New businesses Essay Example for Free

New businesses Essay Consistent findings have imperatively indicated that the correlation between firm entry and survival is negative. Out of every one hundred new businesses introduced in the UK, 50 percent of them become obsolete before their third anniversary. Such high attrition levels are not only evident UK in alone but also in most modern economies and can be said to be a generic rule of thumb. Just why is it that so many nascent firms end up accomplishing little or nothing before they finally become extinct? Is it that their owners do not put enough efforts into the business development or are there other internal and external causes of this prevalent occurrence of business failure? Many theories have been put forth to explain the possible causes of the high rates of new business failure. It is not surprising that major diagnoses of the root causes of low survival rate in new businesses identify management inefficiency as one of the causes of the high attrition levels. Policy makers have also been blamed for recommending entrepreneurship as the solution to rejuvenating the economy yet little is done to educate people on what to expect amid globalization pressures, competition and technological changes that are likely to impact on the business survival. Other theories put forward include the supportive environment thesis, nature of activity and industry theory. Firm survival can however be properly classified in three explanatory dimensions: The firms specific characteristics; Operational factors and the business cycle. This paper explores the characteristics of business failure under these three dimensions and at the same time introduces a discussion on how entrepreneurs can enhance their businesss chances of survival by providing possible solutions to the low levels of survival witnessed in infant businesses. II. Analysis a) Definitions Birth of the firm: The introduction of a business marks the birth of a firm. This may actually start when the idea of the business is borne. Consequent activities such as registering the company, acquiring premises and capital are secondary elements in the birth of a business. Survival of the firm: Survival of the firm refers to its ability to withstand internal and external pressures to meet the objectives for which it was established. Survival determines whether a firm makes it through its lifetime or whether it fails and consequently exits the market. Death of the firm: This denotes the final stage in a business at a point where nothing can be done to revive the business and the only solution is complete closure. Termination of the firm as a legal entity: This means that the business is no longer recognized by the law. It means that a business in the context of the law is no longer operational and it is therefore not liable to debts, taxes among other liabilities to stakeholders. b) New Firms Survival Literature New businesses in the UK have in the past shown high levels of business failures witnessed within the first three years of inception. According to Caliendo and Fossen (2009: 154) at least fifty out of every one hundred new businesses introduced did not make it to their third birthday. A study by the DTI Small Business Service from 1995 to 2004 reveals that these failures are actually vary with industries which could be attributed to the various conditions that exist in these sectors (DTI, 2007: 13). On average, 82% of new businesses established survived the first year in business. Improvement has been recorded and by 2004, an average of 58% of new businesses survived the first three years over all the sectors. Detailed survey results are shown in table 1 and 2. c) Why Half of Nascent Firms Fail: The Survival Explanatory Dimensions 1) Firm Specific Characteristics i)Managerial Organization Discernible management errors and high incidents of poor management highly contribute to the low survival rates of newly established firms. The death of many firms is mostly characterized by management which has turned out to be reactionary. Inefficient decision making and inadequate or non-existent planning will have contributed to the failure of the business in at least 30 percent of nascent firms (Phillips, 2004: 68-70). Veronique and Wever (2000: 138) note that managers inability to react to various forces affecting the business operations such as competition, technological advancements, economic trends and money issues could lead to the ultimate downfall of a business. Inadequacy in management expertise is essentially attributable for the business failure to explore alternative financing options leading to bankruptcy. ii)Inadequacy of Cash Reserves Inadequate financing comes in as a close second after poor management. New owners with little or no prior experience in business may fail to effectively predict cash flow. Miscalculation of amounts required to sustain the business before it picks up and underestimation of the costs associated with borrowing money are the major causes of financial strain (Lane and Schary, 1991: 101-103). Exhaustion of cash reserves is also likely to be influenced by poor pricing, over-investment in fixed assets and uncontrolled growth. Uncontrolled growth occurs when the owners want to take up every opportunity that comes so that at the end of it all they cannot satisfy all their customers. In this case, firms end up borrowing large amounts to meet the high demand and when the loans cannot be paid effectively, what results is collapse of the firm (Audretsch and Keilbach, 2004: 423). Other causes include over dependence on a few customers, fraud and uncontrolled drawings by the owner. iii)Poor debt management and Over-borrowing This is closely associated with cash inadequacy and it results where managers are ill-equipped in financial management. Small business owners are likely to obtain the wrong type of financing and worse still take more than the business can afford to pay (Jostarndt, 2007: 139). This may lead to borrowing loans to clear existing ones which is not a good debt management strategy. Inability to pay debts on time and lack of coordination between incoming cash and outgoing cash may lead to the business finally going bankrupt and consequently causing its death. iv)Ownership Status There are two ways of looking at this perspective: the legal ownership and the reasons for starting the business. A sole proprietorship business is more likely to fail due to financial and management problems than a partnership or a limited company. The reasons for starting the business can highly influence a firms survival. Moore and Gooderl (2008: 8-10) name two types of entrepreneurs: the opportunity entrepreneur and the necessity entrepreneur. The former establishes a business to exploit available business opportunity while the latter may start up a business for the purpose of sustaining himself probably if he cannot find a job. According to Moore and Gooderl (2008: 16-17) the opportunity entrepreneur is likely to succeed while the necessity entrepreneur may not exert enough efforts towards the business. The increased number of necessity entrepreneurs in the UK has highly increased the failure levels in new businesses. v)Personal Characteristics of the owner This mostly has to do with the attitude of the owner and the manner in which he or she applies these in the business context. Owners make a mistake of taking up all responsibilities without making use of delegation to junior employees as a result of fearing that they may not do it perfectly. Jensen (1976: 335) describes this as the challenge of letting go. Owners normally find themselves exhausted from overwork and yet do not find time to address important issues facing the business. Use of business funds by the owner can also cause detrimental effects on the business. Personal attitudes such as aggressiveness and lack of concern for the employees may cause high rate of employee turnover as well as keep away customers (Daily et al, 2002: 398-343). vi)Innovation and reaction to technological changes The world is advancing at a high rate and technology is one of the areas that a business needs to keep up with. Many new businesses fail due to being left behind in technological advancements such that they are overtaken by their competitors who take with them all the customers (Agarwal, 1996: 103-106). Innovation is one of the major tools for a successful business and this is one area that new businesses have not been able to address mainly due to lack of enough capital to come up with new products and services. viii)Poor knowledge of the market Most business owners enter the market with little knowledge about what to expect. Failing to conduct market feasibility studies limit the owners knowledge on the competitors in the market and their influence; the customers characteristics and behaviour and various market fluctuations they are likely to encounter (Covin et al, 2000: 199-206). 2) Operational factors i) Competition New businesses are often overwhelmed by the efforts required to counter competition from already existing firms. This is considering that these firms have already established their customer base and winning loyal customers could prove quite a challenging task for new businesses. Usually, dominant competitors may even device ways of putting new entrants out of business such as lowering prices and offering discounts (Covin et al, 2000: 200). Their aim is to push the new competitors until they cannot keep up with the situation such that they eventually quit. ii) Location The location of a business is a major determinant for its survival. New businesses in rural areas are likely to fail due to limited local markets and isolation. On the other hand high costs, presence of large firms and regulatory barriers pose challenges to businesses located in the urban areas (Sutaria and Donald, 2004: 250-253). 3)Changes in Business Cycle i)Macroeconomic growth and economic pressures New businesses are usually unable to handle economic shocks that may result from high interest rates, fluctuations in exchange rates and general inflation. According to David and Mahmood (1995: 89-93) not many businesses survive an economic surge or a recessionary period which may lead to skyrocketing of supply prices and high costs of borrowing. ii)Entering Cohorts exit rate Cohorts refer to groups with similar characteristics. The result of exit of similar businesses can either have a positive or negative effect on a new business. Exit may mean less competition which is an advantage. New firms however rely on one another for inspiration. A person operating a business where everyone is quitting due to one reason or another is bound to get disillusioned and have the attitude that his business may fail too (Phillips, 2004: 69-71). iii)Changes in legal environment When the laws of a country change, new businesses are likely to suffer since they are not yet stable enough to cushion themselves from such changes. Amendment of tax laws and business requirements may cause a new business to go bankrupt. d) Increasing Survival Chances Strategies to increase the chances of survival for a business entail addressing the leading causes of failure. The most fundamental requirement is the improvement of the management capabilities. When there is good management in a firm, other factors will follow suit because every operation of the business is determined by the management (Sutaria and Donald, 2004: 253-255). Improvement of communication within the business and proper sharing of duties are skills that the owners of the business need to acquire. This can be done through attending management and entrepreneurial seminars and conferences so as to learn secrets of firm survival from professionals. Proper planning is the ideal solution to financial problems. Veronique and Wever, 2000: 139-141) refers adequate anticipation of cash flow as the secret to overcoming financial problems for starters. This could be done through the help of an expert if the owner is not in a position to do so. Finding alternative sources of finance apart from the usual ones is key in preventing the collapse of a business due to lack of funds. There are many available sources of finance including bank loans, credit card advances, sale of assets among others (Moore and Gooderl, 2008: 298-299). Care should then be taken to make sure the finances are properly utilized. The firm should avoid relying on a few customers because huge losses can be felt if the customers suddenly withdraw. Instead, they should aim at a large customer base. Over-borrowing can be reduced through making proper cash forecasts and using the limited resources that the business has. In essence, the firm can adopt a steady growth over time instead of rushing to expand at once (Daily et al, 2002: 399-401). Finally, the management should be keen in managing the debts of the business keenly balancing the income and expenditure so as to cover all liabilities and debts in time. A business must clearly identify its customers and establish whether they can sustain the business effectively considering the level of competition. This can be done prior to the business establishment through a market feasibility studies while answering the following questions: How many competitors are in the area you plan to establish your business? Who will be the businesss customers and what are their buying habits? What is the level of loyalty of these potential customers to the current suppliers? Are they likely to buy your product? Is the product seasonal? Is it possible to make profit out of the business? Once these questions are answered, the likelihood of failure can be minimized as specific strategies to address the issues can be formulated (Audretsch and Thurik, 2007: 113-141). Business owners must realize that they cannot do everything by themselves. Employers can delegate and allow employees to make certain decisions. Consequently, owners will have ample time to concentrate on more important business issues such as finding new customers, getting more funds for the business as well as solving the current issues facing the business (Daily et al, 2002: 403-405). The need for long-term planning is inevitable. This involves planning for growth and transition in the future. It also involves planning for uncertainties such as loss of employees, customers and suppliers. In the wake of the high global trade advancement and changes in the market, businesses should always be alert to avoid being taken unaware by advancements in technology, innovation and changes in customer preferences and culture (Zoltan, 1988: 321). Legal changes and changes in tax systems should be catered for in the long-term business plan. The state of the economy is bound to change from time to time which is why firms must anticipate for any future economic shocks through investing in stocks, futures, options among others. Insurance is also an option for more larger firms. III. Conclusion No environment can be said to specifically favour new firms in all angles hence the need for those starting new firms to be overly cautious. Firms are most definitely exposed to numerous risks that may lead to their extinction as indicated in this discussion. Management is identified as the root cause of low survival rates among nascent firms and its improvement could work to solve the predicament presently being witnessed in new firm survival. Proper balancing of the firms cash reserves; being generally alert to any changes in the business environment; making informed decisions to deal with these changes coupled with excellent management practices is exactly what is needed to save young firms from their predicament and promote their longevity.

Nicotine and its Effects on Weight :: Research Papers

Nicotine and its Effects on Weight Introduction Bad breath, yellow teeth, a chronic cough†¦these are some of the disgusting results of smoking cigarettes. Why do people continue to smoke when the effects are so harmful? The typical response from smokers to this question is that they smoke in order to relax and help relieve stress. Unfortunately, the quick fix happens to be an addictive narcotic. Smoking feeds the addiction, but it also feeds the body with about 40 cancer-causing chemicals as well as almost 4,000 other chemicals (http://www.pueblo.gsa.gov/cic_text/health/w8quit-smoke/index.htm). Besides the visible physical effects, smoking increases the risk of heart disease, stroke, cancer, emphysema, chronic bronchitis, and other lung diseases (http://www.pueblo.gsa.gov/cic_text/health/w8quit-smoke/index.htm). With the first issuance of health warnings on cigarette packages being more than thirty years ago, logically the number of American smokers should have drastically decreased by now. However, polls show that 32 million Americans continue to smoke according to the American Dietetic Association website (http://www.eatright.org/erm/erm011200.html). Those who continue to smoke, despite the health risks, have decided to take chances with their long-term health rather than sacrifice the immediate benefits of a cigarette. Many current smokers say they are afraid to quit their destructive habit for fear of weight gain associated with the cessation of smoking. The added weight, however, poses a much lower health risk than the continuation of smoking. In order to reach equal health risks of smoking just one pack of cigarettes a day, someone would have to be about 125 pounds overweight (http://www.quitsmoking.com/books/nonag/weightgain.htm). Negative Effects on Women Furthermore, the negative effects smoking has on women are especially grim. A site devoted to women and smoking disclose that in the year 2000, women and young girl smokers will have a higher morbidity and mortality rate than that of men. Women smokers have a smaller lung capacity than men, which makes females more vulnerable to the chemicals in cigarette smoke. Also, women smokers have a four times greater chance of developing cervical cancer than non-smokers. Another frightening statistic mentioned in the article says that women who smoked 40 or more cigarettes a day showed a 74% higher risk of developing fatal breast cancer than non-smoking women. Additionally, a woman who smokes has a six-times greater risk of heart attack than men who smoke.

Affirmative Action PRO vs. CON Essay

The 108th Congress of the United States brought up the debate of whether to allow public institutions to adopt the Affirmative Action, allowing minorities to have higher opportunities than the majority. Although no specific stand was approached, it clearly shows the growing interest of people on the act of Affirmative Action. I am pro Affirmative Action when dealing with public institutions. However, I believe a private institution should practice equality. Affirmative Action compensates for the past faults and biased treatments toward minorities, provides ample opportunities to unprivileged people who currently can’t be accepted to institutions, and could rid of the biased view many people still have on minorities. Looking back on American history, we can clearly see many prejudiced acts and viewpoints towards the minorities. The most obvious example is with African Americans. Now at present times, Affirmative Action can and will compensate to a degree the hurts and pains minorities suffered. Although people call America the land of opportunity, many people, consisting largely of minorities, never get a chance to succeed. Many colleges screen applicants with a biased standard, calling it tradition. Companies and institutions prevent employees from receiving full privileges, shouting company regulations. Affirmative Action can tear down those obstacles and false standards giving those underprivileged new opportunities. When Asians fluctuated to the United States during the gold rush, many locals responded violently thinking they will take all the jobs there were. Even today, a number of people still hold biased views toward the minorities. It is evident on the existing practices of the Ku Klux Klan. Affirmative Action can change much of those biased views and allow the minorities to be accepted in the eyes of others. Although Affirmative Action should apply to public institutions, equality should be practiced in private institutions. Equal treatments should allow others to participate on making a non-discriminatory system. Equality, not favoritism, should be standards on private institutions. However, on the overall view, I stand pro on Affirmative Action.

How to Improve Your English

Each learner has different objectives  and, therefore, different approaches to learning English. But some tips and tools are likely to help most English learners. Lets begin with the three most important rules:   Rule 1: Be PatientLearning English is a Process The most important rule to remember is that learning English  is a process. It takes time, and it takes lots of patience! If you are patient, you will improve your English.   Rule 2: Make a Plan The most important thing to do is to create a plan and follow that plan. Start with your English learning goals, and then make a specific plan to succeed. Patience is key to improving your English, so go slowly and focus on your goals. Youll speak English well soon if you keep to the plan. Rule 3: Make Learning English a Habit Its absolutely necessary that learning English becomes a habit. In other words, you should work on your English every day. Its not necessary to study grammar every day. However, you should listen, watch, read or speak English every day - even if its for a short period of time. Its much better to learn 20 minutes a day than to study for two hours twice a week. Tips for Learning and Improving Your English Have patience: Remember that learning a language is a gradual process—it does not happen overnight.Define your learning objectives early: What do you want to learn and why?Make learning a habit:  Try to learn something every day. It is much better to study (or read, or listen to English news, etc.) 10 minutes each day than to study for 2 hours once a week.Choose your materials well:  You will need reading, grammar, writing, speaking and listening materials.Vary your learning routine:  It is best to do different things each day to help keep the various relationships between each area active. In other words, dont just study grammar.Find friends: Finding friends to study and speak with in invaluable and learning English together can be very encouraging.Keep it interesting: Choose listening and reading materials that relate to what you are interested in. Being interested in the subject will make learning more enjoyable - thus more effective.Relate grammar to practical usage: Grammar by itself does not help you USE the language. You should practice what you are learning by employing it actively.Use reading to help with other English skills:  Reading can be used to help with vocabulary, grammar, pronunciation and much more.  Flex your mouth muscles: Understanding something doesnt mean the muscles of your mouth can produce the sounds. Practice speaking what you are learning aloud. It may seem strange, but it is very effective. Exercises like  tongue twisters can help improve your flexibility.Communicate: Grammar exercises are great, but having your friend on the other side of the world understand your email is fantastic!Use the Internet:  The Internet is the most exciting, unlimited English resource that anyone could imagine and it is right at your fingertips.