Why Do Businesses Fail?

Topics: Adidas, Reebok, Herbert Hainer Pages: 4 (1141 words) Published: October 8, 2011
Why Do Businesses Fail?

A common reason for business setbacks or even failure is market competition. A rise in a competitor’s market share is often synonymous with a loss for others. Such downturns occur for two main reasons. First, a new competitor with creative products, financial support and dynamic employees has a competitive advantage over others. Second, more established companies do nothing to change their strategies in response to the new competition. This essay will examine four examples of companies facing market competition. It will go on to analyse how the companies dealt with any problems and conclude with lessons learned from these experiences.

The first example is Adidas, in the late 1980’s a company full of competitiveness and energy which faced the global rise of its fierce competitor Nike, at that time an emerging American sports brand. To capture the sportswear market on the world stage, Nike constantly developed fashionable products, lowered prices and provided superior customer services. Inevitably, its revenues decreased to 17 billion dollars while Nike enjoyed a 17 billion dollars increase to 34 billion dollars between 1988 and 1992 (CUCLIFE, 2011); however, Adidas did not accept this defeat without a fight. It revived itself by making the following three changes. First it relocated its factory. New workshops were built in Vietnam, Thailand, China and other countries in southern America. These populous nations were lacking in manufacturing industry, and the wages there were more attractive to the company. With lower labour costs, costs fell, and the product became more competitive. The second step based on the first one was to expand the scale of the company through reconstruction with another two companies in the sportswear market, Reebok and Taylor. Re-structuring into a bigger company would more than likely lead success, for the combination will be stronger with increased purchasing power, greater brand recognition, lower capital...

Bibliography: Corroll, P. B. and Mui, C., 2008. 7 ways to fail big. Harvard Business Review, Sep, pp.82-91.
CUCLIFE, 2011. Adidas from Germany. [online] Available at: < http://cuclife.com/lady/ShoesBrand/2011/0325/100_2.html> [Accessed 7 Sept 2011]
Datamonitor, 2010. Adidas-Salomon AG SWOT Analysis. Datamonitor: Adidas AG. Available through: Business Source Premier database [Accessed 28 Aug 2011].
Gordon, S. R., 2010. Failure to plan is planning to fail. The Central New York Business Journal, 9 July, p10 and p14.
Hui, Z. Y., 2010. Macdonald’s booming, Finance Ifeng, [online] Available at: < http://finance.ifeng.com/news/corporate/20101216/3065470.shtml> [Accessed 7 Sept 2011]
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