One of the factors that negatively affect the well being of most business firms is the issue of being found in a number of scandals in everyday business operations. In most cases, such scandals normally affect the business operations negatively such that they can easily lead to the firm making financial losses (Yu et al, 2010). The shareholders of such firms are amongst those who normally lose out in case a firm is found to be reengaged in a scandal. There are those who also get affected indirectly by such fraud cases. For instance, distant market participants may get affected in a way that makes them lose interest in participating in the financial markets (The Economist). Once the participants withdraw their participation from the financial markets then such markets would definitely lose out on their customers and finances. The effect may eventually be passed on to the firms that may be forced to increase their cost of capitals as a result of poor participation within the financial markets.
The current market set-ups are so complex that both the small, medium and the large enterprises are finding it quite difficult to survive and cope with the situations. Additionally, a good majority of economies across the globe are very unstable due to the harsh economic periods. The recent rise in oil prices has resulted in a general increase in commodity prices and a rise in cost of living across the globe. Furthermore, the recent recession that occurred in 2008-2009 left a majority of institutions in an unstable situation where some are still recovering from the effects. As a result of that, the corporate that engage a lot of creativity in their business do stand a chance to make it in the business sector. Additionally, for a firm to establish its place in the market and survive, then they need to be more prepared than they were before. At the same time, such firms must make very fast and efficient moves ahead of their competitors so that they gain a competitive advantage over their rivals.
Some of the challenges that organizations are facing in the current century is the inability to organize their workforce so that they can get the best out of the human resource they pocess. Additionally, most firms have a difficulty in preserving corporate knowledge due to the constant employee turnovers witnessed in firms. One reason as to why there is rampant employee turnover is due to the poor remunerations that employees are subjected to by their employers. Moreover, the issue of cutting costs has been an uphill task for majority of firms that have no expertise in doing so. A number of firms have constantly recorded an increase in their costs over the last five to eight years without knowing how to cut down their costs so that they maximize their profits (Martin et al, 2008).
Getting into scandals will definitely have a negative impact towards retaining of customers and tapping into new innovations in the market. First of all, managers must e aware that customers have a tendency of losing trust on firms that are constantly engaged in corrupt practices. Such practices makes the customers and investors to fear investing in a firm that may in the long run make them (investors) run into financial loses (Martin et al, 2008). Apart from that the political attacks on a certain product or a publicly traded company may have a negative on the progress of such a firm. In a majority of countries, the political landscape determines the day to day lives of the common citizens. If for instance the political elites decide to attack the Toyota car manufacturers, then such a move would a negative on the sales of Toyota cars within a certain frame. On the contrary, if the same political elites decide to make praises of the same then there would be an increase in the number of cars sold out by the same firm. Therefore the capability and power of the political wing of the government should never be underestimated.
Statistics reveal that the number of publicly traded companies within the United States has dropped significantly within the last ten years. The data shows that the companies have reduced by a margin of approximately thirty eight percent within the last ten years alone. The same case is what has been happening in Britain where the number of publicly traded companies has fallen by a margin of approximately forty eight percent. Between the year 1980 and 2000, there were a total of three hundred and eleven issues of ipo in America every single year. However, the trend changed between the year 2001 and 2011 where the number of Initial public offerings (IPO) dropped to only ninety nine every single year (The Economist). Those that have been hard hit are the small companies that make very little sales of less than fifty million dollars every single financial year. In the earlier years between 1980 and 2000, there were a total of one hundred and sixty five companies that undertook their IPOs every single year. However, that trend has changed over the last ten years where only thirty companies are able to undertake their IPOs every single year. Additionally, such companies also bear the burden of regulations from the government’s side that was caused by the collapse of Enron in the year 2011.
Going forward, it will be quite difficult for te publicly traded companies to survive based on the information that has already been provided above.
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