Lack of effective business strategy has made internationally-renowned firms fail on multiple occasions in the course of history. Organizations with a workforce strength in thousands had fallen to bankruptcy Strategy Framework. Several business closures shocked the world in the last fifty years, the reason for all being lack of strategic acumen in the C-Level executives.
A strong strategy framework is what can only save a business in difficult times, especially during a recession.
Here we are listing the 5 epic cases of global businesses shutting down because of the poor business planning, and lack of strategic execution:
#1. Target Corporation’s Failure to Thrive in Canada
Target was among the largest US retailers in 2013 when it entered the Canadian Market expecting to repeat the same it had been successfully doing in the U.S.
But unfortunately, fate has had something else decided for them. Within a short span of fewer than two years, the brand declared its closure in Canada citing a loss in billions of dollars. It immediately liquidated its 133 stores located across the country and laid off approximately 17,000 employees.
In particular, the losses amounted to a whopping $2.5 billion!
What Went Wrong?
- Company’s extensively rapid expansion. They took on too much too fast.
- Pricing discrepancy among US and Canadian stores. A study observed 89% of Canadians believing that Target Canada never acted as per its tagline – “Expect More. Pay Less.”
- 53% of those surveyed said that Canadian stores were trying to sell things at a costlier price compared to its US-based stores
- Incompetent supply-chain network. The shelves in the Target Stores across Canada were found mostly empty at the time of its existence resulting in unhappy customers.
#2. Home Depot Went Miserably Wrong in Enticing Chinese People
Home Depot, one of the largest home improvement retailers in the U.S. tried its luck entering the Chinese market in 2006. With the Chinese economy witnessing high growth during the time, the U.S-headquartered DIY giant found the occasion perfect to dip its toes in a new market altogether.
It was 2012, six years into the Chinese market they realized their mistake. Till then, they already had 12 stores across the country. The company throughout the six years posted heavy losses but continued in the hope of emerging out of the dull. Eventually, in 2012, they put a full stop shuttering all its 12 stores while taking a hit of USD 160 million.
What Went Wrong?
- They didn’t understand the consumer mentality, consumer lifestyle, business environment, and culture in China. Chinese do not believe in the DIY approach which happened to be a great success for them in the US.
- In America, people tend to renovate their homes by themselves. On the contrary, the Chinese see it as a sign of poverty to do things by themselves.
#3. Walmart’s Utter Fail in Germany
In 1997, Walmart opened its first store in Germany. Bust, just in nine years, they packed their bags and left Germany as a market posting a huge loss of $1 billion. It opened 85 stores in the said country with an intent to exploit Germany’s profitable discount-led market.
What Went Wrong?
- Restricted business hours, intricate labor laws, and difficult regulatory norms limited the business from driving profits
- At first, Walmart experienced friction in terms of selling price quoted by comparatively small stores in Germany, to which it reacted by further lowering its products’ prices, thus making items cheaper in comparison to local stores. But the German government intervened citing losses to local businessmen, and hence Walmart was forced to raise prices that eventually went against them.
- Cultural Issues – Walmart employees were required to start their work shifts by engaging in synchronized chanting, saying – Walmart, Walmart, Walmart! Further, Walmart cashiers were instructed to smile at their patrons while performing billing which was seen by Germans as signs of flirting. Both these practices went against them.
#4. Starbucks became “Too Available” for Australian Folks
Starbucks, the most popular coffee chain of America found it extremely hard to break into the Australian Market. In July 2000, it opened its first shop in Sydney. It expanded fast, and by 2008, it already had 87 stores across the continent. In 2008, the caffeine peddler was forced to shut down its 61 stores with a reported loss of $143 million.
What Went Wrong?
- They expanded themselves in the new continent too rapidly. With Australian people seeing such an abundance of Starbucks stores across regions, it quickly became “too available” for them.
- Starbucks didn’t try to understand the culture first and overrated its popularity in the said continent strategy framework. The consequence was a lack of need compared to the availability.
#5. Hailo Gave Up on Competing with Uber & Lyft in North America
Hello, a ride-sharing transportation business first opened its operations in North America in November 2011. But, just in two and a half years, it discontinued its operations in the continent citing loss of profitability in the wake of experiencing tough competition from two already active similar businesses, namely Uber and Lyft.
The company put its foot on the brakes in October 2014 with a reported loss of 15 million USD.
What Went Wrong?
Despite scoring a USD 77 million investment from the venture capital giants Union Square and Atomico, Hailo found it illogical to compete in the raging price war between Lyft & Uber.
It felt comfortable continuing with its ever-growing European Market where it has had 2.5 million registered customers at the time of pulling out from North America.
Concluding Thoughts
There is a lot to learn over here from these failed business models and strategies. If you will ask the senior-level executives incorporates the above-discussed scenarios, you will encounter mixed responses with each business strategist in the leadership position having a distinctly different thought on the same.
But the truth is, when strategizing on expansion to new territories, a perfect balance of timing and familiarity with cultural nuances becomes a critical strategy framework. You miss any one of them, and a disaster awaits you!
History has made us learn that great ideas fail very often, especially when you plan for testing unknown waters.
