Critically analyse why a business can fail during the early stages of Essay

Critically analyse why a business can fail during the early stages of operation in a context you are familiar with - Essay Example Below are a number of reasons why businesses may fail soon after inception. Before a business is started, proper planning should be done by the promoters of the business, who may also be the managers when the business has started operating. Prior planning is done using a business plan which looks into various aspects of the prospective business including the market, consumers, and the requirements of the business. A business plan should be prepared by a professional, and it should also show an extrapolated financial account of the business (Landstrom, 2007, p.57). Preparation of a business plan is essential because it gives the entrepreneur a feel of how the business will be. Most times when one is considering starting a business, the profit motive usually cloud a person’s judgment yet there could be telltale signs in the market which can show somebody that the business will actually not be prospective. Therefore, many businesses fail because the owners do not do a proper planning before they start operations, and some issues that would have been dis covered during business planning get the entrepreneur as a surprise. Another factor that may lead a business to fail within the initial stages of its operations is competition and barriers to entry. In well-established markets like the pharmaceutical industries and the hospitality sector in some countries, there is a stiff competition in the market and those who are already developed create barriers to entry for the upcoming businesses. A market example with barriers to entry in the hotel and hospitality sector is a market where Starbucks has a branch. Starbucks has been known to make market entrants face a difficult challenge which end up failing the business because of the competition practices it practices. Since the company is well established, with minimal operational costs due to its