Flights of Fancy
Giveaways are a gimmick frequently used by companies in many different industries as a means of boosting sales. What’s more, they usually work, but you have to be careful when choosing what exactly it is you’re giving away. Hoover used to be so dominant in the UK vacuum cleaner market that people referred to “hoovering the carpet” in conversation. When your company name becomes a verb, you’d think that would be a pretty unassailable business position. Unless, of course, someone as a really bad idea.
Back in 1992, Hoover’s UK division decided to offer free flights within Europe when customers spent over £100 on their products. The offer was then expanded to include flights to the United States. Hoover soon became overwhelmed by the demand for flight tickets., which cost considerably more than a Hoover product. It’s thought that more than 200,000 people applied for free flights and Hoover eventually lost £50 million.
The whole flight fiasco could perhaps be described as one of those things that seemed like a good idea at the time. Hoping to clean up in the market, instead, Hoover themselves were cleaned out. Everything they’d worked for simply sucked away and the British division was sold to an Italian company. (Source)
When Honesty’s Not the Best Policy
Another expression that entered the English language courtesy of a business disaster is “doing a Ratner.” This refers to Gerald Ratner himself, formerly the CEO at Ratners jewelers. Most senior executives praise their company’s products, or at least don’t talk in public about any misgivings they may have. Ratners may not have sold the world’s finest jewelry, but were very popular and the company was doing very nicely. Until that is, Mr. Ratner made his speech at the Institute of Directors in April 1991.
While addressing his audience, it became clear that comparing the company’s products to “crap” clearly wasn’t a wise decision, as customers were insulted, stayed away for the stores in droves and the company’s value very quickly fell by almost £500 million. Ratner claimed that it was a private function, that he didn’t expect anyone to take his comments serious and especially not be reported, but the damage had been done. The company didn’t completely collapse, but came very close. Ratner resigned and the company became the Signet Group in 1993. I guess if you can’t say anything nice, then don’t say anything at all. (Source)
A Lack of Vision
Well before iPods, iPads, mobile phones that do everything except make the tea, even before computers, laptops and the Internet itself, there were videotapes. People growing up in the 1970s and 1980s mostly remember watching movies at home on VHS tapes, but the format had competition from Betamax, which was launched by Sony in 1975. There were quite a few reasons why Betamax failed, but most people agree that it was overpriced, complicated to use, bulky and wasn’t even nice to look at.
It was also poorly marketed, never really caught on with the media and the system could only handle limited recording and playback. This final point was of particular importance when trying to pinpoint the reason for Betamax’s demise. The main appeal of videotapes was that people could watch movies at home on their own TVs. Most movies are around a couple of hours long, even today. Without stating the obvious too heavily, if Betamax tapes lasted an hour and VHS for two hours, which format do you think eventually won out in the videotape format war? In the end, Sony severely misjudged the burgeoning home video market with Betamax and paid the price.(Source)
Going Offline
From 1983 to 1986, Commodore Computers controlled around 50% of the computer market, with the remaining 50% split between Apple, IBM, Atari and others. Two million units of the Commodore 64, also known as the C64, were sold every year and there seemed to be no to assume that success wouldn’t continue in the years to come.
In 1984, the Commodore Plus/4 was released. This was seen as a great step forward, a faster, smarter computer with a colour screen, no less, but formerly loyal customers weren’t impressed. The Plus/4 wasn’t compatible with the much beloved C64 and although there was a little success in Europe, the product was a disaster in the United States. To try and force the issue, the company tried to discontinue the C64 in the U.S. in 1990, with the intention of stopping shipping the machines altogether in 1995. All this did was make customers keep buying the C64s. It became next to impossible for Commodore to make the computers at a decent price without also selling newer models that were more expensive. The company went bankrupt and in business terms, finally went offline in 1994.(Source)
Bre-X Minerals was a small mining company based in Calgary, Alberta in Western Canada in 1995. The company wasn’t really making any waves in the corporate world and the stock was worth under $1. However, stock prices rose rapidly, reaching $300 a share, when it was announced that Bre-X had discovered vast quantities of gold in Busang, on the island of Borneo in Indonesia. The company’s future prospects seemed very bright indeed, yet this glittering prize wasn’t all that it seemed. When a Bre-X geologist died after falling into the jungle from a helicopter and was later eaten by wild animals in 1997, people began to get suspicious.
An independent analysis of the samples discovered that Bre-X had faked their discovery by adding gold dust to samples. The fraud unraveled quickly, with Bre-X delisted on the NASDAQ and TSX stock exchanges and the company filing for bankruptcy protection. Furious investors, who had lost billions of dollars, launched a series of major lawsuits. The big losers from this less than golden opportunity included the Ontario Municipal Employees Retirement Board, who lost $45 million, the Quebec Public Sector Pension fund, which lost $70 million, and the Ontario Teachers Pension Plan who waved goodbye to $100 million.
Yes, indeed, all that glitters isn’t gold, although of course it could be gold dust sprinkled onto regular old rocks, then used to commit major fraud. (Source)
Wrong Car, Wrong Time
Ford is one of the most recognizable company names when it comes to cars. While you’d imagine they’ve had a few models that weren’t as successful as others over the years, no one would usually think of Ford in terms of a massive flop. Yet back in 1958, there was the Edsel.
Ford launched the new model to take a slice of the market share of Chrysler and General Motors, but the Edsel was never popular with the public and sold very poorly. The vehicle was spoken of as an experimental and even a futuristic car, but it failed to catch on with American motorists. By the end of 1959, after spending an awful lot of money on the car’s development, manufacturing, marketing and promotion, Ford decided to kill off the Edsel. The final price tag for this disaster? A cool $250 million, roughly $2 billion in today’s currency. (Source)
The Future That Was
The DeLorean Motor Company was another well-known car manufacturer back in its day in the early 1980s, if not as famous as Ford. Even today, many people are familiar with the DeLorean as the car used in the Back to the Future movie series from the second half of the 1980s.
The car was first introduced by John DeLorean at the beginning of the decade and seemed to be exactly the kind of car the future demanded, at least for the filthy rich. The car had a fiberglass underbody, onto which were attached stainless steel panels and perhaps most famously, gull-wing doors that opened vertically. Despite being a status symbol, the car was very pricey, expensive to build and only 8,900 cars were made by 1983, when DeLorean was arrested for drug trafficking. He was eventually acquitted but his days of attracting investors were over. (Source)
Dot-Com Floozies
When the web was younger, or at least younger than it is now, there was Flooz. The company was part of the dot-com boom in the late 1990s and even had Whoopi Goldberg promoting it in TV commercials. Flooz may seem like an odd name, but it was actually derived from the word for money in Arabic
Flooz was promoted as “e-currency” that Internet merchants and customers could use in a similar way to frequent flyer miles, gift cards or customer loyalty programs at grocery stores. Great idea perhaps, but the idea never caught on. As e-commerce really began to take off, it turned out that people were perfectly happy to use their credit cards for online shopping. Flooz spent around $50 million trying to convince people about the merits of their concept of online currency, but closed its doors, virtually anyway, in August 2001.(Source)
Too Big Too Fail?
In 2001, Enron, an American energy company based in Houston, Texas, once valued at $90 billion, was the seventh largest company in the United States. Enron was a leader in the energy sector and had even done some work in early e-commerce, but there was a much darker side to the company’s operations. Over the years, executives engaged in poor financial reporting and used accounting loopholes to conceal billions of dollars in debts generated by failed projects. Years after Enron’s collapse, evidence was also unearthed of large-scale insider trading. started to dabble in e-commerce and exotic investment areas, such as weather futures went bankrupt.. even some lives with it. In following years, it emerged that they shredded documents, started partnerships with their own shell companies, and engaged in massive inside trading. Enron is now synonymous with the business outcomes of galloping greed.
Shareholders lost nearly $11 billion when Enron’s stock price, which achieved a high of $90 per share in mid-2000, dropped like a stone to under $1 by the end of November 2001. In December, Enron filed for bankruptcy. The company had $63.4 billion in assets, making it the largest corporate bankruptcy in U.S. history at the time. Enron’s fall destroyed careers, investor savings, retiree futures, sent people to prison and even lead to the demise of Arthur Andersen, once one of the world’s five largest audit and accountancy partnerships. (Source)
Up in Smoke
The health risks related to smoking are well known, but tobacco companies still have customers and have tried to keep them happy as anti-smoking campaigns have intensified. R J Reynolds is one of the largest tobacco companies in the United States and in 1988 they launched the Premier cigarette, which was actually an attempt to reduce the harmful effects of inhaling cigarette smoke. It was promoted as a “smokeless nicotine delivery mechanism that looks and feels like a premium cigarette.” Unfortunately for R J Reynolds, it might have looked and felt like a cigarette, but it tasted like charcoal and was an utter failure. Drug users were quite fond of it though, since they could apparently use the “safe cigarette” as a delivery system for other combustible products. And after all their efforts, the people at R J Reynolds spent $1 billion, only to see their dreams go up in smoke. (Source)
About the Author
Simon Rose www.simon-rose.com is the author of The Alchemist’s Portrait, The Sorcerer’s Letterbox, The Clone Conspiracy, The Emerald Curse, The Heretic’s Tomb, The Doomsday Mask and The Time Camera, plus many non-fiction books and articles.
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