MANY BIG BUSINESSES ARE FAILING DUE TO THEIR MANAGEMENT

MANY BIG BUSINESSES ARE FAILING DUE TO THEIR MANAGEMENT

An Astounding Look at Big Business

in Today’s Marketplace

In big business, the boards and senior executives make some of the most incredible mistakes due to arrogance, greed, or being surrounded by sycophants who would agree with the CEO if he/she said the sky was red.  The business they are entrusted to run for the shareholders takes second place to their wily ideas. This is what I am exploring today.

It’s a pity when hard working people with initiative are sucked under because their bosses couldn’t or wouldn’t see the bigger picture. Think about the huge investment in marketing and advertising efforts that Penneys’ new CEO used a few years ago to change Penneys’ established position as a traditional department store to a new market position – a consumer-definition of Penneys as a lower-priced option to other department stores but with the same quality of goods.

He was ahead of the curve in retailing, particularly major brand retailing. It’s apparent he could clearly see the future. And what he saw was a major change coming in the way traditional big business chain-store retailers must acquire new customers and keep them. And it was coming fast.

If you’ve read my book, The New Marketplace, then you will understand why the new paradigm shift to customer-centric marketing and advertising is the biggest change in the marketplace since the Sixties.

It’s not due to these big businesses having no money. It’s about them having no customers. Because customers purposely left them. Quit buying from them. These customers have simply changed the way they shop.

So, what happened? This new kind of Penneys was a work in progress and developing as planned. But at the time he was about to succeed, he was fired. The C-suite Guys saw the bottom line and didn’t like it. Unfortunately, many of these “Big Guys” only look at next quarter’s profits and share price. Nothing else. They aren’t bothered or embarrassed by their own inconsistency in giving the go-ahead, approving the plan, then changing their minds and shutting down the whole effort. Money in their pocket is all they were seeing. Not a thing about the future of the business.

To those in upper management, share price means everything to their personal wealth because they own a lot of shares, and for too many of these kinds of operators, that comes before the company’s well-being any day.  One must assume they have plans to bail out with their golden parachutes just before the business crashes. Because it will crash. It’s only a matter of when.

If you’d like to know more about how bad this can get, you might read the book, “Barbarians At the Gate, The Fall of RJR Nabisco” – the story about the leveraged buyout (LBO) of RJR Nabisco, written by investigative journalists Bryan Burrough and John Helyar.

This short-term thinking by big business management reached a point several years ago, that made it virtually impossible to work with these types and their companies, because any marketing plan and by extension, advertising plan cannot create prospects and new customers in 90 day increments. It’s nuts to even try. And they’d fire their agency for failing.

Sears, for example, is doing everything they can to exceed next quarter’s market’s estimates of their performance. But they aren’t going to make it even by selling off and closing nearly half their stores — dragging down K-Mart and others unfortunate enough to be owned by Sears.

The Attitudes of Those Operating Many Big Businesses Are Directly Causing This Problem Due to Their Short Term Thinking Focused on Next Quarter’s Profits.

Here are some real numbers of some real companies that are dying because of their own management’s short-term decisions.

The following is from a recent article in the Wall Street Journal.

  • J C Penney – 360 store closings, 31% of existing stores.
  • Sears – 300 store closings, 43% of existing stores.
  • Macy’s – 70 store closings, 9% of existing stores.
  • Dillard’s – 60 store closings, 20% of existing stores.
  • Bon-Ton – 40 store closings, 15% of existing stores.
  • Nordstrom – store closings, 25% of existing stores.

More publicly held corporations went broke last year than any year previously. And it’s not as if we can’t figure out the reasons. If one tries to equate the stock prices with a company’s actual valuation many things become immediately apparent. Wall Street has become a casino due to raw greed and few ethics.

This has little to do with marketing, but it’s an insight into the pirates who run some big businesses. It’s something every business person should know.

The bright spot in all this is that not all big businesses operate like this. There are many, many good to great businesses that are managed by very good people who work hard everyday to make their company succeed. Several of them have been my clients I’m pleased to say.

 


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