Common reasons for business crises and ways to overcome them

In the past decade and in the present, businessmen were affected by major changes in culture, commerce, technology and finance that moved us from a more stable and durable environment to live with uncertainty and see it as the natural habitat for business.

The companies operate with an intangible asset structure integrated by the strategy that is equivalent to the map of its course and a very important one that is the business culture that has to do with its principles, its values, management of moments of truth (contact with the Client), the forms of socialization of the members of the company, processes and educational level of human talent. This implies that any change must take place in the marketing-oriented business culture.

The product also became part of the value proposition; Is no longer separated from the service. Consequently, quality is also integral and it is the client’s perceptions that determine the competitive advantage, linked to the experience that the client lives and the environment of the company.

Just as natural organisms are susceptible to diseases, so do businesses. Apart from external causes such as natural phenomena or government decisions, crises in organizations can be generated for reasons such as the following.

  • Overconfidence
  • Granting payment terms greater than their financial capacity.
  • Utility distribution policies above normal levels.
  • Lower prices to get market share without reducing costs.
  • Excessive investment without consulting cost-benefit.
  • Management of inventories or high administrative and process costs that make them less competitive.

Additionally, there are other reasons that are not commonly analyzed as the service, the organizational culture and especially the aspects that add value to the product and for which the customer is willing to pay.

Crises generate diverse changes, technology, strategy, customer focused culture, capital, mergers, sales, etc. To this end, tools like the ones we show below help to overcome them, starting with eliminating everything that does not add value to the product to market and decrease production costs:

Reengineering: Presents interesting ways to optimize processes by looking at the company from the outside inwards; That is, from the customer’s perspective first, so that it has easily identifiable competitive advantages on the part of the buyers.

The philosophy: Looks at business not as profit producing entities but as producers of added value for the customer. It is based on total quality, just-in-time production system, continuous improvement, suggestion system and quality circles.

Market research: Allows to redesign the strategy to make the company truly competitive so that the customer perceives it and prefers it in front of the others.

The so-called “EHVA”: Standardize, Do, Check and Act, as well as other external consultants, are part of the tools to be used to overcome a crisis, but it is fundamental that the profits are seen as a consequence and not as the objective Fundamental of the company.

To implement a system first requires a thorough diagnosis in terms of sales, profits, customer retention and costs, since solving a financial problem of a company in crisis without correcting the causes is to dilate its agony; Is to remove the fever without curing the disease.

A crash plan is an attack on the critical elements such as capital, costs, expenses, customer value proposition, structure and sales that in case of success will not only allow us to overcome the crisis but also, we get stronger from it. Since “a small gap can sink a large ship,” continuous measurement is key to timely diagnosis.

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Sue

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