Circuit City Failure
Failure Analysis/Change Strategy
LDR 531
July 22, 2013
James Pepitone
Failure Analysis/Change Strategy Part One
Circuit City
The success of any company starts with its organizational structure and how the people in high position make positive decisions to improve the company. Circuit city is one of those companies that came up short in 2008. Developed 1959, the Wards Company only operated a few small television and home appliance stores in the Richmond, Virginia. With technology growing and the demand for electronics increase, the Wards Company believe that there was a vast need for mega electronic stores that consumers can explore the world of electronics. It was not until early 1980s the Wards Company decided to change the name …show more content…
to Circuit City. One of the company’s early slogans was “Circuit City--Where the Streets are paved with Bargains “(Circuit City, 2013). This embarked a new beginning in electronic sells.
The main aim for Circuit City was to incorporate and clarify the mission to all employees of the company and that was: “To make sure that all employees are working in the same direction, each oner must live and breathe Circuit City’s values and use them as a guide for actions and decisions (Retail Industry, 2013)”. In our research we found that Circuit City had five values that turely set the culture of the company.
Circuit City Corporate Values (Retail Industry, 2013) * Respect- Associates are the greastes assets. All associates must show that they respect and value the effort of others, knowledge as well as diversity. * Teach-Associates are the backbone of Circuit City experiences and those around them can learn and benefit. Pass on to others the values learned. * Engage –Circuit City encourages an atmosphere of engagements that associates are invested in the future of Circuit City. * Simplify –Using a new outlook to look, ask, and learn about the needs of the consumer. * Maintain the highest integrity-Expectation that all associates will maintain the premier of ethical standards.."
Business Failure
By the end of 2008 Circuit City announced that 155 stores would be close and 17% of the workforce would be laid off. This was the results of drastic changes within the company over the years. In early 2000 Circuit City stores were becoming out of date. Some stores were which in the 80s good location are now bad locations and other stores could not compete with other companies, such as Best Buy in the market. In 1999 Circuit City nearly earned $1.6 billion dollars in sales revenue from large in home appliances (Circuit City, 2013). However, executives were worried about the competitors such as Lowe’s, Home Depot, and Sears. They thought it would be wise to save in warehouse storage and delivery cost. After making these cuts there was a major increase in residential housing, therefore making Circuit City now is out of marker for home appliances. This was a major lose for the company and the beginning of a company going downhill.
Leadership Role
In the final years of management, it became very difficult for corporate officers to make decisions within the company.
One of the biggest decisions for CFO Michael Foss to make was the cutting of operating cost, which meant many people lost their jobs. From a behavior point of view you can describe Foss’s actions as an initiating structure. This means that Foss’s structure his role and the role of others to obtain goals (Robbins & Judge, 2013). Even though he had to make cuts, his main goal was to make Circuit City more profitable. Foss’s behavior still stood in terms of Circuit City values. His attempts to organize work, relationships, and goals made it are hard for company such as Circuit City to lose …show more content…
everything.
At the end of the day management made their decisions based on that Circuit City just could no longer compete in the market. The expenses in the fourth quarter of 2007 came in at 18.8% of sales, which in reality can result in a steady loss of profit (Malester, 2004). In terms of behavior theory, the path goal was not meet but everyone must respect that Circuit City did whatever that could to stay alive. Success of Ford Motor Company
One company that is a success story is the Ford Motor Company. Their mission is focused on creating a strong business that builds great products that contribute to a better world. Ford has definitely done just that. Their vision is people working together as a lean, global enterprise for automotive leadership, which is measured by the customer, employee, and dealer (Ford Company, 2013). Ford has a four-point business- strategy plan that has assisted them in succeeding. This plan consists of operate profitably at current demand, accelerate development of new products that the customers want, finance the plan, improve balance sheet and work together as one team. This plan is been a key to Ford being so successful and reinventing their selves with new designs and models. Ford Company feels that their leadership style is a big reason for their longevity and success as a company. Instead of keeping the CEO position in the ford family they decided to go let an outsider to the automotive world come in and run the show (Hammond, 2011). Another factor that has helped Ford is a woman’s perspective, the company has many female engineers and VP’s of different departments that are involved with innovation and safety of the vehicles. Thinking ahead of the curve has proved to be positive for Ford such as selling off expensive models like Jaguar and Volvo. This allowed them to focus more on improving their core products and getting a wide span of customers interested in Ford again (Hammond, 2011). When looking at their model and theories there is no doubting that they were looking towards the future for the company.
Failure Analysis/Change Strategy Part Two
Circuit City
Before the business failure take place for Circuit City as the CEO and my team of colleagues will try and implement a change process to prevent the impending failure. As the CEO and my team of colleagues will try and implement a change process to prevent the impending failure. The change process we will be using change agents to change the organization from status quo to the desired state. Using change agents can help take a company from is dysfunctional state to help move it to a more stable state even during the time of failure. With the failure of Circuit City using change agents to help with the process they will be able to direct staff and members in the direction of the company. One of the issues that Circuit City had was with locations of where they were. Since Circuit City failed within in this process as a CEO there would need to be continue to try and make sure managers get along because research has been shown that even in a downfall if you keep the managers happy and getting along then the closure of any company would not fail as bad if there was a bunch of mess going on in the company.
Power and Political Issues Power is the ability to influence others to act in a manner that one wishes. Politics is the activities one carries out to influence decision-making regarding the distribution of resources (University of Phoenix, 2013). In an organization, power, and politics are interwoven and sometimes associated with negative connotations. Organizational goals and objectives cannot be achieved without the use of power and politics, therefore they play an important role in the growth and development of an organization (Walumbwa, 1999). The process of organizational politicking usually brings about certain issues associated with power and politics and these include: * Resistance to change * Cultural behavior * Interpersonal relationships * Negative use of power. These issues could be detrimental to productivity and growth of the organization. Dealing with these issues, it is essential for the manager to develop and use his expert power base, as people tend to respond favorably to this type of power base. I will make sure to advance processes that are adaptive to situations even in the face of strong resistance. Promote a culture of creativity and innovation while building and developing effective teams. Avoid making employees feel powerless as this reduces morale. Understanding the political framework of the organization. This will help me in avoiding unnecessary and destructive power struggles ("Leveraging Power and Politics,” 2013).
Organizational Change Organizations need to be adaptive, proactive, and innovative in order to sustain a competitive edge. The advancement in technology has resulted in huge growth of the telecommunications industry. This has turned the business environment global and more competitive (Surdu, 2010). Organizations like Circuit City must have the flexibility to adapt to changes in other to stay competitive. The processes that I will use in implementing and sustaining change following the Kotter’s Eight-step plan are 1. Establishing a sense of urgency by informing everybody connected to the company about the dwindling fortunes (loss in profits, market share). This will lead to the company closing down and people losing their jobs. 2.
Creating a coalition group that will consist of managers, team leaders, suppliers, customers, shareholders, and other stakeholder’s representatives. 3. Create a new vision that will be “satisfying all our customer needs through employee efforts.” This shows employee involvement in the process. They will go through training and cross-training thereby enhancing their skills to better serve the customers. 4. Communicate the vision. This is done by constantly and consistently informing people about the vision. I will have all management staff leading by example, projecting slogans like “fastest in satisfying customer needs.” 5. Removal of barriers. Making incentives and performance appraisals reflect the new vision. This will act as an incentive to achieve the new vision. Also make sure that there is an effective communication system to provide information feedback to enable efficiency ("The 8-Step Process for Leading Change,” 2012). 6. Create and reward short-term wins which will serve to recognize the parties working toward achieving the vision. It will also serve as a feedback for the viability of the
vision. 7. This period consolidates any achievement obtained by trying out fresh projects within the new system. Encourage employees to participate more. 8. Consolidate the success of the new methods by inculcating the new behaviors in new employees. Make sure the new behaviors are rewarded with incentives.
In other words, the most vital areas of change would be location since Circuit City had issues in this area. The reason this would be so vital is because if a company is in a good location compared to the needs of the city then this would have elevated some of the barriers that would have taken place during the change process.
References
Circuit City. (2013). Retrieved from Wikipedia the Free Encyclopedia: en.wikipedia.org/wiki/Circuit_Circuit
Malester, J. (2004). Circuit City FY Loss, Q4 Profit. Twice, 4-6.
Retail Industry. (2013). Retrieved from Circuit City Mission Statement-Lost Vision Led to Bankruptcy and Liquidation: http://retailindustry.about.com/od/retailbestpractices/ig/Company-Mission-Statements/Circuit-City-Mission-Statement.htm
Robbins, S., & Judge, T. (2013). Organizational Behavior. Pearson. Ford Company. (2013). Retrieved from Ford Company: http://corporate.ford.com/
Hammond, L. A. (2011, January 13). How Ford did it. Retrieved from CNN Money: http://money.cnn.com
Leveraging power and politics. (2013). Retrieved from http://www.au.af.mil/au/awc/awcgate/ndu/strat-ldr-dm/pt4ch17.html
Surdu, G. (2010). ORGANIZATIONAL CHANGE- DIFFERENT APPROACHES. Romanian Economic and Business Review, 5(4-1), 48-54. Retrieved from http://search.proquest.com/docview/1117718096?accountid=458
The 8-step process for leading change. (2012). Retrieved from http://www.kotterinternational.com/our-principles/changesteps/changesteps
University of Phoenix. (2013). Power and politics. Retrieved from University of Phoenix, LDR/531 website.
Walumbwa, F. (1999). Power and politics in organizations: implications for OD professional practice. Human Resource Development International, 2(3), 205.
LDR 531
July 22, 2013
James Pepitone
Failure Analysis/Change Strategy Part One
Circuit City
The success of any company starts with its organizational structure and how the people in high position make positive decisions to improve the company. Circuit city is one of those companies that came up short in 2008. Developed 1959, the Wards Company only operated a few small television and home appliance stores in the Richmond, Virginia. With technology growing and the demand for electronics increase, the Wards Company believe that there was a vast need for mega electronic stores that consumers can explore the world of electronics. It was not until early 1980s the Wards Company decided to change the name …show more content…
to Circuit City. One of the company’s early slogans was “Circuit City--Where the Streets are paved with Bargains “(Circuit City, 2013). This embarked a new beginning in electronic sells.
The main aim for Circuit City was to incorporate and clarify the mission to all employees of the company and that was: “To make sure that all employees are working in the same direction, each oner must live and breathe Circuit City’s values and use them as a guide for actions and decisions (Retail Industry, 2013)”. In our research we found that Circuit City had five values that turely set the culture of the company.
Circuit City Corporate Values (Retail Industry, 2013) * Respect- Associates are the greastes assets. All associates must show that they respect and value the effort of others, knowledge as well as diversity. * Teach-Associates are the backbone of Circuit City experiences and those around them can learn and benefit. Pass on to others the values learned. * Engage –Circuit City encourages an atmosphere of engagements that associates are invested in the future of Circuit City. * Simplify –Using a new outlook to look, ask, and learn about the needs of the consumer. * Maintain the highest integrity-Expectation that all associates will maintain the premier of ethical standards.."
Business Failure
By the end of 2008 Circuit City announced that 155 stores would be close and 17% of the workforce would be laid off. This was the results of drastic changes within the company over the years. In early 2000 Circuit City stores were becoming out of date. Some stores were which in the 80s good location are now bad locations and other stores could not compete with other companies, such as Best Buy in the market. In 1999 Circuit City nearly earned $1.6 billion dollars in sales revenue from large in home appliances (Circuit City, 2013). However, executives were worried about the competitors such as Lowe’s, Home Depot, and Sears. They thought it would be wise to save in warehouse storage and delivery cost. After making these cuts there was a major increase in residential housing, therefore making Circuit City now is out of marker for home appliances. This was a major lose for the company and the beginning of a company going downhill.
Leadership Role
In the final years of management, it became very difficult for corporate officers to make decisions within the company.
One of the biggest decisions for CFO Michael Foss to make was the cutting of operating cost, which meant many people lost their jobs. From a behavior point of view you can describe Foss’s actions as an initiating structure. This means that Foss’s structure his role and the role of others to obtain goals (Robbins & Judge, 2013). Even though he had to make cuts, his main goal was to make Circuit City more profitable. Foss’s behavior still stood in terms of Circuit City values. His attempts to organize work, relationships, and goals made it are hard for company such as Circuit City to lose …show more content…
everything.
At the end of the day management made their decisions based on that Circuit City just could no longer compete in the market. The expenses in the fourth quarter of 2007 came in at 18.8% of sales, which in reality can result in a steady loss of profit (Malester, 2004). In terms of behavior theory, the path goal was not meet but everyone must respect that Circuit City did whatever that could to stay alive. Success of Ford Motor Company
One company that is a success story is the Ford Motor Company. Their mission is focused on creating a strong business that builds great products that contribute to a better world. Ford has definitely done just that. Their vision is people working together as a lean, global enterprise for automotive leadership, which is measured by the customer, employee, and dealer (Ford Company, 2013). Ford has a four-point business- strategy plan that has assisted them in succeeding. This plan consists of operate profitably at current demand, accelerate development of new products that the customers want, finance the plan, improve balance sheet and work together as one team. This plan is been a key to Ford being so successful and reinventing their selves with new designs and models. Ford Company feels that their leadership style is a big reason for their longevity and success as a company. Instead of keeping the CEO position in the ford family they decided to go let an outsider to the automotive world come in and run the show (Hammond, 2011). Another factor that has helped Ford is a woman’s perspective, the company has many female engineers and VP’s of different departments that are involved with innovation and safety of the vehicles. Thinking ahead of the curve has proved to be positive for Ford such as selling off expensive models like Jaguar and Volvo. This allowed them to focus more on improving their core products and getting a wide span of customers interested in Ford again (Hammond, 2011). When looking at their model and theories there is no doubting that they were looking towards the future for the company.
Failure Analysis/Change Strategy Part Two
Circuit City
Before the business failure take place for Circuit City as the CEO and my team of colleagues will try and implement a change process to prevent the impending failure. As the CEO and my team of colleagues will try and implement a change process to prevent the impending failure. The change process we will be using change agents to change the organization from status quo to the desired state. Using change agents can help take a company from is dysfunctional state to help move it to a more stable state even during the time of failure. With the failure of Circuit City using change agents to help with the process they will be able to direct staff and members in the direction of the company. One of the issues that Circuit City had was with locations of where they were. Since Circuit City failed within in this process as a CEO there would need to be continue to try and make sure managers get along because research has been shown that even in a downfall if you keep the managers happy and getting along then the closure of any company would not fail as bad if there was a bunch of mess going on in the company.
Power and Political Issues Power is the ability to influence others to act in a manner that one wishes. Politics is the activities one carries out to influence decision-making regarding the distribution of resources (University of Phoenix, 2013). In an organization, power, and politics are interwoven and sometimes associated with negative connotations. Organizational goals and objectives cannot be achieved without the use of power and politics, therefore they play an important role in the growth and development of an organization (Walumbwa, 1999). The process of organizational politicking usually brings about certain issues associated with power and politics and these include: * Resistance to change * Cultural behavior * Interpersonal relationships * Negative use of power. These issues could be detrimental to productivity and growth of the organization. Dealing with these issues, it is essential for the manager to develop and use his expert power base, as people tend to respond favorably to this type of power base. I will make sure to advance processes that are adaptive to situations even in the face of strong resistance. Promote a culture of creativity and innovation while building and developing effective teams. Avoid making employees feel powerless as this reduces morale. Understanding the political framework of the organization. This will help me in avoiding unnecessary and destructive power struggles ("Leveraging Power and Politics,” 2013).
Organizational Change Organizations need to be adaptive, proactive, and innovative in order to sustain a competitive edge. The advancement in technology has resulted in huge growth of the telecommunications industry. This has turned the business environment global and more competitive (Surdu, 2010). Organizations like Circuit City must have the flexibility to adapt to changes in other to stay competitive. The processes that I will use in implementing and sustaining change following the Kotter’s Eight-step plan are 1. Establishing a sense of urgency by informing everybody connected to the company about the dwindling fortunes (loss in profits, market share). This will lead to the company closing down and people losing their jobs. 2.
Creating a coalition group that will consist of managers, team leaders, suppliers, customers, shareholders, and other stakeholder’s representatives. 3. Create a new vision that will be “satisfying all our customer needs through employee efforts.” This shows employee involvement in the process. They will go through training and cross-training thereby enhancing their skills to better serve the customers. 4. Communicate the vision. This is done by constantly and consistently informing people about the vision. I will have all management staff leading by example, projecting slogans like “fastest in satisfying customer needs.” 5. Removal of barriers. Making incentives and performance appraisals reflect the new vision. This will act as an incentive to achieve the new vision. Also make sure that there is an effective communication system to provide information feedback to enable efficiency ("The 8-Step Process for Leading Change,” 2012). 6. Create and reward short-term wins which will serve to recognize the parties working toward achieving the vision. It will also serve as a feedback for the viability of the
vision. 7. This period consolidates any achievement obtained by trying out fresh projects within the new system. Encourage employees to participate more. 8. Consolidate the success of the new methods by inculcating the new behaviors in new employees. Make sure the new behaviors are rewarded with incentives.
In other words, the most vital areas of change would be location since Circuit City had issues in this area. The reason this would be so vital is because if a company is in a good location compared to the needs of the city then this would have elevated some of the barriers that would have taken place during the change process.
References
Circuit City. (2013). Retrieved from Wikipedia the Free Encyclopedia: en.wikipedia.org/wiki/Circuit_Circuit
Malester, J. (2004). Circuit City FY Loss, Q4 Profit. Twice, 4-6.
Retail Industry. (2013). Retrieved from Circuit City Mission Statement-Lost Vision Led to Bankruptcy and Liquidation: http://retailindustry.about.com/od/retailbestpractices/ig/Company-Mission-Statements/Circuit-City-Mission-Statement.htm
Robbins, S., & Judge, T. (2013). Organizational Behavior. Pearson. Ford Company. (2013). Retrieved from Ford Company: http://corporate.ford.com/
Hammond, L. A. (2011, January 13). How Ford did it. Retrieved from CNN Money: http://money.cnn.com
Leveraging power and politics. (2013). Retrieved from http://www.au.af.mil/au/awc/awcgate/ndu/strat-ldr-dm/pt4ch17.html
Surdu, G. (2010). ORGANIZATIONAL CHANGE- DIFFERENT APPROACHES. Romanian Economic and Business Review, 5(4-1), 48-54. Retrieved from http://search.proquest.com/docview/1117718096?accountid=458
The 8-step process for leading change. (2012). Retrieved from http://www.kotterinternational.com/our-principles/changesteps/changesteps
University of Phoenix. (2013). Power and politics. Retrieved from University of Phoenix, LDR/531 website.
Walumbwa, F. (1999). Power and politics in organizations: implications for OD professional practice. Human Resource Development International, 2(3), 205.