Whenever a business fails, we tend to point at different type of internal reasons like failure of major product, a bad investment decision, structural rigidity or management incompetence as the root cause, business failure could also result from external factor
Like competition, change in government regulations, scarcity of raw material etc.
Whatever may be the reasons, it is relevant for manager to get to know them with a view to optimizing then for their company advantage.
Apart from the general know reasons, some factors are peculiar to some organizations and entrepreneurs; some of these are most times environment-driven. The ability of organization to prevent such failure depend on whether management align and see the factors in the context of their business strategy, hence there could be full optimization of their respective risks. Such factors among others include the following:
Failure to change and adopt due to past success. It is a wrong action for anyone to describe his organization or business as failure – proof no matter what the level of the past achievement was. Most of the business that collapse in the recent times are dose we have described as excellent in the past. They have failed not because they lack the strength to sustain success but due to their insentivity to changes around them and therefore get trapped by their past success.
Let us take a walk around some industries estate in Nigeria especially in Enugu, one would find several of these organization that have won different performance awards in the past but are no longer doing well today. This is an unfortunate consequence of their rigidity and management styles.
Whenever an organization losses touch with it’s environment, it becomes less sensitive to competitive demand, thereby operating in an imagined environment. Enron and double A of united state are good example of such organization. For instance, when we are young, we heard of the financial myth and strength of organization i.e. Dommo, AG Leventis, UTC, UAC, CFAD, Odutola Industry, Adebowale Industry etc. But today, not many of these organization can compete favorably with international counterparts, their positive past performance seems to be a major stumbling block in their process of strategic re-orientation.
It is not worthy to mention that most successful business set up today may collapse in future going by their style and management attitude to strategic failure.
To understand why their success today may bread failure tomorrow, because they may need to look at how the organization are using their success. It is suppose to be a learning experience for future growth, but they have programmed their organizational successful strategies to attract no further success.
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