Crisis in the enterprise

Crisis in the enterprise
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Crisis in the company is a situation which if tolerated leads to the failure of the company. Inability to implement the basic functions and objectives are usually evident: a relative increase in costs, reduction of number of new ventures or too much debt. Analyzing the phenomenon of crisis, managers can identify three main phases: a potential, hidden and overt crisis. The first phase applies to all enterprises, it is difficult to see, the degree of hazard can be evaluated using early warning systems. Hidden phase, despite its name, is quite evident for those watching carefully the company. Last phase of crisis involves complete disorganization of the company, chaos, and decision-making incompetence.

Due to the place of crisis, we can distinguish:

Symptoms of crisis

  • In the relationship with the banks:
    • extension of credit lines,
    • increase in the use of promissory notes,
    • increase in debt without sufficient justification,
    • delays in the transmission of financial data,
  • In the relationship with suppliers:
    • increasing number of due demands for payment,
    • numerous changes of suppliers,
    • inability to take advantage of discounts,
    • more frequent crossing of maturities,
  • In the relationship with customers:
    • increase in the number of low-price sales,
    • increase in the number of complaints,
    • general decline in customer satisfaction,
    • sales personnel turnover,
    • ineffective public relations,
    • reduction in advertising campaigns,
    • In relation to the auditor and tax consultant
    • annual decline in equity,
    • lowered profitability and production efficiency,
    • reduced rate of investment,
    • tendency to overestimate the value of stocks,
  • In relation to the authorities:
    • increase in requests for deferment of payment of taxes,
    • increased interest in obtaining subsidies,

Crisis management

Crisis management occurs when managers are dealing with a crisis destroying the organization, and the previous attempts at repair failed. Healing the company should start after preparing its new strategy, structure and operations. Thinking only about liquidity does not guarantee development and success. In crisis management requires a focus on strategic issues. Implementation of the strategy in the crisis therefore requires resolving the situation within the company in relation to the environment, careful planning and decision making.