Companies failed because of one or more of the six common mistakes.
1)They learned from only the recent past.
-Instead of paying attention to larger, less frequent cyclical patterns.
Most people confine themselves to the history of the previous few years and assume that the more distant past is less important or relevant.
2)They relies too heavily on a formula for success.
-following the GARP formula will cause you to miss exceptional companies such as Costco, Mastercard, Starbucks.
-Beware of companies subscribing to the risky formula of hypergrowth ie aggressive store expansion.
3)They misread or alienated their customers.
-Ron Johnson and JC penny.
4)They fell victim to a mania
5)They failed to adapt to tectonic shifts in their industries.
-Blockbuster retail strategy to tackle Netflix.
-Watch out when two troubled businesses combine. Two money losing companies with identical obsolete business models do not merge to become one profitable business.
6)They were physically or emotionally removed from their companies’ operations.
-Ron Johnson and JC penny, Eddie lampert and Sears. Their self-
Imposed distance from their own workers. You are not able to make major changes in a company with thousands of employees unless you connect with them directly.
The two best indicators of a company on its way to bankruptcy - rapidly shrinking revenues and a quickly rising debt load.
Whenever you see ”sluggish economy” chestnut in a disappointing earning report, make sure to check how the company’s competitors are faring.
No comments:
Post a Comment