Advanced Strategic Management Assignment

Why do businesses/companies fail ?

Submitted to: Dr. Vivek Sane

Submitted by: Pradeep Chauhan

A 42, PRN: 18020441199
 Why do businesses/companies fail ?
They say success has many fathers, but failure has only one mother. That's certainly not true for companies. There
are many reasons companies fail, in addition to the inexperience of the founder.
If we can understand why companies fail, we can help more leaders learn what to do, when, why and in what
order—and how to make the right choices for their companies. However, data on company failures is hard to
come by.
Over the past four years, as part of a longitudinal study, the Australian Centre for Business Growth has asked
hundreds of CEOs if they have experienced a major business failure. Nearly one in four (24 per cent) say they
have. The CEOs provided 253 reasons their former companies failed. The top reasons in order of priority, account
for 70 per cent of the reasons their companies failed.
1. Ineffective leadership
Did you know that companies invest so more on leadership development than on any other avenue of learning?
With that, however, only 70 PERCENT of entrepreneurs believe they hold the future of the company in their
hands. Leaders are not just born; they are made through experience. It’s not enough for businesses to have leaders
who are simply good at “leading” with no strategy or rapport. In fact, many leaders end up micromanaging their
employees, resulting in low morale and productivity.
Much is demanded of new businesses and when issues arise, plowing through its thick, muddy struggles can be
extremely difficult for unseasoned leaders. It all starts with bold and grounded pioneers and for the business to
continue to thrive, they all need to be unrelenting mentors. Motivation is a driver, but effective continuity from a
weathered front-runner steers the troop. A business needs leaders who pay attention to the little things–from
constructive criticism to employee needs. These little markers add up to effective leadership. As they say, the
right leaders don’t just lead others to leap like a lion; they look at the wildlife in its entirety.
2. Lack of long-lasting value
Successful companies succeed with this main ingredient: exceptional delivery of goods. First a promise, then the
steady production but most of all, mind-blowing upkeep of goods. A company fails to succeed when it begins to
underdeliver. The mistake with many small businesses is that they get too excited about earning the first treasure
fast that they forget what needs to be done to do just that! That’s a red flag right there, and you can be sure
customers will know you’re simply after their pockets, not really their satisfaction.
Add value to the goods you sell or the services you provide, outsmart your competitors, and make sure your
customer is happy doing business with you. Be a value deliverer, not a mediocre or just-getting-by establishment.
If it is your investment that you’re concerned about, remember that you profit only by creating value for your
customers and that’s where your focus must be.
3. Failure to understand the target market
Good planning and MARKET RESEARCH are vital to any business. Never just “wing it” or you’re bound to
crash. If you’re setting up a quirky new food or clothing line that isn’t exactly turning heads, you’re doing it all
wrong.
If you want to be a smart business owner, you must be able to project the consumer’s wants and needs, and deliver
to them in ways that exceed their expectations. It’s not always about giving consumers something unique in the
long line of stalls; you must also know the fundamentals of your target market: you would want to know what
your target market looks for regularly and how much they are willing to spend. You also need to understand at
least how your service fosters customer loyalty.
Besides knowing your target market and what they want, as a growing business, you must also know and
anticipate your competition. Gathering and analyzing market information will keep you on top of your game and
not blipping below the radar. Ultimately, you want to speed past your competitors if it were a choking race.
4. Lack of transparency
A business that lacks authenticity is bound for a fast nose-dive. Practicing transparency in business and
understanding your customers’ needs go hand in hand. Just because you became the best new business of the
week doesn’t guarantee that you’ll always stay at it. Keep your market’s demands in check and delivering quality
products and services at all times will keep you rowing against higher tides.
Another tip to keep to mind is to never to fixate on the wrong angles of business. This will lead to loss of your
customer’s trust for good. You can’t be working too hard on new ice cream flavors when your customers only
want more of chocolate or perhaps more variations of it. When trying to work your way up, never take your
customers’ demands for granted.
It also pays to ensure your products and services don’t lose their luster in time. Make improvements and try hard
to meet customer needs. You’ll know you did something right when they keep coming back.
5. Reliance on a single customer
Practically all businesses start small. And when you’ve hit the right buttons and your business made it, don’t lose
track of what put you in that position. At the same time, don’t be fooled into thinking your product, service, or
strategy will always work for that one happy customer. What you want is to never become overly dependent on
one or two business favorites. Don’t rest on your laurels, either. Instead constantly look for new ways to expand
and gain trust from other clients. Customer strategy is essential to luring in the fat fish; you would want them over
the ones swimming in the shallows.
Diversity is key, and that’s very true for internationally-acclaimed businesses today. Always map out your
customer network and never rely on “just the first few” top clients. Be an influencer, not a dependent. And if
you’re a startup, be in-the-know of helpful TIPS.
6. Lack of personal growth
Growth means reaching out to creative, lucrative, and inspiring business resources. Attending seminars, meeting
new people, and welcoming new professionals are just some of the ways to work up the ladder in business. The
more you know about the industry of focus, the more skills you develop, the more connections you meet, and the
more concrete and long-term success you earn.
If you are too fixated on your own strategy and believe it’s the only solid pathway to consistent success, you can’t
be any more mistaken. Growth is about building yourself around new opportunities and welcoming connections
and knowledge that enrich your mind, your business, and your life altogether. This is the winning formula for
every successful person out there.
7. Zero cost control and accountability
A well-functioning business is one that always keeps track of where the money goes. Investing on a new project
or professional venture is a bold step. You must always be accountable for every financial decision you make in
pursuit of these promising businesses. However, many business owners that do not keep a record of their sales on
a daily basis. That’s a big misstep. Every business owner needs to plan and manage every project and never
compromise the monitoring of expenditures.
Some entrepreneurs think that when their business starts making money, they should upgrade their facility
immediately. Check how your operations are doing and never spend on something you know you can’t afford at
the moment. Instead of growing your business, you may be grooming it towards failure.
Others also reward themselves by spending big. Avoid these mistakes by sticking to proper budget planning and
resisting the urge to spend. Chances are, it’s too soon for you to be forming frivolous spending habits.
Making proper financial decisions is one of the most critical balancing factors to ensure entrepreneurial success.
In the realm of business, true success takes patience and accountability skills.
8. Lack of concrete business systems
From managing sales records to operating CRMs needed to run the database, all technologies and systems are
created to ensure that businesses of all sizes and industry verticals run smooth. As such, these must always be up-
to-date and customized. Good business groundwork doesn’t squat to make ends meet; they invest in the right
programs and security systems. They keep up with today’s innovative technologies that help boost businesses.
This is the 21st century where automation is an indispensable concept. Without advanced business technologies,
you will be slugging behind your competitors and struggling to meet market demands. If you need to create more
than one platform for your products and services, today’s business systems let you do it systematically. In fact,
this is what online marketing is all about; you get to keep as many websites and platforms as may be reasonably
necessary to get the word about your business out there. You can hire website developers, SEO specialists, and
similar experts to strategize your online placements. Hire more workers that can build your online presence; find
the fastest way to promote brand awareness.
9. Not competing enough
Are you a match with your colossal competitors? It may all be a long shot in the beginning, but to rise through
the ranks, you need to meet the big sharks on the way. The marketplace is tough enough with its numerous
competitive businesses each trying to outdo the other. A start-up must learn to start battling tougher and renowned
moguls in the industry to at least make a blip in the scheme. This is another reason why hiring the right
professionals in your new business is a smart move. Don’t settle for less or swim on the same surface or you’ll
never make it to the deeper, greater ends.
The market is a fast-speeding train with crates waiting to pound the surface, and passengers that perhaps want to
swindle you on your way there. Don’t get choked and maneuver wisely through the passages. This requires a
great strategy, critical thinking and planning, and sharp intuition in your every move to rocket past the
competition. Really, it doesn’t matter how big their jets are.
10. Failure to create a sense of trust
Businesses may be about pleasing your consumers and profiting but those two things aren’t the end-all and be-all
of doing business. At the end of the day, it’s also about understanding and catering to the needs of your employees.
Like it or not, you need your people to grow your business. They are trained, they are skilled, they know the
business operations, and they work hard and put in the right amount of work (or even more) as long as they’re
properly compensated–and trusted.
Never be the type of employer or business owner that sits at the top and forgets who else is doing important work.
It’s not a wall but a bridge that you must build between you as the boss and your workforce. In many cases, all it
takes for employees to become deeply loyal workers is for them to feel that they are valued. When they get what
they have been promised with and are rewarded right, they are most likely to reciprocate by exceeding your
expectations.
 Reasons for the Shutdown of Jet Airways, India's Beloved Airline

The unimaginable debacle of Jet Airways is now a popular case study in almost
every Business School's curriculum. Founder Naresh Goyal is being investigated
by the Enforcement Directorate (ED) and a large number of ex-employees still
remain jobless after the airline shut down its operations in April, 2019. It is one
of the biggest startup failure in India. A lesson for many, here we study the
journey of Jet Airways and dig deep into the reasons for its failure with the help
of the facts and stats in this case study.
What’s the news?
• The government temporarily reallocated Jet’s slots to keep a check on reducing capacity in the sector due
to a significant drop in the carrier’s flights. (Source: Livemint)
• According to some sources, IndiGo and SpiceJet have been allocated 130 slots each, Vistara 110, GoAir
52, Air Asia 42 and Air India 24 slots at Indian airports from Jet’s quota. (Source: Livemint)
• Jet Airways founder Naresh Goyal and his wife Anita were stopped from leaving India by immigration
authorities at Mumbai airport. They were offloaded from a Dubai-bound Emirates flight, which was called
back after it had reached the taxiway in Mumbai airport. (Source: InShorts)
•
Recently, Jet Airways shut down its operations temporarily on 17th April
of 2019. Their last flight was from Amritsar to Mumbai. The shutting
down of the company affected 20,000 employees and more than 60,000
people indirectly. The company is reportedly in a debt of a billion dollars.
The pilot’s union NAG (National Aviator’s Guide) appealed to the PMO
(Prime Minister’s office) and Civil Aviation Minister Suresh Prabhu to
help the company and its employees.
The government on the other hand reportedly asked the banks to save the company without pushing it to
bankruptcy. With unemployment being a major electoral issue for the government, an addition of 20000 to the
list of jobless Indians will only give more substance to the Opposition. The Government is therefore pulling out
all stops to prevent Insolvency of Jet. Consequences have been of such an unprecedented level that an employee
of Jet Airways committed suicide in Mumbai. The man was a cancer patient and was on a break from his job.
Shailesh Singh was a Senior Technician in Jet Airways. He jumped from his building due to depression on
27th April, 2019.
Indian Aviation Industry
Aviation is an under-penetrated market in India. As more and more
Indians choose flight as the best means of travel, the availability of
aircraft hasn't caught up with this growing trend. For the numbers,
India has 565 commercial aircraft for a population of 1.3 billion.
The United States, on the other hand, has 7,309 commercial aircraft
for its population 328 million. To add the aviation industry's woes,
a majority of Indian airports are underdeveloped and in pathetic
condition. Many of them have been rendered unusable. For
instance,most of the airports in India have only a single operational runway whereas countries like the US have
no less than 5 runways.
History of Jet Airways
Naresh Goyal started Jet Airways with 4 leased Boeing 737 aircraft
in 1993. The airline was the paragon of success for domestic carriers
in India. There were rumblings of troubles brewing within Jet
Airways in August of 2018 when the company deferred the second
quarter of the year. The government watchdogs got a sniff of
discrepancies in the airline's finance. In the same month, the DJCA
(Directorate General of Civil Aviation) conducted a financial audit
of Jet Airways. It was based on the reasoning that deferment of
employees’ salaries ought to affect their morale and attitude.
The same month, Jet Airways posted a loss of Rs. 1323 Crores.
In September of 2018, the Income Tax department surveyed the Delhi and Mumbai office of Jet Airways. The
company was then alleged for financial misappropriation.
Similar Cases
It is not the first time that an Airline company has fallen from grace. Many companies before Jet Airways have
seen similar fate. Some of them are:
• Kingfisher Airlines
• Air Deccan
• Air India Cargo
• Indian Airlines
• Sahara Airlines
The common link in all of these cases
The common link in all of the above examples was that they all were, at some point, involved in a merger.
Kingfisher Airlines bought Air Deccan. Kingfisher was a full-service airline whereas Air Deccan was a low-
cost airline. When Kingfisher bought Air Deccan, they incorporated some changes in Air Deccan’s fleet and we
all know what happened after that. Both the companies faced a downfall.
Before Air India and Indian Airlines merged, both the companies were doing reasonably good. After coming
together, the crown jewels of Indian airspace were and continue to remain in the red. Air India has a debt north
of Rs 50,000 crore and nothing positive has come out of the government's efforts to revive the national carrier.
Jet Airways merged with Sahara Airlines and Jet rebranded Sahara as “Jet Lite”. Sahara Airlines has been lost
in oblivion and Jet Airways is heading on the same path.
Therefore, it won't be wrong to say that mergers and acquisitions in case of airlines is a risky bet. A successful
airline establishes a unique identity of its own, and meddling with its brand and presence usually ends on a
negative note.
Reasons for Jet Airways' Failure
There are many reasons for the failure of Jet Airways. Here are just a few of them:
1. Merger: Merging Sahara Airlines with Jet Airways was a mistake on Jet Airways's part. Sahara was
acquired by Jet Airways for $500 million which was way above what the airline was actually worth.

2. Rebranding Sahara Airlines: Jet Airways renamed Sahara Airways as

JetLite. Sahara at the time was a powerhouse with its name on every
Indian's tongue. The rebranding cost Jet Airways flyers who were attracted
towards the Sahara brand image as these passengers couldn't resonate with
JetLite.
3. Mismanagement: Every company and organization rests on the abilities
of its management board; there are no second opinions to this school of thought. The founder of Jet Airways,
Naresh Goyal decided to become a one-man army for Jet Airways and did not hire a sound management
committee to assist him in running the airline. Insiders often talk about his poor financial acumen. He relied on a
single management team for handling all the operations related to Jet. Understanding that specialized teams are
needed to run different departments is no rocket science. And when you acquire one more airline, you can't rely
on your existing management board that's already burdened to pick on additional responsibilities!
4. Full-service airline: Full service airlines offer passengers the choice of economy or business class travel and
on some flights premium economy and first class. The company was operating as a full-service airline. Operating
in India as a full-service airline is not an easy task. One needs formidable financial support and customer
relationships. Catering to the wealthy, the middle class, and the lower sections of the Indian society requires
strategy and operational excellence beyond imagination. That is why most of the companies focus on the middle-
class segment and keep the prices as low as possible. Jet Airways was biting off more than it could chew.
5. Drowning in Debts: Jet Airways was never good with money. It kept on incurring debts and spending more
than its revenue. The employees were paid lavishly when compared to the industry standards. For the sake of
providing comfort and luxury, the Naresh Goyal backed airline compromised with finances.

Conclusion
Jet Airways is on the verge of Bankruptcy. However, there's still some light at the end of the tunnel. Many
entrepreneurs have come forward to employ people who lost their jobs due to the Jet Airways crisis. Many have
been absorbed by competitors such as SpiceJet. If someone ultimately buys Jet Airways, there's hope for the ex-
employees of the bankrupt airline to get their dues. The Indian Government's role is pivotal in deciding the course
this crisis takes.