Entrepreneurial Small Business Failure - Essay Example

Entrepreneurial Small Business Failure Failure Introduction Introduction According to the view of Bradley & Cowdery (2004), the American dream exemplifies owning a business for becoming financially independent. Entrepreneurs derive various advantages by involving in small business activities. A few of the advantages involve the absence of any seniority, profit remains with the entrepreneur itself and the business activities are challenging among others (Bradley & Cowdery, 2004). Petite Palate was established with an objective to provide fresh and organic meals to the infants and the toddlers. The meals being provided by the company were assumed to be packed with nutritious ingredients. The company was founded in the year 2006 by Lisa Beels and Christine Naylor. From the beginning, Christine endured a changed outlook for the infant’s food. She greatly learned from her experiences of being both a chef as well as a mother that an infant could be fed by the ingredients that the other members of the family usually eat. Afterwards, Lisa and Christine both realized the opportunity within the market associated with the gourmet alternative food products for the infants. The food products were usually in the form of frozen material, based upon which the company Petite Palate was established. The company endured three characteristics as their mission. These three features are quality, eco-friendly and fresh organic food product (Audia, 2008). In the year 2008, both the co-founders launched six new products within the market. The customers’ response on using the products was amazing. In this regard, the co-founders thought of expanding their business at the national level. The company demonstrated a good start and took almost two years to focus on other flavours along with packaging. The product was packed in well-designed paper cups that were brightly coloured. The product contained no additional sugar and was made up with entirely organic ingredients (Audia, 2008). In the year 2010 October, the company that was based in New York was entirely closed. In this context, it has been recognised that in the initial phases of its operations i.e. in 2007, the product was successful within the market. The frozen baby product was provided in around 100 stores. The downfall of the company started in the year 2008. Correspondingly, the company faced massive challenges from the suppliers in order to incorporate the frozen product within the freezer section of retail grocery store. This idea was creating a hurdle in the growth of the company. Nonetheless, the managers were adamant with the earlier concept of frozen food, as they believed that these kinds of food products are healthier for the infants rather than using jars for packing the products. The reason that the co-founders depicted related to the closure of the company was failure in developing a strong coordination amidst the suppliers. Another reason which can be depicted is the gap between the customers’ expectations and finished products which led to the closure of Petite Palate (Anvar, 2013). It has been further observed that the baby food product was gaining a growing trend within the similar industry during the time of Petite Palate. This gave rise to an accelerated level of competition within the industry associated with baby food products. Petite Palate faced strong completion from the competitors such as Gerber’s Baby Food, Enfamil and Beech-nut Baby Food among others. These were few of the key facets that led to the failure of the company (Petite Palate, 2010). Reasons for Failure It has been observed that one of the key elements for which small business enterprises usually fail is the acceleration of the managerial demands within the operational activities. Usually, the small business set ups greatly focus on sophisticated ways for gaining control and designing plans for their business activities. Besides, it has been acknowledged that the two major problems i.e. corruption along with bureaucracy create a hurdle in the growth of small businesses. There are numerous factors that play a vital role in the failure of a small business set up. These factors have been briefly described hereunder (Mbonyane, 2006). Poor Planning It is ascertained that an individual must endure an in-depth understanding of the manager’s responsibilities and activities in order to develop the professional competence to sustain in the competitive market scenario. Few of the managerial tasks that frame a necessary part of operational activities within an enterprise include planning, leading, organizing and controlling among others. If the managers within a new small company fail to visualize a proper plan, it can lead to the failure of the entire set up. In the similar way, the co-founders of the company Petite Palate also failed to visualize the importance of proper planning and organization of operational activities, which contributed towards a lack of concrete approach to deal with the evolving complexities (Mbonyane, 2006). Lack of Small Business Management Education Training is an important part within any business activity. It is necessary for the entrepreneurs before starting up a small business unit to focus on enduring proper self-training and development of market awareness. It has been usually observed that the owners of a small business enterprise at times remain unaware of the legal aspects that correlate with their business activities. In this regard, failure in combating the legal obligations and rules might lead to financial losses along with business failure. One of the important features of a small business set up is large stake of the owner associated with huge investments being made. Therefore, the business risks are likely to get transferred into personal liabilities. In addition, it has been revealed that the management within the small business enterprises often lack in terms of specialization and expertise. Correspondingly, a lack of knowledge and specialization related to the business activities results in the mismanagement of the human assets that ultimately leads to the failure of the entire set up. Considering this as particularly a decisive factor, Petite Palate’s co-founders also lacked knowledge related to product design and management plan required for sustainability within the competitive market scenario (Mbonyane, 2006). Lack of Employee Satisfaction Employee satisfaction frames an important part of any business activity. It has been ascertained that usually the family members are hired as the employees within the small business setups. This is done with a view to meet up the requirement of family obligation. Considering this as a factor, it can be ascertained that in the concerned company the co-founders did not face any such problem related with the employees (Mbonyane, 2006). Lack of Customer Relations In the small business start-ups, it becomes difficult for the owners to get involved with the customers’ on a regular basis. For any business set up, the most important stakeholder is considered to be the customers. Providing the customers’ with ample and quality products and satisfying them ensure growth of any business venture. In case of Petite Palate, the managers did not consider the preferences of the customers. This is the reason that in the midst of competitive scenario, the competitors attracted customers’ the most. The co-founders failed to analyse the preferences of the customers (Mbonyane, 2006). Lack of Budget Management Another important financial factor that creates a major hurdle for the small business is determined to be budget management. It has been considered that small businesses endure access to limited capital sources. Correspondingly, a major challenge that is faced by the management while starting and establishing a new business is the expansion of customer base. With regard to Petite Palate, co-founders did not face any such apparent challenges related to budget management (Mbonyane, 2006). Lack of Technology Technology plays a vital factor in the development and sustainability of any organization. Advanced technologies must be applied within the small business units to gain advantage over others. In accordance with this particular scenario, it becomes difficult for the small business owners to invest in technology as they have limited sources of capital. The concerned company did not face any such problem related to technology. The frozen food product was packed in a paper cup and the product contained organic ingredients (Mbonyane, 2006). Poor Location Infrastructure of a business set up helps in the growth and development of any business set up. Due to the limited availability of capital, the owners usually opt for locations in a vacant building or where there is a low rent facility. In this regard, the managers usually do not rigidly analyse the suitability of location being selected for their product. This ultimately leads to the failure of the entire business activities. By considering this factor as a major element of business failure and relating the scenario with the concerned company, it can be ascertained that the factor played a crucial part in disengaging the interest of the potential investors. This is owing to the reason that the company started to lack investor confidence as it was failing to locate its offerings within the grocery stores freezer section. This resulted in a lack of visibility of the offerings (Zimmerman, 2011; Mbonyane, 2006). Financial Challenge in the Start-Ups In a small start-up business, the main constraints can be affirmed as the application of the trial and error methodology, recruitment of quality employees, relationship with the suppliers and the effectiveness of the management plan. With the limited availability of the source of capital, it becomes difficult for the small business owners to deal with the start-up cost involved. In case of Petite Palate, in order to establish a strong base after the commencement of the business, the founders desired to raise a figure of US$2.5 million to US$5 million from the potential investors. This signifies that the company had an issue related to financial stability to ensure business viability (Zimmerman, 2011; Mbonyane, 2006). Analysis From the overall assessment of diverse causes that might result in business failure for a small business set up, it can be affirmed that Petite Palate primarily failed because of a lack of support from potential investors who were skittish regarding the economy thereby they pulled out from lending required monetary assistance to the company. In accordance with the reasons acknowledged for the failure of the entire set up, it can be stated that co-founders did not take any heed to the risks associated with the failure of entire set of business activities. They remained focused towards their traditional set of beliefs regarding placing the products in the freezer section with the consideration that this would be healthier for the children. However, they did not consider the available way out for the company to survive the potential closure i.e. placing the food in jars or pouches. The in-built thought and engraved belief associated with the provision for healthier food products for the toddlers’ was the vital reason for the business closure (Meister Media Worldwide, 2012). A business generally fails due to poor management, lack of proper planning and design and availability of insufficient capital for executing the business activities among others. However, these factors are considered as the basic requirements for business activities. Apart from these factors there are other approaches which are required for the management to undertake as per the situation. In the modern day business paradigm, it requires managers to change quickly as per the need of the hour. In case of Petite Palate, the co-founders could have adapted a changed set of approach for its survival when it faced crisis due to lack of investor support. When competition becomes difficult for the small businesses due to the lack of capital sources, it becomes necessary to collaborate with the competitor and rule the market. Correspondingly, in case of Petite Palate, the co-founders could have adopted the ‘shelf-stable formulations’ as a key production methodology. It took a long tenure for the managers to realize their mistake and therefore it did not have ample time to recover. One of the key reasons for the failure of the company is determined as the need to adapt to the changes in the competitive market scenario. The co-founders could have avoided becoming stubborn with the product that would have facilitated the company to attain desired success and stability. For a business set up to succeed, it is required to be patient and plan accordingly as per the requirement of the current scenario (Meister Media Worldwide, 2012). The business idea assumed by the co-founders of Petite Palate was sound, but they lacked in terms of making an in-depth analysis of the entire business scenario along with determining the competitors’ strengths and weaknesses. The stubborn attitude of the co-founders was the main reason for the failure of Petite Palate. The failure of the business setup was propagated by a lack of integration within the supply chain management (Zimmerman, 2011). The ultimate goal of the supply chain is to accelerate the quality of the collaboration, which is incorporated within the suppliers and the managers. By improving the supply chain management, the co-founders of Petite Palate might have saved the company from being permanently shut down. Thus, it can be well recognized that adaption to change is necessary for managers to survive in the midst of tough competition in the era of modernization. References Audia, B. M. (2008). Your first licensing deal: the ins and outs of licensing agreements. EntrepreNews, 2-18. Anvar, M. M. (2013). Supply chain integration model: practices and customer values. Dissertation to obtain PhD in Industrial Engineering, 1-155. Bradley, D. B., & Cowdery, C. (2004). Small business: causes of bankruptcy. SBA, 205-219. Meister Media Worldwide. (2012). Five innovations that failed. Retrieved from http://www.todaysgardencenter.com/business-management/five-innovations-that-failed/ Mbonyane, B. L. (2006). An exploration of factors that lead to failure of small business in the Kagiso Township. Dissertation, 1-60. Petite Palate. (2010). About us. Retrieved from http://www.petitepalate.com/pp/index.html Zimmerman, E. (2011). How six companies failed to survive 2010. Retrieved from http://www.nytimes.com/2011/01/06/business/smallbusiness/06sbiz.html Read More