Closing Companies: What Went Wrong?

By B. Sapoznik

As we approach the end of the calendar year, companies, businesses, and schools enter a well-deserved break. However, some of these unfortunate institutions might be closing their doors for the final time, similar to the many doors have been closed behind them. Around 93% of the world has modernly adopted the capitalist economic system, which is greatly based upon private property and the principles of meritocracy. Though, this also means that after a certain point, no bank loans nor share sales can make up for a company’s detrimental cash balance, and they ultimately have to shut down. Usually, companies try to stay afloat by selling themselves, since they contain high-end personnel and top-notch facilities, but this no longer makes the company independent. In this article, we will be reporting some of the largest cases of business bankruptcy and disappearances in the past few decades.

When talking about bankruptcy, one of the most famous examples that comes to mind is that of Blockbuster. Blockbuster was one of the largest streaming companies throughout the 1990s. It became the most popular movie-rental brand and was internationally known for its variety of sales – from videogames to films, blockbuster had basically everything on the market. As the company entered the 2000s, they came across an offer to buy Netflix for $50 million, which investors rejected because they thought the company was reliant on abstract concepts of the future, such as fully digitalized streaming. And so, the companies surrounding Blockbuster grew in the 2000s: Apple, Netflix, and Google all adapted towards the modern settings, evolving into technologies such as DVDs. Partially, Blockbuster also evolved. They also used DVD technology, causing its store amount peak in 2004 with over 9,000 stores worldwide. However, the company failed to keep up to its record in the future. With the growing digitalization of the late 2000s and early 2010s, Blockbuster remained in its market of physical streaming, causing it to lose popularity since newer technologies were more practical. Also, the company managed to accumulate over $1 billion in debt, affecting its development and consequently being overtaken by other streaming services. Soon enough, the company’s rapid economic decline led to its file for bankruptcy in 2010. For reference, Netflix currently holds a market cap of nearly $400 billion.

Another industrial giant which surrendered to bankruptcy was Toys ‘R’ Us, historically one of the worlds largest toy-selling businesses. Throughout the late 1990s and the early 2000’s, the company saw increasing competition, as stores such as Walmart, Target, Mattel, and Hasbro were huge contenders for toy-shopping activities. So, Toys ‘R’ Us decided to partner with Amazon in 2000 to sell their toys online, with a trustworthy distributing service. Despite this, Amazon violated the terms of their contract by letting other toy-selling companies to commercialize their products on the website, leading to a 51-million-dollar prosecution by Toys ‘R’ Us, which was successful (paid in 2009). The unfortunate handling of the company led to its sale in 2005 to private investment firms for $6.6 billion using borrowed capital. The usage of the borrowed capital in the purchase made Toys ‘R’ Us’ debt shoot up from $1.86 billion to $5 billion, further complicating the companies situation. Alongside these factors, the 2000s and 2010s were the global stage for a shift in child entertainment. These years principally migrated children’s attentions from physical toys into digital entertainment, with applications such as video games or mobile games. And so, the company’s failure to adapt towards the global incentives led it to bankruptcy in 2017. Together with Blockbuster, this is another example of failure to adapt, leading to Toys 'R' Us' depreciation and ultimate failure.

Another famous case is that of RadioShack, a massive electronics distributer. The traditional company, founded in 1921, found itself doing well at the start of the 2000s. Furthermore, the company then started to suffer a lot of competition around the years of 2005-2007, as digital distributers Amazon and eBay started becoming increasingly popular for their accessibility and reduced price, whilst RadioShack only kept physical stores. The later years of the 2000’s only brought bad news to the business – they started to lack modern electronic products, and the release of the iPhone directed the global user attention away from generic brands and into the Apple mindset. As their profits lowered, the company saw their outdated products remaining on their shelves, and bad management caused the company to file for bankruptcy in March 2017.

As seen in the examples above, there is an immense amount of public pressure in any business – whether that is electronics, films, toys, or anything else. What makes modern companies thrive is their ability to adapt and to evolve, as they keep up with public demands and integrate new concepts into their businesses daily.