Many new and old companies are becoming as sick companies due to several reasons. High competition in the market, rapid changes in the industry, rigid organizational activities, lack of prospective vision and long term orientation, lack of resources, incompetent strategies, under performance, over anticipation and many more effectiveness related aspects contribute for a company to become sick.
Contribution of a Consultancy Firm in Reconstructing a Sick Company
Capital restructuring, raising fresh capital, capital reduction, organizational reengineering, divestiture and liquidation are few options which can be suggested by a consultancy firm for a sick company. Either increasing the competitiveness or ensuring the survival and recovery of the company or even closure while maximum realization of value can be the motive underlying in the suggestions given by a consultancy company.
The rebuilding and reconstructing process of a sick company can be done mainly in three phases. One can be relating to Strategies to be presumed, second can be related to performance related improvements and third can be financing options for rebuilding.
– Strategically Rebuilding a Sick Company
- Corporate restructuring and organizational structure change
- Growth strategy
- Harvesting strategy
- Organizing for survival
- Retrenchment, downsizing and organizational rearrangement
– Performance Improvement to Rebuild a Sick Company
- Process reengineering
- Cost, process and performance benchmarking
– Corporate Finance Options for Rebuilding a Sick Company
- Mergers and acquisitions/divestitures
- Split-ups, equity carve outs and divestitures
- Capital restructuring
- Liquidation and recovery
Sick Company – Small Enterprises of Sri Lanka – Assistance from Consultancy Firms
Rebuilding and reconstructing these companies involve huge investments, tremendous efforts, pool of expertise, advices and guidance. Specially in a developing country like Sri Lankan’s scenario it imposes huge financial assistances and these companies are burden for the country and which would pull back the economic prosperity of the country and the development of all aspects of the business sector as well.
In financial term a sick company can be identified as a company which is unable to settle its debts. In marketing perspective a sick company can be seen as a company which is uncompetitive and looses its market share due to high competition and poor customer satisfaction. In operational perspective a sick company can be identified as a company which produces low quality products and involve huge defects and dissatisfy its customers.
Globalization is a main factor which has made many local companies to become sick. Sri Lanka has been severely affected by globalization due to the open economy policy and liberalization of the Balance of Payment.
Many Small Enterprises of Sri Lanka has become redundant from marketing, financial, operational and even in many perspectives. This can be explained by a cycle of redundancy. When new products and services are bombard into the local market the home products and services started to be considered as unattractive and uncompetitive. The Small Business Enterprises starts to loose their market share and from the marketing perspective these companies starts to become sick. When this happens the companies try to reduce their costs and offer their products at a lower price in order to capture the market but this in turn affects the quality of the products produced and this leads to low quality out puts and huge defects. Here the company becomes sick from the operational perspective also. Finally this makes the company to bankrupt and financially also the company becomes ill.
In many instances these failures of the business can be rectified to an extent provided that there are proper and prospective guidance and strategies are utilized. Most of the Sri Lankan businesses lack in right time strategies and guidance due to unavailability and unawareness. These issues can be mitigated to a considerable extent through the assistance of industry experts.
Business consultancy is an act which advices appropriate measure and steps at the right time which need to be followed by businesses to avoid their failures and losses. Consultants are in a better position to help the businesses as they are surfing in the industry and posses sound knowledge about the industry.
Right strategy at right time would avoid failures and break downs.