Date Published: November 10th, 2014

The causes of Business failure and how to correct situations
 
Many organizations fail in business operations while others succeed and the causes for their business failures, many investors, top management, and their leadership do not seem to know or knew but intentionally failed to correct situations in a timely manner, by turning a blind eye to the problem, as well as giving deaf ears to pubic criticism. When situations go out of hand and it becomes too late to be corrected, seeing operation costs raising, profits declining, market shares tremendously dropping, and the overall performance in terms of return on investment, market share, and profitability effecting the organizations adversely, they sought for other options such as filing for bankruptcy, acquisitions, or mergers, and when they fail on these options, they sought for a worst case scenario and that is the selling of the business.  
 
In my opinion the causes of business failure are Ethics and Trust, though there may be other causes, but I strongly believed that Ethics and Trust are the main causes for most businesses failure in operations worldwide. I have been able to come up with this opinion conclusively based from my perspective. Companies engage in business either by providing goods or service in the market, with the expectation that consumers will buy the goods or products and/or seek their services, and the objectives of their marketing is to achieve their goals from an overall performance of the company in terms of return on investment, market share, and profitability.
 
In all works of life there is one thing that is most common and that is: “Strategy” and it is used in different contexts. For example: Strategy in war is to win; strategy to win a budget debate in parliament or congress is to pass a budget, etc. In general, strategy is a method or plan chosen to bring about a desired future, such as achievement of a goal or solution to a problem. In marketing, we talk about strategy and performance, and the key focus is on the customer/consumer to meet their needs and satisfaction which is the main focus in my opinion in terms of ethical market behavior and market trust in the real world of business that has become and continues to be a serious problem, and has led to many organizations’ failure in business operations. This issue would continue as a problem for many organizations worldwide and lead to more business failure that looks like a chronic disease in some human dresses, and seem to have no more cures.
 
Crafting and executing a strategy, is one thing in the real world of business, but the most important part of a strategy is the application and practice of the strategy, including monitoring, and evaluating of external opportunities and threats in light of a corporation’s strengths and weakness. A strategic vision is a road map of a company’s future providing specifics about the technology and customer focus, geographic, and product markets to be pursued, the capabilities it plans to develop, and the kind of company that management is trying to create. In the other hand, a company’s mission statement is typically focused on its present business scope- “Who we are and what we do”. Mission statements broadly describe an organization’s present capabilities, customer focus, activities, and business makeup.
 
A strategic plan consists of an organization’s mission and future direction, near-term and long-term performance targets, and strategy. There comes the failure of some business for many organizations over years and even at present time. When an organization deviates from its mission statement and strategic vision, it is heading for disaster, and the deviation could be intentional. Your customer focus, promised geographically, and product market to be pursued, and capabilities you plan to develop, activities and business makeup must be consistent with your performance and/or, activities to the customer focus. Failing makes customers lose trust on the organization’s activities, including poor quality of products and/or services, sales managers and associates’ poor knowledge about company products/goods/service to communicate clearly in person or over the phone, both features and benefits on the products or services does hamper the organization’s business growth, and has a negative impact on your business with competitors, all of these factors, and more can let valuable customers shift to other business premises, as companies have no control over customers buying habits, they can come and go at anytime to other companies that best serve them, meet their needs and satisfactions.
 
Here are few examples of some companies’ visions and mission statements, (1) AVIS Rent -A- Car. Stated: “Our business is renting cars. Our mission is total customer satisfaction.” (2) Otis Elevator Stated: “Our mission is to provide any customer a means of moving people and things up and down, and sideways over a short distance with higher reliability than any similar enterprise in the world.” (3) American Red Cross stated: “The mission of the American Red Cross is to improve the quality of human life; to enhance self-reliance and concern for others, and to help people avoid, prepare for, and cope with emergencies.” Any deviation from their missions by these organizations customers will perceive their organizations as lack of trust, not trustworthy, not reliable, lack of business ethics, etc. What follows next, customers start to shift away from them, lose of market shares, overall business performance decline including return on investment and profitability with the exception of the American red Cross which is a non-profit organization, but society in general will lose confidence on Red Cross activities because of lack of trust on the organization deviating from their activities.
 
Market driven strategy and performance in business practices offer several different opportunities as well as challenges over time. Market driven organizations are customer oriented, understating the relationships between strategy and performance and stress on ethical marketing behavior. In marketing, strategy for competitive advantages are many including: offering superior value to customers through (1) lower prices than competitors charge for equivalent benefit and/or (2) unique benefits that more than offset a higher price. On time delivery, availability of goods in warehouse, solving customer problems in a timely manner, etc, regardless of the attractiveness of the business environment, high performance is more difficulty to achieve in a demanding environment, despite that the organization with sound strategies outperform their competitors, however, from my perspective based on random sampling, verbal questioning, and interactions I had with many people in different industries, I conclusively believe the fact remain that without Ethics in Marketing, and (Market and Organizational Trust), the business will fail in the long run or short run.
 
No customer would like to do business, or remain loyal to any organization that lacks good business ethics, provides poor customer services, inferior products, and is not trustworthy. Today, everything has changed. Globalization, the internationalization of markets and corporations, has changed the way modern corporations do business. To reach the economics of scale necessary to achieve the low costs, and thus the low prices needed to be competitive, companies are now thinking of a global (worldwide) market instead of a national market. For example, Nike and Reebok, manufacture their athletic shoes in various countries throughout Asia for sale on every continent. Like Nike and Reebok, many other companies in North America and Western Europe are outsourcing their manufacturing, software development, or customer service to companies in China, Eastern Europe, or India. Instead of using one international division to manage everything outside the home country, large corporations are now using the matrix structure, in which product units are interwoven with a country or its original units. International assignments are now considered key for anyone instead of reaching top management.
 
I believe it doesn’t matter what kind of manufacturing business, or where company does business, without business ethics and trust, the business would fail in operations. Understanding Globalization and Electronic commerce: challenges to strategic management are critical without ethical market behavior and market trust. Managers and professional ethical responsibilities include: (1) identifying the ethical issue, (2) determining the guidelines for ethical behavior, and (3) encouraging employees to practice ethical behavior. The typical ethical appeal is based on moral philosophy – doing good because it is right. The reality is that, in the real world of business, no businessman is going to sacrifice his company on the altar of such altruistic extremism. The marketing manager wants (and needs) guidelines for coping with the pressures of self – interest and encouraging altruism. The challenge is to show that practicing good ethics leads to a long–term favorable business performance.
 
The situations that are most difficult and perhaps encountered most frequently are most managers do not include ethical considerations in their decision, or intentional managers do not recognize the ethical impact of their decisions. Both situations should be avoided. Ethical guidelines that are too general provide limited direction for employees who want to practice ethical behavior. Such guidelines also give those people who lack a strong commitment to ethics a basis for pursuing unethical behavior, and the problem in such situation is leadership problems, for example, executive leadership and strategic vision. Executive leadership is the directing of activities toward the accomplishment of corporate objectives. Executive leadership is important because it sets the tone for the entire corporation.
 
As stated earlier, a strategic vision is a description of what the company is capable of becoming. It is often communicated in the company’s mission and vision statements. People in an organization want to have a sense of mission, but only top management is in the position to specify and communicate this strategic vision to the general workforce. Top Management’s enthusiasm (or lack of it) about the corporation tend to be contagious. People should know that the higher you go the more visible your integrity or lack of it becomes. Integrity is exhibited in action, not pronouncement of intention. In a civilized world and society, people want to do business with leadership that is competent and honest. Honest employees in a workforce need motivation to reach their goals, through the leader’s communication of his message constantly. Effective leaders are equally comfortable communicating to individuals, small groups, and large gatherings, customizing their approaches for each audience.
 
Ethics and Trust are valuable aspects in life for every human, society and organizations, and they are responsibilities. For instance, ethical responsibilities of an organization including the management are to follow the general held beliefs about behavior in the society. For example, society generally expects firms to work with employees and the community in planning for layoffs, even though no law may require this. The affected people can get very upset if an organization’s management fails to act according to generally prevailing ethics values. Undoubtedly, I believe that an organization with an ethical code of system of safeguards can create more consistent honest leadership, as well as leaders, and followers because of trust relationship between the leaders and the follower (workforce), that would help in the company’s success in terms of return on investment, market share, profitability, business growth, and as well as retaining repeat and loyal customers in continued business with the company in refuses to switch to other competitors in the market.
 
People won’t follow, or do business with leaders they think are dishonest, and you can’t expect honest followers if the leaders model dishonesty. Understanding customer service both internally and externally from my perspective is becoming more and more complex and critical in the real world of business because of the way the modern organizations do business as technology is shifting internationalization of markets and competitors with wide approaches. In addition to business ethics and trust, organizations that are investing in their employees in new learning process, hired and trained professionals with the right skills, knowledge, experiences, competent, honest, forward looking, inspiring and with integrity in doing their work will help their organizations succeed and grow in the rapid market changing world by creating more value through innovation. But unlike companies that believe in unethical market practice and lack trust, and also depend on cheap labor costs, they will continue fall along the way side in their cause of doing business.
 
Leadership is all about credibility. Leadership opportunities are everywhere, and can happen anywhere and at any time. Leadership is not a position, but a learning process and leadership is an identifiable set of skills and abilities that are available to all of us, but not genetics and it is not an inheritance but a learning process, and the willingness to do what is ethical and based on moral philosophy-doing good because it is right. Thus Leadership Theory deals with what a leader is (character) and what a leader does (competence). While performance modeling considers the primary outputs as “attributes” (character) and “competencies” (competence). Ethics Theory says, “Do the right thing” (character) and “Get the right thing done” (competence). While the decision-making approach focuses on balancing the “heart” (character) with the “head” (competence).
 
Trust is a rich word, laden with meaning and direction for your life. Leaders must lean on trust and be confident in them, and believe they are doing the right thing-Ethics. Most people tend to think about trust in terms of character–of being a good or sincere person or of having ethics or integrity. Character is absolutely fundamental and essential. To think that trust is based on character only is not true, it is myth. Trust is a function of two things character and competence. Character includes your integrity, your motive, and your intent with people. Competence includes your capabilities, your skills, your results, and your track record, both are vital. In all works of life, there is an increasing focus on ethics in society, the character side of trust is fast becoming the price of entry in the new global economy and market. However, the differentiating and often ignored side of trust is-competence and it is equally essential. You might think a person is sincere, even honest, but you won’t trust that person fully if he or she doesn’t get results and the opposite is true. A person might have great skills and talents and a good track record, but if he or she is not honest you’re not going to trust that person either.
 
In the real world of business, whether national/local and/or on the Global market, what customers, employees, and people are looking for in leaders are: Honesty, Forward-looking, Inspiring, and Competent for people to willingly follow someone, or do business with someone in a competitive market, with the rapid changes in business, and with the large number of new entries in the market. First customers, employees, and other people want to assure themselves that the person is worthy of their trust. They want to know that the person is truthful, ethical, and principled (Honest). People expect leaders to have a sense of directions and a concern for the future of the organization (Forward-looking). People expect their leader to be enthusiastic, energetic, and positive about the future, and able to communicate the vision of the organization (Inspiring). People must believe the leader is competent to guide them where they are headed, a track record and ability to get things done (Competent). To act with integrity, you must first know who you are. Leaders must know what they stand for, what they believe in, and what they care most about. Clarity of your values will give you the confidence to make tough decisions with determination and to take charge not only of life, but the business you manage and the people you lead in the organization.
 
Marketing concepts and strategy includes ethics in marketing. The waves of trust are essential, and are in every society. But trust is the most underestimated, neglected, least understood. Most people turn a blind eye on trust, and believe they can engage in unethical practice with impunity (go unpunished) because of the power invested in them. Example: CEOs, Managing Directors, Sales and Marketing Managers, Financial Controllers and leaders of nations, societies and communities to state a few. In marketing, market trust and organizational trust are extremely important, and if developed and leverage it has the potential to create a high return on investment. Without proper application and practice of these concepts the business will result in failure. Market trust is the underlying principle behind the wave in repetition. Trust is about your company’s brand (products), service and as well as your personal character, which reflects the trusts, customers, investors, and others in the market place in you.
 
Undoubtedly, brands powerfully affect customer’s behavior and loyalty. When there is a high trust in brand (product), customers buy more, refer more, give the benefit of the doubt, and stay with you longer (repetition - they come back). When customers do not trust you or business, because of unethical marketing practice, you see no repetition from customers. You and your company have no control over customers buying behavior, they come and go into business premises and, stay longer in doing business with you if they can trust in you and your business with good business ethics. When you lose customers, you are also losing market shares, sales volume drops, loss on profit, and decrease in return on investment and consequently, the working capital is tied on inventory because of the slow turnover of stock. Problems begin to come such as: being unable to pay business taxes, employee wages and salaries delayed in payment, company bills continue to accumulate, etc, and lawsuits begin to come against the company and ends up with either the company filing for bankruptcy, the sale of the business, mergers and/or acquisition. On the opposite spectrum, if there is a trust on you, and ethical business practice is seen in you and your business, your organization will succeed.
 
To be continued on Part 2 with some Suggestions of Corrective Measures-(Problem Solving Methods).