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5 Miserable Business Failures of 2007
And the Helpful Lessons We Can Learn From Them...
It’s
an unfortunate fact, but every year, many businesses experience setbacks or go
under altogether. While you can’t always prevent failure, what you can do is
learn from the failure of others, while simultaneously making jokes about them.
With that in mind, here are the stories of some major companies that
experienced failure in 2007. Do yourself a favor, and try to learn something.
5) Metronet
Metronet was a group whose prime responsibility included
maintaining and improving the London subway lines. Over the past few years,
Metronet went way over budget and had to ask for ₤551m in emergency funding.
Meanwhile, competitor Tube Lines has been consistently on time and on budget.
On July 18th, Metronet went into “administration,”
which is a fancy British version of bankruptcy (kind of like how they call an
apartment a “flat”).
A story from the Times Online suggests that Metronet’s
failures were due to a lack of efficiency.
The story cites an arbitrator who said that
the company “would not have needed extra money if it had been run in an
‘efficient and economic way.’”
In hindsight, their company slogan of “Metronet: Relax, That
Deadline Isn’t Set in Stone” was probably a bad idea.*
[*Not the actual slogan.]
4)
Fopp / Music Zone
To anyone that follows the music industry, it
should come as no surprise that these two affiliated music stores
closed down in 2007. Originally rivals,
Fopp took control of Music Zone in February. Until this year, the two companies
had a combined 87 locations in the U.K. However, between the recent decline in
record sales and the added pressure of taking over Music Zone, Fopp was forced
into administration this past July. The company was subsequently taken over by
HMV group. The brand was re-purposed and a handful of stores were re-opened,
but Fopp no longer has the reach it once did.
Where
did it all go wrong? According to one music industry insider, “Something
something file-sharing something something illegal downloading something
something slumping industry something something something kids these days!!!”
The
decline of these stores shows what happens when companies fail to adapt to
changing social trends. On the other hand, how do you compete with something
that’s free? So maybe the real lesson is, don’t open a music store.
3) Kwik Save
On May 30th, U.K. supermarket chain Kwik Save closed 79 stores. In the
following months, the company shut down even more locations, and
eventually went into administration.
Kwik
Save was originally positioned as the U.K.’s discount grocery store. However,
the rise of major chains (Tesco and
Asda) put Kwik Save in an unfortunate position where it was no longer the
cheapest supermarket, but didn’t have the appeal of a friendly neighborhood
market either.
The
lesson here is that you need to find a niche in the marketplace. It’s better to
be good at one thing and stand out from the crowd, than to be average in all
areas and get lost in the shuffle. If you don’t believe that, just ask Gary
Coleman, who’s been milking that “whatchu talkin’ bout Willis” line for 30-some
years now. Oh, you can call him “washed-up”… all the way to the bank!
2)
MAXjet
MAXjet
was a small, all-business class airline that offered luxury flights between New
York, Los Angeles, Las Vegas and London. Clients of the airline included
professional sports teams, major corporations, and a bunch of other rich people
who didn’t want to sit next to a 400-pound guy and his 8 screaming kids.
With
the high price of operating an airline, outrageous fuel costs, and the rising
price of peanuts and Sprite, MAXjet was unable to operate at a profitable
level. On December 7th, the company was forced to suspend trading of its shares
on AIM (that’s the Alternative Investment Market, the London Stock Exchange’s
stock market for smaller companies; not Instant Messenger). On December 24th,
MAXjet ceased operations, leaving jets on the tarmac and passengers scrambling
to find a way home. Merry Christmas everybody, now enjoy the bus!
According to experts -- such as
the Associated Press -- all-business class airline service is a thin
market, and MAXjet didn’t have the resources or financial backing to compete.
The company suffered from a severe lack of economies of scale. For you
non-economics majors, here’s what that means: They had 5 planes. Given the
enormous overhead of running an airline, you need more than five planes.
Seriously, it’s not good when your entire flight attendant staff can carpool in
one minivan.
MAXjet plans to file for bankruptcy protection.
1)
CompUSA
In
December, electronics retailer CompUSA announced it would be closing all of its
103 stores following the holiday season. The company was acquired by Gordon
Brothers Group, which will attempt to sell CompUSA and its entities (CompUSA.com,
CompUSA TechPro).
CompUSA was successful in the 1990s, but has struggled in this decade. So what
went wrong? Apparently Best Buy really lives up to its name. For one,
other large-scale retailers (especially Best Buy) have dominated the
electronics market in the 2000s. Also, much of CompUSA’s revenue came from the
sale of PCs, and as the price of PCs fell over the past decade, CompUSA’s
profits dropped accordingly. When the success of your company is tied so
heavily to one product, market changes and trends can have a devastating
effect.
(A
similar tragedy befell the early 1990s company Snap Bracelet Warehouse.)
Hopefully you all learned some valuable lessons today. Bottom line, failure is
a part of life, but successful people learn from their mistakes. And they also
work hard. So get off the Internet and get back to work or you’ll end up on the
unemployment line with everyone mentioned above..
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