Prior to a Chapter 11 bankruptcy filing in 2011, Borders Group, Inc. also operating Waldenbooks saw years of success since Tom and Louis Border founded the company in Ann Arbor Michigan in 1971. In 1992 Kmart acquired Borders then a chain based of 21 bookstores in the Northeast and Midwest eight years post acquiring Waldenbooks. Before scheduling massive location expansion marketed as an international superstore with 1,000 locations, Kmart changed the then “Borders-Walden Group” in an IPO change to “Borders Group” (“Timeline: A Short History Of Borders Group Bookstores”, 2011).
The downfall of Borders began with their late entrance to e-commerce in 1998. It is after 1998 that Borders ridicule of sluggish sales and poor Internet present began to haunt their growth. Quickly in April 1999, Borders Group acquired All Wound Up, a toy retailer that they hoped would build their presence in shopping malls, novelty stores and kiosks (“Borders To Acquire Kiosk Operator All Wound Up”, 2011). The Revolution of E-Commerce and Cafi?? Bookstores
Borders Group at their highest point of success operated in US, UK, Australia, New Zealand, Puerto Rico and Singapore as they forecasted prior to their IPO change in 1995.
Through its subsidiaries, Borders, Walden Book Company, Borders UK and Borders Australia were able to boost its revenue through it vast growth in store chains (Datamonitor 1). In the competitive retail book business, Borders began to face competition from mass retailers and large e-commerce based book companies. Amazon. com founded in 1994 by Jeff Bezos, set the pace for Amazon to keep up with.
Leaders at Borders should have immediately started to scurry and start an online bookstore.
At this point, they had a leg up on Amazon because they were a new company. Borders was in a good position in 1995 after their IPO change to start their e-commerce site. However, management within the organization decided to wait until 1998 to plan and 1999 for startup. Borders senior management should have looked at their inventory and realized that they would be able to millions of titles, instead of being limited as traditional brick and mortar bookstores.
They would have also been able to offer more products such as downloads (“Timeline: A Short History Of Borders Group Bookstores”, 2011). With their international growth came a heavier focus in music and movies in mall-based settings, they took on a licensing agreement with Seattle’s Best. Barnes ; Noble started a connection with Starbucks around 1993. Borders did not join the cafibookstore movement until 2004 with full Seattle’s Best setups in all stores in 2006.
According to Barnes & Noble, their decision to become a cafibookstore is a large part of what has made them successful. Just as Borders waited too late to move to e-commerce, they were also fully behind the curve in signing their lease with Seattle’s Best and certainly 2006 is too late for it to be implemented in every store in the country. While select Borders locations offered cafi?? ‘s, they were not name brand and did not attract as many customers (“Timeline: A Short History Of Borders Group Bookstores”, 2011).
Borders operations management should have been on top of their competition and started benchmarking earlier instead of waiting for their numbers to fall. Management in the bookstores and at the corporate level should have communicated the issues in the store to each other in a way that it would lead to a better bottom line for the company. The organizational behavior at Borders throughout its term on the stock market was purely reactionary. When they noticed a drop in numbers they would quickly look for solutions and start benchmarking other companies.
Through the years Amazon has developed many merchant relationships that have brought them business. This would have helped Borders bottom line. Their leaders were obviously not able to see the big picture and were stuck in the frame of mind that a bookstore should be traditional. This is where management ultimately failed the company. Front line, they were able to see that customers were satisfied. In 2001, Borders announced a deal with Amazon to re-launch their website which was not very user friendly and did not carry products customers were looking for.
This deal would include Amazon’s books and music offerings featured on Borders e-commerce site (“Timeline: A Short History Of Borders Group Bookstores”, 2011). Borders experienced extreme competition from the Barnes ; Noble’s Nook and Amazon’s Kindle. Bill Ackman’s Pershing Square and Bennet Lebow CEO single handedly failed Borders. In 2006, Bill Ackman, founder and CEO of the capital management company stated that Borders shares were in fact undervalued. According to “Timeline:
A Short History Of Borders Group Bookstores” (2011), Ackman expected shares to rise from $23.92 to $36. At this point, he advised Borders that Amazon was hype and the threat that it had on their success was “exaggerated”. It was a enormous blunder to undervalue their rivalry. Bennet Lebow was CEO at the time of Ackman’s financial analysis and judgement on Amazon’s ultimate threat to the company. At this point, Borders had already announced their decision to sell a number of their Waldenbooks outlets by half and dumped its businesses in UK and Ireland to Risk Capital Partners (“Timeline: A Short History Of Borders Group Bookstores”, 2011).
Amazon began selling the Kindles in 2007 while Borders sought a buyer that never would come. Barnes & Noble joined in on the e-book band wagon in 2010 with their Nook while Borders followed up with their less successful Kobo eReader. According to Reuters, Borders took a $42. 5 million loan from Ackman facing problems with liquidity. Liquidity risks often occur when a company is interested in asset trading but is unsuccessful because no one in the market wants to touch it. It can ultimately affect the acquirers’ ability to trade at a later date.
At this point, Borders credit rating has failed and their cash outflows were too great. Someone at Borders should have been leading a campaign for managing liquidity risks. Borders let it get out of hand before correcting their issue (“Timeline: A Short History Of Borders Group Bookstores”, 2011). In conclusion, Borders did not have highly motivated management determined to keep up with the fast changing e-commerce market. Instead, they failed their customers by not offering the products and services that they needed in a timely enough fashion.
Borders did eventually come up with the solutions that would have kept them in business, unfortunately it was too late. The CEO and investors miscalculated the company’s ability to tank. In 2011 Borders was acquired by Barnes & Noble with conditional commitment from GE Capital and shortly filed for Bankruptcy. Benchmarking is extremely important and organizational management would have stayed ahead of the curve had they incorporated research in all of their strategies.
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