Corporate Icons Falling Like House of Cards

What do Eastman Kodak, Sears Roebuck, K-Mart, and American Airlines have in common?

 They are all U.S. corporate icons on the verge of implosion and each one of these likely failures is through a fault of corporate marketing management.  The rules for marketing are pretty simple.  I describe them to my students usually the first class meeting.  The discussion is centered on what  “marketing” is.  After going through lengthy textbook definitions, I eventually end up setting forth my own definition:

            “Marketing is a four-part process that involves determining:

1. WHO is your target market?
2. WHAT are their needs?
3. What, then, is your DISTINCTIVE COMPETENCY in fulfilling those needs?
4. How do you COMMUNICATE your distinctive competency to your target market?”

It seems so simple, and looking at most success stories you see these questions are answered fully and obviously.  Look at today’s corporate winners such as McDonald’s, Apple, Nike and Starbucks.  Sure all of them have experienced bumps in the road, but all have refocused based on my four-part premise.

Now let’s look at four losers – Kodak, Sears, K-Mart, and American Airlines.  What has caused their demises?

Kodak: For years a corporate giant and huge profit-maker.  During the good times they seemed to have a good grasp of target markets, needs and clearly they had a distinctive competency in film-based photo technology.  They had a brilliant marketing communications campaign  where they marketed the intangible “memories” rather than tangible “high-quality film.”  Where did they go wrong?  Changing technology.  The bizarre fact is that Kodak invented digital technology, but they didn’t embrace it.  They lost sight of their target market’s needs and lost their distinctive competency.  Choosing to extend the product life of film technology, they abandoned their market and now are left with patents and other intellectual property of dubious value.  Unless they find a merger partner, they appear doomed.

As the Wall Street Journal in a op-ed piece by Forbes Publisher Richard Karlgaard points out, “Kodak’s problem wasn’t blindness.  Rather it was that film was a fatally attractive cash cow.  Even in its decline, the company’s film business produced outrageous profits.  The cash paid for Kodak’s forays into digital, but the result was that Kodak’s digital cameras never learned to run on their own two feet.  Trust-fund babies seldom do.”

Sears and K-Mart.  We can lump these two corporate icons together since they have already merged.  For both the 2011-2012 improved Christmas selling season was a disaster.   While peer retailers had surging sales, Sears and K-Mart reported badly decreased same-store sales.   The target market is easy to identify here, but Sears and K-Mart failed to discern the customer’s needs.  In the highly competitive retail marketplace, the customer wants to shop in a conducive atmosphere and see a wide variety of merchandise.   The pre-holiday reports already had boded badly for Sears and K-Mart.  Their investment in their stores was significantly below the industry averages.  Many stores appear old and rundown.  That’s not what upbeat Christmas shoppers were looking for and that is not what they found at Target, Walmart, Kohl’s, J.C. Penney, and upscale stores like Nordstrom and Macy’s.

Since its announcement of soft holiday sales, Sears has run under increasing pressure from its finance sources who want to shorten the payment terms from 90 to 45 days, which would cost Sears $1 billion this year.  A senior director for Fitch Ratings, told the Wall Street Journal, “Sears has adequate liquidity to fund its operations through 2012, if there are no material changes in vendor terms” but added, if the company’s earnings deteriorate further, “It will be at additional heightened risk of restructuring over the next 24 months.”

Finally, there is American Airlines.  Now in bankruptcy, its parent company, AMR Corp., was recently delisted from the New York Stock Exchange.  When trading has ceased, the stock was selling at 52 cents a share.  Delisting is a harsh punishment and only is done when the exchange believes the price of the stock to be abnormally low or without value.  Once the world’s largest airline, American joins United Air Lines as opting for Chapter 11 bankruptcy as a short-term solution to operational problems.  But, in the final analysis the reason why a company files for bankruptcy is that they taking in enough revenue to offset expenses.  From a marketing perspective, American has had target market problems.  It has slipped from No. 1 to No. 3 as the preferred network for corporate travelers.   Its “hub-and-spoke” old guard operations system is obsolete and was set up for the airline and not for the customer.  Its change fee and baggage pricing, while consistent with some other carriers,  is not customer-sensitive and has been competitively exploited by Southwest Airlines.  The American Airlines bankruptcy is the not the death knell of this company but it shows major weaknesses in its marketing and operational strategies.

Since the bankruptcy filing, articles have been written about other carriers eager to swallow up AMR’s valuable routes.  In an article ranking major airlines on service categories, American was dead last in “overall rank” and “baggage handling” and next to last in “excessive delays” and “bumping passengers”.

Missing from the list of imploding icons are two more:  General Motors and AT&T.  Were it not for the ‘Too Big to Fail’ doctrine that justified the bailout of this company, GM would probably not successfully emerged from Chapter 11 bankruptcy.  However, this corporate icon has appeared to dodge the bullet and seems to be in the midst of a highly successful turnaround.  The same can be said for Chrysler.