Business research

Because of the UK tax system, poor credit in banks, and the expense of operating the company, most new limited companies in the United Kingdom do not last past five years (Gray, 2002, p. 67). Businesses close at an unprecedented pace in the region, mirroring the rates of business startups. The majority of companies that fail are micro-enterprises, which are the most profitable sector in the country (Finch, 2004, p. 56). Most of these failing businesses are not registered with the tax department and therefore come under the government turnover. There has been limited research to explain why the market closes within the first five years of their opening. The financial reasons for closing a business vary from one organization to another, and they depend on insolvency and bad debts (Franks and Sussman 2005, p.45). Therefore, it is important to determine the reasons that contribute to the failures of these businesses.

The United Kingdom is a good place to start a business, but its survival becomes difficult because of government cuts hold up so many projects making it difficult for small businesses to develop (Edwards, Ram, and Black, 2003, p. 66). The economic turn down makes it difficult for the firm to sustain them in the developing environment. The limited companies created fail to seek professional advice on business management making them fail to manage their companies leading to failure (Beaver, 2002, p. 5). The motivated this research to carry out a case study on the limited companies to determine the reasons that contribute to their closer.

The study will use survey design to determine the reasons that make the limited companies fail after five years. The design is suitable because it will elicit the attitudes and feelings towards the factors contributing to the business failure. The plan will also help in forming a theoretical framework that will be used to improve the companies and present recommendations that can assist the management in managing the organization to reduce the alarming rates of closure.

The Purpose of this Study

The study aimed at conducting an investigation on the reasons why limited companies fail after five years in the United Kingdom.

Literature Review

According to Mintel (2000, p. 33), failure is the discontinuance of the business because of lack of financial resources. Resources for business failures can be multifaceted, in a study conducted by Mole (2000, p. 305) it is revealed that companies establish fail in their first five years because of economic failure and compulsory spontaneous liquidation. The study discovered that apart from financial failure little information is provided as the primary source of the business failure after five years. The findings obtained in this research will help in answering the first research objectives, which aim at establishing the major caucuses of business failure after five years.

Another study conducted by Stokes and Blackburn (2002, p. 17-27) categorized the companies that fail after five years: those that fail because of economic failure and loss to various creditors and those that were traded or bankrupted with deficits to stop further loss. Some companies are sold because the owner is not in a position of managing it efficiently, and this includes a business that does not have the ability to make returns on investments or not meeting the needs of the owner (Cope 2011, p. 604). Findings obtained from this study will be used to answering the research questions.

Studies on business failures tend to report a percentage of three to nine percent in a year. Research conducted on the solidity of companies stipulates that almost half of the organizations close within five years of startup because the owners are unsuccessful in managing the organizations (Collis and Jarvis, 2002, p. 100). In the same way, Whyman and Petrescu (2011, p. 56), discovered that business failures have also been categorized by functions and where they originate, which might include external and internal business environment. These factors are considered whether they are strategic or operational in nature or whether they originate from outside the business context. Similarly, the findings obtained in these studies will help in explaining the reasons why companies close after five years.

A review of limited companies failure and bankruptcy indicated that the leading causes of these failures included bookkeeping, publicity, economics problems, as well as endogenous factors, exogenous issues, and the performance of the business administrator. Researchers have cited accounting and finance as the main courses of business failures (Whyman and Petrescu 2011, p. 44). In addition to this, Wainwright (2011, p. 12) conducted a review of thirty research articles issued between 1972 and 1989 to grow a typology to classify commerce failure. The study identified twenty-four factors that affect business causing them to fail, which were organized into four broad themes. The subjects were created based on whether the closure elements started within or outside and the type of reaction needed, either premeditated or organizational. Similarly, Storey (2011, p. 303), also developed an associated typology, and they identified ten major themes in a study conducted among 486 research respondents. The researchers defined failure based on the opinions of accountants and bankers who profoundly influence the survival of the business.

Recent research classifies the company failures in a more systematic method by categorizing these factors affecting failure as either endogenous or exogenous to the organization. According to O_x0092_Regan and Kling (2011, p. 92), small companies experience three central challenges when beginning their corporations. These risks include both the economic risks, industry risks, which are both exogenous influences and firm based chances. These three factors can further be divided into systematic and non-systematic risk. The Systematic or economy factors can be rewarded while the Unsystematic risks like business and manufacturing based are not rewarded because the presence of modification approaches that limit the possible causes of risk. Furthermore, risks are also controlled by the inconsistency in incomes, which directly relates to the failure of the organization. To some extent, business failures are associated with the variability of earning which is associated with the failure or success of an organization. Theses economic factors are also determined by both the internal and external factors of an organization (Cook, Pandit, and Milman, 2011, p. 275).

In established organizations, investors can reduce the consequences of random possibilities by increasing assets across numerous businesses and businesses. Small limited companies do not have enough resources to diversify investments and therefore have limited options to reduce the risks of systematic leading to high risks of failure in business (Blackburn, Carey, and Tanewski, 2011, p. 506). In addition to this, the researcher obtained data from a well-managed organization with the aim of determining the possible impact of macroeconomic influences on small industry mortality. These groups were selected because they keep up to date records of the failures and success of their organizations as they develop in stages. These researchers concluded that systematic influences were linked to thirty percent to fifty percent of small organizations failures in retail sales, banking interests, unemployment, and employment (Blackburn, and Wainwright. 2010, p. 56). Findings obtained in this study will be used to develop a framework can use to improve their limited companies.

Some research studies have indicated the role of the manager as another source of business failure in the United Kingdom (Blackburn, and Wainwright. 2010, p. 56). The researchers noted that the directors_x0092_ motivational factors lead to the success of the organization or business failure (Blackburn, and Wainwright. 2010, p. 56). One study indicated that most studies fail because of lacked total commitment in their companies because they immediately take the profits as their salaries, play slight wages, hire outside management and do not share information with the other employees working in the organization (Lyonette, and Baldauf 2010, p. 67).

In addition to this, the researcher notes that the following are the primary characteristics of a successful entrepreneur. Some of these features constitute the ability to take risks, ability to identify business opportunities, have the potential to pursue career development in business, and the power to decide on financial matters depending on the economic situations. The companies that do not have managers who have these characteristics are likely to fail after five years of initiation (Kitching, Hart, and Wilson, 2010, p. 45). Just like other findings in the review, results from these studies will help bring out the gap on what other researchers have conducted on the topic. Moreover, they contribute to explaining the reasons why companies close after five years.

In conclusion, most relevant studies reviewed focused on the factors linked to the relative success or closure of limited companies in the country. Different models have been established to describe the causes of business failures, and the findings have indicated that business failure is associated with adverse effects instead of low economic context in the country. The business closure has been related to the attitude and behavior of the manager. Research should be conducted to provide reasons why limited companies fail in the United Kingdom five years after initiation.

Research Questions

Survival rates are lower because the implementation of the organizational structure is challenging and it affects the progress of these companies. The United Kingdom is a good place to start the business, but its survival remains a challenge because of the recession, which affects the development of limited companies. Once the market is developed the manager also face challenges in establishing long-term goals for the organizations.

The current economic situation makes it challenging the limited companies to survive after five years of initiation. However, there are other reasons why these businesses fail to survive, and they include the ability to plan for the firm. Managers who fail to plan well for their companies will not manage to survive after five years. These companies also experience poor management, and the managers fail to plan for the organizational productivity. In addition to this, the limited companies do not have the visibility, which is the ability to position itself before the consumers. Most of the new businesses do not know their competitors, making it difficult for them to fit in the market. Therefore, the study will be based on the following research questions.

Research Questions

1. What are the primary reasons why a business fails after five years in the United Kingdom?

2. Which government factors influences the limited company?

3. What are some of the managers_x0092_ characteristics that contribute to business failures within their first five years of initiation?

4. What are some of the ways of improving these limited companies to avoid closure? Methodology

This chapter provides an operational framework for data collection and analysis. It gives a description of the research design, target population, sample size and the selection criteria that the researcher used. It also addresses data collection tools as well as data analysis, validation and reliability test.

Research Design and Methodology

The study will use survey design to determine the perception and opinions from research participants on the reasons why business close after five years of initiation. Survey method is a suitable way of answering the study research questions.

Andres (2012, p. 32) states survey examines and record the area and features under investigation to improve come up with a plan of developing them. Thus, the study will focus on quantitative and qualitative statistical approach. Descriptive information like such as means, standard deviation, frequencies percentages will be used in the analysis of the data. Surveys make use of detailed questions concerning an enormous number of subjects and then complete complex analyses to discover patterns and associations among study variables.

Study Participants and Research Instruments

The study will target employees employed in these companies, community members and the management team in the organization. The workers will be targeted because they can provide correct information on the reasons why limited companies fail within the first five years after startups. Some of the staffs selected had worked for businesses that failed before or managed these organizations before they failed.

Sampling Techniques

Non-Probability sampling will be used to identify the research participants. In this sampling technique, research participants will be purposely select because they are convenient for the study and have experienced the challenges of the business failing after five years of initiation.

Primary Data

Research Instruments

The study will use questionnaires and interview guides to obtain responses from the study participants. Questions are suitable for this study because it will help in generating large volumes of information from the research participants. The questionnaires can be carried out by different people thus reduces the effect of validity and reliability in research. Information that will be obtained from the questionnaire can easily be quantified into the statistical analysis software program for analysis. Furthermore, information obtained from the questionnaires can be used to generate theories that will guide improvement of created limited companies.

Apart from this, the interviews will be conducted to obtain information from the research participants. The interviews are of an advantage because they provide face-to-face interaction between the researcher and the participants. The method will allow accurate screening of information as they interact with the respondent. The interaction with the respondent will enable the researcher to capture the verbal and non-verbal cues that will add value to the information obtained. Moreover, they can also indicate a level of enthusiasm for the topics being discussed in the interview.

Analysis of Data

Information obtained from research participants will be analyzed using both qualitative and quantitative research approaches. Information from the questionnaire based experiments will be coded into the SPSS for quantitative analysis and testing of the hypothesis. Open-ended question from the questionnaires will be analyses qualitatively regarding themes and narratives.

Reliability and Validity of Research Instruments

In testing validity of the research instruments, the researcher will evaluate the efficacy by requesting a series of inquiries, and will frequently look for the responses in the study of others. The researcher will use multiple sources and evidence to established evidence and test the validity of the instruments. The researcher will also use test-retest techniques to measure the reliability of the research instruments. Above all, the researcher will ensure that the research goals and objectives are defined and operationalized.

Access and Ethics

The research will obtain permission from the government to allow the research process. Permission will also be obtained from the companies where respondents will be received before conducting the research process. The researcher will maintain honesty and integrity during the investigation process. Whereby, all the information collected will only be used for research purposes. The researcher will also conduct a peer review to ensure the originality of study findings obtained from the research respondents. The researcher will also allow the participants to take part in the research process freely without being coerced. Participants will be ensured of informed consent and informed of all the research procedures as well as the risks involved in the investigation process before taking part in the activity. Finally, the researcher will ensure the study participants of confidentiality and protections of their responses.

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