Analysis : Resources And Failures Of Smes

Successful firms capitalize on economies of scale & scope, create management structures and invest in research & development

Small businesses are the backbone of national economy and play a leading role in innovations as well as in creating jobs. Small business has the intrinsic needs to growth. Obvious contributions of the growth of small businesses include the increased return on investment and job creation. The interesting and valuable question is how small business grows and are all small businesses growing? It is no surprise that the growth of business is a core topic both in organization theory and entrepreneurship, both are interested in the process and causes of business growth. Stages of growth models, which assume that business go through some distinct stages from birth to maturity, have been the most popular theoretical approach in academic to understand small business growth. Although the stages model of growth has been criticized for being too sequential and linear which is unrealistic and inconsistent with empirical evidence (e.g. Phelps et al., 2007; Levie and Lichtenstein 2010), various new stages models of business growth have been developed since the 1960s.

Although so many businesses large and small are started every year, over 90% of businesses fail. Why is that?

Smaller firms might avoid opportunities because they lack the resources and knowledgeable personnel who have more insight about entering foreign markets or expect that the risks might be more

1. I believe that the single most important responsibility of a company is to make sure that the people that they serve are happy with their goods or service. I believe this to be most important because if the people are unhappy with your good or service, then the amount of business that you do will go down therefore causing you to earn less money and a failure in the business.

Business failure refers to a company ceasing operations following its inability to make a profit or to bring enough revenue to cover its expenses. A profitable business can fail if it does not generate adequate cash flow to meet these expenses. There are many factors that affect a businesses ability to succeed, including the consumer demand for the product and the surrounding competition within the operating market, however it ultimately comes down to the firms financial efficiency and its ability to cover

Organizational failures and bankruptcies have become a highly frequent sight of present generation. Organizational failures is most commonly referred to as financial losses or stagnation of financial performance of an organization, however, it is a more comprehensive concept. Not being able to attain organizational objectives – no matter whether they are financial objectives or non-financial – is organizational failures. Internal workings of the organizations have long been a subject of study for management theorists, for what else can be more useful study than study of

Regression analysis seems to be extremely useful in determining financial distress and the bankruptcy of firms. In fact, in a particular study conducted by Bredart in 2014, it was presented that regression analysis was able to show an 84% prediction accuracy rate in determining bankruptcy of 870 firms between the years of 2000 and 2012 (Bredart, 2014). The independent variables used in Bredart study included profitability (net income/total assets), liquidity (current assets/current liabilities), and solvency (equity/total assets) while the dependent variable included financial distress.

When the business has more work than it can handle is another warning of the enterprise not doing well. A lack of liquidity can also be a cause of business failure. Liquidity is the speed at which an asset can be converted into cash and if the company does not have enough liquid cash at its disposal, it can lead to their downfall. A new business venture that provides products or services at the cheapest price in a desperate quest for making sales is also a sign of struggle.

3. Small companies are less efficient in operation will fail because it cannot compete with others.

Conclusion: This paper is intended to give clarity on the depths of small businesses, how they plan to succeed and get through possible adversity. The surviving mechanism it takes to maintain in a world where large businesses are expected to exist longer than small business.

A number of important studies claim the appearance of the stylized reality demonstrating that company size has been linked with company success and departure (Manj-Antol and Arauzo-Carod, 2008). Smallness has a tendency to maximize company departures (Grilli et al., 2010; Pez et al., 2004), because companies coming into the marketplace with a fairly modest level might face price drawbacks and bigger issues in being able to access capital as well as labour market segments in contrast to well-established companies. Nevertheless, many of us even now understand very little regarding the survival styles of companies while in a crisis phase.

Business failure refers to a company ceasing operations following its inability to make a profit or to bring in enough revenue to cover its expenses. A profitable business can fail if it does not generate adequate cash flow to meet expenses. Arditi (2000), defines the failure of a company as an inability to pay its obligations when they are due (Frederikslust, 1978).

As defined Robert W. Rowden (Thunderbird International Business Review, March-April 2001), a small firm (with a maximum of 50 employees) is centralized and personalized through management of an owner-manager. This type of organization provides some advantage such as proximity between manager and employees because there is less hierarchy. Furthermore, internal information system is more simple than big companies, it allows an efficient sharing of ideas and to have an adaptability to the market changes. Yet, a small company doesn 't have the multinational 's human and financial resources to

If efforts are put towards promoting SMEs, particularly, the likes that are concerned with the informal sector, achievement of development that is sustainable is inevitable. Most developing as well as developed countries depend on the small and micro enterprises in the provision of employment. Even though a number of small and medium-sized enterprises are not part of the formal sector that is