Week 7 Assignment
Devry University
Small Business Management and Entrepreneurship
Professor Chao-Hrenek
Table of Contents
Introduction ………………………………………………………………. 3
History of the Small Business failure ……………………………………. 3
Reason for the Failure …………………………………………………… 5
Analysis of Failure and Opinions ……………………………………….. 7
References ……………………………………………………………….. 9
Introduction
“The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself.” (Drucker) In small business, a company needs to always be evolving with the demands of the customer. If the business refuses to change their mindset about business or does not see the market changing, then it becomes impossible for the business to stay profitable. Borders did not see the book industry changing, and when they finally noticed the industry changing they did not react fast enough and lost a huge clientele market. Borders grew into one of the largest book retail stores but with the failure to understand the ebook market and online shopping, they are failing to survive in the book retail industry.
History of Small Business Failure
The Borders Company originated in 1971 in Ann Arbor, Michigan by the Borders brothers (Johnson, 2011). The single store had a small inventory supply of books that sold to the community in the Ann Harbor area. Borders was making a good profit in the Ann Harbor area, and started expanding across the country. Borders hired a lot of top management consultants from other companies, including Robert DiRomualdo, the former president of Hickory Farms (Johnson, 2011). Borders has making large strides and competitors and companies in the retail business started to notice Borders. The Kmart Corporation purchased the Waldenbooks (a mall-based book retail store) and was having troubles making a profit with the book industry. The Kmart corporation acquired Borders in 1992, hoping that the addition of Borders would solve all their problem with their book industry (Alex, 2011). However, this was not the cause. Many of the top level management left the company after Kmart bought the company and Kmart had to put the company back together. With pressure from the shareholders of Kmart, the company had to get drop Borders in a stock-purchase plan (Alex, 2011). That is when the Borders Group was created.
Borders started to take off again, and by 2003, Borders had over 1200 stores worldwide (Alex, 2011). The stores were located in shopping mall, and standalone location. These stores also offered Starbucks and started to branch off into different electronic devices (Johnson, 2011). The Borders group understood the importance of customer service and started the offer Borders Rewards that help bring repeating companies (Johnson, 2011). With all the strides that Borders was taking, their competitors Barnes and Nobles and online competitor Amazon were still beating them in sales.
In 2007, Amazon and Barnes and Nobles understood that the book industry was changing from reading books into reading ebooks on different electronic devices and the people that were purchasing books were buying them online for a cheaper price (Johnson, 2011). Amazon created the Amazon Kindle, while Barnes and Noble later created the Nook. The Kindle and Nook were electronic tablets that were built to read ebooks, play video games, read emails, and surf the internet. As the competitors were adapting to the evolving market, the Borders Group either did not notice the market changing or refused to change their business plan to adapt to the market of electronic books.
Since the market was changing and the customers were using ebook tablets or buying the books online for a cheaper price, Borders sales were dropping dramatically. In 2009, the Borders Group starting to close some stores worldwide (Ovide, 2011). The holiday season in 2009, the sales were down 15% from the previous holiday season
