Factors Affecting Business Failure of 3PL Companies in Sri Lanka

Abstract

Sri Lanka, Small & Medium Enterprises (SMEs) contribution to GDP and employment generation is over 70 percent. As per the previous studies done by Lussier, Bandara and Marom (2016), 45 percent of the businesses (Small & Medium Enterprises) fail in Sri Lanka. According to literature, failed companies are defined for the research as, failed or potential to fail companies & SBU (Strategic Business Units), where a company is in liquidation, loan default, credit risk, financial distress, payment issues to suppliers or lenders and having a nonperforming business unit. The main objective of this study is to explore the factors affecting business failures of 3PL (Third Party Logistics) companies in Sri Lanka. As Literature suggests, inadequate resources, poor financial management, inefficient strategic management, Poor administration & human resources management, poor adaptability to the external environment, poor customer-supplier relationships are the factors affecting on business failure situations, which are considered as independent variablesfor the study. The dependent variable is the business failure in 3PL companies of Sri Lanka. A Sample frame of 135 fail or nonperforming companies or Strategic Businesses Units (SBU) in Sri Lanka was used for the study. Primary data was collected through structured questionnaires using seven-point Likert scale, from the entrepreneurs and managers of fail and non-performing companies of Sri Lanka. The quantitative data analysis was done using SPSS (23). Univariate, Bivariate and Multivariate analysis used for data analysis and due to dependent variable date are categorical, ordinal data, ordinal logistic regression is used to explore the impact of relationship between the dependent variable and independent variables. The study concludes that independent variables, inadequate resources, poor financial management, inefficient strategic management, poor administration & Human Resources and poor customer-supplier relationships are the significant factors affecting business failure in 3PL companies.