Even the largest multi-national corporation with hundreds of subsidiaries doesn’t have unlimited resources. Every business faces restrictions within the branches of its operations, from marketing campaigns to importing goods and services. Therefore, one of the biggest challenges of running a business operation is maximizing returns given its limited set of inputs.
Financial restrictions include limitations regarding raising capital and generating a steady cash flow. For instance, a small export business likely cannot afford a large warehouse with which to store inventory. A common financial restriction is the inability to attract investors or get approved for a substantial bank loan. Even larger corporations have restrictions based on the value of its stock. When a company’s stock price is low, the ability to tap into capital raised by investors and issue new stock is limited. Companies that issue stock also face restrictions by virtue of being accountable to shareholders. Every strategic move is subject to review by investors who may or may not approve of the company’s direction.
Economic conditions are another impediment to businesses. Few things hamper profits for a business faster than an economic recession. Recessions trigger a decrease in consumer confidence, which means people are less likely to spend disposable income on products offered by corporations. Though corporations purveying durable goods such as cars and refrigerators are hit hard by recessions, retail businesses are also affected by downturns. Robert Carbaugh, author of “Contemporary Economics: An Applications Approach” explains that when economic indicators show slowed growth, such as a higher unemployment rate or slowed housing construction, consumers grow reticent to spend money and may choose to save more of it instead.
Marketing restrictions include laws prohibiting companies from launching campaigns in an unethical manner. For instance, Kerry Segrave explains in her book, “Product Placement in Hollywood Films” how several firms belonging to the Tobacco Institute agreed to outlaw tobacco product placements in movies. Companies are also not allowed to have subliminal advertising campaigns. Businesses also face hurdles getting their products displayed on the shelves of large supermarket chains. Gaining product awareness and brand recognition requires innovative campaigns that stay within budget.
Companies face supply chain restrictions when their inventory tracking systems are limited, distribution channels are challenged by the sub-par infrastructure system and communication with vendors is limited or non-existent. Technological challenges pose some of the greatest restrictions on a business’s supply chain. For example, a business that purveys its wares to sub-Sahara Africa likely faces problems with transporting goods from one distribution center to the next because of the poor roads. Ensuring the delivery of the product is arduous as well if Internet capabilities are limited.