Saturday, December 13, 2008

The slow death of a corporation


A forlorn shelf in a forlorn shop on the brink of closure. This is not a scene from some developing country in an early stage of development. It was the scene today at our local Woolworths.

Woolworths is closing down which will leave 815 gaps in British high streets and 30,000 people without a job.
Walking around our local Woolworths today, it would have been hard not to feel a bit sad. This is a shop with a presence on British high streets for 99 years. Everyone knows Woolworths and it is known affectionately as "Woolies".

However Woolies has lost its way of late so although sad, its demise cannot be seen as wholy unexpected. Twenty years ago Woolworths was the place a lot of people would go to buy nails, a tin of paint or a new lamp. In fact its strength was that it really stocked most things. Of late it has focused on confectionery, CDs and DVDs, toys and children's clothes. These are all areas in demand but they are also areas that other shops do a lot better. There was no special reason to go to Woolworths. It had no area of particular strength.

It was a tired old giant trading on its name and former glories. However in the face of the gathering storm it has crashed to the ground, like a rotten tree in a forest.
I actually heard someone in my office this week, saying they hoped the government would "bail out Woolies". The mania for bail outs seems to know no limits.
While it is sad that an old chain of department stores is closing, that is not reason enough for the government to commit more millions (and probably billions) to support a business that has failed to supply anything that anyone really wants anymore. Of course those that lose their jobs may feel differently but that is to overlook the thousands who have gained jobs in Woolworths' competitors over recent year. In a free market, the price of failure has to be closure or it would cease to be a free market. If badly managed businesses cannot be allowed to fail, then there is much less hope for well managed businesses.
On a similar theme, but a much bigger scale, the fate of the "big 3" American auto companies should ultimately be determined on the basis of whether they are capable of providing products that people would really want to buy in a free market. While I would feel tremendously sad if any of the three companies failed (I once worked for the European operations of one and my Father worked for another), they should not be bailed out to postpone the inevitable. Otherwise money is being wasted that could be invested in other businesses with futures.

The free market is hard on failure but it is the free market that has allowed businesses such a Woolworths to flourish for so long. If they fail now, they are not failing solely as a result of the recession. They are failing after years of decline. Their death is not sudden but has been slow. They are only actually dying now because the recession is the wind in the forest that gets rid of the rotten trees. Only if we allow that wind to work its course will there be a fair chance of strong new trees growing in years to come.

This weekend I felt like I was bidding a sad farewell to a shop I have known all my life. The gloomy shelves scattered with rubbish and tacky products are a sad shadow of the Woolworths that once was so relied upon by millions of Britons. There is no pleasure in its demise but its management have been the authors of its decline. Where business is concerned we should not seek to protect failures but focus on how best to encourage future successes.

2 comments:

cw-patriot said...

The free market is hard on failure but it is the free market that has allowed businesses such a Woolworths to flourish for so long. If they fail now, they are not failing solely as a result of the recession. They are failing after years of decline. Their death is not sudden but has been slow. They are only actually dying now because the recession is the wind in the forest that gets rid of the rotten trees. Only if we allow that wind to work its course will there be a fair chance of strong new trees growing in years to come.

American political 'pundits' are paid big bucks to analyze current economic conditions, but I haven't read a more concise, well-reasoned analysis of current government interference in the free market than the above paragraph. Thank you!

... and heartfelt wishes for a blessed Christmas to you and yours, Luis!

~ joanie

Luis said...

Joanie,

Thank you for your kind comment. I just try to say it as I see it !

Best wishes to you and your family over Christmas and the New Year.

Luis