Why Do Businesses Fail?

1528 Words Oct 25th, 2010 7 Pages
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Why Do Businesses Fail?

Analyze the reasons and provide a case study of one or more companies that have failed or suffered serious setbacks before they recovered.

Name: YAN Hong
ID number: 100004456
Tutor: Mrs. Dawn Cremonese

It is well known that the financial crisis which started in 2008 is a worldwide recession. Even the Lehman Brothers Holdings, which was a global firm with a high reputation, went bankrupt on September 15th, 2008. Lehman Brothers Holdings failed because it was unable to retain the confidence of its lenders and counterparties and because it did not have sufficient liquidity to meet its current obligations. (Anton R. Valukas, March 11th, 2010) Undoubtedly, the impact of Lehman’s bankruptcy was tremendous and
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Some of the quality mistakes bring uncountable cost, while some bring companies to the end of their businesses. As a result, better quality than quantity should be advocated as a regulation before companies start any strategies. On the other hand, the government should strictly control the quality of products and make a more detailed policy on standards to stimulate corporations focus on the quality of their products.

Last but not least, the subject of diversification. It is well known that, the fluctuation of the economy is unavoidable and one corporation, if they only produce one product, the fluctuation will inevitably influence the corporation. Fortunately, corporations can learn from the principle of investment portfolios, which divides the risk into pieces and would definitely decrease the probability of failure. Even though corporations who only focus on one product seem to gain higher quality, it is not necessarily the truth it might be a struggle for corporations to survive in competitive circumstances. Next comes the problem of how to manage the portion of every product and how many products should a corporation afford to minimize the risk of failure while gain a higher profit? The number of possible answers is quite vast. For example, making decisions fitted with the corporation’s real situation, making full use of mathematic models to decide the number of the category, hiring professional corporations for consultant, etc.

Besides
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