Drongesen 1

Leland Drongesen
ENC 1102
April 3rd, 2020

What Factors Contribute to the Success or Downfall of a Business?

Many people attempt to open new businesses every year, however, many fail within the
first few years of opening. In fact, only “about half survive at least 5 years”, according to the
Small Business Organization. In my research, I plan to analyze the patterns in statistics of
popular failed businesses and try to discover possible reasons for their failure and provide
strategies and insight to how this demise can be avoided in the future. So far, I have looked at the
downfall of multiple once popular businesses including Toys R’ Us, Lucky’s Market,
Blockbuster, and Sears. I have tried to identify trends and find reasons behind the loss of profit
and ultimate failure of these businesses. I have also examined the common habits practiced by
successful businesses such as McDonald’s, Apple, Tesla, and Disney to try to understand what
makes their brand so appealing to consumers in comparison to their competitors. I will look at
strategies used in both successful and unsuccessful companies and try to establish new
techniques failing businesses can implement in order to make a profit again. Since my major is
marketing and I plan to get my master’s degree in business administration, it seems appropriate
to research businesses and the reasons behind the success and failure of companies. This seems
like a beneficial topic for me to research since I can possibly apply my research to my future
career and try to avoid the mistakes made by failed companies and incorporate techniques
observed in more successful companies.
The first company that I researched about was Toys R’ Us. This was a very popular
business and one many Americans were very fond of. Unfortunately, last year, it shut down
because it had poor sales and was unable to make sufficient profit. This makes me question how
such a successful business that had so many fans could face such an unexpected demise.
According to “What Went Wrong: The Demise of Toys R’ Us” by Denise Dahlhoff and Mark A.
Cohen, “Toys R Us has failed to innovate its business model, incorporate technology or adapt to
changing consumer behavior.”. This suggests that the failure of Toys R’ Us was largely due to
their inability to innovate and compete with their rivals, like Target. While Target used to sell
many of the same items that Toys R’ Us did, it expanded its market over time by adding many
new features including grocery sections and Starbucks’ to many of their stores. These
innovations helped the company continue to grow, while other companies who were unable to
innovate efficiently, like Toys R’ Us, could not maintain profit. While Toys R’ Us is a very
appealing company to children, it is only popular within that one demographic. Since this
company was unable to expand its market to a wider audience, it began to lose profit. It is very
easy to see how the loss of sales in this business is due to their inability to market to other
demographics, which has been a problem that many popular companies have struggled with as
well.
The next company I researched was Lucky’s Market, which is a company spread out
across ten states that is very popular in Florida and recently faced an unexpected closure. In
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researching this closure I learned that it was because the mother company of Lucky’s, Kroger,
decided that Lucky’s was not a smart investment and would ultimately be unprofitable. In the
news article titled “Lucky’s Market Reportedly closing down all of its stores” by Russell
Redman, the author explains how the failure of Lucky’s is due to their inability to make a profit
for Kroger. He quotes the Kroger Chairman who said “The amount of investment that it would
take for Lucky's to be a meaningful contributor to Kroger overall and the efforts that it would
take, we just didn't think it created a good return for the investments that were needed to be made
relative to that.”. Considering Kroger owns many other similar companies, dropping Lucky’s is
not too much of a loss for the company. It is clear that this company failed because of the
massive amount of competitors in this market including Publix, Whole Foods, and Trader Joe’s,
as well as an ability to stand out in this market. While Publix is well know for their deli and
Boars head items, and Trader Joes is popular for their large selection of vegan and health food
items, Lucky’s seemed to have trouble offering unique products and could not find a place
among it’s competitors. This failure was mostly because Lucky’s lacked uniqueness and was not
nearly as admired as its rivals.
One very popular business failure that occurred in the past decade was that of
“Blockbuster”. It was a very popular company that has a cult of followers and is still very talked
about to this day. It made headlines when it went Bankrupt and made many wonder how this
large company that so many loved was closing so abruptly. The primary reason for the failure of
this company was their inability to innovate and compete with rivals like Netflix who offered
more accessible content for a cheaper cost. Not only did Blockbuster have to compete with
Netflix, they also had to compete with the increasingly popular Redbox company. Blockbuster
had plans to expand online, and even began created Redbox style DVD vending machines.
However, due to a management issue, their plans were never acted on, which is a large reason for
their downfall. Another prominent reason they failed, according to Greg Satell in “A Look Back
At Why Blockbuster Really Failed and Why it Didn’t Have to”, Blockbuster “earned an
enormous amount of money by charging its customers late fees, which had become an important
part of [their] revenue model.”. Unlike Blockbuster, Netflix only charged a monthly fee and did
not penalize their patrons like this. Due to consumers' accessibility to alternatives at better prices,
they preferred using video services like Redbox and Netflix rather than Blockbuster.
Another very popular and once successful business that has faced failure in the past few
years is the Sears corporation, primarily affecting Sears and K-Mart stores around the country.
Many people were surprised by this closure since it was such a large business. Sources suggest
that sears ultimately failed because they had a poor manager who had issues leading the
company. In a case study about the business failure of the Sears corporation, Mark Cohen
remarks “Further, nothing that [CEO of Sears, Alan Lacy] did in the five years he was in the job
convinced me that he was even able to learn how to become effective in his role.”. He then goes
on to say “If you’ve got appropriate leadership skills, then almost anything is possible. If you
don’t, you’ve got nowhere to go.”. This shows that a large issue in the failure of the Sears
corporation was the management and an inability for the CEO to lead the company. Overall,
Sears failure was due to poor management caused by personal issues going on with the
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management. In reading about this company, it is apparent that their failure is due to personal
issues that affected the managers ability to lead the company in the right direction.
In Contrast, one successful company that has maintained success for years is McDonalds.
They have been able to innovate effectively and found new ways to appeal to their consumers by
creating new menu items and deals. There has even been a movie created titled “The Founder”
about the creation of this business and discusses why their business model is so successful. They
have used advertising techniques to appeal to children, with toys and special kids products, and
to adults, with good deals. They continue to develop and adapt to consumers over time and have
maintained steady success. In a news article titled “McDonald’s sees success from its ‘most
ambitious plan in history’” by Rebekah Schouten, the author details a recent plan that the
company has put in place in order to boost their already thriving sales. She remarks
“McDonald’s also plans to grow its delivery footprint in 2019. Delivery has grown to a $3 billion
business for McDonald's restaurants globally, and the company now offers delivery in more than
20,000 restaurants across 75 countries, marking more than half of all McDonald's restaurants
globally.”. This shows one specific example of how the company is constantly adapting and
creating new strategies to appeal to consumers over time.
Another very popular company that is still currently very successful is Apple. This
company has created a very strong name for themselves and constantly finds ways to adapt to
consumers changing needs with their products. They continue to create a very strong brand name
and create loyalty among their customers. In the article “Apple: It’s All About the Brand” by
Leander Kahney, the author remarks “Apple, of course, is the archetypal emotional brand. It's not
just intimate with its customers; it is loved.”. This suggests that a lot of Apples success comes
from their ability to connect with and create trust with their customers, unlike many other
companies. Another reason for the massive amount of respect for Apple among consumers is the
love for founder, Steve Jobs. Jobs was an extremely successful and influential figure that faced
an untimely death in 2011 after a long battle with pancreatic cancer. He inspired many works
about his life that discuss how his company began in his garage, including the movies “Jobs”
featuring Ashton Kutcher and “Steve Jobs” featuring Michael Fassbender. This shows that
consumers not only have a love for the company but the overall admiration for the creation of the
brand and respect for its founder, which is the reason for its continued success.
One company that has become extremely successful in the past few years is Tesla, which
is an innovative car company founded by Elon Musk. This is a company that has found a way to
profit on modern technology that is appealing to modern consumers including battery operated
vehicles. This company continues to expand their brand and adapt to appeal to consumers of
different income levels, creating luxury self-driving cars, while also creating battery operated
cars as affordable as 35,000 for those who do not plan to spend that much on a vehicle. In the
article “The Secret Of Tesla’s Success Is Not Selling Cars: It’s Being Able To Anticipate The
Future” by Enrique Dans, Dans discusses how Tesla is very adaptable as a business and remarks
“The future of the company is about greater efficiencies in production, about differential
improvements to self-driving technology, about moving into the world’s largest automobile
market, and about a long-term orientation that some analysts are now beginning to understand.”.
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It is very easy to see Tesla’s increasing popularity as a brand, just by how many are on the roads
and the massive amount of people promoting the luxury of these vehicles on social media.
Another brand that has maintained success and trust among consumers throughout the
years is Disney. This company is constantly finding ways to appeal to all age groups and
continues to rule both the film and tourism industries. This is one brand that has continued to
evolve to meet consumers’ needs and is constantly finding new ways to innovate. A large part of
Disney’s success, however, is because of the massive amount of trust that customers of all ages
have for the company. In the article “Disney Knows It's Not Just Magic That Keeps a Brand on
Top” by Allen Adamson, he says “Disney promoted customer engagement with an emphasis on
meeting a customer’s needs at a time and in a manner preferred by the customer. What’s more, in
answer to a question raised by one of Walt Disney World’s 75,000 employees, “Who owns the
guest?” it was communicated that no one owns the guest. However, someone, in every case,
“owns the moment.”. This shows the professionalism within this company and the high standards
they have for their treatment of their guests and the products the put out. A large part of the
reason why this company is so loved by consumers is that Disney makes the customer feel
important and is a company that has found ways to offer experiences and products that are unlike
any other companies.
In researching these companies, it is very easy to see common faults made in these once
-successful businesses that lead to their downfall. While there was different issues within the
companies and different factors that contributed to each company’s loss of profit, they all
seemed to have the same period of over-exposure and success, followed by a steep decline.
While each happened over a different period of time, all of these business seem to follow the
same pattern of decline. I also observed many similar practices in businesses that have
maintained success throughout decades and found beneficial strategies that can be utilized in any
business plan. The success of a business depends heavily on their ability to adapt to consumers,
how they react to changes, and their ability to innovate. We can see through companies like
Sears and Blockbuster that a company's success is not guaranteed forever, regardless of how
large the business may be. We can also see through companies like Apple and Disney that the
ability to appeal to and interact with consumers is a crucial aspect in any business model.
Overall, it is clear to see trends in the primary causes of business failure, even in the handful of
business that I researched. This information and the trends I observed will be very useful to me
throughout my career and helps me understand what is necessary to develop a successful
company..

Works Cited
“Small Business Facts.” Do Economic or Industry Factors Affect Business Survival?, June 2012,
https://www.sba.gov/sites/default/files/Business-Survival.pdf.
Business Radio. “The Demise of Toys R Us: What Went Wrong.” Knowledge@Wharton,
knowledge.wharton.upenn.edu/article/the-demise-of-toys-r-us/.
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Redman, Russell. “Lucky's Market Reportedly Closing Most of Its Stores.” Supermarket News,
22 Jan. 2020, www.supermarketnews.com/retail-financial/lucky-s-market-reportedly-
closing-most-its-stores.
Satell, Greg. “A Look Back At Why Blockbuster Really Failed And Why It Didn't Have To.”
Forbes, Forbes Magazine, 21 Sept. 2014, www.forbes.com/sites/gregsatell/2014/09/05/a-
look-back-at-why-blockbuster-really-failed-and-why-it-didnt-have-to/#4fb65b601d64.
Columbia Business School. “Sears: A Case Study in Business Failure.” Ideas & Insights, Ideas at
Work, 23 Oct. 2018, www8.gsb.columbia.edu/articles/ideas-work/sears-case-study-
business-failure.
Kahney, Leander. “Apple: It's All About the Brand.” Wired, Conde Nast, 4 June 2017,
www.wired.com/2002/12/apple-its-all-about-the-brand/.
Team, Tesla. “$35,000 Tesla Model 3 Available Now.” Tesla, Inc, 4 Mar. 2019,
www.tesla.com/blog/35000-tesla-model-3-available-now.
Dans, Enrique. “The Secret Of Tesla's Success Is Not Selling Cars: It's Being Able To Anticipate
The Future.” Forbes, Forbes Magazine, 9 Sept. 2019,
www.forbes.com/sites/enriquedans/2019/09/09/the-secret-of-teslas-success-is-not-
selling-cars-its-being-able-to-anticipate-thefuture/#504221354973.
Adamson, Allen. “Disney Knows It's Not Just Magic That Keeps a Brand on Top.” Forbes,
Forbes Magazine, 15 Oct. 2014, www.forbes.com/sites/allenadamson/2014/10/15/disney-
knows-its-not-just-magic-that-keeps-a-brand-on-top/#1ce936a25b26.