A tale of two businesses.edited

Running head: TALE OF TWO BUSINESSES 1

Tale of Two Businesses

Terry Dashner

LDR/531

February 19, 2014

Allen Autrey

TALE OF TWO BUSINESSES 2


Selecting a business that failed and one that has succeeded within the last five years is the

general task for the week six writing assignment. The task includes identifying the business’

objectives, vision, mission and pinpointing the indicators that led to the failure or success of each

business, such as aspects of leadership style, communication, and structure. More specifically, it

will describe how specific organizational behavior theories could have predicted or explained the

company’s failure or success. It will cite the role of leadership, management, organizational

structure, and culture of the organizations and departments that aided and abetted in the

company’s demise or success.

In part two of the week six research document, the author is assigned a fictitious role as CEO

of the failed organization before the business failure takes place. In this imaginary role as CEO,

the author has the opportunity to lead the organization in a change process to prevent the

impending failure. Moreover, the role requires identification of the most vital areas for change

and the potential barriers that the CEO may face during the change process. The power and

political issues within the organization are identified and John Kotter’s eight-step plan is

implemented as a resolution for the change.

Tale of a Business Failure

In 1971 (Bomey, 2011), brothers Tom and Louis Borders opened a small used bookstore

called Borders Book Shop in Ann Arbor, Michigan. Louis Borders developed a primitive

software program that helped manage inventory and, to some extent, project sales, which gave

Borders a competitive advantage for at least twenty years. In the late 1980s, Borders recruited

Robert DiRomualdo to lead the company forward. DiRomualdo is given credit for leading the

company to national prominence in the 1990s. In the national spotlight, the Kmart Corporation


purchases Borders in the early 1990s. Not long after, Borders separates from Kmart and goes

public on the New York Stock Exchange. Its shares close at an all time high in 1997. In

continuing the company chronology, DiRomualdo the CEO is replaced in 1998; Soon after,

Borders establishes business in the United Kingdom; Borders posts an annual profit of $101

million in 2005; Borders sells its United Kingdom and Ireland subsidiaries in 2007, and its stock

reaches an all time low. Borders never recovers its market share high and continues its downhill

slide until it filed for Chapter 11 bankruptcy protection in 2011 and 10,700 employees lost their

jobs. Borders is a business tale from rags to riches to rags.

Borders Objective, Vision, and Mission Statements

According to author Barbara Farfan (Farfan, 2014), Borders business objective, vision, and

mission statements could not keep it from going under. Its mission statement, vision, and values

were divided into two parts: “Our Vision” and “Our Values.” Borders knew that books and other

types of literature defined humanity, thus making each human unique. Borders embraced a

community spirit in its values’ statement and became good neighbors to enrich the

neighborhoods in which they conducted business. Borders celebrated “discovery” and

“familiarity,” (part of their expressed mission statement). In other words, they believed in

connecting a person’s exploration for knowledge to the moment of discovery, which resulted in

familiarity and comfort; however, in the end, Borders reach was more than its objectives, vision,

and mission statements could sustain. In other words, no lofty, eloquent, or sophisticated mission

statement or system of values works when CEO leadership topples, and owners are too

shortsighted to see the future of books belonging to the digital age.

Indicators of Business Failure

According to an NPR report (Noguchi, 2011), there are several indicators that Borders was


headed toward its demise in the late 1990s. By the mid-1990s Borders had hit its peak and began

to slide downward. Borders took on CD music and DVD sales at a time when the industry was

making headway into the digital age. This was a costly mistake for Borders. Its chief competitor,

Barnes & Noble, began strengthening its online business with books, not CDs or DVDs. With

that came the e-reader or the Nook. Borders, on the other hand, built physical plants and stores

and outsourced its online sales to Amazon.com. NPR compared the action to that of giving one’s

competitor the keys to its entire operation.

Organizational Behavioral Theories Predicted the Demise and Leadership Role

Although John Miner’s book entitled, Theories of Organizational Behavior, received a

negative review by Richard Guzzo (Guzzo, 1981), in the journal: Industrial & Relations Review,

it still warrants consideration when underscoring the importance of organizational behavior on a

company’s success or failure. According to Guzzo (1980), “This book is not completely

satisfactory as a methodological appraisal because it lacks the criticisms that deductive theorists

would make (such as the logical consistency of various approaches).” (p. 469). A

methodological appraisal of Borders poor business decisions is not necessary to understand the

“big picture” as to why Borders failed. As economists predicted (Lowery, 2011), in 2011,

Borders was doomed to fail because investors believed it had no economic future. Its leadership

from the top, down could not get this. Although Barnes & Noble saw the digital age as the future

to book sales, Borders organizational behavior from the “Macro” perspective could not learn

from its industry and, thus, met its demise.

Tale of a Business Success

According to Bloomberg Businessweek (Stone, 2013), Costco Wholesale is the second largest

retailer in the United States behind Walmart. In a world economy marked by the recession and


downsizing, Costco with its $55.00 a year membership is not typical. Costco has succeeded over

the last five years while the competition has lost customers to the Internet. Costco sales have

increased almost 40% and its stock price has doubled since 2009. Even with a change at the

helm, share prices are up 30% under the leadership of its new CEO Craig Jelinek. Costco pays its

hourly workers an average of $20.89 an hour, not including overtime. Walmart in comparison

pays an average wage of $12.67 an hour. Almost 90% of Costco’s employees have company-

sponsored health insurance, whereas, Walmart claims that half of its employees do.

Costco’s Objectives, vision, and mission

Costco’s headquarters (Stone, 2013), which is twenty miles from Seattle, Washington, reflects

frugality. The executive wing is covered with a worn and well-faded blue carpet. There is no

expensive art in the halls. Several walls have a few Van Gogh prints hanging, worth about

$15.00 a piece. The CEO earned $650,000.00 in 2012, plus a quarter million more in stock

options and bonuses. These business values of frugality and keeping costs at bay reflect the

success of a company that is serious about staying ahead of the competition. Costco believes that

ethical business determines profits and success. Part of its mission statement says that it will

conduct business with ethics in mind, such as obeying the law, taking care of its membership,

and caring for it employees, and its vendors.

Indicators of Success

CEO, Jelinek is focused on Costco’s future. He (Stone, 2013) vows to keep prices low,

volumes high, and—in a rare move—keep his employees happy. Jelinek is determined to deepen

the Costco footprint in France and Spain, thus strengthening its International presence. Costco

has no public-relations staff. This no frills attitude defines the style of over 600 warehouses

around the world. Not even Amazon.com can beat Costco’s prices. But, not all is well in


Camelot. Costco must concern itself with danger signs. For example, in February of 2013,

Tiffany (Bomey, July), filed a trademark infringement suit against Costco alleging it improperly

labeled engagement rings as belonging to Tiffany. Costco called it an honest mistake, saying it

should have been labeled “Tiffany-style” rings. Nevertheless, Costco values its employees and

honors them as investments. It pays its employees a living wage, unlike some of its competitors

like Walmart; therefore, Costco is riding high by scaling waste and frivolity that some other

businesses may flaunt as prosperity and success. Costco is here to stay.

Specific Organizational Behavioral Theories and Leadership Role

Costco is modeled after Price Club (Stone, 2013), a 1976 store founded by Sol Price and his

son, Robert. Price Club stocked only about a thousand products in large quantities and marked

prices up to a set amount in the belief that retailers added only limited value. Sol Price is

deceased, but his right hand lieutenant by the last name of Sinegal brought Price’s model to

Washington in 1983. Price Club and Costco merged in 1992. Sinegal maintained Price’s pro-

labor principles and instead of reducing wages and health benefits for employees at the request

of Wall Street, Sinegal boosted them every three years. The legacy lives on at Costco and

employee satisfaction ranks among the highest for any American business. This organizational

behavior in light of other retailers, such as Walmart, is uncommon, but it is working.

II.


Leading Organizational Change

In part two of the week six research document, the author of this document is assigned a

fictitious role as the CEO of the failed organization (Borders) before the business failure takes

place. In this imaginary role as CEO, the author has the opportunity to lead the organization in a


change process to prevent the impending failure. Moreover, the role requires identification of

the most vital areas for change and the potential barriers that the CEO faces during the change

process. The power and political issues within the organization are identified and John Kotter’s

eight-step plan is implemented as a resolution for the change.

The New CEO

As the newly assigned CEO of Borders, Tee Dashner has assessed the company’s state of

health and created a business plan that addresses the issues that are hindering the growth and

business dynamic of Borders. There (Sandburn, 2011) are five issues identified in the plan:

Failure to see the value in the Internet market. No longer will we use Amazon.com as our

principle vendor. Online sales should come directly through our website.

We will embrace the e-reader market immediately. We will compete with Barnes &

Noble for our share of the e-reader market and begin developing a digital reader

comparable to the Nook and Kindle.

We will not open any more physical locations. We are reviewing the feasibility of closing

properties that are currently in operation.

We will attack our debt aggressively.

We will stop marketing music CDs. It’s a new day, and Apple® is crippling the CD

industry with iPod music downloads. This begins immediately.

The CEO is aware of the difficulties this change may impose upon leadership. Old concepts die

hard, but they must die in order for Borders to rise to new heights. Borders will lead the industry

once again.

Steps to Success


The CEO has consulted with John Kotter’s organization to map out a step-by-step strategy

that will move us forward. Although John’s book entitled, The Leadership Factor, received a

negative peer-review assessment from Sharon A. Tucker (Tucker, 1989), Director of

Compensation and Organization Consulting for C & B Consulting Group in St. Louis, MO, the

review was written over a decade ago and should hold little relevance to the current time and

markets. Kotter’s (Kotter International, 2014) steps are outlined:

Establish the Immediacy of the situation

Gather a consensus

Implement a new vision

Communicate to gather support

Empower those who can make things happen

Establish goals that come quickly

Stay the course

Change the mindset

A Walk Through

Beginning immediately, all Borders Administration personnel should assess their operations

and report their findings to the Department of Strategic Development, headed by the CEO.

Department Plans are due within two weeks. These plans should include a strategy for a turn

around for Borders. Once the reports are received and approved by the Department of Strategic

Development, Action Plans become priority. Departments of Operations, and each Borders

business entity is put on notice of the immediacy of the assignment. Every CFO, CIO, and other

entity leadership personnel are responsible for gathering a coalition for action. In other words, it

is imperative that everyone is on board and communicating the action plan in one accord as one


voice. Company culture opposed to the changes is banned and forever buried. Borders seeks and

implements a new vision for change from this time forward. The payoff for participating in the

vision is within reach and assured as the company makes forward progress. Mid-line managers

and supervisors are hereby empowered to make command decisions as they implement their

action plans. Hierarchal command channels are dead. Administration officials are responsible

within their action plans in formulating teams that share responsibilities in managing and

building a new company. The first departments to show movement toward this outcome will

receive bonuses. Other bonuses and rewards are herby activated to address short-term goals. It’s

a new day and Borders will come through on top.

Conclusion

This document has met the challenge of identifying two businesses that, within the past five

years, has either failed or succeeded as a viable and sound business entity. The document

includes the business' objectives, vision, mission and pinpoints the indicators that led to the

failure or success of each business, such as aspects of leadership style, communication, and

structure. More specifically, it describes how specific organizational behavior theories could

have predicted or explained the company's failure or success and citing the role of the leadership,

management, organizational structure, and the culture of the organizations and departments that

aided and abetted the demise or success of the businesses.

In part two of the document, the author took the fictitious role as CEO of the failed

organization before the business failure took place. In this imaginary role as CEO, the author

took the opportunity to lead the organization in a change process to prevent the impending

failure. Moreover, the role required identification of the most vital areas for change and the

potential barriers that the CEO might face during the change process. The power and political


issues within the organization were identified and John Kotter’s eight-step plan was implemented

as a resolution for the change. Furthermore, the document presented research from peer-reviewed

journals that added depth and expertise for the reader. Thus, the tale of two businesses is told

with the goal of educating the reader as to business volatility in both worlds of success and

failure.


References

Bomey, N. (July 18, 2011). Borders' rise and fall: a timeline of the bookstore chain's 40-year

history. Retrieved from http://www.annarbor.com/

Farfan, B. (2014). About.com Retail Industry. Retrieved from

http://www.retailindustry.about.com/

Guzzo, R. (1981). Theories of Organizational Behavior. Industrial & Labor Relations Review,

34(3), 468-469. Retrieved from http://www.apollolibrary.com

Kotter International. (2014). Retrieved from http://www.kotterinternational.com

/our-principles/changesteps

Lowery, A. (2011, June). Readers without borders. Retrieved from http://www.slate.com

Noguchi, Y. (July 2011). NPR. Retrieved from http://www.npr.org

Sandburn, J. (2011, July). Time Business & Money. Retrieved from

http://www.business.time.com

Stone, B. (2013, June). Bloomberg Businessweek. Retrieved from

http://www.businessweek.com/

A tale of two businesses.edited

Leadership & Management

Transcript of A tale of two businesses.edited