The most important lesson one can learn about business is that you can never allow yourself to get complacent. No matter how high you climb, there is always a chance that your multimillion company will go out like a light.
History is full of examples of how successful and seemingly unmovable businesses, which were leaders in their niches, went bankrupt in a matter of months. As you can see from stories of the top 10 corporations that went out of business, the most common reasons for such failure are the inability to innovate and change to fit the demands of time and bad management. In the majority of cases, businesses collapse because of people and their mistakes and miscalculations. Therefore, entrepreneurs need to study those stories and learn from the mistakes of those companies so they know exactly what to avoid.
5 Examples of Top Corporations That Lost It All, or How NOT to Do Business
The biggest bankruptcy in the history of bankruptcies, the collapse of Lehman Brothers made a major impact on the US and the world at large. Lehman Brothers survived the Great Depression and a variety of problems through the century of its history. However, in 2008, the giant has fallen for good, going down with the debt of $619 billion as opposed to $639 billion in assets.
This bankruptcy was directly connected to the global financial crisis of 2008 and the US subprime-mortgage crisis. The fall of Lehman was caused by the market collapse and the company management’s inability to react to it fast enough. Through a variety of methods, the company managed to recover a bit in 2007 and got to the point where investors’ confidence started to return. However, for all their efficiency those efforts came too late. The absence of support and help from the US government also contributed to the fall of this giant among financial businesses.
As some of you might remember, Kodak used to be the name that defined the photo industry at one point in time. However, all this came to an end with the Kodak bankruptcy of 2010. This particular story of business collapse is more of an embarrassment to the company’s executives than a tale of tragedy and the world literally working against you, like it was with Lehman.
You see, Kodak’s fall out of grace is a very important example for every modern business to study because it shows perfectly what happens to businesses that ignore innovation. No amount of goodwill and trust from the consumers will help you if your company gets so complacent that it stops being competitive. Kodak shows the business owners of today that they should be hiring innovators and then listening to them and realizing the ideas that will keep your business one step ahead at all times.
While Kodak’s executives didn’t have enough trust and respect for their team and thus ignored their innovative ideas, Blockbuster is an example of a company that failed because it didn’t have enough trust in its executive. Of course, the reason for the collapse of one of America’s iconic brands was far more complex, but it was firing CEO who offered a plan to completely rework Blockbuster’s business model that finished it for good.
One can also look at Blockbuster as an example of an old-school business missing an opportunity because it didn’t take the risk of backing a startup. This doesn’t sound that damning until you learn that the name of that startup was Netflix. Today it’s easy to see who won in the end.
General Motors seemed to have everything going for it, yet this 70+ year old mammoth of a business collapsed anyway. The government’s backing and desperate closing of several branches didn’t help.
The reason for that was an inflexible structure of the business, which basically consisted of fixed costs. Therefore, when the business started to slow down, General Motors started losing billions without any hope of recovery. Bear that in mind when you design your own business plan and think of how much money it will cost you to run when the sales drop.
Toys R Us
There are many reasons why Toys R Us failed, but they all can be traced back to the simple fact that costs thousands of businesses their lives. Toys R Us failed to evolve with the consumer.
It really is that simple. The company had it good, it was loved, and it is loved still. But it couldn’t change with the times enough to stay not only loved but useful to the consumers as well. It became outdated, which is the biggest threat to any business today. Society changes and evolves constantly, especially during the current age of technological progress. Failure to change with the times can only result in a complete failure of your business.