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Identifying Business Winners And Losers


Identifying Business Winners And Losers

The differences in the performance of Apple and Amazon versus Radio Shack, Toys-R-Us, and Blockbuster in the same economic environment raise the question of what made their fate so different. Why would a cash machine like Blockbuster go under while a thousand-dollar investment in Apple in 2008, at the beginning of the great recession, would be worth more than $7000 in 2018? Toys-R-Us, an established, innovative retailer, fell apart in this period. Meanwhile, a thousand-dollar investment in the experimental startup Amazon at about the same time would be worth more than $20,000 in 2018.

Was it a great brand? Both the winners, Apple and Amazon, and the losers, Radio Shack, Toys-R-Us, and Blockbuster, have, or had, great brands. Was it scale? At its height, Radio Shack was the world’s largest telecommunications retailer with thousands of retail stores. Toys-R-Us was considered a “category killer,” as the world’s largest seller of toys with thousands of retail stores. Blockbuster used a sophisticated computerized inventory management system to become the dominant distributor of video entertainment, also with thousands of retail stores.

Was it great distribution? In their day Radio Shack, Toys-R-Us, and Blockbuster were powerful retailers.

Was it superior marketing? Radio Shack, Toys-R-Us, and Blockbuster executed some strong advertising and promotion. Radio Shack advertised during the Super Bowl and filled pages of newspapers with ads for its products. Blockbuster offered a very powerful shopper loyalty program, Blockbuster Rewards, powered by a sophisticated customer database. Toys-R-Us created an iconic “spokes animal,” Geoffrey the Giraffe.

Was it access to capital and other resources? All three of the now defunct firms had significant cash flow and access to investment funds. Indeed, all three were acquired, in some cases more than once.

What, then is the difference between a business winner and a business loser?

While there is no doubt that being lucky, being at the right place at the right time with right product, plays a role in success, the real difference is the ability of managers, including marketers, to create positive net present value (NPV) products and marketing campaigns. Product innovation without positive return produces failure (see DeLorean). Great advertising without positive returns will not be successful (see Kodak). There is no doubt that quality, innovation, creativity, and execution are important. Marketing is important. But, without the discipline of positive financial outcomes, a firm cannot be successful.

Corporate strategy and marketing strategy are about finding positive net present value opportunities. This is not as easy as it seems. If it were so easy, there would not be a history of colossal failures by some of the largest and dominant firms.

Innovative ideas can fail in two ways. The most visible failures are those introduced into the market without success. More insidious are failures associated with good ideas never getting to market because they lacked the resources and management support for implementation.

Contributed to Branding Strategy Insider by: David Stewart, President’s Professor of Marketing and Business Law, Loyola Marymount University, Author, Financial Dimensions Of Marketing Decisions.

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