difficulties. All businesses need to have a strategic plan to ensure that they are operating in the best markets with correct margins and adequate level of financial resources. All too often management spend too much time dealing with day to day problems and so fail to address these fundamental issues. Lack of management control may result from:

Failure to develop a business plan
Failure to understand costs, markets and key customers
Failure to submit returns, resulting in penalties and possible investigations allowing customers unnecessary discounts
Wasting time fending off creditors
Wasted promotional expenditure

3) The loss of main trade accounts causing a reduction in turnover and possibly trading profits is another principal cause of businesses finding themselves in financial trouble. The business will often then offer substantial discounts and extended credit terms in an attempt to generate sales, however, this causes further pressure on cash flow. Unless a business is in the fortunate position of being able to reduce overhead costs to compensate for the loss of turnover. It is essential that the loss of a major client is replaced as soon as possible.


4) Inadequate or inappropriate financing is the fourth major cause of company difficulties. 

Use of short term overdrafts for long term capital acquisitions
Failure to use factoring facilities when sales are substantially increasing
Inadequate shareholder capital all contribute to cash flow problems
These problems will become more pronounced when a substantial difficulty such as a major bad debt, loss of a principal customer or business interruption occurs.
The Solutions
In addition to the above list there are numerous other reasons why businesses become Insolvent including excessive remuneration and uninsured losses arising but the most common cause remains the failure by management to manage their business. Where management takes a proactive stance, controls the situation and seeks advice where necessary, whilst they will not be immune to the possible downturns of the economy, they will be much more likely to survive.

The following are the some factor that become the reason of the failure of the Mr Raheem .Mr Raheem leave his father brand that has a good name in the market .this become a reason for the failure of the Mr Raheem business. As mention in the above senario Mr Raheem has no experienced about the business management and he set the new business .no experence of business is also a reason of the failure of the business.  Mr raheem also start the new plant of the dry milk thats cost is more than the return .it is loss for him

To make the good will in the market is not an easy task.because the good will can not b purchased .

Mr Raheem leave the brand name of his father business product.and to make a new brand name is not easy to obtain .this become a loss for the Mr Raheem.

MGT211 Assignment#01 Solution 

After the death of Mr. Nadeem Khan, his business of confectionery was divided among his two sons, Mr. Khalel Khan and Mr. Raheem Khan. Both were interested in carrying the brand name of Eastren’s Bakers but Khalel was smart enough to carry the brand name and Raheem started the same business with the name of Fresh Bakers in the same city. From the day one, Mr. Khalel started enjoying good sales with less effort as having same salespersons working with his father whereas Mr. Raheem was facing difficulty to hunt good professional bakers. He was less interested in hiring previous salespersons. In the beginning, Mr. Khalel offered same confectionery items but Mr. Raheem introduced some more items and for such purposes he took loan from his friend.

Raheem also tried to set a plant for dry milk but failed to manage the supplies as his actual cost was 50% higher as compared to estimated cost. It was a big loss. Mr. Khalel, as he has worked with his father, was having more information about the cost of raw material and machines thus avoided diversification at the initial stage. Now Mr. Raheem is getting advices from friends and relatives to get out of this situation whereas Mr. Khalel is enjoying good returns.

Requirement:

Solve the case study while answering following questions:

Q1. Identify any five factors that bring failure for Mr. Raheem. (5 Marks)

Q2. Advice Mr. Raheem, how he can get out of this situation? (5 Marks)

solution::

Q1. Identify any five factors that bring failure for Mr. Raheem?

answer:

1.Poor inventory management

2.Poor location

3.Personal use of business funds

4.Lack of experience

5.low quantity of material

 

Q2. Advice Mr. Raheem, how he can get out of this situation?

answer:

1.Project a positive business image.

2.Level the playing field with technology.

3.Invest in yourself.

4.Take time off

5.Plan everything.

Thank you very much sir you are always helping in true letter and spirit. thanks for the idea.

factors that can bring success or failure for small businesses Starting a business can be the key to financial independence, or the road to ruin. The statistics for startup businesses are certainly grim, with some 90 percent of new businesses eventually closing up their doors forever. According to Elizabeth Wilson of Entrepreneur Magazine, while some 40 million businesses are started each year, a paltry 350,000 break out of the pack and begin growing and making money. Making sure your own company is one of the top 10 percent means avoiding some common business pitfalls.

Find Niche
As a small business, you can't be all things to all people, so you need to carve out your own niche in the market. Determine what makes your business unique so you can capitalize on this feature through your marketing efforts. For example, do you offer products that differ from the competition or do you offer a unique shopping experience? Do you offer expertise that is not available in your local market?

Minimize Overhead
You may be forced to operate on a shoestring budget, especially when first starting out, so keep expenses to a minimum by reducing your overhead. Rent the cheapest building that suits your needs and shop around for items , such as insurance. Learn as much as you can about basic computer maintenance to keep service costs down. Even simple things like, such as turning off your computers at the end of the day, can reduce your energy bills.

Focus on Service
You may not be able to compete with the larger companies when it comes to pricing, which magnifies the need to deliver superior customer service. Go the extra mile by providing additional services, including free delivery or offering extended hours. Build a database of customer email addresses so you can send them a newsletter filled with useful tips and regular promotional offers.

Location
If you operate a brick-and-mortar business as opposed to one that's Internet based, your location will play a big role in determining your success. According to the Business know-how website, factors to consider when choosing your location include proximity to your customer base, the location of your business in relation to your competitors and your building's accessibility.

Poor Planning
Poor planning can cause your business to fail before it has a chance to succeed. That's why a carefully crafted business plan is an essential component to your success. A business plan is a written document covering items, such as your business' purpose, your marketing strategy, capital requirements and any potential problems you might face

Good job Mr. Tariq Malik......Keep it up dear...

Thanks allot

thnxx alot Mr. Tariq Malik good job..

welcome 

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