Why Do Once Successful Companies Fail?

A number of once successful companies fail because of several reasons. These reasons may include failure to respond to changing markets, failure to curtail costs, failure to sustain profitability and failure to introduce products and services that have a longer market life. In short, irrational decision making and poor risk management can bring even once successful businesses down to their knees. Failing companies is a problem that largely points toward the flaw in management of the respective organization.

While the tendency of taking risks among flourishing companies could be considered one reason for their eventual downfall, it must also be noted that without calculated risk, no company would continue to grow. However, the balance between calculated risk and reckless adventures need to be maintained by rational managers in order to ensure the progress, productivity and profitability of a business. Better risk managers have successful companies that last for a very long time.

According to Stanford University professor Charles O’ Reilly, the ability of entrepreneurs to manage business lines while recognizing and adapting to the evolving local and international markets is what makes the difference between successful and failing companies. In the modern age of globalization, companies need to be far more vigilant and competitive than ever in order to hold their ground as a successful and thriving enterprise. The researcher maintains that successful companies would need to radically change how they operated when they started out in order to excel not only at survival, but also at growth.

The failure to recognize and respond to change can be considered to be one of the prime factors behind the downfall of once successful companies. As a matter of fact, a number of entrepreneurs see change as a threat to their current status, and if they incidentally are doing well, they often choose to change nothing in response to the evolving markets.

Managers avoiding these mistakes could help their successful company avoid failure.