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DISCUSSING ALL THINGS DETROIT-WINDSOR SINCE 1999

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  1. #1
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    Default Why do so many companies in Metro Detroit go bankrupt?

    I was just thinking about the Borders bankruptcy and how they were once owned by K Mart, which also went through bankruptcy when it was based in Metro Detroit. Then of course there are the auto companies, minus Ford, that went through bankruptcy. And the major suppliers like Delphi, Visteon and Lear that went through bankruptcy as well. I'm sure there are others that I'm not thinking of right now but you get the idea... Why do Detroit area businesses fare so horribly?

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    Because they're run into the ground by management?

    Just wanted to get one in before people start union-bashing...

  3. #3
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    I think it's because we're risk takers around here. But also because we get caught in old ideas, or old ways of doing business. Change and openess to other's ideas are violently kept out. We stand so tough, like Ahab and his whale, to the death, in love with our own pride.

    Each failure is a sunken ship, and each sunken ship has casualities and a captain who made mistakes, and is going right down with the whole damn mess. Always remember that.

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    Quote Originally Posted by Detroitnerd View Post
    Because they're run into the ground by management?

    Just wanted to get one in before people start union-bashing...
    Unions are filled not because they want to see people fail, but because they are trying to shelter themselves from reality and/or change. No other reason.

  5. #5
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    I don't think it's Detroit specific. If you live in Detroit, it probably seems like it is. If you live somewhere else..... well, you get the point.
    The whole country is in poor shape.

  6. #6
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    When Borders was making money, they kept trying to gut the one thing people LIKED about them: That intelligent, well-read people were able to give expert advice to book-buyers. Instead, they cracked down whenever the work force tried to unionize, tried to turn them into low-paid "stockers" who knew nothing about books, and began an ill-fated expansion into CDs and DVDs (remember them?). The whole while, they were using their profits to buy back stock and increase their personal wealth while not building their core business. So, um, there's one you can't blame on the unions; they actually knew better what made the business work in the first place.

    Speaking generally, the usual reasons for business failure are:

    -Inadequate funding
    -Bad location
    -Lack of a well thought-out business plan
    -Poor execution
    -Bad management
    -Expanding too quickly
    -Insufficient marketing or promotion
    -Inability to adapt to a changing marketplace
    -Failure to keep overhead costs low
    -Underestimating competitors

    Oh, yeah. Keep blaming unions.

  7. #7
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    Quote Originally Posted by Detroitnerd View Post
    When Borders was making money, they kept trying to gut the one thing people LIKED about them: That intelligent, well-read people were able to give expert advice to book-buyers. Instead, they cracked down whenever the work force tried to unionize, tried to turn them into low-paid "stockers" who knew nothing about books, and began an ill-fated expansion into CDs and DVDs (remember them?). The whole while, they were using their profits to buy back stock and increase their personal wealth while not building their core business. So, um, there's one you can't blame on the unions; they actually knew better what made the business work in the first place.

    Speaking generally, the usual reasons for business failure are:

    -Inadequate funding
    -Bad location
    -Lack of a well thought-out business plan
    -Poor execution
    -Bad management
    -Expanding too quickly
    -Insufficient marketing or promotion
    -Inability to adapt to a changing marketplace
    -Failure to keep overhead costs low
    -Underestimating competitors

    Oh, yeah. Keep blaming unions.
    Was/is Borders unionized?

  8. #8
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    Quote Originally Posted by DetroitDad View Post
    I think it's because we're risk takers around here. But also because we get caught in old ideas, or old ways of doing business.
    These two sentences contradict each other.

  9. #9
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    Quote Originally Posted by iheartthed View Post
    Was/is Borders unionized?
    Nope. They successfully blocked every effort of their workers to organize. I remember when the workers struck the Liberty Street store in Ann Arbor five years ago and had some long talks with them. They were warning the management even then.

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    Quote Originally Posted by iheartthed View Post
    Was/is Borders unionized?
    To my knowledge, only the downtown Ann Arbor store was. Not sure if this is still the case, my fuzzy brain recalls a short-lived strike-- Maybe a few years back. Can anyone add more?

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    Quote Originally Posted by Redleg81 View Post
    To my knowledge, only the downtown Ann Arbor store was. Not sure if this is still the case, my fuzzy brain recalls a short-lived strike-- Maybe a few years back. Can anyone add more?
    Yeah, I do vaguely remember the strike now. I think I was still living in Ann Arbor at the time.

  12. #12
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    A high percentage of businesses everywhere go bankrupt. What I find unfortunate is the number of successful businesses which have been bought out and then hollowed out--all the banks (except Comerica, which left all by itself), Hudsons, Motown, Cunningham's/Perry's, Stroh's. Not that that is unique to Detroit either.

  13. #13
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    I used to work at Borders, and I work for the union that once organized store 1.

    That being said, the downtown Ann Arbor store was briefly unionized- there was a CBA there for a couple of years, but when the CBA expired the workers never ratified a new one. Its a REALLY long story that I'd rather not get into as to why we never had a second contract, but its partly our fault.

    As for management, I was the inventory supervisor in the Brighton store, and I couldn't believe the incredibly stupid things management would have us sell (and actually INSIST on us trying to sell). I remember stocking things like pancake batter, meat rubs, and $6 little tins of "gourmet" Swedish fish- and getting pissed off because I knew I would be packing them up and shipping them back to the company (which I did).

    The other stupid thing corporate did was severely lower pay, fire experienced staffers, and go to an almost completely part time work force who knew little about literature. Once upon a time, you had to take a lit test to work there, but that has not been the case for years. Many of the older, more experienced staffers had regular customers who would recommend them books.

    Due to our proximity to corporate, we got a lot of gossip as to what was going on there, and we heard that a bunch of former grocery CEO's took over Borders and had the mentality that "selling a book is just like selling a head of lettuce!" To date, I have never seen a book rot.

    All that being said, Borders relied a lot on CD and DVD sales to fund its rapid expansion- and we all know what is happening to those industries. Between all that and the rise of eBooks, the industry in general is declining.

    The question is then, why is BnN faring better than BInc? I think that in part, BnN's model was a lower skilled workforce that centered more on mass market/genre lit sales, where BInc was slightly (and I emphasize SLIGHTLY) more "high brow" and had a clintele that wanted more service. It sounds weird, but trust me, I can back it up. When BInc adopted BnN's labor strategy, it hurt some of their base of customers, since service now became more or less equal in both retailers, what incentive was there to go to Borders? Also, BnN embraced eBooks much sooner than BInc did and I'm sure sales of its Nook are boding well for the company- though I'm sure its just prolonging the inevitable.

    Just my 2 cents.

  14. #14
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    I just realized I used a little jargon, heh. Just to clarify:

    Store 1 - The Downtown Ann Arbor store
    BnN - Barnes and Noble
    BInc- Borders Inc.
    Mass Market - "pocket" paperback books (not to be confused with "quality paper" books)
    Genre Lit - Categorical Fiction, such as romance, sci-fi, fantasy, true crime, mystery/thriller, etc.

  15. #15
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    Borders is out of business because they failed to change with the times.

    With modern technology, you must evolve daily.

    They failed to see the success of e-books.

    They failed to see the success on-line music.

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    This is strictly my opinion and anectdotal, but in my experience working in an office in Metro Detroit is like taking a time machine back to the 1970's. The corporate culture here is stagnant, old-fashioned, backward-thinking, in large part. Very top down, with the bigshots calling all the wrong shots. I know there are innovative examples (like Quicken) but I think the good-old-boys mentality of the auto industry spilled over into other industries.

  17. #17
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    Quote Originally Posted by Detroitnerd View Post
    Speaking generally, the usual reasons for business failure are:

    -Inadequate funding
    -Bad location
    -Lack of a well thought-out business plan
    -Poor execution
    -Bad management
    -Expanding too quickly
    -Insufficient marketing or promotion
    -Inability to adapt to a changing marketplace
    -Failure to keep overhead costs low
    -Underestimating competitors

    Oh, yeah. Keep blaming unions.
    I think that we can blame both unions and management. The whole "Detroit model" for the auto companies, their suppliers, and the UAW was based on a monopoly/oligopoly practice. The unions demanded wage increases, management di a show of force to keep the demands from being too extreme, management factored the new wage agreements into their cost calculations, management figured the level of profit they needed (after taxes since they considered taxes as a "cost"), and then set the price for the rest of America. The rest of America, being addicted to cars, went into debt to pay the price demanded by the Big 3/UAW. Detroit and the metro area swam in profitability.

    Suddenly, a small cloud the size of a Volkswagen appeared on the horizon. Slowly European cars and later Japanese cars became available to the public and after getting hosed by Detroit, the rest of the country could now give Detroit the finger. The Big 3/UAW ignored the competition and steadily lost market share. Even though car sales are recovering, the Detroit area is still in the crapper.

  18. #18
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    All good points. Does anyone remember PharMor from the 90's? It was a highly profitable business with over 300 stores nationwide. They went bankrupt because one of the owners (private stock) and the CEO embezzled millions from the company, hid losses and moved funds to a world basketball league.. I thought K-Mart had similiar problems.....
    Old Guy is right, companies are going bankrupt everywhere not just Metro Detroit. For instance I believe Florida has the largest amount of bank failures in the US. It's just the times all over this country.

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    Default

    Yet Radio Shack is still in business.

  20. #20
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    Borders is history because their online product became stagnant and they quit. Basically they said "oh, why dont we just let the wolf run the hen house?" and allowed Amazon to become the monster that they are.

  21. #21
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    Quote Originally Posted by Red Devil View Post
    Borders is history because their online product became stagnant and they quit. Basically they said "oh, why dont we just let the wolf run the hen house?" and allowed Amazon to become the monster that they are.
    I forgot about that part! Good point- when all else failed and we couldn't find or order a book a customer wanted, we directed them to "borders.com" which was basically an amazon skin. BInc got a cut, but BNN did a better job of adapting.

    As for Radio Shack- I think they are a great example of a store that adapts with the times. I spend some money there still because their prices are reasonable, they carry an interesting line of goods, and they have great locations.

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    Quote Originally Posted by HistoryNotHisStory View Post
    Borders is out of business because they failed to change with the times.

    With modern technology, you must evolve daily.

    They failed to see the success of e-books.

    They failed to see the success on-line music.
    e-books are successful? Every statistic I see, every poll I see tells a different story on that....a vastly different one.

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    Quote Originally Posted by mikefmich View Post
    e-books are successful? Every statistic I see, every poll I see tells a different story on that....a vastly different one.

    http://money.cnn.com/2011/04/15/tech...acks/index.htm

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    How amazing is Borders in Detroit/Grosse Pointe/Dearborn had closed while Barnes and Noble, Marwil, and John King books are still open. I think local stores in downtown detroit could still thrive if they would just open on weekends and leave the old M-F 9am to 5pm philosophy behind

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    Quote Originally Posted by mikefmich View Post
    e-books are successful? Every statistic I see, every poll I see tells a different story on that....a vastly different one.
    You don't need a poll are article to see so many of them out in public. When I get on the subway, bus, walk through a city park, stop by a coffee shop, catch a flight, I see a ton of people with E-readers. On no day will I see less than a dozen.

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