HOW & WHY COMPANIES FAIL

Let’s consider the case of #JetAirways

The biggest challenge a company faces is developing its ability to adapt to changing business environments.

Any company, however big or stable, is not immune to a downfall if it fails to adapt quickly

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Jet Airways started in 1993 and quickly became the top private airline in India.

Their USP: Excellent in-flight service.

They enjoyed the loyalty of the rich class, bollywood celebs, corporates, commoners etc.

They enjoyed peak market share for more than a decade.

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In 2006, just when they were riding at their peak, a new player was born - #IndiGo

IndiGo was new and catering to the changing customer demands of price over quality.

They focused on being the best low cost carrier (LCC).

Unlike Jet, they did not focus much service.

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In 2006, at a high level meeting at Jet Airways, their business consultants told the senior management that IndiGo had placed an order of 100 airplanes.

Such a huge purchase order was unheard of for a new comer and was something to worry about for Jet.

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Jet’s senior management instead laughed at IndiGo and were still under the impression that people cared for service quality more than the pricing.

Instead of adapting to a changing environment, they stuck to their past beliefs.

Jet was more worried about #Kingfisher

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Jet thought Kingfisher was a bigger threat as they were operating on the same quality over price principle.

However, over the next 12 years IndiGo grew at great speeds and conquered the throne in aviation industry.

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At last in April 2019, Jet's situation became so grim that they did not have money left to pay their monthly EMIs or keep operating the business on a daily basis.

Finally Jet failed on 19 April 2019.

Does this mean IndiGo is immune to such a failure in the future?

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Not at all! Neither IndiGo nor any other company is immune to a downfall if it fails to adapt with the changing times.

There have been innumerous examples of failed companies that were once market leaders and looked rock solid.

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MORAL OF THE STORY

As investors, we need to be aware not only about the past performance & current situation of a company but also consider its future growth potential.

Every business has a life-cycle & investors cannot fall in love with a company forever.

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