A company is put up with great effort, giving employment opportunities to many while contributing to economic development. Businesses are important for a society since they are the entities offering products for all sorts of needs and wants of people. However due to unfortunate reasons, they are compelled to close down. Here are a few of them.
1. Economic conditions
Economic conditions are a main reason since they have a huge effect on companies. Most companies fail to face great recessions or depressions and hence they leave their respective industries. Trusted Hong Kong Company deregistration, sole trader and partnerships winding-up are very common during these times. During an economic crisis, market conditions will drop drastically, leaving businesses with no sales. This will mostly affect companies who sell nondurable goods. However durable goods sellers will survive since they can hold off their products till the economic crisis ceases.
2. Low profits
Some companies may not be able to cope up with rising costs and hence with low income and profits, they are most likely to leave the industry. When companies cannot achieve economies of scale and still incur high costs, it may be very difficult for them to survive. Compulsory costs such as production, purchasing, administration, finance and marketing costs, overheads etc. cannot be avoided and hence should always be reduced and maintained. However, when costs cannot be managed properly, dividends will decrease and hence shareholders will pull out of the company. Hong Kong Company deregistration situations may now arise.
3. Unavailability of resources
Economic resources are needed by every organization to function. These resources are, land, labour and capital. Due to many reasons, resources may not be available and hence will be a problem for companies. Land resources can be scarce and there can be certain legalities due to the arising environmental pollution. Labour resources can decrease due to wage laws while capital can be difficult to obtain with increasing interest rates. Also, low quality materials may also be a reason since the company cannot produce up-to-standard products.
4. Tough competition
Many new organizations enter into existing industries, having greater technology and other benefits. These companies may have competitive advantage over others and hence will lead to existing companies to leave the industry. However, this decreased market share can be regained if companies targeted a specific market and offer them a unique product so that a less number of permanent customers can be achieved.
Apart from these, there are many more reasons why organizations opt to close down with the difficulty to face crises. Companies should have strategic plans to overcome such situations so that they can continue in the industry, building trust in customers about their continuity.