What Makes Businesses Fail in the 21st Century

What Makes Businesses Fail in the 21st Century

Warren Parker

Charleston Southern University

Business 650

Dr. Breland

Business Failures

Given the tremendous amount of literature available, the availability of education/training, the technology sources, the research methods and modern management principles, why are there still so many failures of major businesses now at the start of the 21st century?

When I read this question, it makes me think of small businesses in the major business category, as well as large firms. So we will research both in this paper. It all starts by stating the old quote "People don't plan to fail, they fail to plan." Why is this you ask? Nine out ten business failures in the United States are caused by a lack of general business management skill and planning. Business failures have been on the increase since 1990's, and well into the 21st century. I will include in the next few paragraphs some things I have researched in business failure and managerial mistakes.

Let us look at business ethics to start with. What exactly is business ethics? "When business is bad, pressure can increase on salespeople to bend the rules to bring in needed revenue. To avoid ruined reputations, businesses must decide how to deal with ethical business situations."(6) Have you ever seen those companies that have ridiculous prizes that you can win? In the 21st century today, there are few companies out there that can actually back up these prizes. A lot of the prizes out there are advertised by smaller companies who have no chance of backing them up. Stupid things like "Buy an ice cream cone from our store and win a million dollars!"(7) If by some miracle a person should win one of these crazy contests, how could a small business pay the reward? More than likely a business would come up with some disqualifying excuse no to pay out. For Instance "In the early 1990s, some company that was trying to get publicity offered a million dollars to anyone who could make a basket at a Chicago Bulls game from the opposite free throw line. The company certainly got loads of publicity in anticipating the first try. The very first guy to try it actually made the basket. Even the Chicago Bulls players were jumping up and down in excitement. A couple days later, the guy was on the news again because the company (or their insurance company) claimed some loophole had disqualified him."(7) Another example is "There is some company now that is running TV commercials that advertise "official" new five dollar coins with presidents' pictures on them. If you listen carefully, the coins were authorized by the government of Liberia in Africa. No matter how you look at it, there is substantial deception involved here. That particular commercial has so many aspects of deception that it is nearly humorous. Except that there are a lot of people who actually send them money."(7) When it comes down to major corporations, we can just take a look at ENRON and their ethical issues. To succeed in business, companies need to back up their word, and play right.

Discounting the need for experience is other ways businesses fail. If there is one thing that distinguishes big business management from small business management, it is that the owner or manager must be the main guy in everything that goes on in a small business, whereas each of the different specialties of a business such as accounting, marketing, purchasing, research, training and sales, has a specialist who is responsible for them in large firms. Seldom does one person have an in-depth knowledge or experience in all management disciplines. For instance let's say a lawyer in his own firm will find it hard to succeed in business for himself if he has no skills in marketing or financial matters. One solution is to get some training in operating a business before you start. Colleges now have good programs for someone who wants to start their own business. The owner should figure out what their weak points are in their business. The gaps can then be closed by a crash self-development program, getting some knowing partners or staff, or by hiring outside consultants.

Keeping your books and records up to date is highly important as well. Most companies starting out ask a lot of questions on what books they should keep up with. New business owners should not ask the question what they should keep, but more or less what each member needs to know. The correct books meticulously kept are useless if the proprietor makes no use of the information they convey. If a business owner wants to create serious problems for his advertising, stock control, and all the way to his taxes, then a poor record keeping behavior will lead to this. When considering a good record keeping system, it should be kept regularly with current information and highly easy to access and maintain. When you need to know a lot about your business, records are mainly a road map to all your questions. If you can't find the answer to your questions in your records, then something need to change. Unused information is worthless and a waste of time. I was reading a funny story in Times Newsweek online about a Business School that had been shut down due to financial problems. Drake Business School told roughly a 1,000 students that they could finish their course at twelve different schools, or they could be reimbursed for what they have already paid. Drake's CEO, David Cary Hart, was shot in the buttocks at a subway near campus. This lead to the school termination by the board of directors. No one knows why this had happened, but some believe it was related to a string of financial problems. In a letter to students and faculty, Hart, who had run the school for only three months, stated: "I have shared, with all of you, the fact that Drake has financial problems; some of which were considerably worse than I expected...Certainly I did not foresee, nor plan for, sustaining a serious gunshot wound that will leave me disabled for up to a year. There's just no strategy for such an event. (8)" The incident has caused around 125 staff members looking for work in the surrounding area. Reports have stated that Drake had millions in financial problems from bad bookkeeping to a lack of state grants. Drake will reimburse students with a bond which they had posted.

One major thing bad for businesses, whether major or small is spending a lot more than you receive. The words Ð''breakeven figure' from a business's accountant, is sometimes the worst thing businesses want to hear about their