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Business Failure - Research Paper Example

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Wesabe’s Business Failure Name Institution Date Wesabe’s Business Failure Introduction Starting a business is highly risky; in fact, 80 percent of small enterprises fail five years after formation and 50 percent within the first year (Zimmerman, 2011)…
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Download file to see previous pages The company was among the first to try out the Web 2.0 approach for dealing with this problem (Bruene, 2010). It started off on the right track since it had the appropriate technology thus was flexible in contracting negotiations. They had state-of-the art user interfaces that allowed the company to carry out efficient transactions. It featured in a public API and it had a well established database (Bruene, 2010). It had a strong brand image at the start and never used commissions from financial providers. At this juncture, it is important to note that the company was the first of its kind and had the experience as compared to other competitors. However, the company’s woes began even before the company was formed as several companies had started working on similar plans. The company started off with a decent capital investment of approximately $5 million capital investment and had up to 150, 000 members in the first year of its operation. The company was adversely affected when a similar company Intuit Company (Mint) was started $117 million capital and 300, 000 users (Bruene, 2010). Mint had a better brand name, an easier interface and a huge pool of capital. This together with the increasing competition from other new entrants put increasing pressure on Wesabe. The company began generating revenue later than Mint and finally ceased its operations in July 2010. The company’s mission statement was concerned with offering cheap, fast and efficient financial services by using the internet. It defined itself as ‘a community of real people dealing with real money issues’. The goals and objectives focused on ensuring that its clients meet their financial targets (Bruene, 2010). It was referred to as web based site that offered its members a better understanding on how to manage funds. It also focused on giving sound financial advice to their customers thereby improving their decisions on spending. The company did not aim to compete with traditional banks focused on providing unique and secure financial solutions to its customers. The company operates in a highly competitive market and its chief competitor is Mint. Mint has had outstanding growth since it was formed ten months after Wesabe. It has a market share of 60 percent (Bruene, 2010). The second competitor is Geezeo that has been experiencing impressive growth in the recent past. Other competitors include BudgetTracker, Thrive, Yodlee, PearBudget and Buxfer all which have shown impressive growth over the years (Bruene, 2010). The company faced competition from these other players in terms of marketing, sales and technology. The company failed to employ strategic marketing strategies therefore it did not reach a large number of users. Mint was more aggressive with marketing its financial services. With regards to sales, the company did not apply the sales tactics such as the ones used by Yodlee and Geezo. In terms of technology, Wesage did not integrate the FI’s online banking frameworks in their system. Reasons for Failure As earlier stated, most businesses fail after a few months in operation. The major reason is due to lack of enough capital investment to run future activities. Stiff competition from other players in the market may also cause a business to shut its doors. Such businesses are characterized by poor developed business models that are impractical and ineffective (Bridges, 2013). Small businesses tend to be anxious to generate profits therefore they may over expand their activities. The other reason ...Download file to see next pagesRead More
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