Reasons of Corporate Failure and its Solutions

2. Pioneer Group
 Naqash Ahmad BB11042
 Umar Idrees BB11056
 Syed Faisal Hussain BB11061
 Majid Sohail BB11064
 Mutaher Ejaz BB11055

4. Definition
Corporate failure refers to companies
operations following its inability to make profit
or bring in enough revenue to cover its
expenses. This can occur as a result of poor
management skills, inability to compete or
even insufficient marketing.

6. Causes
 Technological causes.
 Working capital problems.
 Mismanagement.
 Fraud by management.
 Loss of Revenue
 Damage to Credibility
 Increased in Operating Expenses
 Poorly structured Board.
 Financial distress.
 Wrong financial management.
 Over-Expansion and Diversification.
 Failure to react competition.
 Rely on few major customers.
 Dishonest Audit committees.

8. Introduction
 American energy company based in Houston,
Texas.
 Formed in 1985
 One of the world's leading electricity, natural
gas, pulp and paper, and communications
companies
 Employees were around 21,000
 Claimed revenues of $111 billion in 2000
 "America's Most Innovative Company" for 6
consecutive years.

9. Causes of Failure
 Complex financial statements.
 Complex business model.
 Unethical practices.
 Special purpose entities.
 Wrong Financial audit.
 Investors' confidence decreases.
 Illegal Loans & Debt Burden.
 Shareholders’ Loss.

11. Introduction
 Founded in 1996
 Steven F. Herbert (CEO)
 Head Quarter: Alpharetta, Georgia, USA.
 Financing Industry.
 Products: Mortgage banking and
business finance.
 Pioneer of internet banking industry.

12. History
 Initially NetBank offered “Sign on” bonus of $50.
 In 2000, NetBank added the following products:
 Online safe deposit boxes.
 Individual retirement account.
 Expended customer support.
 In 2001, Bank acquired “resource bancshares mortgage
group”, A leading provider of mortgage banking services.
 In 2003, Bank added a number of product lines i.e.,
Leasing, ATM, Merchant processing services.
 Bank reached the peak of operation at the end of 2004
through 2005.
 In 2006, restructured company.
 In 2007, NetBank was closed.

13. Causes of Failure
 Restructuring attempt.
 ATMs were sold.
 Loans from financial institutes were rejected.
 Received deficiency notice from the NASDAQ
stock market.
 No physical branches.
 Encountered several complaints (freezing
customers accounts).
 NetBank’s CEO sold NetBank.

15. Introduction
 ZARCO group of companies is providing
financial services. e.g. money transfers,
currency exchange, bank drafts, traveler
cheques etc.
 Offices in USA, UK, Pakistan and Canada.
 Formed in June 2003 by Mr. Lakhte Hasnain.
 Within two years, acquired one million
customers.
 Achieved Best Performance Award in 2006,
Businessman of the Year Award 2007 and
Western Union Agent of the Year Award in
2008.

16. Fraud at ZARCO
 Violated the rules set out by SBP.
 CEO illegally transferred Rs. 1,870/- million to
his bank accounts abroad. (FIA Report)
 Company’s employees embezzled Rs. 1.25/-
billion.
 Deceived Customers.

17. Consequences
 SBP suspended license for a limited period in August
2009.
 Head office, branches, franchises were barred from
undertaking any kind of business activity.
 ZARCO owed $6 million to the Western Union and Rs.
90.048 million to its local business associates.
 Court dismissed the pre-arrest bail of CEO.
 CEO was arrested from outside the courtroom by FIA.
 Became second Forex Company to be bankrupted after
Khanani and Kalia in August 2009.
 727 branches were closed.
 7000 of its employees had to sit home.

19. Introduction
 AirLine Company.
 Founding Fathers: Walter Mittelholzer and
Balz Zimmermann.
 Parent Company: SAir Group.
 CEO was Mario Corti.
 Headquarter: Kloten, Switzerland.
 Fleet size: 76 (2002)
 Website: www.swissair.com

20. History
 Was Founded in 21 March,1931
 1932-1933: Owned the fastest plane of
that time known as “Orion”.
 1937: Both the founders died.
 1944: An aircraft was destroyed by
American bombing raid.
 1951-1977: Company progressed a lot
and increased its fleet size.
 Ceased its operations on 31 March,2002

21. Causes of failure
 The “Hunter Strategy”…..
 In mid-2000 : 3.25-4.45 Billion dollar loss.
 A Million dollar loss per day due to various investments.
 Terrorist attacks made the situation exacerbate.
 Unable to pay the debts to “UBS”.
 Sabena Airways and German LTU were taken despite the
heavy capital requirement.
 Increasing competition from low-cost carriers. (Easyjet and
Ryanair).
 2nd October, 2001.
 Share price.

23. Preventing corporate
failures
 Appointment of non-executive
directors
 Audit Committees
 Development of environment learning
mechanism
 Focus on research & Development

25. Conclusion
 Directors should be responsible.
 Proper planning is critical to the success
of a business.
 Sincere audit committees should be
appointed.
 Management’s first and foremost duty is
to struggle for the company’s main
objective.