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Downfall! The Rise And Fall Of 4 Global Business Icons

The business landscape has changed dramatically over the last 30 years, particularly with the advent of digital technology. In that time we’ve lost a number of global business brands who were both household names and dominant players in their respective industries. 

Be it strategic misjudgments, complacency, technological change, or a lack of foresight, there’s plenty to learn from the demise of these once-loved global business icons. 

 

PanAm

In the 1950s and 1960s plane travel experienced its first commercial boom. During this “Golden Age” of flying, Pan American World Airways ruled the skies. The ‘World’s Most Experienced Airline’ – as went the advertising slogan – was renowned for its first-rate service and modern fleet of aircraft.

Not just an iconic and trusted brand, PanAm was a highly successful business. Its lucrative hold on transatlantic flight routes helped the company to generate huge profits and boast cash reserves of $1 billion at its peak. When it became the first airline to fly Boeing’s new 747 jumbo jets in the late 60s, the future looked bright. 

 

 

Where did it go wrong?

The 1973 oil crisis wreaked havoc on the global economy. By the end of 1974, the price of oil had risen by 400%. Aviation and other oil-reliant industries saw their costs shoot up. For PanAm, this couldn’t have come at a worse time. Its recently acquired wide-bodied Boeing 747 fleet consumed considerably more fuel than older plane models of the time. This forced ticket prices to rise during a difficult period for the US and world economy. Half empty flights led to huge losses. The once-mighty ruler of the skies was now struggling to turn a profit. 

In the subsequent years, the company attempted numerous operational cutbacks and restructures to balance the books. However, another fateful incident followed a decade later. In December 1988 a PanAm flight from New York to London exploded over the Scottish town of Lockerbie. Investigators quickly linked the explosion to a bomb on the plane, however, PanAm was found guilty of security failures. Fines and lawsuits followed, not to mention major reputational damage. The final blow was the outbreak of the first Gulf War in 1990 which caused fuel prices to rocket and the company to suffer insurmountable losses. 

PanAm filed for bankruptcy in January 1991.

The lesson? 

Events will happen outside your control. Economic shocks, in particular, can come out of nowhere. If you’re in an industry reliant on a particular commodity, have a contingency in place. You may need to react quickly and decisively. 

 

Blockbuster

Before the advent of digital streaming, video rental stores were the place to go when you fancied a night-in watching a movie or box set. This was a new phenomenon in the 1980s as more and more people purchased home VHS players. By the time the first Blockbuster store opened in Dallas in 1985, the video rental industry was taking shape – helping to create a huge new income stream for film distributors. 

Over the years, Blockbuster became the industry leader, growing in size to have over 9,000 stores around the world and revenues of $5.9 billion at its peak in 2004. In the UK, it had over 4,000 stores and its blue and yellow signage was familiar sight on the high street. 

 

 

Where did it go wrong?

At the turn of the century, Blockbuster still dominated the video and DVD rental market. However, internet speeds were improving. This carried the potential to radically alter how we consume all forms of media. The idea of streaming a feature-length movie online was now a reality. 

Some had this foresight, others did not.  

Whilst the fledgling Netflix proactively evolved its business model from a mail-order DVD subscription service to an online streaming service, Blockbuster was slow to respond. The company did develop its own streaming services but none of these caught on. It was even slow to adopt Netflix’s popular and convenient mail-order service. 

Added to the competitive challenge, was the operating cost of running bricks and mortar video stores. Blockbuster placed faith, as well as millions of dollars, in keeping these stores going. All the while this was a cost its competitors needn’t worry about. Coupled with the dwindling demand for its services, by the late 00s it was clear Blockbuster’s days were numbered. 

Blockbuster went into administration in 2013.

The lesson?

Foresight is a powerful thing in business. The Netflix vs Blockbuster case study is frequently cited as an example of a complacent business failing to seize an opportunity whilst being outflanked by a more nimble and forward-thinking competitor. Keep on top of technological changes and be ready to pounce. 

I’ve been frankly confused by this fascination that everybody has with Netflix…Netflix doesn’t really have or do anything that we can’t or don’t already do ourselves.

John Actioco Blockbuster, CEO, 2008

EMI

Robbie Williams. Pink Floyd. Paul McCartney. Radiohead. What do they all share in common? Yes, they’re British. But, they were also EMI artists. The British record label was a powerhouse in the music industry with roots stretching back to the first recorded releases. Over the years, the conglomerate evolved to comprise the famous sub-labels Parlophone, Capitol Records, and Virgin Records. This made it the world’s fourth-largest business group and record label as recently as 2012. And, arguably, one of Britain’s most successful exports. 

 

 

Where did it go wrong?

Much like Blockbuster, EMI was partly a victim of the digital age. In the late 90s, the music industry was booming with CD sales helping to power huge profits for the major labels. The peak came in 1999 when the world’s record companies generated nearly $30 billion. 

Bubbling underneath, however, was a grave threat to the prosperity of the industry: the mp3 era had begun. File sharing software, most notably Napster, was enabling internet users to download entire back catalogues for free. Over the course of the next decade, the industry grappled with how to deal with this threat whilst profits dwindled. This perhaps makes EMI’s decision to sign Robbie Williams to a six-year album deal worth over £80 million in 2002 – the largest recording contract in British music history – somewhat questionable.

In 2007, after a period of financial losses, EMI was acquired by a UK based private equity firm, Terra Firma. This proved to be a disastrous acquisition. “It’s been taken over by somebody who’s never owned a record company before,” said Radiohead’s Ed O’Brien. The band subsequently left the label. Jobs were cut and a number of high profile artists became embroiled in disputes with the new management. The losses increased. Meanwhile, Terra Firma went to court with their financiers Citigroup claiming they’d been misled over the valuation of the company prior to the acquisition.

EMI was eventually sold off to Universal Music Group and Sony/ATV Music Publishing in 2012. 

The lesson?

The boom times might not last forever. Be quick to sense when the tide is turning. You don’t want to be the last one at the bar when the party’s over. 

 

Kodak

“You press the button, we do the rest.”

George Eastman, founder of Kodak

Kodak was undoubtedly one of the best known and leading players in the world of photography. Founded in 1888 by George Eastman, the company had made it their mission to democratise photography by developing affordable camera technology for the masses. Not only did they do that, but they were also at the forefront of many innovations over the years – inventing both the Instamatic camera and the digital camera.

But it wasn’t cameras where Kodak made their money. The large majority of their revenues came from sales related to film. This was known as a ‘razors and blades’ model: selling cameras at a low-profit margin to help drive sales of the higher-margin item, film. By 1976, Kodak’s enjoyed near-total market dominance, carving out an 85% market share for cameras and a 90% market share for film. 

 

 

Where did it go wrong?

It would seem logical that the company that invented the digital camera would be the one to benefit from the shift towards digital technology. Unfortunately, that wasn’t the case for Kodak.

“The broad applicability of the technology platform meant that a good engineer could buy all the building blocks and put together a camera. These building blocks abstracted almost all the technology required, so you no longer needed a lot of experience and specialized skills. Suppliers selling components offered the technology to anyone who would pay, and there were few entry barriers.”

Willy Shih, former vice president of Kodak

In the new century, as the market for film dramatically shrunk, Kodak failed to make money through the sale of digital cameras in this newly competitive space – in fact, it was losing money as the margins were so low.

It was at this point that the company needed to radically diversify its product portfolio. Rival competitor Fujifilm correctly anticipated the impending disaster, making bold moves into lucrative untapped markets such as cosmetics and LCD screens. Kodak, on the other hand, misjudged its attempts to diversify, entering the inkjet printer business just at the time smartphones and social media were taking off. It had even acquired a photo-sharing site, Ofoto, in 2001, but instead turned the site’s focus to expanding printing sales. 

Kodak filed for bankruptcy in January 2012. 

The lesson?

You can’t rely on your golden goose. If you’re over-reliant on one particular revenue stream, think about diversification and be careful to do your research so you invest shrewdly. 

 


 

Just like the world of sport, in business, it’s a supreme challenge to stay at the top forever. Making sure your business is attuned to new market demands and competitors and, crucially, having foresight is integral to maintaining success. Who knows, in 30 years we might find an Amazon or an Apple on this list…

 

Have you thought about your strategy recently? Read our guide on how to write a robust business plan

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Huw Moxon is the Digital Marketing Manager for Informi.

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