Today’s market can be incredibly tough for businesses of all sizes. Companies big and small have to make difficult decisions and employ innovative strategies to stay ahead of the competition. Reasonable companies employ all sorts of intelligent tactics to overcome challenges.
But not all businesses make good or even sane decisions all the time. Sometimes, the mistakes are small enough to ignore. Other times, they’re so blatant and baffling you have to read about them to learn what not to do.
The following are four terrible business strategies real companies have employed in the past to try to gain an advantage.
Severance and Free Work
Firing employees is a tough decision for most companies. Sometimes, however, it’s necessary to cut loose people to preserve profits. While laying off people is an understandable yet difficult decision, expecting them to continue working for you sans payment is not just terrible but also illegal.
But that’s exactly what the SunTrust Bank did in 2015. After letting approximately 100 employees go, the bank offered their former employees severance packages. But the money came with some pretty heinous strings: the workers would have to be available to work for two years to do more work for SunTrust with no additional benefits. Needless to say, the company removed this stipulation once it got out.
Causing Blackouts for Profit
There are multiple ways companies can assess if a given strategy is going to be disastrous. Smart businesses employ ERM solutions and hire consultants to make the best decisions possible. Bigger companies have access to more resources, which makes it even more infuriating when they pull off terrible stunts.
A few years before they entered the annals of business failure, energy company Enron did some pretty despicable things to cut corners. These included engineering blackouts to raise energy prices. A leaked tape exposed an Enron employee calling one of their power plants in Las Vegas and instructing them to come up with a reason to shut down. The engineered blackouts netted Enron over a billion dollars, not that it would save them from the bigger scandal later on.
Ignoring Your Market
Way back in the ’70s, two video formats were waging an informal war. In one corner was Sony’s Betamax, which featured crisper sound and clearer image. On the other corner was JVC’s VHS. For ten years, these two formats fought bitterly until VHS emerged victorious.
But how did VHS, with its inferior sound, poorer picture, and easily damaged devices, win against Betamax? Simple: Betamax ignored the needs of their market.
Comfortable in the technical superiority of their product, Sony blithely ignored the fact that their tapes couldn’t record anything more than one hour long. This immediately made it a less desirable format for movie distributors, which formed a huge chunk of the market. Because of this, VHS would dominate the video market until the advent of DVDs.
Actively Defrauding Customers
At the same time of the VHS/Betamax feud, a Colorado-based company called MiniScribe was manufacturing disk drives. Poor sales eventually forced the company to turn to venture capitalists for help, but the assistance their new partner offered proved less than legal.
MiniScribe’s new owners employed a whole slew of illegal methods to keep the company afloat. Apart from aggressively doctoring their accounts, the company also packaged and shipped bricks instead of disk drives to create the illusion of sales. MiniScribe tanked, and those involved were convicted of fraud.
Business can be hard, but that’s no excuse to exploit customers and other people. Should you ever have to make a tough decision at work, remember the terrible ideas these companies tried, and do the opposite.