The biggest problem that Borders faced was bankruptcy and quick turnover of managers affecting smooth running of operations of the firm (Hitt et al., 2007). Borders were once a giant book store at the time employing over thirty thousand employees and having over one thousand three hundred large stores. Back in the 1990’s when the firm operated at its peak its stocks traded for over $35 per share. In 2011, the firm faced bankruptcy; it had to downsize its operations to six hundred and seventy-four stores manned by a staff of nineteen thousand five hundred. Its share prices also fell to 23 cents per share. The biggest contribution to this bankruptcy was the firm failing to adapt to changing market trends. The firm stuck to distributing their books through large store, and it could not cope with competition from large chain store retailers who also stocked books besides other items. People were hence less likely to visit a bookstore to get a book when they could get it in the retail chain store while shopping for other items. Most books were also being sold online, and the firm had not adopted online retailing. Instability in the management also did not give the managers time to plan and implement their strategies worsening the situation (Hitt et al., 2007).
Borders competitive advantage arises from the fact they have operated in the industry for a longer time and thrived compared to their relatively newer competitors, they also have resources to steer the business back to profitability. Brand name provides a big competitive advantage to a firm in the market (Ireland et al., 2008) Borders could use the fact that it is a well-known book retail to endear itself to its potential customers. Being in possession of the capital base far above the other competitors gives a firm a big competitive advantage (Ireland et al.,2012 ).The value of the firms fixed assets, stocks and competencies of the workforce are what the firm would use to get back to profitability.
The solutions for Borders to return to profitability include fully embracing web-based retailing, attaining stability in executive management and reducing the number of their physical stores. Stability in management is the only way an institution or firm can prosper. A firm should give the manager time to formulate, implement and assess the effectiveness of his strategies (Ireland et al., 2012).When the turnover of managers is high then, the managers cease to be accountable for their decisions and actions and this greatly affects the business (Wheelen and Hunger, 2012 ).Also to survive in the competitive market and the only way Borders can remain relevant is by setting up web based operations on their own right and not through outsourcing, their brand name will appeal to their old customers and help attract new customers. The firm should also concentrate on closing down retail outlets that had ceased to be profitable and only maintain those that are strategically placed so as not to lose customers that may still wish to get books from the stores. Closing the stores will also reduce the number of employees bringing down the total expenditures arising from rent and salaries. It can also renegotiate its current leases to reduce its rent further. Borders should also renegotiate with its creditors to be granted a longer period to pay its debts, and this will leave it with some capital to reinvest into the business hence clearing the debts without hurting the business.
Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2007). Strategic management: Competitiveness and globalization: concepts. Mason, OH [etc.: South-Western.
Ireland, R. D., Hoskisson, R. E., & Hitt, M. A. (2008). Understanding business strategy: Concepts and cases. Mason, OH: South-Western Cengage Learning.
Ireland, R. D., Hoskisson, R. E., & Hitt, M. A. (2012). The management of strategy: Concepts and cases. Mason, Ohio: South-Western.
Wheelen, T. L., & Hunger, J. D. (2012). Strategic management and business policy: Toward global sustainability. Upper Saddle River, N.J: Pearson Prentice Hall.