Why Circuit City Busted, While Best Buy Boomed - Article Example

Why Circuit City Busted, While Best Buy Boomed By Anita Hamilton Of all the articles, this article titled brings most to the table according to us. This is because it gives us a clear picture of how Circuit City was run down by its management and the series of poor strategic plans that they undertook. This article gives the most of all articles on how the company was operated and it gives us an insight into the downturn of the business from its position as one of the largest retailers in the nation. It illustrates how the company stuck to its beliefs and did not change its culture and values in order to effectively compete in the rapidly changing electronic-retail industry. This article basically illustrates the mistakes that Circuit City undertook before its eventual demise and how its archrival, Best Buy, continued to thrive on the contrary. Circuit City’s failure was not as a result of the downturn in the economy only; its principal failure was in its bad management over the course of the years. The article is well written as it gives us an idea of where Circuit City once was at the peak of the industry and how it slowly succumbed to the changing market, eventually giving up its position as the market leader to Best Buy. The writer also shows the differences in Best Buy and Circuit City; two companies which took entirely different approaches leading to one prospering to be the market leader and the other having to liquidate. The author also used simple and easy to understand writing style and vocabulary that is easy to comprehend. In this article, the writer seems to have one goal in mind and that is to give a clear explanation of Circuit City’s failure. Most of the other articles only gave us an insight on what happened after Circuit City filed for bankruptcy; therefore, “Why Circuit City Busted, While Best Buy Boomed” provides the main causes for their failure. Other articles do not equip the reader with the complete picture of the state of affairs in the Circuit City camp prior to its liquidation. They also do no show how Best Buy, Circuit City’s archrival, prospered and busked in Circuit City’s detrimental strategic missteps. However, this article clearly illustrates this by providing the reader with an insight into what really happened to the second best electronic merchandise store. Circuit City to Shut Down By Parija B. Kavilanz This article also gives a detailed account of Circuit City’s filing for bankruptcy, the approval of the motion to liquidate its remaining stores and all the events that followed the decision to liquidate all the company’s assets. This article outlines how the company had been forced to close shop following its inability to pay up its debts, which shows that the values the company had adopted prior to this had all failed in achieving the company’s future objectives. What led to the unfolding of these events is also a question that is well documented in this article. Therefore, this article offers a reader the ending to the sad story of the now defunct Circuit City. The writer of this article had the intention of telling his readers how the company’s mismanagement run the company down until it closed business. The whole process of how the company started by closing a number of shops and laying off workers is also illustrated in this article. This article shows the outcome of the stalled negotiations of Circuit City with its creditors and lenders; liquidation. The article gives a picture of the events that unfolded following the decision to liquidate all Circuit City’s assets. All the efforts that the company had undertook to save it from going under had all been in vain as Circuit City was forced to close shop. The liquidation process was from then on, all systems go! The author also uses a brilliant technique of leaving the reader in suspense by informing us that despite all the miscues that Circuit City took there was still hope that the company would find a buyer who would pull it out of liquidation. By so doing, a reader is left with the lingering question of what exactly would happen at the end. The author gives us a crucial bit of the story of Circuit City; that of its demise. Why Circuit City Failed, and Why B&H Thrives By Avi Dubnikov Main reason why we considered this article informative is that it gives consumer’s point of view on the experience at Circuit City. This article illustrates consumer’s experience step by step for the audiences who don’t have firsthand experience shopping at Circuit City. It is impossible to analyze company’s state without going through the experience especially in retail business analysis. In addition, the author compares the different store services and why consumers might choose to shop at competitor instead of Circuit City. In this article the author gives us the picture of how Circuit City’s customer service was wanting in all respects and compares this with that of another retailer, B & H whose customer service was exceptional in all regards. This article therefore informs a reader how the poor customer service together with other factors led to the company’s rapid fall. The comparisons made by the writer to show how a giant retailer was on the verge of closing business while a small company was on the rise, gives a compelling picture to a reader. This is the most endearing aspect of this article. Circuit City to Stay Open in Bankruptcy Beleaguered No. 2 electronics retailer urges budget-conscious consumers not to shun its stores for holiday gifts. By Parija B. Kavilanz This article basically tries to show the attempts that the Circuit City management took to try and keep the business afloat when it was sinking. Whether the attempts that were made helped the state of affairs or not, was another question all together. The company had taken a major hit following the economic downturn and a string of managerial blunders did not make the situation any better either. The writer tries to show the reader how most of Circuit City’s blunders were of their own making since the retailer’s competitive landscape had become more formidable than before as Best Buy, its principal rival, continued to improve its product offerings and service. The company had also kicked its own teeth by announcing the laying off of more than 3,000 of its highest-paid sales persons, replacing them with lower-paid sales staff. This was a source of severe backlash as people were skeptical of buying expensive products from less knowledgeable sales staff. A point clearly put across in the whole article. Years of strategic blunders and poor financial performance led to the company’s executives first announcing the closure of 155 of its 566 operating stores before filing for bankruptcy protection. By so doing Circuit City would cut about 17% of its 40,000 staff. The company tried as much as possible to continue business as normal during the bankruptcy period by: honoring customer programs, accepting credit cards and honoring warranty plans. However despite all these efforts, there were still doubts that the company could still attract shoppers after filing for bankruptcy. This was because of the obvious going concern question; would the company still be around in the future? This is the impression that the author leaves the reader wondering about at the end of the article. Lessons Learnt Over the course of the research on Circuit City’s bankruptcy, our team found a few major reasons why it failed. According to article “Why Circuit City Busted, While Best Buy Boomed” by Anita Hamilton, the principal cause for the failure of the company was poor strategic decisions undertaken by the management. This eventually led to the company failing to adapt in the changing retail-electronics industry resulting to it giving the upper hand to Best Buy. The company’s management made a series of mistakes in their choice of stores’ location. In high competitive retail business, real estate attributes are vital in order to get consumers to shop at their stores. When making a decision on opening a store, Circuit City officials failed to account for easy access, good proximity and high traffic areas to give customers that convenience they were looking for. The company eventually had to revamp to a revitalization program which included renovating older format stores, relocating stores to urban areas, and leasing the least profitable and favorable stores. In one of Circuit City’s annual reports, it stated that the company had relocated 106 stores out of 166 and remodeled 49 existing stores from 2001 to 2008 fiscal years. From this information, we can conclude that in the past few decades the company had opened stores in out of way, and inconvenient locations which later turned out to be massive expenses later. (Why Circuit City Busted, While Best Buy Boomed) In addition, Circuit City had to compete for a portion of the market share with large electronic retailers. However, selection on their merchandise offering gave Circuit City disadvantages over their opponents. Although as a second largest electronic retailer, Circuit City offered video, entertainment, audio products, as well as Pc hardware’s and telecommunication products, they stopped carrying appliances and failed to sell big brand name products such as Apple. (Why Circuit City Busted, While Best Buy Boomed) Circuit City’s poor customer service was also a reason for its failure as was outlined in the article “Why Circuit City Failed, and Why B & H Thrives”. From this article we learnt that for a business to thrive in a competitive market, it has to have an exceptional customer service. This creates brand loyalty and in cases of tough economic times, customer loyalty accounts for the bulk of the revenue streams a company receives. A small company like B & H was rapidly growing due to the fact that it offered its customers a wonderful experience when they came to their stores. B & H had recruited good sales person who treated their customers with utmost care and formed formidable customer relations. Customers demand and spending had decreased dramatically during the company’s last few years due to its merchandise choice and price point. They didn’t carry cutting edge new products that Best Buy did, and they couldn’t compete in terms of price with discount retailers like Wal-Mart. Due to lack of consumer interest in their merchandise, Circuit City couldn’t sell existing merchandise to finance adequate products to meet customers demand and expectations. On top of their obsolescence products, their demand forecast was inaccurate. Their demand estimate didn’t account for foreseeable risks such as economic condition, and rapid technological changes. Due to optimistic demand predictions and decreased consumer interest which left Circuit City with excess inventory caused them to decrease their price on unsold items. (10-K annual report) Inventory price reduction meant less sales profit with the same level of expenses that hurt its profit margin even more. According to their 2008 annual report, Circuit City’s gross profit has decreased from $23.2 million to $ 20.7 million and by 2008 they had net loss of $2.7 million dollars. It also comes to our knowledge that Circuit City explained in their annual report that recruiting and keeping capable workers while maintaining the labor cost down was a challenge due to prevailing pay, changing demographics, state and employment requirements and health insurance costs. Facing net loss, the management decided to replace qualified employees with lower cost less qualified workers, which received harsh criticism from pundits and also customers; adding salt to injury. (Circuit City to Stay Open in Bankruptcy) We also learnt from the article “Circuit City to Shut Down” that the court approved the retailer’s motion to liquidate. Showing that the court was of the view that the company was in no state to continue business and it had to liquidate its assets so that its creditors could get paid. From this article, it is clear that the company’s fate was sealed when the court realized that the business was no longer a going concern and for the creditors to stand a chance of being paid, the only way forward was for the business to liquidate all its assets. References Dubnikov, Avi. “Why Circuit City Failed, and Why B&H Thrives.” Hamilton, Anita. “Why Circuit City Busted, While Best Buy Boomed.” Time Business. Web. 11 Nov. 2008 Kavilanz, Parija. “Circuit City to Stay Open in Bankruptcy.” CNNMoney. Web. 10 Nov. 2008 Kavilanz, Parija. “Circuit City to Shut Down.” CNNMoney. Web. 16 Jan. 2009 Read More