Failure of RadioShack - Case Study Example

Failure of RadioShack Table of Contents Introduction 3 RadioShack Corporation 3 PESTEL analysis 4 Failure of RadioShack 6 Critical appraisal of strategic issue 8 Idea for improvement of the situation 10 Implementation of solutions 13 Implementation Plan 14 Gantt chart 15 Conclusion and Recommendations 15 Reflective statement 17 Reference list 18 Introduction The main purpose of the report is to highlight the reasons behind a failing business and formulate solutions for overcoming the situations in the present market condition. RadioShack Corporation, an electronic retail chain situated in America, is chosen for the project. In 2015, the company became bankrupted owing to huge financial loss and the reasons behind this bankruptcy are depicted in the report along with the strategic solutions. The strategic solutions are innovative enough to bring changes in the business outlook of the failing company. Few solutions are provided for improving the business of RadioShack Corporation; among which implementation plan for the significant solution is prepared along with the Gantt chart. RadioShack Corporation RadioShack Corporation founded in 1921, is an electronic retail chain situated in America. The company operates in Mexico and the US. However, it has to leave its operation in the UK during 1999, Canada during 2004 and Australia during 2002 (RadioShack Corp., 2015a). Following the decline in business pattern due to financial crisis, RadioShack Corporation filed for protection under the US bankruptcy law. It had encountered 11 consecutive quarterly losses for the past few years (RadioShack Corp., 2015a). The company delivers wide range of products; however core products of RadioShack are video gaming, home entertainment, sound equipment, computers, musical equipments, portable power and weather radio (RadioShack Corp., 2015b). The sales person of the company uses value proposition for selling the products and services to the customers. RadioShack also offer personal sales experience to the customers by dealing with the customers directly. This strategy has helped the company to retain customers and also attract new ones. PESTEL analysis The most significant way of understanding the macro environment of RadioShack is by performing a PESTEL analysis. Political There is strong opposition from the US government against the use of cellular phones that are supplied by Safe Link Wireless. This is a big challenge for RadioShack as it uses cellular phones that are supplied by Safe Link Wireless (Editor, 2009). The rule and regulation in the electronic device industry in the US has increased over the years so as to avoid low quality consumer products and ensure the safety of the population. However, the government encourage entrepreneurs for innovating new products and services and establish their business so as to help the consumers to meet their demand. Hence, the overall political condition encountered by RadioShack in the US is quite challenging as the government in the US did not favour the use of cellular phones. Economic The overall economic outlook of the US is considered to be weak because of the mentioned figures. The growth in GDP of the US has declined during 2013 (1.9%) as compared to 2012 (2.1%) (Euler Hermes, 2013). Because of the less household income, the sales of the electronics retail industry have declined considerably. The demand for the consumer electronic products is expected to remain steady over the years (Euler Hermes, 2013). However, the situation can be improved if the disposable income of the consumers increases during the period of time. Social The changing life style of the individuals in the US has threatened the existence of many companies. The change has been adopted by the consumers due to globalization, which have also affected their taste and preference. This has affected the business of consumer electronics industry in the US to a great extent. The employee turnover in the consumer electronics have increased over the years due to the reduction in salary. Moreover, globalization has increased outsourcing of work and as a result, the employees working in the US industry have lost their job. This has affected the social status of the individuals in the US as the household income is reduced. The consumers have cut down their expenditure on luxury items and have concentred on purchasing the necessary items. Hence, this has also affected the consumer electronic industry in the US. Technological The technological upgradation is threatening for the electronic industry as it increases the cost of production. The electronic companies have to stay updated with the change in taste and preference of the consumers in the US. RadioShack has failed to adopt the changes according to the taste and preference of the US consumers, and this has affected its sales and profit. Environmental The companies in the US are more concentrated on continuing a clan and green business. Being a responsible citizen, the companies have adopted corporate social responsibilities where they are undertaking several activities such as enhancement of beautification of environment. Legal There are many rules and regulations formulated by US government, which are to be followed by the companies in various industries in order to safeguard the environment and continue an uninterrupted business. Failure of RadioShack The main reasons behind the failure of RadioShack are discussed in brief. The RadioShack stores are outdated as the company did not change the vintage look (Solomon, 2014). The stores are antiquated and old fashioned as compared to the electronic stores that exist presently in the US market. Presently, the electronic stores are decorated in such a manner that it attracts the customers very easily. The stores display the best electronic devices with the price tags so that the visitors get an idea of the instruments that are sold in the stores. They are aware of the products, which are sold in the stores and those they need. Hence, it is necessary for the electronic stores to display the best items that are available to them. However RadioShack did not change the old fashioned look of the stores, which was less attractive to the customers or visitors. The company needed to revamp the merchandises that are sold by them as their core product i.e. cell phone has become saturated in the US market. On 6th February, 2006, there was a management issue when the CEO of the company, David Edmondson, was accused to have misstated his curriculum vitae (Solomon, 2014). He was forced to resign from the post. After his resignation, Julian Day took his place; she had experience in the financial sector. Julian had the capability to revitalise the condition of failing companies but she did not have any practical experience in front-line sales, which was highly needed for the survival of the company in the long run. This management issues had resulted in huge confusion for the post of CEO in RadioShack (Brown, 2014). During 2006, RadioShack had devised strategies for increasing the production units by lowering overhead cost for earning more profit. The company closed about 500 stores in different locations (Wharton, 2015). These stores could not bring enough revenue per year. In spite of the changes, the stock price dropped drastically in the booming consumer electronic market. RadioShack also eliminated the fifth headquarter and cut down the workforce in order to reduce the overhead expense. This strategy was formulated in order to improve its competitive position in the long run (Fearon, 2015; Beer, 2014; Lutz, 2014; Picchi, 2015). The corporate lay off was criticised by the public and sales of the company further decreased to a great extent. RadioShack did not concentrate on online business like its competitors; instead it gave store locator and press releases in the website. The lack of online facility to purchase electronic items has de-motivated the customers to visit the stores as they moved to its competitors. In the contemporary world of business, customers prefer to shop online than to visit stores as they get a lot of options at one time, which the stores cannot provide. Hence, it is convenient and time saving for the customers to shop online. With regard to RadioShack, the main issue was that the consumers could not purchase online so they moved to its competitors, who had this facility (Brown, 2014; Fearon, 2015). The company never plunged into eCommerce but kept on dealing with the problems that are arising in the store due to decrease in sales. Critical appraisal of strategic issue Company and store related issues: RadioShack did not much concentrate on eCommerce facility i.e. the customers did not get the opportunity to buy their products online. Instead the company has specified their store location in the website so that the customers can easily find the stores. However, with the increase in demand for online shopping experience, the customers of RadioShack switched the brand to its competitors, which affected the sales figure to a great extent (Fearon, 2015). The company failed to utilise eCommerce in the long run in the present market, where the consumers prefer to shop onion than to go to the stores for purchasing any product (Beer, 2014). Additionally, the stores of RadioShack were outdated as the company did not change the vintage look. With the passage of time, the outlook of the stores was less attractive to the customers. RadioShack needed to revamp their merchandise as its core product i.e. cell phones have become saturated in the US market because of the existence of a number of brands (Fearon, 2015; Beer, 2014; Lutz, 2014; Picchi, 2015). The company also failed to deliver new range of electronic products in order to stay competitive in the US market. Lack of strategic leadership: There were a number of management issues that took place in the company which affected its reputation in the public. The stakeholders were concerned with the confusion that existed in the internal management as they have invested in the company. The stakeholders included shareholders, employees and the public (Fearon, 2015; Beer, 2014; Lutz, 2014; Picchi, 2015). These stakeholders are interested in the profit of the company; however they had to encounter loss due to decrease in sales of the company. The sales of RadioShack decreased considerably as the management failed to maintain a steady growth in its sales figure. The first management issue that affected the reputation of the company is the resignation of CEO, David Edmondson. The CEO was accused to have forged his curriculum vitae to get the position in the company; hence he was forced to resign from the designation. Later he was replaced by Julian Day, who had the capability to solve the problems that were arising in the management and satisfy the shareholder by ensuring that the business is performing well. However, she had experience in finance sector and did not have the skills to manage front-line sales. These skills are essential for a company like RadioShack, as the business is based on the sale of the electronic items. The lack of appropriate skills also raised confusion in the internal management as the new CEO could not devise strategies as per the requirement of the company (Fearon, 2015; Beer, 2014; Lutz, 2014; Picchi, 2015). The lack of strategic leadership in the company affected the sales of the company as the customers were reluctant to purchase its products. Moreover, the management also failed to make modifications according to the change in taste and preferences of the customers in the US. In order to earn profit, RadioShack had taken a drastic step of increasing units of production by lowering the overhead cost. The company closed about 500 stores in different parts of the US; these stores could not bring enough revenue to the company (Fearon, 2015; Beer, 2014; Lutz, 2014; Picchi, 2015). The decision regarding reduction of overhead expense could not bring enough revenue to the company as the sale did not improve. The stock price of the company did not recover from the slump, though the consumer electronic market was escalating during the period of time. RadioShack eliminated the fifth headquarter and also downsized the workforce so as to reduce the overhead expense (Fearon, 2015; Beer, 2014; Lutz, 2014; Picchi, 2015). Though the strategy was devised in order to stay competitive in the market; but it failed to achieve the goal. The downsizing of the employees affected the stakeholders to a great extent and the general public criticised the operation of the company; the corporate lay off thus could not assist it to survive in the long run and improve the profit position. It can be concluded that RadioShack experienced strategic issue that comprised lack of leadership, outdated stores and lack of eCommerce. This not only affected the sales of the company but also made them weak in the present competitive world. The company lost customers and even the stakeholders were not happy with the fact it is not performing well. It is assumed that in this challenging situation, RadioShack should improve the operation and products of the company and concentrate on the demands and needs of the contemporary customers. Idea for improvement of the situation The fundamental issues faced by RadioShack began with their managerial decision making process, the continuous changes in the top management of the business and most of the senior executives resigning from the company had affected the operational performance of the company leading to its failure. Moreover, the corporate layoff strategy implemented in the year 2006 reduced their resource base with an aim of reducing the overhead costs. This strategy was not able to enhance the performance of the company and instead attracted public criticism lowering the brand equity of RadioShack. Apart from this, other strategic issues of RadioShack were related to their customer relationship management, product base, store design, etc. In order to solve the issues faced by RadioShack, two primary forms of problem solving techniques will be used namely questioning and brainstorming. Both these forms of problem solving techniques are performed in a collective manner which relate to the issues of RadioShack. According to Dennis, Minas and Bhagwatwar (2013), questioning can be used in an exploratory or descriptive manner that helps in measuring the impact of the concerned problem and the probable gaps in the planning, decision making and implementation process of the organisation. In regards to the problems of RadioShack, they will have to implement questioning processes within every functional activity. The types of questions to be included in association with a particular issue are also an important aspect for successful implementation of the problem solving techniques. Such as funnel questions, open questions, close questions, etc. RadioShack can link their questioning process with each of the planning and decision making activities which will help in identifying the gaps and also improve the performance in their operational activities. Another technique that can be used for their problem solving process is Brainstorming. Brainstorming has been defined by Kohn, Paulus and Choi (2011) as the process of cognitive thinking within a group for solving any particular problem. The primary theme of brainstorming is to develop creative ideas by consulting the members of a group which can help in identification of the probable solutions and selection of the appropriate options in context of the concerned issue (Carpenter, 2007). In case of RadioShack, they have to develop a particular body for the brainstorming process. This team will help in reducing the influence of the identified problems and develop suitable measures for mitigating them. However, the implementation of Brainstorming needs to be framed within a specific framework in accordance to the issue being handled. Figure 1: Brainstorming process (Source: Kohn, Paulus and Choi, 2011) The above given figure highlights the basic framework for performing a brainstorming activity. The brainstorming process of RadioShack will be formed by selection of the group members on the basis of their creativity and experience regarding the concerned issues. Apart from them, other employees will also be allowed to participate in the brainstorming process for suggesting ideas. These ideas will be implemented in order to solve the problems. However, it must be noted that brainstorming process is a long-term process and needs to be managed with absolute focus. Any changes in the middle of the implementation can disrupt the brainstorming session. The solutions that are obtained after the implementing the methods are detailed below: 1) RadioShack should invent new range of the electronic products that will meet the need of the customers in the contemporary world. 2) Enhance the quality of the products that are delivered to the customers. 3) Develop a strong management, which will help in leading the employees so as to develop a successful business. Leaders play an important role in an organisation; hence RadioShack requires efficient and talented leader, who has the ability to provide solution for the issues that are experienced by the company. The above mentioned solutions will help the company to recover from the present state. Implementation of solutions Among the two problems solving techniques, brainstorming technique is selected as it is appropriate for solving issues that had taken place in RadioShack. Aims: The main aim of the brainstorming technique is to gather ideas from the contributors. This method is effective than the individual generating idea for solving a particular problem. Objectives: The main objective of brainstorming technique in this case is to gather information regarding the problems or issues and find solution for the same. Implementation Plan RadioShack will develop a definite body for implementing brainstorming process. The team helps in reducing the influence of identified problems and hence develop appropriate measures for mitigating them. The brainstorming process that is implemented in this is elaborated henceforth. The group member is selected on the basis of experience and creativity for the brainstorming process. These group members include few employees, who have the ability to identify the solutions for particular problems. However, other employees are also permitted to participate in the process (Özbal, Pighin and Strapparava, 2013). Firstly, the problems are explained to the group members and the rules are dictated to them. They are detailed regarding the problems and asked for the ideas or solutions. The participants are allowed to write down the solutions and everybody gets the chance to present their ideas. Among the participants, leads are suggested by the team members so as to present the idea elaborately and also summarise them. In the conclusion of the process, the best idea for solving the problem is selected and noted for its implementation and further discussion. The whole process will take place within 30 minutes. The following Gantt chart highlights the brainstorming process that will be implemented in RadioShack. The solutions obtained from the brainstorming methods are to be implemented by the company so as to direct the business towards a successful path. The following Gantt chart helps in detailing the process that will be implemented for undertaking the changes. Gantt chart 3 days 2days 2 days 5 days 2 days 4 days Perform brainstorming method Analysing the solutions obtained from the method Choosing the best ones Identify the needs and demand of the customers in the US through primary research Contact the production department and communicate the changes that will be made in the product. Find efficient leader for the company Conclusion and Recommendations RadioShack Corporation had failed to develop products and services that would satisfy the needs of the present market in the US. A number of reasons are responsible for the failure of the company. Few includes saturation of product range offered by the company, management issues, failure to utilise eCommerce, customers relations problem and failure to identify the changing taste and preferences of the individuals in the US. These issues have become severe for the company as it has lead to bankruptcy. The company has filed for bankruptcy in 2015 as they had experienced a huge loss at the end of the fourth quarter of 2014. Hence, it can be concluded that it will be difficult for a company to recover from such a situation. Nevertheless, there are several problem solving techniques, which can be used in order to improve the situation. Two techniques such as brainstorming and questioning are chosen for solving the situation. However, brainstorming technique is appropriate for solving the problem in the company. According to CATUR framework, the following issues can be encountered while implementing the plan. The complexities include opposition from the employees as they can be reluctant to accept any changes in the organisation. There is ambiguity in the implementation plan as it is not certain whether the plan will be successful. If the employees are reluctant to adopt the changes in the organisation then there will be tension between the employees and management. The uncertainties that can be experienced by the company while implementing the plan are change in preferences of the customers. The risk associated with the plan is lack of finance, which can be barrier to completion of the plan. Reflective statement The company chosen for the project is RadioShack Corporation. RadioShack is such a company, which has experienced a number of issues in the last few years because of its business pattern. The changing demand and needs of the customers in the US has forced the company to encounter challenges due to decrease in sales. Hence, I have learnt that efficient strategies are needed for the company to enhance the business operation and increase sales. Brainstorming is the best method that can provide efficient results in form of solutions. Thus the companies who are encountering failure like RadioShack can implement the same for strategising solutions. Reference list Beer, J., 2014. 6 Brands That May Not Make It Through 2015. [online] Available at: < http://www.thefiscaltimes.com/2014/12/30/6-Brands-May-Not-Make-It-Through-2015 > [Accessed 24 April 2015]. Brown, T., 2014. Radioshack Stumbles Down Road Taken By Many Failed U.S. Retailers. [online] Available at: < http://www.reuters.com/article/2014/09/12/us-radioshack-bankruptcy-analysis-idUSKBN0H72AW20140912 > [Accessed 24 April 2015]. Carpenter, T. D., 2007. Audit team brainstorming, fraud risk identification, and fraud risk assessment: Implications of SAS No. 99. The Accounting Review, 82(5), pp. 1119-1140. Dennis, A. R., Minas, R. K. and Bhagwatwar, A. P., 2013. Sparking creativity: improving electronic brainstorming with individual cognitive priming. Journal of Management Information Systems, 29(4), pp. 195-216. Editor, 2009. Exposing The Safelink Wireless Government Cell Phone For The Poor Scam. [online] Available at: < http://www.ihatethemedia.com/cell-phones-for-the-homeless-scam > [Accessed 24 April 2015]. Euler Hermes, 2013. Consumer Electronics Industry Outlook. [pdf] Euler Hermes. Available at: < http://www.eulerhermes.us/economic-research/economic-publications/Documents/industry-outlook-consumer-electronics-april-2013.pdf > [Accessed 24 April 2015]. Fearon, S., 2015. Why RadioShacks demise is a good thing. [online] Available at: < http://www.cnbc.com/id/102392992 > [Accessed 24 April 2015]. Kohn, N., Paulus, P. and Choi, Y., 2011. Building on the ideas of others: An examination of the idea combination process. The Journal of creative behaviour, 47(3), pp. 554–561. Lutz, S., 2014. 4 Reasons RadioShack Is Massively Failing. [online] Available at: < http://www.businessinsider.in/4-Reasons-RadioShack-Is-Massively-Failing/articleshow/31419429.cms > [Accessed 24 April 2015]. Özbal, G., Pighin, D. and Strapparava, C., 2013. BRAINSUP: Brainstorming Support for Creative Sentence Generation. ACL , (1), pp. 1446-1455. Picchi, A., 2015. 5 mistakes that doomed RadioShack. [online] Available at: < http://www.cbsnews.com/news/5-mistakes-that-doomed-radioshack/ > [Accessed 24 April 2015]. RadioShack Corp., 2015a. About RadioShack. [online] Available at: < http://radioshackcorporation.com/company/history.php > [Accessed 24 April 2015]. RadioShack Corp., 2015b. RadioShack Has Deep Roots. [online] Available at: < http://radioshackcorporation.com/company/history.php > [Accessed 24 April 2015]. Solomon, S., 2014. A History of Misses for RadioShack. [online] Available at: < http://dealbook.nytimes.com/2014/09/16/for-radioshack-a-history-of-misses/?_r=0 > [Accessed 24 April 2015]. Wharton, 2015. Lessons from RadioShack: To Stay on Top, Figure Out What Got You There. [online] Available at: < http://knowledge.wharton.upenn.edu/article/where-radioshack-went-wrong/ > [Accessed 24 April 2015]. Read More