The list of market leaders that have gone bust or required Government intervention is seemingly endless. Companies that, at the time of their peak, were considered by many as global leaders. Companies that you could never have imagined as one day just not existing. I’m sure we all remember the news articles about the likes of Kodak, Enron, Blockbuster, General Motors, Lehman Brothers, Northern Rock, Marconi, Readers Digest, Woolworths, BHS, Bradford and Bingley, Equitable Life….the list goes on and on.
But what happens internally for such large companies to lose their way? I believe it’s quite simple and can be broken down into four basic parts. Two when a company is formed and growing that explains why they become successful and two when things start to fall apart.
When a company is in its infancy, owners and employees are generally keen and hungry to succeed. This takes the form of ;
When a company grows and ages things start to change. It starts to trade on its name and past history. This is not a bad thing and the most successful companies use this as a springboard to become the market leaders in their sectors and even expand into other sectors successfully.
BUT at this stage things can also go terribly wrong. For me there are two main factors.
The constant ‘striving for increased profits’ causes companies to withdraw their once great products and services and make them inferior. This can take on many forms but in the Financial Services industry this takes on the guise of companies no longer offering whole of market products and instead proffering their own inferior, more expensive ones to clients. This is done on the premise of ‘risk’ when in reality it’s all about making more profit for the company and treating the once loyal clients with contempt.
Products become increasingly inferior over the years as they realise some clients will stick with them regardless as they have ‘that name over the door’ which stood for so much when they were in their ‘heyday’. They then continue to treat these clients with increasing contempt as they realise in the short term profits can continue with poorly made poorly performing products. Again the cheaper the product the more profit can be made.
But then like the companies aforementioned at the start it all comes crashing down, this can be generational in timeframe as it takes the clients children or grandchildren to realise what has happened over the years and then it is just a matter of time before all that is left is to turn out the lights.
This article does not provide individual financial advice and are the views of the columnist only. Vision Independent Financial Planning Ltd is authorised and regulated by the Financial Conduct Authority