Are You Aware of the Risk Factors in Business?
“The concern has to endure fluctuating demands. The size of the unit should be such that it should be able to adjust its production according to the market requirements. ”
Whenever one has to start a business a great number of factors ought to be taken into consideration. An entrepreneur should not decide the size of unit arbitrarily. He should base his decisions on certain economic and non-economic factors.The frequent changes in demand should be considered while planning the size of an enterprise. There is always some kind of fluctuation in demand. The demand of goods may be influenced by a large number of factors. The fluctuation in demand may be for a short period or for a longer term.
The concern has to endure fluctuating demands. The size of the unit should be such that it should be able to adjust its production according to the market requirements.
First comes the case when the demand for a product may undergo a permanent change. This may happen due to changes in fashion, taste and methods of production. In that case the company will have to shift to some other products. A smaller unit may be able to reorganize itself quickly and is at a lesser disadvantage as compared to a larger enterprise.
Theses changes can occur due to depression or boom also. During depression production is more than demand. A unit will have to be sold at a loss to stay in the business. Smaller units are not able to face depression for a long period.
Some commodities may be more in demand during a particular season and their demand may decline when the season is over. The unit should take up the production of a number of goods required during different seasons so that production may be altered according to demand.
Sometimes, the changes are not caused by a specific reason. These may be caused by different factors at different times. The demand for a product may go up because of a shift in population at a particular place.
This demand will decrease, the moment additional people will move out of that place. The factors of risk and fluctuations favor a small size because the adjustments can be easily made and reorganization of the business becomes less costly.
Author - DeeKay
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