Topic 1 Nature of business BUSINESS GROWTH AND DECLINE CHAPTER FOUR © Cambridge University Press 2012

The four phases of the business life cycle There are four phases of the business life cycle: establishment growth maturity post-maturity.

The four phases of the business life cycle (cont.) The establishment phase The establishment phase is where the business first enters the market. The owner must decide on the location of the business, the types of products the business will sell, how to find motivated, appropriately trained staff and the most suitable legal structure.

The four phases of the business life cycle (cont.) The growth phase The growth phase is characterised by increasing sales and revenue for the business. Customers are now aware of the business and/or product and the business begins to increase its market share.

The four phases of the business life cycle (cont.) The maturity phase During the maturity phase, business growth and market share begin to slow. The business is faced with increased competition from new entrants.

The four phases of the business life cycle (cont.) Post-maturity phase The post-maturity phase is the final stage of the business life cycle. There are four very different stages in the post-maturity phase: steady state, decline, renewal and cessation

The four phases of the business life cycle (cont.) Cessation Cessation refers to the closure of a business. Voluntary cessation occurs when the owner of a business decides to cease the operations of the business. Involuntary cessation occurs when the closure of the business is forced on the owner. The most common cause of involuntary cessation is the inability of the business to repay its debt.

The four phases of the business life cycle (cont.) Bankruptcy Bankruptcy occurs when a sole trader or business partnership is unable to repay the financial obligations (debt) of the business. A business will enter liquidation when an independent party is appointed by the court to sell the assets of the business so as to recover all outstanding debt owing to the business’s creditors.