What is the biggest mistake made by a multi-billion dollar company?

What is the biggest mistake made by a multi-billion dollar company? by Chandan Bhat

Answer by Chandan Bhat:

How about stock prices plummeting by £500 Million overnight?
Sounds grave, well it is. One speech by the CEO of the company changed its whole fate, up-to the extent that it went near bankruptcy from being a billion dollar company churning out profits in the millions.

Has anyone told you “Words once spoken cannot be taken back” ?
Well, looks like someone wasn’t all aware of this.

This is Gerald Ratner:

He was the CEO, he was highly respected and credited for the growth of the Ratner group.

He inherited the company in 1984.(It was a family-owned business) He expanded the group from 100 shops to over 2000 in just 6 years. Ratner didn’t play by the usual business tricks but rather used a lot of psychological tricks. He hung huge posters and covered every part of the facade of his shops with banners to attract customers.

Ratners Jewellers were famous for selling Jewellery at dirt low prices, prices so low sales exploded and no other chain could replicate the prices and yet have the same profit margins.

In 1991, he was invited to speak at the Institute of Directors and here’s where he made the Billion Dollar Mistake. When asked about how his products could be sold for such low prices, he replied stating “ because it’s total crap!”

He also stated that some of the earrings sold by the Group were “Cheaper than an M&S Prawn Sandwich but probably wouldn’t last as long”

Here’s the video of the whole event:

https://youtu.be/Nj9BZz71yQE?t=3m45s

Prawn Sandwich remark at 05:58

The next day his remarks were national news. The results were immediate and the company dropped by 500 Million Pounds. Customers avoided the stores and within a year the Ratners stores started closing down the same way they had grown(2000 to 150).

Gerald Ratner resigned in November 1992 and sold all his shares of the company. The company has now re-branded themselves as The Signet Group.

And that’s what I’d consider one of the biggest screw-ups ever.


Fun Fact: Many of you might have heard or read about “The Ratner Effect” Or the phrase “pulling a Ratner”, these are all named after him.

What is the biggest mistake made by a multi-billion dollar company?

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s