If your business becomes insolvent and has to close down then this can have a detrimental flow on effect to other businesses. The liquidation of your assets and any resulting bankruptcy can not just change your life but the lives of many others working in many other areas. The downfall of an industry can start from just one company going out of business. The ripple effect can even go on to influence the state of the economy.
Your suppliers
If your business is unable to repay its debts and becomes insolvent then this can lead to you becoming bankrupt and having to close down. This in turn will then go on to effect your suppliers as you will no longer be a client. Your business closure may not make much difference if you are one of their smaller clients or if there are many other companies operating in your industry, but if you are their major client or if you held a monopoly in the industry, then the effect of your business shutting down will have a big impact. Your supplier could suffer a massive reduction in profits, they may have to reduce their staff numbers, putting people out of work, and then possibly go on to be unable to pay their own debts, therefore become insolvent themselves.
Your product becoming unavailable
Some businesses may rely on your company producing your particular product. Those businesses who you supply to may not be able to get your product anywhere else, which will seriously effect their business. They may find that their only option is to source your product from overseas, which could be more expensive, and this has a flow on effect for the economy as more Australian dollars head off overseas.
Decrease in competition
Once you have gone out of business there will be a decrease in competition within your industry, which can result in an increase in the price of your product or service. Price increase can occur if there are limited number of companies involved in the production of your product, and if your business closure leaves only one company holding a monopoly then they can effective 'name their price.' Customers will also have less choice between brands.
Community
Your business closure can effect the local community by taking trade away from the area. Consumers may have come to the area specifically to visit your business and in doing so brought business to surrounding shops. The whole community, as well as these other stores, can suffer as a result of your business becoming insolvent.
Consumer confidence
Consumer confidence in the industry can be effected if your business has to fold as they may become cautious about spending money within your industry. Other companies manufacturing the same product can then be affected by consumers spending less.
Positives for other businesses
Naturally other businesses in your industry will pick up your clients as a result of you having to close down. This will go on to increase their profits and they will then have to hire more staff, therefore increasing employment within their community.
Your suppliers
If your business is unable to repay its debts and becomes insolvent then this can lead to you becoming bankrupt and having to close down. This in turn will then go on to effect your suppliers as you will no longer be a client. Your business closure may not make much difference if you are one of their smaller clients or if there are many other companies operating in your industry, but if you are their major client or if you held a monopoly in the industry, then the effect of your business shutting down will have a big impact. Your supplier could suffer a massive reduction in profits, they may have to reduce their staff numbers, putting people out of work, and then possibly go on to be unable to pay their own debts, therefore become insolvent themselves.
Your product becoming unavailable
Some businesses may rely on your company producing your particular product. Those businesses who you supply to may not be able to get your product anywhere else, which will seriously effect their business. They may find that their only option is to source your product from overseas, which could be more expensive, and this has a flow on effect for the economy as more Australian dollars head off overseas.
Decrease in competition
Once you have gone out of business there will be a decrease in competition within your industry, which can result in an increase in the price of your product or service. Price increase can occur if there are limited number of companies involved in the production of your product, and if your business closure leaves only one company holding a monopoly then they can effective 'name their price.' Customers will also have less choice between brands.
Community
Your business closure can effect the local community by taking trade away from the area. Consumers may have come to the area specifically to visit your business and in doing so brought business to surrounding shops. The whole community, as well as these other stores, can suffer as a result of your business becoming insolvent.
Consumer confidence
Consumer confidence in the industry can be effected if your business has to fold as they may become cautious about spending money within your industry. Other companies manufacturing the same product can then be affected by consumers spending less.
Positives for other businesses
Naturally other businesses in your industry will pick up your clients as a result of you having to close down. This will go on to increase their profits and they will then have to hire more staff, therefore increasing employment within their community.
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