Diagnosing Strategic Problems:

There are many symptoms that can be taken into account when diagnosing strategic problems that a firm may be facing. Two of such symptoms are: (1) too many customer complains; and (2) too much dept.

Too many customer complaints:

Satisfied customer is the key to succeed for every business. Companies are aiming to satisfy customers with products, services, and atmosphere to maintain long lasting relationships with them. More customers are leading to more sales and eventually higher profit. On the other hand, if the company does has many customer complaints it will lead to decreasing number of satisfied customer, deteriorating sales and eventually lower profit. Therefore, companies should perceive customers complain as a warning sign to problems. The company must quickly and efficiently respond to solve this problem. If the company failed to address the problem promptly it will lead to deterioration of company’s brand image. For instance, there was a small fruit and vegetable store on the corner where I resident in Brooklyn. It was very dirty inside, products were not fresh and there was always a long wait time when customers are ready to check out. Of course people complained about everything but management did not seem to care. Overtime, the store was forced to close because there were no more customers that were willing to spend their moneys in that store. A few months later someone reopen this store again after renovation and changing the name. I personally still do not shop in that little store because I believe the guys who reopen it is the same owners and this store will go down the same path. This is an example that shows that brand name can be harmed easily and it is very hard to rebuild customers’ trust.


Too much debt:

Although debt can be a major source of liquidity, companies must be aware that frailer to pay debt obligations at maturity or interest payments will send them to bankruptcy. In addition, heave debt burden takes away from companies’ financial flexibility and ability to grow. For example, Frontier airlines filed for bankruptcy earlier this year due to the change in policies by its principal credit card processor. The credit card processing company unexpectedly said that it would withhold “significant proceeds” received from the sale of Frontier tickets. As the result, Frontier did not have enough liquidity to continue its operations and decided to file for Chapter 11. This shows that companies, especially those that participate in the capital intensive industry like airlines, need to have enough “cash cushion” in order to sustain afloat and high leverage worsens the situation.