My opinion of why some companies are failing

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Have been noticing that we are getting fewer seed catalogs than usual and on checking have found that at least three companies we always bought from are haveing serious problems. Companies are having problems that really should not have problems. Toro went bellie up, and parts are hard to find, according to the repair shop I use for small engines, saw where Clorox was having a really hard time, sales really down. We were setting talking about this while carving and realized that in 1999 we bought a ton of seed, new tillers, and stocked up on things for Y2K. Seed companies sales shot through the roof, some borrowed money hired new help and then sales dropped. We bought extra Clorox and so did many others, We still have over 50 gallons, We will not need bleach for 4 or 5 more years. We haven't bought toliet paper yet and still have at least one 55 gallon barrel full.] We still have one drum of desiel fuel for the tractor. Think about it and let me know am I completely wrong or did Y2K possibly cause some of these. Wife says its not good for me to start trying to think. David

-- David in North Al; (bluewaterfarm@mindspring.com), April 06, 2002

Answers

post-y2k did cause problems for some companies. A few tech companies didn't have a reason to exist after y2k. Even Coleman camping products(owned by Sunbeam who went bankrupt/reorg last year) admitted that their business was hurt post-y2k.

-- Dave (multiplierx9@hotmail.com), April 06, 2002.

now Mitch heres a toilet paper stumper for you, how many rolls of t.p. in a barrel lol Bob se,ks.

-- Bobco (bobco@kans.com), April 06, 2002.

You have brought up a good point that makes sense to me. I would like to hear Chucks opinion on this also, as he is somewhat close to this topic with his vocation.

-- Jay Blair in N. AL (jayblair678@yahoo.com), April 06, 2002.

Companies are going under because they are mismanaged. CEOs who get millions and millions but have little incentive to make any changes. CE) salaries should only be tired to the profitability of a company.

Companies are also going under because the people they are trying to keep happy are not customers but stock holders. As long as stock holders are happy the company does good. Very bad cycle to be in. Cut work force stocks go up, holders happy. Decrease qality and cost stock goes up. Customers no see problems and leave. Stocks crash down, stockholders run. company bankrupt. Gets sold to some other bid name and the cycle repeats. There are some companyies that are purchased becasue they are failing. A profitable company needs to show so loss at tax time.

-- Gary (gws@columbus.rr.com), April 06, 2002.


Gary, All good points,and I agree, in summation: GREED!!!!!

-- Woodsbilly n.c. Pa. (coleenl@penn.com), April 06, 2002.


Toro is still in business. I have family that works at the plant in southern Minnesota. The main office near the cities is obviously running. Try the website at www.toro.com

They have a customer service page for email questions, and a Master Parts Viewer page. And an 800 phone number. Good Luck. We've lost a Country General store, and a hardware store distribution depot. (that one was over 200 people) Not Y2K IMOP, just companies cutting back due to the recession.

-- Sharon in SD (bugstabber@netscape.net), April 06, 2002.


The market is in worse shape, in many ways, than it has been since the great depression. Many companies used their own stock as currency to fund aquisitions and operations, but when the market died, their collateral dried up, which made it more difficult to raise money, and if a company had lots of debt, they began to have problems meeting obligations. Just like if you went out and got a big car payment and a huge mortgage, then they cut back your hours at work. You'd be in a crunch. Many of these companies got ahead of themselves in trying to "keep up with the joneses" (or cisco's or lucents, as the case may be). They took on huge debt in order to expand more rapidly. Now they are feeling the crunch because when people's stock portfolios are down, they feel poorer, and don't spend as much money, which means lower profits for companies, which means stocks go down some more, which makes people feel even poorer....It's called the "negative wealth effect".

Gary, your belief that running a company for the stockholders is bad for consumers is common among some segments of society, but is completely wrong. (I don't mean to offend you, so please understand what I AM trying to say, and don't read any personal attack into it)

Think about it: First of all, more than 80% of ordinary folks in this country are stockholders. Most of them do so indirectly through company pension plans and 401k's. So pitting stockholders against consumers really makes no sense in that regard, because most consumers ARE stockholders.

Secondly, in order to provide jobs, companies must stay in business. If they miscalculated what the market was going to want in the way of their particular product, and made too much, they now have excess inventory to get rid of, but in the meantime, they are basically paying people to do nothing. You might pay someone six bucks an hour to mow your lawn, but you wouldn't pay them six bucks an hour to sit in your front yard between mowings. You basically lay them off as soon as they are done mowing, and hire them back next week.

Companies must lay off idle workers in order to survive. It's an unfortunate reality, but if companies didn't strive to be efficient, they would soon be out of business for good, and then ALL of the jobs that they provide would be lost, permanently.

True, sometimes companies try to cut corners by lowering quality. All that really accomplishes is to open up a market for another company to come in and cater to those who will pay a little extra for added value. I see that in my business. E-trade has undercut the brokerage business by offering very low priced (read "loss leader) trades. However, they must do so at the expense of service. Fortunately, there are still enough people around who will pay extra for good advice, and more service. So I still have a job.

As for Y2k having an effect on the economy, it certainly has, but not because everyone went out and bought a truckload of toilet paper. It played a large part in the current market downturn because companies all upgraded their computer systems in 1999 to make them Y2K compliant. Once Y2k turned out to be a flop (partially due to all those upgrades), many companies quit spending on Info. Tech. and computers, which caused many a high tech company to feel the pinch. They had been forced to increase capacity and hiring to meet the demands of pre-Y2K, only to have to shut those plants down again afterwards. Such is life.

-- Chuck (woah@mission4me.com), April 06, 2002.


Oh, as as for Executive Compensation, you can bet your last dime that it IS tied to performance, lots of CEO's have been shown the door in the last couple of years!

-- Chuck (woah@mission4me.com), April 06, 2002.

just a note, i read somewhere that bleach looses its potency after 2 years, it has a half life like radiation. if you have that many bottles, you may want to give some away, or check its strength...

-- js (schlicker54@aol.com), April 06, 2002.

Why some companies are failing........SERVICE. I recently ordered two new recliners for my living room (first thing I ever bought that was a yard sale/thrift sale chair! After being married 23 years wanted my own colors!) The company wanted to charge me $ 25.00 to deliver them a mile to the house! They also did not have these chairs put together said, we could do it. Probally good thing I was at work when Hubby went to pick them up. Will I go back to this "Local" company NO! Will I drive 30 miles across stateline to a company that will deliver and set up as part of a sale, you bet I will. I try to keep any of my purchases to local business, but if they don't have service I'll go elsewhere. I support a local feed company, as they provide great service. The prices are a bit higher but the service is there when I need it. I have told many business owners and managers that their employees were the reason I left with out a purchase. Just my opinion to why many business/companies are failing. Denise

-- Denise K. (Rabbitmom2@webbworks.com), April 06, 2002.


I definitely agree with Gary and Denise. In my experience, as soon as a company goes "public" with stock offerings, they stop trying to please the customer, and look only for the stockholder's approval. To me, that equates with greed. Where is the service?

IMHO a company can get along without stockholders (they did before they went public), but they CAN'T get along without customers.

-- Bonnie (51940@aeroinc.net), April 06, 2002.


as soon as a company goes "public" with stock offerings, they stop trying to please the customer, and look only for the stockholder's approval. To me, that equates with greed. Where is the service? IMHO a company can get along without stockholders (they did before they went public), but they CAN'T get along without customers.

Here's what's funny about that. Every company has one or more owners. Any company that is incorporated has shares of stock, (thus, stockholders) even if the stock isn't publicly traded. If a company is privately held, the stockholders are usually the officers, directors, and employees of the company, along with institutional investors and wealthy private individuals who purchase the stock privately.

Here's the funny part. Someone was complaining about executive compensation (which I'll admit does get excessive), but if a company isn't publicly traded, the executives own most of the stock!

When a company goes public, anyone can become a part owner of that company. Ownership gives individuals a say in the major decisions made by the company. Look at the big fight going on right now over the Compaq/Hewlett Packard merger. The little guy (small shareholders) are mostly for it, and some of the bigwigs are against it. But it looks like the little guy might win this time.

If I shop at Walmart, and like their stores and service, as an individual, I might be inclined to buy their stock. Once I do, I have an ownership stake in the company, so I'm going to probably be more loyal in shopping there (which is good for other consumers, the company, AND the shareholders, all three of which I now represent) and, I'm more likely to say something if I notice that the store starts looking trashy.

Now, if Walmart stays a private company, I have less of an incentive to shop there, because I can't get a share of the profits.

Levis is a privately held company, and I have less of an incentive to buy their clothing than I do jeans sold at walmart, because as a walmart shareholder, every pair of jeans I buy helps the company, and helps me.

Shareholders ARE consumers, and in many cases, they are YOU. I'd be willing to bet that most of you have some sort of retirement vehicle (I hope you do anyway) that invests in stocks, either directly or indirectly.

Lastly, if a company doesn't look for the customer's approval, they won't have the stockholder's approval for very long. A company needs happy, paying customers to make a profit. Shareholders expect a companys management to do so.

The bottom line is that Shareholders and Customers are NOT diametrically opposed, as some suggest. Profits are not bad, they are necessary. It is not a zero-sum game. A win for the customers is a win for the company, is a win for the shareholders.

-- Chuck (woah@mission4me.com), April 06, 2002.


Unions have to share some of the blame as well, with the way they partition jobs into "specialties", striking for unrealistic pay at times, and contract "requirements" to use union labor only for this or that (think almost any type of temporary venue, like an indoor expo).

I'm not saying that there is no place for unions, but in many instances (like political campaigning for example) they have overstepped their authority to represent the employees paying them.

I wonder how many small businesses have refused to grow because they're afraid the unions will interfere with every little decision?

-- GT (nospam@nospam.com), April 06, 2002.


Chuck, I'd qualify what you said a little. Sure, you can't stay in business if you're not making a profit. And you're sure not going to get repeat business if you're not giving the customer what they want for their money.

However, I perceive two problems in the way businesses are run these days which are there almost to the exclusion of everything else.

One is that there has arisen a very short-term view of things. Judgements are made on quarterly results, or at best annual ones, and investment in the structure - capital - of the company is undervalued and even unappreciated because people aren't interested in long-term growth - they want to see short-term returns above all else.

The other, and they both become entangled, is that there is a concern with stock prices rather than dividends. Obviously people want personal profits, funds want immediate profits as well, but they're getting them to an excessive extent from wheeling and dealing (gambling) in stocks (sorry, but my view). Prices are extremely volatile, and company executives are making decisions - being required to make them, since it is the stockholders after all - based on these factors rather than on returning dividends from the stocks (profit from the company itself).

In other words, it has now reached the stage where the people who own the companies (stockholders, and particularly funds) are requiring the people who run the companies (managers) to take actions which are actively against the long-term survival of the company. Things like, for instance, selling off a division with a tremendous long-term growth potential because it won't turn a profit for two years. Laying off experienced staff (the memory and experience base of the firm) because there's a six-month or twelve-month slump in business. Deliberately losing say an average twenty years of experience for the sake of an artificial adjustment in a couple of quarters bottom- lines. Artificial because they're not even saving money over that period - it costs to lay those people off, but those costs are brought to book a different way than are salaries and wages. Sure they can point to long-term savings, but it's been achieved at the expense of long-term growth and long-term income - they no longer have the capability to respond to an upturn in the market. As we all know, if a business isn't growing it's dying, and they are deliberately electing to ensure that they can't grow, purely for short-term reasons.

Well, it's a good thing people are interested in homesteading and self-sufficiency. This trend, if anything, is going to be what causes society to collapse.

-- Don Armstrong (darmst@yahoo.com.au), April 06, 2002.


Don,

If you are saying that companies have been short-sighted, I'd have to give a wholehearted "Amen!" to that!

As for paying dividends, many companies have chosen to forego dividends and use profits instead to institute stock buyback programs. This is a very good trend in the long run, for two reasons:

A. It defers gains until the stock is sold, instead of giving a yearly gain (dividend) taxable as income (in this country, I don't know how it works down under).

B. It reduces the pool of shares of available stock, which makes the market rise as the amount of stock available decreases while the number of people buying stock increases.

Don, you are very insightful. Good discussion!

-- Chuck (woah@mission4me.com), April 06, 2002.



Clorox sales are also down because they have introduced an "ultra" product, that you have to pay the same amount for, but you don't use much less. It has been in the papers here a lot!!! A lot of people have just quit buying it, and are buying the generics. To me they all do the same thing. I don't think there is as much "brand" loyalty as there used to be. People go with what is cheaper when it doesn't matter, and to me bleach is bleach!!!

Customer service is practically non-existent in most stores that we can afford to shop in. It is available to a limited extent in some places, but these stores are usually double the price, so we usually just try to figure everything out on our own and save the money. Sometimes I truly wonder how our economy works at all! Most people are up to their ears in debt, and one paycheck away from being homeless. I am coming to the end of a LONG tax season, and what I ahve seen this year has not given me any hope that things are getting better. Guess I am a little pessimistic this time of year. People as a general rule have NO money saved, their pension plans have LOST money this year, their debtload is high, and they can'teven think baout making it on one paycheck!!!!

Sorry a little off-topic, but sometimes I wonder where people's heads are when they know that no job these days is forever, and they think that if they get a credit card offer in the mail, they MUST "deserve" it or the bank wouldn't send it to them, Good Grief!!

-- Melissa in SE Ohio (me@home.net), April 06, 2002.


I also agree with Gary and Denise.... but my opinion aint worth much as I am still in the throws of learning the proper way to do my books..... I liked my old system better than this carnfounded computer crap..... ( I guess I should apologize for saying " crap "... Im sorry.... oppsss twice...LOL)

-- Kristean Thompson (pigalena_babe@yahoo.com), April 06, 2002.

Alot of companies make products that we may want but we don't need when things tighten up their products are the first to be hit,and with the credit card debt [believe its $9000 average per household] it means alot of folks have already spent most of their income for the next 5 to 10 years which will have an effect on the economy.

-- Gary (burnett_gary@msn.com), April 07, 2002.

After almost 40 years owning/managing small weekly newspapers, one of the problems I see is this: any business has cycles — down periods and up. The prudent thing to do is put back a portion of profits during up cycles to see you through the downturns. We did that successfully for many years, at many papers. When we sold our last paper, it was in excellent financial shape and was wholly owned by ourselves and our stockholders. Following that financial course had allowed us to pay the paper off in only four years.

In order to (here's a good old fashioned phrase) save for a rainy day as well as take the best care of your employees and your product, one has to concentrate primarily on one's core product, limit acquisitions, loans, and expansions and pay yourself a living, but not excessive, wage. In other words, don't be greedy at the expense of your product or your employees. Perhaps we were more geared to that sort of program because newspapers are not allowed to take one cent of federal money, not even a small business loan. In other words, there could be no bailouts in times of economic crisis.

Since our retirement, our persoanl income has been cut in half. However, we follow the same principals in our household as we did in our business ard are doing exceedingly well, thank you. In fact, next Monday, we will close on a land purchase for which we're paying cash from our savings.

What I saw during the 90s were companies in the throes of buying orgies, spending money like water in the illusion good times were here to stay. In other words, if they made it, they spent it -- profits seemed to literally burn holes in their pockets. No company that made the profits these corporations claim to have made for over ten years should "suddenly" find themselves in the red after a very brief, very mild recession.

-- sally rogers (saltes@intertex.net), April 07, 2002.


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