The business world is brutal, and so much hinges on single decisions that can either make or break a company.
Some decisions are inspired and take the company to the next level.
Others have massive impacts on very well-established products and companies which would finish off smaller companies.
For this, read “New Coke”. Find out more here.
Sadly, some decisions are so bad, they lead to the end of companies.
Here are 10 decisions so bad they killed off companies.
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JCPenney
Department store JCPenney was well-known for its policy of marking down prices, which made its customers feel like they were getting a deal.
In 2012, it decided to list items at fair prices.
The effect of this was that customers no longer thought they were getting a deal, which led to sales plummeting.
The year didn’t start well as it was discovered 30 percent of JC Penney’s bandwidth had been used by staff watching YouTube videos.
COO Michael Kramer laid off 1,600 staff as a result of this.
Layoffs continued through the year and did losses.
Speaking at the time, CEO Ron Johnson said: “I’m completely convinced that our transformation is on track.”
Sales continued to plummet and Johnson was sacked the following year.
More and more closures continued over the following years, including 33 in 2014, resulting in 2,000 job losses.
The company lasted until the 2020 Covid pandemic, before declaring bankruptcy in May.
242 stores closed with the impact of the pandemic blamed.
But in June, 827 stores reopened, including 154 which had been previously earmarked for closure.
Top-level staff left and stores continued to close across the US.
In September 2020 an $800 million bid from Brookfield Property Partners and Simon Property Group saw the company rescued.
The move saw 60,000 jobs saved and the company continues to function today, despite the bad decisions of the past.
MoviePass
MoviePass was launched in 2011 and allowed subscribers to buy a movie ticket every day for a monthly fee.
It used an app where users could check into choose their theater, movie and time.
After lowering prices its membership ballooned to three million.
However, it suffered from financial issues and eventually filed for bankruptcy in September 2019, before its co-founder Stacy Spikes led a bailout in November 2021, leading to a relaunch in 2022.
One of the issues the company faced was cinema chains didn’t take to it.
In 2017, AMC called it a “shaky and unsustaintable program.”
The company said: “by definition and absent some other form of other compensation, MoviePass will be losing money on every subscriber seeing two movies or more in a month.”
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Blockbuster
We all remember renting a video from Blockbuster and posting it back through the letterbox.
However, the company went bust in 2014 after it was unable to compete with the new kids on the block.
A decision to turn down a $50 million bid from Netflix seems particularly foolish.
Netflix was a DVD service at the time and boss Reed Hastings has publicly stated he decided to form the company after being stung for $40 in late fees at Blockbuster.
Blockbuster’s demise was eventually caused by a $1 billion debt and a big falling out at board level.
Just for Feet
Good advertising can take a company to the next level, and bad advertising can destroy it
The greatest advertising opportunity of all is at half time in the Super Bowl.
Companies pay millions for the opportunity, but Just for Feet got it very wrong in 1999.
The sports footwear company thriving at the time and spend more than $1 million on the commercial.
It showed a group of white men chasing a Kenyan runner through the desert.
They drug him and force Nike trainers onto his feet.
The man then cries out and tries to shake them off his feet.
The commercial can be seen here.
Stuart Elliot of the New York Times called it “”appallingly insensitive”
Advertising Age columnist Bob Garfield said the commercial was “neo-colonialist”, “culturally imperialist”, and “probably racist”.
Just for Feet then sued advertising giant Saatchi and Saatchi over the commercial, but the suit fell through after Just for Feet filed for bankruptcy in 1999.
It wasn’t just the commercial that killed off the company.
At the same time, an accounting fraud led to three executives admitting a scheme to overstate earnings by $8 million between 1996 and 1998.
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Borders
Book and music retailer Borders was an early adopter of using Amazon for online sales, but went bust after it didn’t latch onto its own digital model.
It was hit by the recession of 2011, but critics said it outsourced its book sales to Amazon for too long, as well as not embracing e-books.
It also had too many stores and too much debt to survive as its competitors surged ahead.
Mervyn’s
Department store Mervyn’s had survived for 60 years before owner Mervin Morris sold its stores to Dayton Hudson, now Target.
Then it all went wrong.
It started well.
The sale took place in 1978 and more and more Melvyn’s appeared in US towns and cities.
Target eventually put the Melvyn’s stores on the market in 2004.
Some hard bargaining took place, with Target refusing to sell the stores unless they were kept as Mervyns, aiming to save the 30,000 staff.
In July 2004, Target announced Mervyn’s had been sold to a group of investors that included private investment firm and turnaround specialist Sun Capital Partners, Cerberus Capital Management, and real estate investment company Lubert-Adler Management Inc.
62 store closures were announced in September 2005.
2007 saw another 18 close for good.
Mervyn’s announced it had filed for bankruptcy protection in July 2008;
Mervyn’s then sued the firms, claiming they had stripped its retail assets and forced it into bankruptcy.
The case led to a payout of $166 million in 2012.
Red Lobster
A famous Simpson’s episode sees Homer take a local all-you-can-eat restaurant to court having not had all he can eat.
This concept had a massive impact on the Red Lobster chain, which ran an all-you-can-eat offer on snow crab.
However, the company underestimated the abilities of customers to guzzle the crustacean and ended up losing $1.1 million a month.
Bosses also didn’t take into account how time-consuming cracking open and eating endless portions of crab could be, so the table turnaround was also very low.
Unlike other companies, Red Lobster didn’t go out of business due to this.
Pop superstar Beyonce referencing the company in her single “formation” during the Super Bowl in 2016, which gave the company a much-needed 33 percent sales boost.
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Circuit City
Experience is vital in business.
Customers want to talk to someone who knows what they’re talking about.
Circuit City learned this the hard way in 2007 when it decided to sack its well-paid, long-serving staff and replace them with cheaper options.
November 2008 saw 155 stores close and the loss of 17 percent of the workforce at the end of that year.
It filed for bankruptcy protection the same month.
It then borrowed $1.1 billion to stave off bankruptcy.
Court papers revealed it had assets of $3.4 billion and debts of $2.32 billion.
Ricardo Salinas Pliego, owner of Mexican television broadcaster TV Azteca and electronics store chain Elektra, then purchased 28 percent of Circuit City.
But the following January, the company started bankruptcy proceedings.
30,000 jobs were lost.
Circuit City’s assets were bought by Systemax Inc in April 2009.
Systemax then sold the brand to retail veteran Ronny Shmoel in January 2016, with the brand relaunching in 2018 as an online retailer.
Some stores were promised, but this never happened.
