Despite the fact that the company Borders was one of the leading companies in the book business, it collapsed because of strategic management mistakes. Analyzing the company’s annual report, we can conclude that the main failure was poor adaptation to the online business. Borders was unable to compete with companies such as Amazon, Barnes & Noble and retail shark Wall-Mart. The company is a far cry from its closest competitor, Barnes & Noble, in creating a viable model for selling digital content. In 2001, Borders redirected its users to Amazon’s site; it took a full seven years before the company relaunched its own online book-selling service in 2008 (SEC Edgar Filing Tracker, 2011, p.80). The rotation of top management in recent years has also not contributed to stability within the company itself. Borders missed the point when all the market players began cutting back or completely abandoning music CDs and DVDs, which hit the company’s finances hard.
Another ill-considered step that Borders took was related to personnel policy. Over five years the number of employees decreased from 35,000 to 19,500 (SEC Edgar Filing Tracker, 2011, p.68). At the same time, in-store revenue continued to drop; in the third quarter of 2010, Borders was 12% short of revenues and posted a loss of $74.4 million (SEC Edgar Filing Tracker, 2011, p.80). The company’s crisis occurred in December when it stopped paying publishers for supplying goods during the pre-holiday holidays. Borders said it was able to secure $505 million in financing from GE Capital, an amount it said was intended to support its operations during the court battle (SEC Edgar Filing Tracker, 2011, p.87). Economists say the money should have been enough to keep the company afloat for two to four months. GE Capital had provided a $550 million loan, a condition of which was that the company would pay off $125 million of its previous debt (SEC Edgar Filing Tracker, 2011, p.87). Judging from the information provided in the company’s annual report, it was possible to conclude that the collapse began at a time when Amazon began to take market share.
Reference
SEC Edgar Filing Tracker. (2011). Form 10-K Borders Group Inc.Annual report [Section 13 and 15(d), not S-K Item 405]. Web.