Borders vs. Amazon: Adaptability, Flexibility, and Management

Borders vs. Amazon: Adaptability, Flexibility, and Management Structure

Amazon and Borders Bookstore both remained very popular and profitable in the 2000's. However, as Amazon was rising, Borders was falling, in a series of events that eventually led to its demise and bankruptcy. These two companies both started by selling similar items- books and paper products. But their business models and management strategies differed immensely, enough to keep one in business and put one out of business. The reasons for this are many, but it can be attributed to a few main causes. Each company relied on a specific management policy, and only one company was able to adapt and change to remain relevant.

Company Histories

Borders

The Borders brothers, Tom and Louis, started a used bookstore in 1971 in Ann Arbor Michigan. This store eventually led to hundreds of retail locations, and its humble beginnings and slow growth at the beginning of the business helped Tom and Louis establish a presence within the local community and within the local University, where the brothers hoped much of their business would come from. As the brothers' store gained popularity, they expanded to 40 locations in the mid-1990's (Ovide, 2011). This was a time when the internet was still relatively new and people weren't doing as much buying and selling online. The brothers sold their chain to Kmart, which also held the Walden Books Company. In doing so, they gained great wealth but the Borders stores became behemoths, selling thousands of books and paper products in a super store type environment. Many people complained that they single-handedly put the independent bookstore out of business in America. Borders' rival Barnes and Noble worked hard to grow as quickly as Borders in as many locations. As technology advanced and the internet became a popular meeting and commercial space, Borders did not change their business model much, instead focusing on what worked in the past wen people had far less access to so many different sales mediums (McGrath, 2010). The chain eventually started to show losses after the 2008 recession, which kept people out of major retailers as consumers were less confident and less likely to spend money on items they could buy used or in digital format.

Amazon

Jeff Bezos, a Seattleite with two degrees from Princeton, founded Amazon in 1994. Bezos understood that, at the time, the internet was growing at a rate of 2300% per year, and he saw a unique opportunity to take advantage of such growth and prevalence (Marcus, 2005). He began to sell items at an online store. The store, which was first called Cadabra was later renamed Amazon. The first company meetings took place at local bookstores. The company held products in a warehouse and then filled orders that came in online. In this way, unlike Borders, the company did not have to worry about the overhead of filling stores with inventory (Marcus, 2005). This was a huge money saver. The company also began offering individuals not connected to Amazon, a platform to sell their goods. Tis eventually developed into one of the internet's largest online sales platforms. Bezos did not make any money until the 2000's, largely because the company was fueled itself by the profits and incoming cash flow, and because technology and society had not yet caught up to the idea of internet sales forums. Once they did however, Bezos and his company were making money hand over fist.

Management Approach to Internet Sales

Amazon's Success

Amazon's success, though slow to become apparent, is based upon the fact that it is highly adaptable to the popular goods and items that people want. They also don't have to worry about inventory overhead in the same way that Borders did. Also, Amazon offers people a platform for online sales, which helped to transition them to one of the internet's busiest online retailers. Amazon's success is also owed in part to the notion that the company experimented with alternative ales and marketing platforms instead of being slow to change, like the corporate-backed Borders. This gave Amazon another key advantage: the ability to evolve and adapt as necessary while maintaining a business platform people were excited to use (Marcus, 2005). It encouraged interaction, and Amazon's management recognized that flexibility and the ability to encourage positive, technologically relevant adaptation as one of its most prized attributes.

Borders' Failure

The failure of Borders comes on the heels of many years of stagnation and reluctance to understand and develop technologically fresh and relevant action. In other words, the sales model that worked for Borders in the 1980's and 1990's, when the internet was not yet being used as a sales platform, worked well. Once people began to realize they could get any product they wanted without having to go to a large store, or a book, in the case of Borders, the company ceased to be technologically and socially relevant (Ovide, 2011). This in and of itself did not lead to the demise of Borders. What led to their demise was their reluctance to experiment and become more technologically relevant. Also, their huge overhead costs and hundreds of franchise locations bogged them down fiscally, especially in the face of a huge recession in 2008. Management's reluctance to react coupled with a business model and machinery that were archaic and outdated led to the eventual bankruptcy of the company. With its corporate structure, Borders was just too large and immobile to adapt to the changing technological environment (McGrath, 2010). Borders also was reluctant to encourage interaction in the same way that Amazon was able to by providing individuals a platform to buy and sell things online, besides just books and paper products.

It can easily be seen by comparing these two businesses that flexibility and adaptation, when built into a company and its management framework, creates a highly successful, evolutionary company. There are many ways in which to build in such flexibility, and taking Amazon as an example. When a company's management becomes too large to support itself in that it stagnates a company's decision-making process and keeps it from adequately adapting in a relevant manner, it no longer becomes flexible. Also, keeping the sales platform relevant and fresh, as Amazon did with its online sales platform that allows people to buy and sell to and from each other, not just from Amazon, helps build flexibility.