When Toys “R” Us declared bankruptcy and liquidation of its 80+ branches in 2017, people all over the world were heartbroken and shocked. It became trending news all over the media with people sharing their condolences along with their memories of the brand that had been loved by children for nearly 5 decades. It was considered as the end of an era by many. A lot of speculation arose as to why a company of such a large scale would fail after years of success; many blamed the insurmountable amount of debt that the company owed while some claimed that company failed because it couldn’t catch up with its competitors such as Target and Amazon. 

Whatever the reasons were, the biggest takeaway from the demise of Toys R Us is that any company, regardless of its history or popularity can crumble down. And in order for any business to stay relevant and successful constant effort is required.

Think of it this way:  running a business is like growing a flower garden. You may have the most amazing and beautiful garden in the world, it will wither away if it’s not watered or consistently maintained. Toys R us isn’t the only company that has met a terrible fate, the past few decades has witnessed many once strongly established companies fail and fade into oblivion. 

There are many reasons why a company, even a well established one would fail. However, some of the most common reasons are:

Failure to innovate

Innovation is the key to the success of any business. If you check the history of any popular company you would see that it became successful because they brought something innovative  to the market. And they continue to succeed only because they are still constantly evolving and innovating. 

 

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A classic example of  this would be the downfall of Blackberry. In the early 2000’s Blackberry reshaped the cellphone market by introducing groundbreaking features that were not found in cell phones before. For many years, Blackberry was the ‘it’ phone to have. Then in 2010 came along Apple and introduced to the world the first official smartphone. It literally took the world by a storm and gave Blackberry a run for its money. Instead of adapting to the latest trends that Apple offered, the company refused to budge and continued making phones based on their previous models. The company’s refusal to innovate eventually led to its downfall. Today it is still struggling to catch up to its old reputation. 

Nokia, Kodak, MySpace and PanAm are few other examples of once highly successful companies that failed because they didn’t adapt. The point is that any company that refuses to adapt to the latest trends is bound to fail.

Lack of effective marketing

Marketing- to be specific effective marketing- is extremely important for the success of any organization. In order to reach out to the masses and increase its revenue, a company has to market its product in a smart and effective way. These days there are so many avenues for marketing. And if those avenues are smartly utilized it can greatly boost the company’s popularity and sales. However, bad marketing and a lack thereof can tarnish the business badly. 

Over the last few years many famous companies have badly suffered because of their terrible marketing campaigns. Either those campaigns were culturally inappropriate, racist, insensitive or simply not relatable to the masses. Kendall Jenner’s Pepsi Ad, Dove’s  racist Facebook Ad and Walker’s selfie competition campaign are just a few of recent marketing disasters that cost millions of dollars to these companies. 

Leadership failures

These days it’s all about being a leader rather than a boss. Gone are days of age old workplace hierarchies, set rules and dictatorships. Employees these days demand respect and want to be led not bossed around. A good leader is someone who understands the value of engaged and productive employees and knows how to get the best of out of them. They keep their workforce united and strive for constant growth and adaptability. Effective leadership can lift a company off the ground and take it to the skies while a poor leadership and management can completely abolish a business. Bad leadership leads to an increase in employee turnover, lack of innovation and productivity, a toxic workplace culture and financial loss- all of the recipes for a company’s eventual failure. 

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Bad reputation

Ted Rubin once said : “A brand is what business does, a reputation is what people remember.” Once your reputation is tarnished it is quite difficult to bounce back from it. In today’s world where everything is so transparent, a single mistake can damage your reputation and cost you your entire business. There are many reasons why a company might earn a bad reputation. Terrible customer services, mistreatment of employees, unethical practices and poor product quality are just a few of those reasons. Take for example, Sears, a retail store chain that was widely popular once upon a time. Over the years the company has garnered a negative reputation because of the mistreatment of its employees. In the last decade the company has shut down more than half of their stores and has lost more than 100,000 employees, only because of a bad reputation. 

Poor financial choices

At the end of 2001, Enron, one of America’s largest energy companies and a wall street darling, filed for bankruptcy. At that time it was the biggest case of bankruptcy in the American history, with an estimated loss of $74 billion. Today, the company’s name has become synonymous with financial failure as the company owed its demise to terrible financial investments and fraudulent schemes.

Enron isn’t the only company that faced failure because of financial collapse. In the past few decades, beloved brands such Blockbuster, BHS, Comet and Compaq have collapsed because of bad investments, increasing debts and poor financial management. Popularity and even good sales are not enough to save your company if your financial situation is at the shackles. By the time Toys R Us liquidated, it was still beloved and was one of the most sought after brands in the world. However, it’s increasing debt  and financial instability led to its downfall.

Starting up a business and making it successful isn’t just enough. Any company that fails to sustain its business is bound to collapse, regardless of how popular and successful it once was.