Monday, June 12, 2017

The Eighth Way to Fail Big

                In “Seven Ways to Fail Big,” Carroll and Mui analyze common trends among 750 of the “most significant” business failures in the United States. Their findings show that a majority of failings center around problems with strategy, versus with management. They highlight key factors such as dishonest financial reporting, investing heavily into incorrect technologies, and accumulating a number of smaller brands or companies.
                In addition, it would be interesting to see an analysis of the number of companies that have failed because of tarnished images. For example, recent reports about American Apparel’s second bankruptcy filing focus on many of the problems the company faced (oversaturating cities with storefronts[1], changes in youth fashion trends[2], growing success of rivals[3]). However, an underlying problem highlighted in the reports is the effects of the former CEOs scandals, which included sexual harassment claims by former employees and documented inappropriate behavior.[4] The manner in which news about the CEO impacted consumers’ views of the company led to brand changes. The company attempted to tone down the sexualized nature of their clothing styles and marketing, however, this led to inadvertently driving away the customer base to whom these aspects appealed.4 It is notable the extent to which scandals were able to impact the clothing company that was often praised for its desire to keep production in the United States and out of sweat shops while paying immigrants twice the rate of minimum wage.2 This highlights the importance of preserving the respectability of a brand and how single headlines, in today’s connected world, can start a domino effect towards business failure.
                Another example of such an instance would be the Susan G. Komen Foundation’s decision to withdraw funding from Planned Parenthood in 2012. The Foundation argued that “it would no longer fund groups under federal investigation” at the time that Congress began to look into claims that federal funds were being used by Planned Parenthood for abortions.[5] However, backlash occurred because Planned Parenthood provides health services such as breast exams, which the Susan G. Komen Foundation strongly encourages.[6] The response was strong enough to lead to Susan G. Komen reversing the decision a mere three days later.6 Data shows that the scandal led to a 22%, or $77 million, decrease a single year in fundraising and entry fees for the foundations events.[7]
                Thus, it seems in today’s media-connected world, a potential eighth reason companies fail is faux pas that can damage a brand or organization with one incorrect move.



[1] Shan Li, “American Apparel rapidly grew its retail footprint. Did that strategy contribute to its collapse?”, Los Angeles Times, Jan 2017, http://www.latimes.com/business/la-fi-american-apparel-stores-20170118-story.html.
[2] “American Apparel files for bankruptcy,” The Guardian, Oct 2015, https://www.theguardian.com/business/2015/oct/05/american-apparel-files-for-bankruptcy.
[3] Nathan Bomey, “American Apparel topples into bankruptcy again,” USA Today, Nov 2016, https://www.usatoday.com/story/money/2016/11/14/american-apparel-chapter-11-bankruptcy/93788450/.
[4] Mallory Schlossberg, “American Apparel made one mistake that led to its downfall,” Business Insider, Oct 2015, http://www.businessinsider.com/how-american-apparel-imploded-2015-10.
[5] CNN Wire Staff, “Komen Foundation reverses funding decision of Planned Parenthood,” CNN, Feb 2012, http://www.cnn.com/2012/02/03/politics/planned-parenthood-komen-foundation/index.html.
[6] David Wallis, “Komen Foundation Struggles to Regain Wide Support,” The New York Times, Nov 2012, http://www.nytimes.com/2012/11/09/giving/komen-foundation-works-to-regain-support-after-planned-parenthood-controversy.html?mcubz=1.
[7] Michael Hiltzik, “Susan G. Komen Foundation discovers the price of playing politics,” Los Angeles Times, Jan 2014, http://www.latimes.com/business/hiltzik/la-fi-mh-susan-g-komen-20140108-story.html. 

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