Strategy illustration Strategy theory

Business failure

Start up businesses have a very high failure rate in this country with as many as 1 in 3 failing in their first three years. The reverse side of the coin is that around two thirds survive and some go on to prosper and expand. Key reasons for business failure include:

Poor marketing

Successful modern businesses are ones that understand and meet the requirements of their customers. Detailed market planning and market research is therefore an essential for new businesses, to find out details such as the potential size of the market, the extent of competition, as well as consumer preferences and tastes.

Cash flow problems

Many businesses struggle through poor cash flow management. It is all very well having a good idea and a good product but it is also necessary to be able to meet short term cash outflows. Many businesses try to grow too quickly, and end up borrowing too much money externally, resulting in crippling interest repayment charges.

Poor business planning

Business planning should cover aspects such as marketing, finance, sales and promotional plans, as well as detailed breakdowns of costings and profit predictions. It is often said that 'failing to plan, is planning to fail'.

Lack of finance

Insufficient finance often means that businesses are unable to take opportunities that are 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.

Failure to embrace new technologies and new developments

In a fast changing world leading businesses are ones that make best use of advanced modern technologies in an appropriate way. Firms that operate with outdated technologies and methods frequently find themselves at a cost disadvantage over more dynamic rivals.

Poor choice of location

Location is a very important business decision. A good location is one that appeals to large numbers of customers, while at the same time minimising costs. For example in retailing it is often a mistake to choose a low cost location, that is not visible to customers. However, conversely there are considerable cost advantages to out-of-town retailers that customers are prepared to travel to visit.

Poor management

Weak and inexperienced management is one of the major causes of business failure. Managers have to work extremely hard, and to understand their customers needs, and the business that they are in if they are to be successful.

Poor human resource relations

Often a cause of failure. Successful businesses motivate their employees to work hard to help the business to succeed.

Lack of clear objectives

Successful organisations have clearly focused and communicated objectives that enable everyone in the organisation to pull in the same direction.


Supporting Documents

These downloads will help to put strategy theory into context using real world examples from real businesses.

The marketing mix in the food industry
McCain Foods logo

Discover how McCain Foods employed strategy theory to succeed in the food & drink industry by downloading our premium case study.

Leading a revolution in banking
Intelligent finance logo

Discover how Intelligent finance employed strategy theory to thrive in the financial services industry by downloading our premium case study.

Planning effective marketing strategies for a target audience
adidas logo

Discover how adidas applied strategy theory to thrive in the sportswear industry by downloading our premium case study.

Innovation in infant nutrition
Cow & Gate logo

Learn how Cow & Gate used strategy theory to succeed in the food & drink industry by downloading our premium case study.

Positioning the brand
Chap Stick logo

Discover how Chap Stick applied strategy theory to thrive in the healthcare industry by downloading our premium case study.


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