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Why Zimbabwean businesses fail

It has been suggested that the ultimate reason why businesses fail is leadership. Based on a study by the US bank the leading reasons are: Poor Financial Planning, Poor Marketing, Poor Management and Poor business Planning. These factors are true, but we also have to consider the tough environment in which companies operate.

The question is not why businesses fail, the question is how do businesses survive? This environment is one where all companies are at risk of failure. In this situation the duty of business is not to make a profit, but just to survive. This is the time to get lean and to trim the fat. With a turbulent environment management has to be on the ball and be able to operate and think outside the box. In fact in this situation, there is no box.

 Economic environment, Legislative environment, Political environment have made the business environment difficult. Price controls, shortages, power supply, lack of funding, fuel shortages and old and defunct equipment and machinery.  The list can go on and on. This post looks at the those things that companies have in their control and the things that can be done differently.

 Surely we cannot slate the companies operating during the last decade. It is worth applauding those that made it through. Obviously, some could have eased their pain through this time and some could have avoided failure. We can however look back and learn a few things. This list is not exhaustive, but picks most of the factors that cause business to fail.

  •  Many businesses fail because of fundamental shortcomings in their business planning. Plans must be realistic and based on accurate, current information and educated projections for the future.
  • Being unprepared for fluctuations in business. Boom times when demands are high as well as slow times when you are struggling to get by. (Put money away during boom times to prepare for slow times.)
  • Poor Management. Autocratic CEO, Lack of balance of management team, (legal, finance, marketing), weak finance director.
  • Poor or slow response to change. Management responding and reacting instead of being pro-active, (Scenario planning).
  • Not being able to adapt. One of the key reasons why businesses fail is not being able to adapt. In challenging times, your business has to be flexible and adapt and adjust quickly according to the market.
  • Commitment from management. Management with a ‘Get what you can and can what you can get ‘attitude will lead the company to collapse. Management should be interested in the long-term survival of the company.
  • Cutting down in wrong areas. Instead of doing what would increase the income, they start cutting out things that actually make the income. It makes more sense to downsize management perks than to cut down on inputs that create revenue.
  • Crisis Management. A businessman making bad decisions in a stable economy will tend to make bad FATAL decisions in an unstable economy. This is because its sink or swim in business and if the water gets deeper you have more chance of sinking.
  • Financial Management. Poor budgetary control, no cash flow plans, No costing and pricing systems.
  • Spending too much.  Purchasing items when you don’t need, upgrading when the older version will do and not budgeting. Is it necessary to buy the CEO the latest Mercedes? 
  • Failure to control cash. Carrying too much stock, paying suppliers too promptly, allowing customers too long to pay impacts the business negatively. Cash flow is the lifeblood of the business.
  • Failure to control costs ruthlessly. High operational costs. Flying economy instead of business class and downscale the bosses company car.
  • Inability to DIFFERENTIATE your service and product from others.
  • Corruption, theft and dishonesty. Millions of dollars are lost yearly as management and staff take what doesn’t belong to them.
  • PRICING. Many Zimbabwean products are priced higher than imported goods. This allows SA imports room in their market.
  • Failure to gain new markets. Spar supermarkets used the downturn to build its brand and gain market share.
  • Quality. The standard of some goods has been going down and customers choose imports instead of local goods.
Categories: Business
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  9. teekay
    September 7, 2015 at 9:46 pm

    To who ever put this up thanks a bunch ths waz a gud read for my assignment and i also realised that most of wat u said leads to one fact poor planning is leading to the collapse of the companies in zim, managers of most businesses in zim esp. parastatals are old people who have lost passion for what they do to develop strategies that counter the problems we are expiriencing as a country i mean we cannot seat and wait for the economy to get better because the business sector is a signifiant part of the economy which we shuld change ourselves and also the management lack the expectise to get these businesses through this crisis

    • October 2, 2015 at 8:05 am

      Thank you teekay. You are right. I see management as being a serious issue in Zimbabwe.

  10. ephraim
    April 10, 2016 at 8:30 pm

    Zim ceos are overpaid.compare the man at the groung’s salary any zim ceo.ha its disapointing really.

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