20 Corporate Fails
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10 Corrporate Fails
Learn how these big companies lost a ton of money.
Schlitz
The Company: Schlitz beer was at one time the largest beer brewer in the United States.
The Mistake: Cost Cutting. Actually 10 mistakes in all. Starting in the late 1960's the company made 10 rounds of cost cutting to increase profits. But each round also reduced the quality of the beer. In the last round, they stopped filtering yeast flakes which would appear in the beer foam.
The Aftermath: Company's sales begin to nose dive and even after an attempt to restore quality, sales never fully recovered. After a crippling workers strike in 1981, the company was sold to Stroh's in 1982.
The Mistake: Cost Cutting. Actually 10 mistakes in all. Starting in the late 1960's the company made 10 rounds of cost cutting to increase profits. But each round also reduced the quality of the beer. In the last round, they stopped filtering yeast flakes which would appear in the beer foam.
The Aftermath: Company's sales begin to nose dive and even after an attempt to restore quality, sales never fully recovered. After a crippling workers strike in 1981, the company was sold to Stroh's in 1982.
Kodak
The Company: Once, one of the largest companies in the world. Kodak was the leader in film and photography for much of the 20th century.
The Mistake: Digital Photography. In 1975 Kodak invented the digital camera, but later dropped it because they didn't want digital cameras to compete with their photographic film business.
The Aftermath: By the late 1990's photographic film was dying and being quickly replace by digital photography. Kodak attempted to transition to digital, but by then they were far behind. In 2011, the company declared bankruptcy. In 2013, the company emerged as a shell of its former self and declared its focus to be imaging for business.
The Mistake: Digital Photography. In 1975 Kodak invented the digital camera, but later dropped it because they didn't want digital cameras to compete with their photographic film business.
The Aftermath: By the late 1990's photographic film was dying and being quickly replace by digital photography. Kodak attempted to transition to digital, but by then they were far behind. In 2011, the company declared bankruptcy. In 2013, the company emerged as a shell of its former self and declared its focus to be imaging for business.
Blockbuster
The Company: In 2004, Blockbuster video had over 9,000 stores and 60,000 employees and was the leading video rental company in the world.
The Mistake: Netflix. In 2000, Blockbuster had a chance to buy Netflix for $50 million.
The Aftermath: Consumers rapidly switched to Netflix and Redbox costing Blockbuster significant business, and in 2010 Blockbuster had to declare bankruptcy. Today Netflix is worth over $7 billion.
The Mistake: Netflix. In 2000, Blockbuster had a chance to buy Netflix for $50 million.
The Aftermath: Consumers rapidly switched to Netflix and Redbox costing Blockbuster significant business, and in 2010 Blockbuster had to declare bankruptcy. Today Netflix is worth over $7 billion.
The Signet Group
The Company: The Signet Group is the world's largest specialty retail jeweler, owning many jewelry chains like Zales, Kay, and Jared. The company used to be known as the Ratner Group.
The Mistake: 'The Ratner Effect'. CEO Gerald Ratner explaining to a business conference, the reason why his products were so cheap was because that they were 'total crap'.
The Aftermath: After his remarks were reported, the company lost over $800 million dollars in value. The company was forced to change its name to the Signet Group. Today insulting a company's own product is called 'doing a Ratner'.
The Mistake: 'The Ratner Effect'. CEO Gerald Ratner explaining to a business conference, the reason why his products were so cheap was because that they were 'total crap'.
The Aftermath: After his remarks were reported, the company lost over $800 million dollars in value. The company was forced to change its name to the Signet Group. Today insulting a company's own product is called 'doing a Ratner'.
Atari
The Company: Atari was at one time the largest home video game console maker in the world. Their Atari 2600 game system sold over 30 million units.
The Mistake: Nintendo. Nintendo wanted to enter the United States market, so they decided to partner with Atari to distribute its Famicon game system. At the 1993 Consumer Electronic Show, Coleco, Atari's main rival, showed off the Nintendo game, Donkey Kong, on one of its system. Atari saw this as a huge betrayal and canceled its partnership with Ninetendo.
The Aftermath: Nintendo decided to go on its own and redesigned and released the Famicon system into the United States as the Nintendo Entertainment System which became a huge hit, while Atari faded into obscurity.
The Mistake: Nintendo. Nintendo wanted to enter the United States market, so they decided to partner with Atari to distribute its Famicon game system. At the 1993 Consumer Electronic Show, Coleco, Atari's main rival, showed off the Nintendo game, Donkey Kong, on one of its system. Atari saw this as a huge betrayal and canceled its partnership with Ninetendo.
The Aftermath: Nintendo decided to go on its own and redesigned and released the Famicon system into the United States as the Nintendo Entertainment System which became a huge hit, while Atari faded into obscurity.
Harland Clarke
The Company: Harland Clarke prints catalogs checks, scantron forms, and more. The company has a virtual monopoly on check printing.
The Mistake: Custom Stationary. Due to online bill pay and debit cards, Harland Clarke knew the check printing business was shrinking. So the company invested $100 million to create Fidipidi, a custom stationary and greeting card printing app on facebook.
The Aftermath: Unfortunately, the advertising platform didn't work and the customers they advertised to didn't want it. Total orders taken... 13. By 2011, Fidipidi was no more.
The Mistake: Custom Stationary. Due to online bill pay and debit cards, Harland Clarke knew the check printing business was shrinking. So the company invested $100 million to create Fidipidi, a custom stationary and greeting card printing app on facebook.
The Aftermath: Unfortunately, the advertising platform didn't work and the customers they advertised to didn't want it. Total orders taken... 13. By 2011, Fidipidi was no more.
Sprint and Nextel
The Company: Sprint was the third largest and Nextel was the fifth largest mobile provider in the United States.
The Mistake: Merger. In 2004 Nextel and Sprint decided to merge companies. Unfortunately, Nextel phones didn't work on Sprint network and Sprint phones didn't work on Nextel network which the new company never was able to fix. Also, while Nextel's customer service was rated the highest in the industry, Sprint was rated the worse. The new company decided to go with Sprint's customer service.
The Aftermath: In 2008, company had to write down $29.7 billion in lost value directly attributable to the merger.
The Mistake: Merger. In 2004 Nextel and Sprint decided to merge companies. Unfortunately, Nextel phones didn't work on Sprint network and Sprint phones didn't work on Nextel network which the new company never was able to fix. Also, while Nextel's customer service was rated the highest in the industry, Sprint was rated the worse. The new company decided to go with Sprint's customer service.
The Aftermath: In 2008, company had to write down $29.7 billion in lost value directly attributable to the merger.
United Artists
The Company: United Artists was a movie studio founded in 1919 by DW Griffith, Charlie Chaplin, Mary Pickford, and Douglas Fairbanks. The movie studio made some of the greatest movies ever, such as 'Rocky', 'One Flew Over the Cuckoo's Nest' and 'Manhattan'.
The Mistake: 'Heaven's Gate'. The dream project of Academy Award winning director, Michael Cimino, the movie spectacularly ran over budget. The movie ended up being a huge flop that doomed the studio.
The Aftermath: United Artists parent company Transamerica decided to exit the movie making business and sold its movie library in 1981. It wasn't until 2006 when it was announced that Tom Cruise was going to resurrect the brand.
The Mistake: 'Heaven's Gate'. The dream project of Academy Award winning director, Michael Cimino, the movie spectacularly ran over budget. The movie ended up being a huge flop that doomed the studio.
The Aftermath: United Artists parent company Transamerica decided to exit the movie making business and sold its movie library in 1981. It wasn't until 2006 when it was announced that Tom Cruise was going to resurrect the brand.
Circuit City
The Company: Circuit City when it finally declared bankruptcy was the 2nd largest electronics store in the United States with 567 stores.
The Mistake: 'Cheap Labor'. The company made several mistakes, but the most devastating blow was when they tried to save money on labor costs. The company decided to fire their highest earning workers, who earned sales commission, and replaced them with lower costs hourly workers barely making above minimum wage.
The Aftermath: With the loss of their top salesmen, sales plummeted. Within a year, CEO Phillip Schoonover had resigned and in November 2008 the company had filed for bankruptcy.
The Mistake: 'Cheap Labor'. The company made several mistakes, but the most devastating blow was when they tried to save money on labor costs. The company decided to fire their highest earning workers, who earned sales commission, and replaced them with lower costs hourly workers barely making above minimum wage.
The Aftermath: With the loss of their top salesmen, sales plummeted. Within a year, CEO Phillip Schoonover had resigned and in November 2008 the company had filed for bankruptcy.
Enron
The Company: At its height, Enron was one of the largest companies in the world with revenue over $111 billion.
The Mistake: Creative accounting. CEO Jeffrey Skilling hired chief financial officer Andrew Fastow in 1990. Fastow started to create many shell companies to hide company debts, making Enron look profitable when it really wasn't.
The Aftermath: In 2001, a series of revelations exposed the company's accounting tricks and everything fell apart. The company filed for bankruptcy, the largest ever at the time. Jeffrey Skilling was sentenced to 24 years in jail and Andrew Fastow to six.
The Mistake: Creative accounting. CEO Jeffrey Skilling hired chief financial officer Andrew Fastow in 1990. Fastow started to create many shell companies to hide company debts, making Enron look profitable when it really wasn't.
The Aftermath: In 2001, a series of revelations exposed the company's accounting tricks and everything fell apart. The company filed for bankruptcy, the largest ever at the time. Jeffrey Skilling was sentenced to 24 years in jail and Andrew Fastow to six.
Lehman Brothers
The Company: Lehman Brothers was at one time the 4th largest investment bank in the United States, behind only Goldman Sachs, Morgan Stanely, and Merrell Lynch.
The Mistake: Mortgage Backed Securities (MBS). Mortgage Backed Securities are groups of different mortgages bundled together and sold as an investment. In the early 2000s, the most common MBSs were made from risky subprime mortgages. Lehman Brothers made huge profits selling MBSs to investors such as pensions and mutual funds.
The Aftermath: In 2006, the market for MBSs started to collapse as subprime mortgages begin to weaken. To continue keeping paper profits up, Lehman Brothers started buying the MBSs themselves, instead of being able to sell them off to investors. In 2008 the market completely collapsed and the MBSs lost their value, Lehman Brothers was left holding billions of dollars of bad MBSs and was doomed. In 2008, the company declared bankruptcy starting the worse financial crisis since the Great Depression.
The Mistake: Mortgage Backed Securities (MBS). Mortgage Backed Securities are groups of different mortgages bundled together and sold as an investment. In the early 2000s, the most common MBSs were made from risky subprime mortgages. Lehman Brothers made huge profits selling MBSs to investors such as pensions and mutual funds.
The Aftermath: In 2006, the market for MBSs started to collapse as subprime mortgages begin to weaken. To continue keeping paper profits up, Lehman Brothers started buying the MBSs themselves, instead of being able to sell them off to investors. In 2008 the market completely collapsed and the MBSs lost their value, Lehman Brothers was left holding billions of dollars of bad MBSs and was doomed. In 2008, the company declared bankruptcy starting the worse financial crisis since the Great Depression.
JCPenny
The Company: JCPenny is a chain of mid range department stores with over 1,000 stores in the United States.
The Mistake: Every day prices. In 2011, JCPenny hired Apple executive, Ron Johnson, to be the new CEO. One of his plans to improve sales was to get rid of sales and implement lower prices every day.
The Aftermath: Even though prices were lower overall, customers hated no longer having sales and company revenue dropped. In 2012 revenue was down 28% and by 2013 Ron Johnson was fired.
The Mistake: Every day prices. In 2011, JCPenny hired Apple executive, Ron Johnson, to be the new CEO. One of his plans to improve sales was to get rid of sales and implement lower prices every day.
The Aftermath: Even though prices were lower overall, customers hated no longer having sales and company revenue dropped. In 2012 revenue was down 28% and by 2013 Ron Johnson was fired.
AIG
The Company: American International Group (AIG) is a multinational insurance corporation with more than 88 million customer s world wide.
The Mistake: Collateralized Debt Obligations (CDOs). AIG Financial Products division, headed by Joseph Cassano, started to make big profits selling CDOs, insurance for mortgage backed securities. When the housing market collapsed in 2008, the mortgage backed securities suddenly became worthless and AIG had to payout billions of dollars.
The Aftermath: AIG had to be bailed out by the United States Government for $85 billion dollars, the largest in US history. Joseph Cassano was eventually let go, but he had already made $315 million in salary and bonuses.
The Mistake: Collateralized Debt Obligations (CDOs). AIG Financial Products division, headed by Joseph Cassano, started to make big profits selling CDOs, insurance for mortgage backed securities. When the housing market collapsed in 2008, the mortgage backed securities suddenly became worthless and AIG had to payout billions of dollars.
The Aftermath: AIG had to be bailed out by the United States Government for $85 billion dollars, the largest in US history. Joseph Cassano was eventually let go, but he had already made $315 million in salary and bonuses.
MySpace
The Company: Was at one time the largest social network. In 2005 it was purchased by News Corp for $560 million.
The Mistake: Advertising. In an effort to boost revenue, MySpace made a deal with Google that doubled the number of ads on its page. The MySpace pages started to become cluttered with advertising that was often gross or sexual in nature.
The Aftermath: Though short term profits rose, the company soon started to rapidly bleed users who fled to Facebook. In 2011, the company was sold to Specific Media for $35 million.
The Mistake: Advertising. In an effort to boost revenue, MySpace made a deal with Google that doubled the number of ads on its page. The MySpace pages started to become cluttered with advertising that was often gross or sexual in nature.
The Aftermath: Though short term profits rose, the company soon started to rapidly bleed users who fled to Facebook. In 2011, the company was sold to Specific Media for $35 million.
Red Lobster
The Company: Red Lobster is a multinational casual dining chain specializing in seafood. Also famous for being the home of cheddar biscuits.
The Mistake: Snowcrabs. In 2003, Red Lobster launched a promotion for all you can eat snow crabs at a time when snow crabs prices were at an all-time high. Red Lobster seriously underestimated the gluttony of American eaters. Because snow crab prices were high the restaurant would start to lose money if a customer ate more than a half dozen. Unfortunately, the average customer ate at least 2 dozen. These all you can eat customers also drove away other customer that couldn't be seated because they would sit and eat for hours on end.
The Aftermath: Red Lobster lost $3 million dollars in the fiscal quarter of the promotion and company president, Edna Morris, had to step down.
The Mistake: Snowcrabs. In 2003, Red Lobster launched a promotion for all you can eat snow crabs at a time when snow crabs prices were at an all-time high. Red Lobster seriously underestimated the gluttony of American eaters. Because snow crab prices were high the restaurant would start to lose money if a customer ate more than a half dozen. Unfortunately, the average customer ate at least 2 dozen. These all you can eat customers also drove away other customer that couldn't be seated because they would sit and eat for hours on end.
The Aftermath: Red Lobster lost $3 million dollars in the fiscal quarter of the promotion and company president, Edna Morris, had to step down.
Nokia
The Company: Nokia, at one time the largest cell phone maker in the world.
The Mistake: The iPhone and Android. In 2007 Apple launched the iPhone and in 2008 Google launched Android smart phones, Nokia the leading cell phone maker in the world decided to stick with its own system, Symbian. Unfortunately, there were very few apps developed for Symbian and cell phone users began to move towards iPhones and Android phones looking for apps.
The Aftermath: By 2011 Nokia abandoned Symbian and tried to revive its fortunes with Windows Mobile, which also failed misreably. Nokia eventually was bought out by Microsoft.
The Mistake: The iPhone and Android. In 2007 Apple launched the iPhone and in 2008 Google launched Android smart phones, Nokia the leading cell phone maker in the world decided to stick with its own system, Symbian. Unfortunately, there were very few apps developed for Symbian and cell phone users began to move towards iPhones and Android phones looking for apps.
The Aftermath: By 2011 Nokia abandoned Symbian and tried to revive its fortunes with Windows Mobile, which also failed misreably. Nokia eventually was bought out by Microsoft.
Blackberry
The Company: Was once the dominant smart phone maker in the industry. Its phones were so addictive they were nicknamed crackberry.
The Mistake: Not changing with the times. Blackberry failed to realize that consumers not businesses were driving the smart phone economy. Blackberry failed to realize that consumers wanted more than just emails and wanted more consumer friendly apps and games.
The Aftermath: Blackberry steadily lost market share to iPhones and Android phones. From a once dominant market share, today they now only have 3% of the market, and their stock price has dropped 90% from its highest point.
The Mistake: Not changing with the times. Blackberry failed to realize that consumers not businesses were driving the smart phone economy. Blackberry failed to realize that consumers wanted more than just emails and wanted more consumer friendly apps and games.
The Aftermath: Blackberry steadily lost market share to iPhones and Android phones. From a once dominant market share, today they now only have 3% of the market, and their stock price has dropped 90% from its highest point.
Arthur Andersen
The Company: Was once one of the 'Big Five' accounting firms in the United States, providing auditing, tax, and consulting services to some of the largest businesses in the United States.
The Mistake: Cooking the books. Arthur Andersen was the accountant for the companies, Enron, Worldcom, Sunbeam and several other companies that participated in 'creative accounting'. As accountants they were responsible in making sure that all their client's accounts were legal and in order. But as their consultants, they often advised their clients in how to hide debt.
The Aftermath: After the collapse of Enron, the United States Department of Justice decided to go after Arthur Andersen and prosecuted the company for obstruction of justice. The company decided to gamble and fight in court but was eventually convicted. Even though the conviction was eventually overturned, the damage to the company's reputation was too severe and in 2011 had only 200 employees from a high of 85,000.
The Mistake: Cooking the books. Arthur Andersen was the accountant for the companies, Enron, Worldcom, Sunbeam and several other companies that participated in 'creative accounting'. As accountants they were responsible in making sure that all their client's accounts were legal and in order. But as their consultants, they often advised their clients in how to hide debt.
The Aftermath: After the collapse of Enron, the United States Department of Justice decided to go after Arthur Andersen and prosecuted the company for obstruction of justice. The company decided to gamble and fight in court but was eventually convicted. Even though the conviction was eventually overturned, the damage to the company's reputation was too severe and in 2011 had only 200 employees from a high of 85,000.
IOmega
The Company: IOmega was the makers of the Zip drive, the successor to the floppy drive. The zip drives could hold 100 MB as compared to a floppy disk which could only hold 1.44 MB
The Mistake: USB Flash Drives. For a time Zip drives were the dominant portable storage option. And though USB flash drives were extremely weak at the time, one of IOmega's engineers started researching USB Flash drives and saw the possibility of creating a low cost USB powered flash memory drive. Marketing decided to not to pursue this as they saw it as a competitor to their cash cow Zip drive.
The Aftermath: USB flash drives steadily improved, coupled with competition from CD-RW and the Zip drive was doomed. IOmega's stock value went from a high of $100 to today's low of $2.
The Mistake: USB Flash Drives. For a time Zip drives were the dominant portable storage option. And though USB flash drives were extremely weak at the time, one of IOmega's engineers started researching USB Flash drives and saw the possibility of creating a low cost USB powered flash memory drive. Marketing decided to not to pursue this as they saw it as a competitor to their cash cow Zip drive.
The Aftermath: USB flash drives steadily improved, coupled with competition from CD-RW and the Zip drive was doomed. IOmega's stock value went from a high of $100 to today's low of $2.
Quiznos
The Company: Quiznos is the 2nd largest submarine sandwich store in the word. At one time there were over 5,000 Quiznos restaurants in the world.
The Mistake: Mistreating Franchises. With most restaurant chains, a small business owner who purchases a franchise expect to be helped by corporate in setting up their new restaurant. Instead, Quiznos was accused of exploiting their franchisees. Franchise owners, who paid $25,000 to be an owner of a Quiznos, said they received little support, and were forced to buy all supplies from corporate vendors at a significant markup.
The Aftermath: Many franchise owners said that it was impossible to make any profits. It was said that 40% of all Quiznos restaurants were losing money. Several lawsuits were filed against Quiznos. In 2006, one franchise owner committed suicide complaining that Quiznos had destroyed his life. In March 2014, Quiznos filed for Chapter 11 bankruptcy.
The Mistake: Mistreating Franchises. With most restaurant chains, a small business owner who purchases a franchise expect to be helped by corporate in setting up their new restaurant. Instead, Quiznos was accused of exploiting their franchisees. Franchise owners, who paid $25,000 to be an owner of a Quiznos, said they received little support, and were forced to buy all supplies from corporate vendors at a significant markup.
The Aftermath: Many franchise owners said that it was impossible to make any profits. It was said that 40% of all Quiznos restaurants were losing money. Several lawsuits were filed against Quiznos. In 2006, one franchise owner committed suicide complaining that Quiznos had destroyed his life. In March 2014, Quiznos filed for Chapter 11 bankruptcy.
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