Essay on Impact of Disruptive Events on Business Performance Financial Crises, Terrorism Earthquakes

Minsky's theory

Financial Crisis Theory

Explanation

Hyman Minsky has suggested a post-Keynesian clarification that is best appropriate to a closed economy (Filho, Martins, & Miaguti, 2019). He has theorized that financial fragility is actually a characteristic of a capitalist economy. Extraordinary fragility will lead to a bigger risk of a financial crisis.

The levels of financial fragility move along with the business cycle. Right after a recession, the companies have suffered lost much financing then select the only hedge, which was the safest. Along with the growth of the economy and anticipated profits growth, the companies assumed to believe that they could permit themselves to undertake speculative financing (Hilty, Blair, Cheng, & Paige, 2019).

He also has defined that there are three approaches to financing that the companies might select, in relation to their acceptance of risk, which are:

·         For hedge finance, income flows are anticipated to reach financial responsibilities in each duration, comprising both the main and the loan's interest.

·         For speculative finance, a company has to roll over debt for the reason that income flows are anticipated to cover the interest costs merely.

·         For Ponzi finance, anticipated income flows will not even cover the cost of interest. Thus, the company has to borrow or else sell off its assets only to cover up its debt (Keen, 2015).

Strong Point

The strong point in this theory is that it can be adopted in terms of making the betterments in the organization.

Weak Point

The weak point of this theory is the fact that it required quite lengthy and tough works to do.

Quote

“The financial system swings between robustness and fragility and these swings are an integral part of the process that generates business cycles.”

Disruptive innovation theory by  Clayton M. Christensen

Business Performance

Explanation

Christensen distinguished disruptive innovation commencing sustaining innovation. He clarified that the latter's objective is to enhance the performance of the current product. Conversely, he also explains that disruptive innovation is a product or service planned for a new customers’ set. Christensen also stated that products measured as disruptive innovations incline to avoid phases in the customary product scheme as well as the expansion process to increase market power along with the competitive advantage rapidly (Christensen, Raynor, & McDonald, 2015).

He claimed that disruptive innovations might upset the successful, well-managed companies that are approachable to their customers as well as having outstanding research and development. These companies have appeared to disregard the market's greatest vulnerable to disruptive innovations since the markets have extremely tight profit margins and are less to deliver an excellent rate of development to a recognized (sizable) companies (Christensen, Raynor, & McDonald, DISRUPTION, 2016).

As a consequence, disruptive technology offers a sample of an occurrence when the corporate business-world recommends to "focus on the customer" could be deliberately counterproductive (Christensen, McDonald, Altman, & Palmer, 2019).

Strong Points

The strong point in this theory is that it can be accepted and adjusted easily by the companies to recover their business performance.

Weak Points

The weak point of this theory is the fact that the theory is still questioned whether it has been overpraised and misused, as per if it were able enough to clarify the whole thing in each sphere of life, counting not only business but also education as well as public institutions.

Quote

“Disruptive innovations were technologically straightforward, consisting of off-the-shelf components put together in a product architecture that was often simpler than prior approaches.”