Borders Group was once a giant in the bookselling industry. But in recent years, the company has been struggling. In February 2011, Borders filed for bankruptcy and liquidated its assets. So, what went wrong?
There are several factors that contributed to Borders’ demise. First, the company made a series of poor strategic decisions. For example, Borders decided to get out of the CD and DVD business in 2006. This was a mistake because CDs and DVDs were still popular at the time. Second, Borders didn’t invest enough in e-commerce and digital books.
This was a problem because more and more people were buying items online or reading e-books. Third, Borders had too much debt. This made it difficult for the company to invest in new initiatives or respond to changes in the marketplace.
The Borders Group failure is a cautionary tale for other companies. It’s important to make smart strategic decisions and keep up with changing technology. If a company doesn’t do these things, it may not be around for long.
The purpose of this essay is to analyze Borders Group’s business decision to liquidate physical stores and transition to digital stores in early 2011. To properly evaluate this response, we will consider factors such as industry development, corporate core competency, and Borders’ financial position.
The book retailing industry has been through a lot of changes in the past several years. The development of internet and e-commerce has greatly impacted the sales volume of physical bookstores, which leads to Borders’ liquidity crisis. The strategic management failure of Borders Group is mainly due to its lack of understanding of the future development trend of the book retailing industry and its poor response to this change. Although Borders had made some efforts to enter the digital market, it was too late and not enough to save the company.
Borders Group was once one of the biggest book retailers in the world with over 650 stores across the globe. However, it filed for bankruptcy in 2011 and liquidated all of its physical stores later that year.
Borders Group Inc. experienced almost 40 years of development across the world before ending in 2011 due to competition from online bookstores and the popularity of digital books (Checkler and Trachtenberg 2011).
Borders was formerly the nation’s second-largest book and music retailer, but it made several poor decisions during its inception and growth, including outsourcing the online sales operation to Amazon; concentrating on store expansion and refurbishment in the early stage of bookstore digitization; and heavily investing in CD and DVD sales, all of which put it into debt (The Week 2011).
Outsourcing the online sales operation to Amazon was a fatal strategic mistake. In 1998, Borders and Amazon signed an agreement in which Amazon would be responsible for Borders’ website sales in exchange for a certain percentage of revenue. At that time, it may have been a good choice because of the lack of experience and human resources in e-commerce (Checkler and Trachtenberg 2011).
However, with the rapid development of Internet technology, this decision gradually showed its disadvantages. The first is that Borders lost control over customer traffic and was not able to get feedback directly from customers (The Week 2011). Secondly, as an important part of the company’s marketing channel, website should have aligned with other channels such as physical stores and social media, but the fact that it was outsourced to Amazon made it difficult to achieve this strategic coordination (Checkler and Trachtenberg 2011).
The second reason for Borders’ failure is that the company did not attach enough importance to digitalization and lagged behind its competitors in the transition from physical books to e-books. In 2007, when Barnes & Noble started to sell e-books, Borders only set up an e-book development team, but there was no specific plan for e-books sales (The Week 2011). Furthermore, Borders adopted a “wait-and-see” attitude towards developing its own e-reader device and application software, which further widened the gap between it and Barnes & Noble (The Week 2011).
In February 2011, 226 Borders stores liquidated after the company filed for bankruptcy and accepted GE capital’s financial assistance (Nawotka 2011). What’s more, under the bankruptcy protection, Borders failed to attract a buyer that could save it from itsfinancial distress and then went out of business entirely (Newman 2011).
The Borders Group was the second largest bookstore chain in the United States, with 1,249 stores across America. At its peak in 2003, Borders had a revenue of $3.2 billion (Nawotka 2011).
This paper will critically evaluate and analyze the strategic management decisions made by Borders Group that led to its demise. To do this, the paper will first provide a brief history of Borders Group. It will describe how the company started, what it did well in the beginning, and how it expanded. Next, the paper will discuss some of the poor strategic management decisions made by Borders Group starting in 2006 that contributed to its decline and eventual bankruptcy.
These decisions include diversifying into non-book businesses, such as music CDs and DVDs, and investing heavily in e-books and e-readers. The paper will conclude with a discussion of the lessons to be learned from Borders Group’s failure.
Borders Group was founded in 1971 by two brothers, Tom and Louis Borders, in Ann Arbor, Michigan (Nawotka 2011). The company started as a small used bookstore called Border’s Book Shop. In its early years, Borders did well by focusing on customer service and offering a wide selection of books (Nawotka 2011). The company expanded rapidly in the 1980s and 1990s through a combination of store openings and acquisitions. By 2006, Borders had grown to 1,249 stores across America (Nawotka 2011).
However, starting in 2006, Borders made a number of poor strategic management decisions that contributed to its decline and eventual bankruptcy. One of these was diversifying into non-book businesses, such as music CDs and DVDs. This was a mistake because it took Borders away from its core competency of selling books. Furthermore, the music and DVD businesses were not as profitable as the book business, so Borders Group was actually losing money by diversifying into these areas.
Another poor strategic decision made by Borders Group was investing heavily in e-books and e-readers. This was also a mistake because it turned out that customers were not interested in buying e-books from Borders. Furthermore, the market for e-books and e-readers was dominated by one company, Amazon.com, which made it very difficult for Borders to compete.
The lessons to be learned from Borders Group’s failure are that companies should focus on their core competencies and not diversify into businesses that they are not good at. Furthermore, companies should be very careful about investing in new technologies that may not be successful.