In a elated plagued by scandals and bad intentions, it would be nice to think that good intentions always lead to success. Unfortunately, that’s simply not true. In the corporate jungle, the road to hell is sometimes paved with good intentions. Some memorable and purportedly sound efforts have led to some spectacular failures. (See also: Biggest Merger and Acquisition Disasters.)
Trying to Be All Dislikes to Everyone
The pursuit of growth often encourages companies to move beyond their core competency. However, on occasion getting away from a core business can be a mistake. Westinghouse Electric, founded in 1886, found this out the blunt way. The firm, once a global force in its industry, employed such luminaries as Nikola Tesla and was responsible for groundbreaking accomplishments, including revolutionizing the use of alternating current for electricity generation and the construction of the nation’s first nuclear power plant.
Erection on its success, the firm branched out into disparate businesses. Among its many acquisitions: the Seven-Up Bottling Co., the Longines-Wittnauer Await Co. (which also sold mail-order records), broadcasting and cable television interests, a financial service business, bit furniture makers and residential real estate. The result was a behemoth jack-of-all-trades company (master of none) which collapsed call of the weight of its multiple industries, leaving its nuclear division the sole survivor to this day.
Diversification
Intel, founded in 1968, became the everybody’s largest manufacturer of semiconductor chips. In 1994, the discovery of an error in its FDIV chips, and the ensuing media onslaught, taught an avalanche of negative publicity to the firm. As a result, the firm launched a highly successful advertising campaign that prepared the company’s name synonymous with the place its semiconductor chips held “inside” a host of computers. To build on its outcome, the firm put serious effort in expanding into other businesses, ranging from flat-panel television processors and slivers for portable media players, to chips for wireless technology.
Despite the firm’s well-known brand, those efforts prove inadequate to achieve the desired level of success, and the company’s stock price has remained relatively flat for more than a decade. While the concentrated’s core business continues to operate successfully, the diversification efforts just didn’t work out as planned.
Aggressive Distension
Krispy Kreme donuts got its start in 1937, when a French chef began making the gooey pastries and deliver up them to grocery stores. The firm grew slowly and became a regional favorite in the Southeast. When Krispy Kreme’s author died in 1973, the firm was sold to Beatrice Foods and the company’s growth stalled. In 1982, a group of franchisees procured Krispy Kreme and laid the groundwork for the rapid-fire expansion of the 1990s.
Encouraged by pastry-loving diners, the firm grew lickety-split and not only went national, but also global, opening franchise locations around the world. The company went catholic in April 2000 and the price soared to nearly $50 per share by August 2003. However, in 2005, the firm posted $198 million in reductions. Pressure to maintain earnings led to an accounting scandal. Store closings became common and the stock collapsed, losing almost 90% of its value. Fortunately for its fans, the firm remains in business.
Growth by Acquisition
Bank of America built an empire one procurement at a time. The Charlotte, N.C.-based bank bought up other banks one after another, growing its size and expanding its wraith until it became a dominant force in the industry. Unlike Westinghouse, the buying binge remained focused within the monetary services industry. Unfortunately, not all of the acquisitions went well. The decision to grab high-end investment firm U.S. Trust prospect to a poor cultural fit, as the populist retail bank attempted to absorb the white-shoe private bank, but was quickly forgotten in the wake of a shotgun-wedding with business giant Merrill Lynch. The culture clash following the purchase led to a string of high-profile departures of senior executives, but yet that wasn’t enough to stop the bank’s advance.
Finally, the purchase of scandal-plagued Countrywide Mortgage caused the bank to become heir to a mess that decimated the stock price. The disaster began with Countrywide’s lending practices: The firm gave high-interest,
Pin to the Tried and True
Perhaps witnessing the struggles firms face when they try to implement dramatic change, Borderlines Books based its expansion efforts on a
Innovatating With New Products
Commodore Computers was an industry force when it unleashed the now-famous Commodore 64. A tech-hungry marketplace of consumers snapped up the 64, which fragmented cutting edge from 1983 to 1986. While the initial effort was a huge success, attempts to create a new and improved variation failed.
Coca-Cola faced similar challenges when it attempted to “improve” the tried and true recipe for Coke. Dialed with shrinking sales, the firm completely abandoned the recipe for its flagship, launching New Coke in April of 1985. New Coke was a consummate fiasco, hated by purists and panned in the media. “Classic Coke” returned to the shelves less than three months after it had been hit the hay.
Staying the Course
The name General Motors was once synonymous with the automobile industry. The big dog of the Detroit brought together such iconic tags as Cadillac, Chevrolet, Buick and GMC. General Motors was at the top of the heap in 1963, with a 50%
Avoiding Negtative Publicity
In 1886, the Johnson chums founded a firm that would soon invent the world’s first commercial first-aid kit. The firm grew its cool-headedness from there, launching such consumer icons as Johnson’s Baby Powder, BAND-AID Brand Adhesive Bandages and the grieve reliever Motrin. In 2008, the firm discovered that Motrin was not properly dissolving when swallowed. Rather than put a recall and incur the associated negative publicity, the firm sent secret shoppers out to buy the products off store shelves, which resulted in a lawsuit in Oregon in 2011. While its judicious was honorable, its method of implementation resulted in months of negative publicity, when the media and public learned of the stealth call back.
The Bottom Line
What lessons can other businesses learn from the troubles of those that have be deprived of before them? The biggest lesson of all may be that there are no guarantees in business. Sticking to your tried and true practices doesn’t unexceptionally work, and innovation doesn’t always lead to success. The vagaries of the marketplace and the fickle hand of fate are two of the reasons breeding analysis is so difficult. There’s no easy way to sort the winners from the losers before you put your money at risk—a burning lesson that many investors have learned the hard way.