Competition from PC makers
The personal computer revolution affected the company’s hardware sales badly. Personal computer sales weren’t money makers for the company because of the tough competition from companies like Dell and IBM.Competition from PC makersMobile operators selling cellphones directlyFailure to adapt to e-commerce trendsWrong inventory collectionTough competition from AmazonAggressive share buy backBorrowing to buy sharesChanging the business modelFrequent CEO changeCreditors didn’t like the plansBad re-branding strategy
Mobile operators selling cellphones directly
After Radioshack stopped selling personal computers it moved to selling cellphones. The move was profitable but soon mobile operators started running their own kiosks thus putting more pressure on the company.
Failure to adapt to e-commerce trends
While e-commerce giants such as Amazon were rising, Radioshack’s site didn’t allow customers to shop online and instead it just referred them to shops.
Wrong inventory collection
According to critics, Radioshack stores had many bizarre items that most people weren’t looking for. This resulted in consuming more store space while providing less revenue.
Tough competition from Amazon
The tough competition coming from online retailers such as Amazon has put tremendous pressure on traditional stores that sell directly to customers such as Radioshack.
Aggressive share buy back
According to Fortune, Radioshack spent up to $500 million to support the falling share prices by buying back shares whereas they should have accepted the new valuation and saved the money.
Borrowing to buy shares
Radioshack had to borrow money to buy back shares. This resulted in increasing the company’s debt to equity ratio and putting it in a bad financial condition. (See How to identify a stock market bottom?)
Changing the business model
Radioshack’s competitive advantage was the professional advice hardware enthusiasts used to get when buying items to make hardware. As the company moved to selling finished products this competitive advantage became non-existent and so the company lost to traditional stores selling the same items.
Frequent CEO change
The company changed its CEO 7 times between 2005 and 2014. This unstable management environment could have contributed to many of the company’s missteps.
Creditors didn’t like the plans
The creditors didn’t like the plans of the company to shut down more than quarter of its stores. This put the company in a very unstable financial condition. (See Why Soundcloud is failing?)
Bad re-branding strategy
Radioshack tried re-branding itself as The shack but it got criticized for the fact that its problems had more to do than just its name.
Leave a comment Leave a comment