February 12, 2015
Case Study #1 – Radio Shack
Organization in Crisis
Radio Shack, a consumer electrics business chain with roughly 4,000 store locations has been serving consumers for almost a century.
Brief Situation Summary
After many years of declining sales, Radio Shack has filed for bankruptcy as of Thursday, February 5th, 2015. The declines in sales started when Radio Shack began to lose relevance with consumers. As Radio Shack declined many other competitors started gain market share, and hold a stronger presence with the public. The loss of sales resulted in Radio Shack no longer having the capability to afford all of their locations. As bills started to increase, the company simply could not keep up. The organization plans to close half of its stores, and combine the rest with Sprint locations, allowing some products to still be sold. According to Radio Shack’s Chief Executive Officer Joe Magnacca, “These steps are the culmination of a thorough process intended to drive maximum value for our stakeholders,” (McCarty and Lochner). As of right now, the company’s priorities are paying their stakeholders, employees, and closing their remaining locations successfully. This crisis became very serious in a short amount of time due to Radio Shack failing to take action pre crisis.
The people most affected by this crisis are the employees and the stakeholders of the company. Employees and primary and secondary stakeholders, are immediately affected because not only are jobs going to be diminished, but payment becomes questionable. Employees become worried about finding their next job, as well as how they are going to get paid as their location comes to a close. Stakeholders are concerned with their personal shares within the company and how their contributions will be affected. The publics who are peripherally affected are Sprint and Radio Shack’s competitors. Sprint becomes affected by this crisis because now they are working hand in hand with the company, which means a newly adapted business plan. Competitors are affected slightly because they no longer have to compete with Radio Shack’s sales, and they have less competition to focus on. Since the company has been around for almost a century, there are a lot of supporters who have been using Radio Shack for a long time who are going to be extremely disappointed. They have built a relationship with this company, and now they will have to adapt to a new company regarding their technological needs. All of these publics are impacted, and Radio Shack will have to work with each one accordingly.
This type of crisis has caused Radio Shack to no longer be an organization that can stand on its own. From here on out it will always be affiliated with Sprint because they are now “cobranded,” and it will be known for its loss of relevance in society (Isidore and Lobosco). The company’s ability to conduct business began to lag at some point, in relation to its competitors, and it never fully regained the strength it had almost a century ago. The technology field is changing on a consistent basis, which means that companies like Radio Shack have to be able to adapt and grow with the technology that is being sold, and it is apparent the company failed to do so. Another important aspect of owning a chain like Radio Shack is the relationship the organization has with its key publics. A big reason why this company became unimportant to consumers, and other businesses is because Radio Shack failed to successfully reach out, advertise, and fight for their spot in the technology field. Radio Shack needed to have close relationships with the media, community, employees, and consumers as a proactive tactic. The organization’s mission statement states, “Through its convenient and comfortable neighborhood stores, knowledgeable sales associates help customers get the most out of their technology products,” (Farfan). The company got too comfortable being “comfortable,” therefore staying a big competitor became difficult.
The biggest warning sign that the business was going downhill was the decline in sales. Radio Shack wasn’t proactive in focusing on risk management, therefore they didn’t take the warning seriously. The decline in sales has been going on for years, and it was a manageable problem, but it wasn’t acted upon until it was too late. Another important warning sign was the company was uncertain of the fate of the chain. In other words, Radio Shack simply could not keep up with the ever changing technology that was sold, and how to market and sell those particular products. If they would have expanded their advertising capabilities, online shopping experience, and accepted change, perhaps consumers would have ended up choosing Radio Shack more often over Best Buy. The crisis developed because the organization failed to take corrective action when warning signs became evident.
This crisis could potentially have been prevented if the right actions would have been taken. First of all, the first year a decline of sales was apparent I would develop numerous theories as to why consumers are choosing the competition over my organization. Next, I would build strong relationships with the media by using the relationship management theory to get my company’s image in the eyes of consumers once again. If those actions weren’t strong enough, I would conduct surveys about the Radio Shack customer experience, to gather insights from consumers. After analyzing the surveys, I would begin to take the necessary preventive action to get my company back on track. Because Radio Shack is 94 years old, I would look into remodeling the look of the company to make a statement that our organization is still relevant. Taking these steps early and efficiently would definitely work because consumers are always looking for the “next best thing,” and if Radio Shack became more cutting edge and new it could potentially have attracted the competition’s client base.
In the circumstances Radio Shack is in right now, I do believe they are taking the necessary steps in ending their business with a decent amount of dignity left. They are making sure the stakeholders and employees know they are of the highest priority as the company comes to a close. Working with Sprint was a good business move because although locations are closing, Radio Shack will still be able to sell some of their products through a popular organization. One aspect that could be improved upon was the coverage in the media. The public can get the perspectives from numerous media platforms, but none coming directly from Radio Shack. Radio Shack has been around for so long, it should release their own statements to their website, and not act like the crisis isn’t happening. Consumers have grown up with this company, they deserve to know what is going on and why.
Randazzo, Sara. “RadioShack Proposes Up to $3 Million in Bankruptcy Bonuses.” Wall Street Journal. N.p., 10 Feb. 2015. Web. 10 Feb. 2015. <http://www.wsj.com/articles/radioshack-proposes-up-to-3-million-in-bankruptcy-bonuses-1423598930>.
McCarty, Dawn, and Lauren Coleman Lochner. “RadioShack Files for Bankruptcy Protection.” Bloomberg.com. Bloomberg, 5 Feb. 2015. Web. 09 Feb. 2015. <http://www.bloomberg.com/news/articles/2015-02-05/radioshack-files-for-bankruptcy-protection-as-losses-mount-i5spaw86>.
Isidore, Chris, and Katie Lobosco. “RadioShack Declares Bankruptcy.”CNNMoney. Cable News Network, 5 Feb. 2015. Web. 09 Feb. 2015. <http://money.cnn.com/2015/02/05/news/companies/radioshack-bankruptcy/>.
Farfan, Barbara. “Radio Shack Mission Statement Is Clear and Simple.” Retail Industry. N.p., n.d. Web. 10 Feb. 2015. <http%3A%2F%2Fretailindustry.about.com%2Fod%2Fretailbestpractices%2Fig%2FCompany-Mission-Statements%2FRadio-Shack-Mission-Statement.htm>.