RadioShack, which opened in 1921 as a single-store retail and mail-order operation in downtown Boston, has fallen on hard times throughout its history, most recently filing for bankruptcy in February of 2015. The company’s poor performance can be linked to weak alignment between its business and operating models. Having once been the go-to place for electronics, from radios to early home computers, a series of events led to the demise of RadioShack, including:
- Ineffective shift to e-commerce
- RadioShack’s ineffective shift to e-commerce made the company less capable of meeting modern consumer demand. Given that customers became accustomed to having a large retail inventory of component parts that emerging competitor online storefronts could provide, RadioShack’s brick-and-mortar stores were unable to carry the range of inventory that customers desired.
- Poor mix of inventory
- Relative to big stores (e.g., Best Buy), RadioShack’s retail locations are typically small and therefore, the company had to be very deliberate in what it wanted to stock, but in-store inventory did not match market needs (e.g., CueCat, an infrared scanner that read a type of QR code generally linking to advertisements, was stocked in stores but not a product that aligned with overall corporate strategy).
Further, RadioShack realized that selling components and accessories (e.g., capacitors and computer cords) would not generate enough capital to sustain its 2,000+ stores. In response, RadioShack tried to change its branding to focus more on general consumer electronics (e.g., televisions, electronic toys, etc.), and in an effort to be operationally aligned to the shifted business model, the company implemented a number of changes, including:
- The type of inventory held in store
- Although RadioShack started carrying a broader range of consumer electronics, the company was never able to effectively compete with large retailers such as Best Buy. In the process, the company also further alienated its long-time customers by stocking less of its traditional components and accessories.
- New labor strategies
- Given that RadioShack’s business model centered around having a large number of storefronts, the company relied on managers to do an excellent job running stores, given inability for significant corporate oversight at each location. To address this issue, RadioShack implemented “Fix 1,500,” an initiative which rated managers to single out the lowest performing 1,500 managers and emphasize their need to improve. However, this program was ultimately unsuccessful, as it disincentivized and demotivated managers that were critical to operational success at a store-level.
- At the corporate level, in 2006, RadioShack brought in CEO Julian Day to revitalize the company and improve operations, however, Day was a poor fit and unable to lead a successful turnaround (evident by being the focus of an Onion article…). In particular, he lacked front-line sales experience and was unable to allow RadioShack effectively compete with retailers such as Walmart (which offered a one-stop shopping experience and deep discounts, given its stronger relationships with suppliers).
RadioShack saw the writing on the wall – it recognized that its historical business model of selling electronic components to consumers needed to change and that its operating model would need to change along with it. However, as RadioShack redefined its business model in attempt to remain relevant to the modern consumer, it did not change its operational structures in a way that supported the new strategic objectives. The result? A company which failed at every step and ultimately declared bankruptcy.